**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        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, 2005**
  Commission
        File Number 000-51297
  **FIRST
        METROPLEX CAPITAL, INC.**
 (Exact
        name of registrant as specified in its charter)
  **Texas**
              
              **71-0919962**(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              Identification
                  No.)16000
                  Dallas Parkway, Suite 125, Dallas, Texas(Address
                  of principal executive offices, including zip code)(972)
                  720- 9000(Registrant’s
                  telephone number, including area code)
 Indicate
        by check mark whether the registrant: (i) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (ii) has been subject to such filing requirements
        for
        the past 90 days.
  Yes
xNo
o
  The
        number of shares outstanding of the issuer’s Common Stock as of August 11, 2005,
        was 1,680,000 shares.
  
 **FIRST
        METROPLEX CAPITAL, INC.**
  INDEX
 PAGEPART
                    I. FINANCIAL INFORMATION
                3ITEM
                    1. Financial Statements
                3ITEM
                    2. Management’s Discussion and Analysis of Financial Condition and Results
                    of Operations
                17ITEM
                    3. Quantitative and Qualitative Disclosures about Market
                    Risk
                31ITEM
                    4. Controls and Procedures
                31PART
                    II. OTHER INFORMATION
                32ITEM
                    1. Legal Proceedings
                32ITEM
                    2. Unregistered Sales of Equity Securities and Use of
                    Proceeds
                32ITEM
                    3. Defaults Upon Senior Securities
                32ITEM
                    4. Submission of Matters to a Vote of Security Holders
                32ITEM
                    5. Other Information
                34ITEM
                    6. Exhibits
                34
 
 2
  **PART
        I.**  **FINANCIAL
        INFORMATION**
  **ITEM
        1.**  **Financial
        Statements**
  **FIRST
                    METROPLEX CAPITAL, INC.****CONSOLIDATED
                    BALANCE SHEETS**
  JUNE
                    30,
                  2005
                
                DECEMBER
                    31,
                  2004(Unaudited)ASSETSCash
                    and due from banks
                
                $
                1,631,000
                
                $
                843,000Federal
                    funds sold
                
                
                10,065,000
                
                
                11,565,000Total
                    cash and cash equivalents
                
                
                11,696,000
                
                
                12,408,000Investments
                    restricted
                
                
                420,000
                
                
                420,000Loans,
                    less allowance for credit losses of $250,000 and $100,000
                
                
                16,397,000
                
                
                6,559,000Bank
                    premises and equipment, net
                
                
                1,174,000
                
                
                1,181,000Other
                    assets
                
                
                4,000
                
                
                115,000TOTAL
                    ASSETS
                
                $
                29,691,000
                
                $
                20,683,000LIABILITIES
                    AND SHAREHOLDERS' EQUITYLIABILITIESDemand
                    depositsNoninterest
                    bearing
                
                $
                4,688,000
                
                $
                1,739,000Interest
                    bearing
                
                
                7,203,000
                
                
                2,996,000Time
                    deposits $100,000 and over
                
                
                2,860,000
                
                
                1,200,000Other
                    time deposits
                
                
                1,371,000
                
                
                284,000Total
                    deposits
                
                
                16,122,000
                
                
                6,219,000Other
                    liabilities
                
                
                41,000
                
                
                9,000Total
                    liabilities
                
                
                16,163,000
                
                
                6,228,000SHAREHOLDERS'
                    EQUITYCommon
                    stock, $0.01 par value10,000,000
                    shares authorized1,680,000
                    shares issued and outstanding
                
                
                17,000
                
                
                17,000Additional
                    paid-in capital
                
                
                16,380,000
                
                
                16,380,000Retained
                    deficit
                
                
                (
                    2,869,000
                )
                
                (
                    1,942,000
                )Accumulated
                    comprehensive income
                
                
                -
                
                
                -Total
                    shareholders' equity
                
                
                13,528,000
                
                
                14,455,000TOTAL
                    LIABILITIES AND SHAREHOLDERS' EQUITY
                
                **$**
                **29,691,000**
                
                **$**
                **20,683,000**
  The
        Notes
        to Financial Statements are an integral part of these statements.
  3
 
 **FIRST
                  METROPLEX CAPITAL, INC.****STATEMENT
                  OF OPERATIONS****(Unaudited)**3
                  MONTHS ENDED
                JUNE
                  30, 2005
              
              6
                  MONTHS ENDED
                JUNE
                  30, 2005
              
              3
                  MONTHS ENDED
                JUNE
                  30, 2004
              
              6
                  MONTHS ENDED
                JUNE
                  30, 2005INTEREST
                  INCOMEInterest
                  and fees on loans
              
              $
              299,000
              
              $
              457,000
              
              $
              -
              
              $
              -Investment
                  securitiesRestricted
                  investments
              
              
              6,000
              
              
              13,000
              
              
              -
              
              
              -Federal
                  funds sold
              
              
              66,000
              
              
              127,000
              
              
              -
              
              
              -Total
                  interest income
              
              
              371,000
              
              
              597,000
              
              
              -
              
              
              -INTEREST
                  EXPENSEDeposits
              
              
              61,000
              
              
              91,000
              
              
              -
              
              
              -Interest
                  income, net
              
              
              310,000
              
              
              506,000
              
              
              -
              
              
              -PROVISION
                  FOR CREDIT LOSSES
              
              
              76,000
              
              
              150,000
              
              
              -
              
              
              -Interest
                  income afterprovision
                  for credit losses
              
              
              234,000
              
              
              356,000
              
              
              -
              
              
              -OTHER
                  INCOMEService
                  fees
              
              
              7,000
              
              
              10,000
              
              
              -
              
              
              -7,000
              
              
              10,000
              
              
              -
              
              
              -OTHER
                  EXPENSESSalaries
                  and employee benefits
              
              
              350,000
              
              
              702,000
              
              
              -
              
              
              -Occupancy
                  expense
              
              
              116,000
              
              
              221,000
              
              
              -
              
              
              -Professional
                  fees
              
              
              58,000
              
              
              89,000
              
              
              -
              
              
              -Other
                  operating expenses
              
              
              172,000
              
              
              281,000
              
              
              -
              
              
              -696,000
              
              
              1,293,000
              
              
              -
              
              
              -Loss
                  from operations
              
              
              (455,000
              )
              
              (927,000
              )
              
              -
              
              
              -Preopening
                  costs
              
              
              -
              
              
              -
              
              
              (242,000
              )
              
              (489,000
              )NET
                  LOSS
              
              
              (455,000
              )
              
              (
                  927,000
              )
              
              (242,000
              )
              
              (489,000
              )Net
                  loss per weighted average share
              
              $
              (0.27
              )
              $
              (
                  0.55
              )
              $
              -
              
              $
              -Weighted
                  average shares outstanding
              
              
              1,680,000
              
              
              1,680,000
              
              
              -
              
              
              -
  The
        Notes
        to Financial Statements are an integral part of these statements.
 4
  **FIRST
                    METROPLEX CAPITAL, INC.****STATEMENT
                    OF CHANGES IN SHAREHOLDERS' EQUITY****SIX
                    MONTHS ENDED JUNE 30, 2005****(Unaudited)**
  AccumulatedAdditional
                  
                  
                  
                  OtherCommon
                  
                  Paid-in
                  
                  Retained
                  
                  ComprehensiveStock
                  
                  Capital
                  
                  Deficit
                  
                  Income
                  
                  TotalBALANCE,
                      December 31, 2004
                  
                  $
                  17,000
                  
                  $
                  16,380,000
                  
                  $
                  (
                      1,942,000
                  )
                  $
                  -
                  
                  $
                  14,455,000Comprehensive
                      incomeNet
                      loss - YTD
                  
                  
                  
                  
                  
                  
                  
                  
                  (927,000
                  )
                  
                  
                  
                  
                  (927,000
                  )Total
                      comprehensive lossBALANCE,
                      June 30, 2005
                  
                  $
                  17,000
                  
                  $
                  16,380,000
                  
                  $
                  (
                      2,869,000
                  )
                  $
                  -
                  
                  $
                  13,528,000
  The
        Notes
        to Financial Statements are an integral part of these statements.
  5
 
 **FIRST
                  METROPLEX CAPITAL, INC.****STATEMENT
                  OF CASH FLOWS****(Unaudited)**SIX
                  MONTHS
              
              SIX
                  MONTHSENDED
              
              ENDEDJUNE
                  30, 2005
              
              JUNE
                  30, 2004CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (
                  927,000
              )
              $
              (
                  489,000
              )Adjustments
                  to reconcile net lossto
                  net cash used in operating activitiesProvision
                  for credit losses
              
              
              150,000
              
              
              -Depreciation
                  expense
              
              
              92,000
              
              
              (2,000
              )Changes
                  in operating assets and liabilities:Other
                  assets
              
              
              111,000
              
              
              (
                  182,000
              )Other
                  liabilities
              
              
              33,000
              
              
              (
                  14,000
              )Net
                  cash used in operating activities
              
              
              (
                  543,000
              )
              
              (687,000
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESNet
                  change in loans
              
              
              (
                  9,988,000
              )
              
              -Purchases
                  of bank premises and equipment
              
              
              (84,000
              )
              
              (
                  641,000
              )Net
                  cash used in investing activities
              
              
              (10,072,000
              )
              
              (
                  641,000
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESAdvances
                  from organizers
              
              
              -
              
              
              1,153,000Net
                  change in demand deposits
              
              
              6,969,000
              
              
              -Net
                  change in time deposits
              
              
              2,934,000
              
              
              -Net
                  cash provided by financing activities
              
              
              9,903,000
              
              
              1,153,000Net
                  change in cash and cash equivalents
              
              
              (712,000
              )
              
              (175,000
              )CASH
                  AND CASH EQUIVALENTS,beginning
                  of period
              
              
              12,408,000
              
              
              343,000CASH
                  AND CASH EQUIVALENTS,end
                  of period
              
              $
              11,696,000
              
              $
              168,000SUPPLEMENTAL
                  DISCLOSURE OFCASH
                  FLOW INFORMATIONInterest
                  paid
              
              $
              89,000
              
              $
              -Income
                  taxes paid
              
              $
              -
              
              $
              -
  The
        Notes
        to Financial Statements are an integral part of these statements.
  6
 
  **FIRST
        METROPLEX CAPITAL, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1.**   **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
  **Organization
        and Nature of Operations**
  First
        Metroplex Capital, Inc. (the “Company”) was incorporated on December 23, 2002
        for the purpose of holding the common stock of T Bank, N.A. (the “Bank”). For
        the period from December 23, 2002 (date of inception) to November 2, 2004,
        the
        Company was in a development stage engaging in the preparation of applications
        for regulatory approvals, raising capital, financial planning, systems
        development, acquisition of equipment and facilities and recruiting activities.
        On October 29, 2004 the Company completed an offering of 1,680,000 shares
        of its
        common stock at a price of $10 per share. The gross proceeds from the offering
        totaled $16,800,000.
  The
        Bank
        began operations on November 2, 2004. The Bank provides a full range of banking
        services to individuals and corporate customers with two banking facilities
        serving North Dallas, Addison, Plano, Frisco and the neighboring Texas
        communities. The Bank is subject to competition from other local, regional,
        and
        national financial institutions and is also subject to the regulations of
        certain federal agencies.
  The
        accompanying consolidated financial statements include the accounts of the
        Company and its wholly-owned subsidiary, the Bank. All significant intercompany
        transactions have been eliminated in consolidation.
  In
        the
        opinion of management, all adjustments consist only of normal recurring
        adjustments, necessary to present fairly the assets, liabilities, and equity
        of
        the Bank and the operations and changes in shareholders equity for the three
        and
        six months ended June 30, 2005 have been included.
  **Cash
        Equivalents and Statement of Cash Flows**
  Cash
        due
        from banks, cash on hand, federal funds sold and all other highly liquid
        investments purchased with an original maturity of three months or less are
        considered to be cash and cash equivalents. Generally, federal funds are
        purchased and sold in one day. From time to time, deposits with correspondent
        banks will exceed amounts insured by the FDIC. Management does not anticipate
        any losses and evaluates the correspondent banks’ financial status on a regular
        basis. Advances from organizers of $2,605,000 were converted to common stock
        upon closing of the stock offering in October 2004.
  **Loans**
  Loans
        that management has the intent and ability to hold for the foreseeable future
        or
        until maturity or pay-off are stated at the principal amount outstanding,
        net of
        unearned interest, deferred loan fees and the allowance for credit losses.
        Interest earned, both fixed and variable rates, is credited to operations
        based
        on the principal balances outstanding. Unearned interest and deferred loan
        fees
        are capitalized and recognized as income over the terms of the loan using
        the
        effective interest method.
  The
        Bank
        grants commercial, real estate and consumer loans to customers. Although
        the
        Bank anticipates having a diversified loan portfolio, a substantial portion
        of
        its debtors' ability to honor their loan contracts is dependent upon the
        local
        economy. The Bank's loan policy for requiring collateral is based upon a
        number
        of factors including amount and purpose of loan, length of term, past credit
        history, financial strength and liquidity of the borrower.
  Loan
        origination and commitment fees, as well as certain direct loan origination
        and
        commitment costs, are deferred and amortized as a yield adjustment over the
        lives of the related loans using the interest method.
  Impaired
        loans are accounted for at the net present value of expected future cash
        flows,
        discounted at the loan’s effective interest rate, the observable market price of
        the loan or at the fair value of the collateral if the loan is collateral
        dependent.
  7
  **Allowance
        for Credit Losses**
  The
        allowance for credit losses is maintained at a level considered adequate
        to
        provide for losses that can be reasonably anticipated. Until management has
        adequate historical data upon which to base the estimate of the allowance
        for
        credit losses, a balance of approximately one and one half percent of the
        outstanding principal is used unless additional information regarding the
        ability of the borrower to repay the loan, current economic conditions or
        other
        pertinent factors indicate a different allowance is needed. Credits deemed
        uncollectible are charged to the allowance. Provisions for credit losses
        and
        recoveries on loans previously charged off are added to the allowance. Because
        of uncertainties associated with regional economic conditions, collateral
        values, and future cash flows on impaired loans, it is reasonably possible
        that
        management's estimate of credit losses inherent in the loan portfolio and
        the
        related allowance may change materially in the near term.
  Accrual
        of interest is discontinued on a loan when management believes, after
        considering economic and business conditions and collection efforts, that
        the
        borrower's financial condition is such that collection of interest is doubtful.
        When accrual of interest is discontinued, all unpaid accrued interest is
        reversed. Interest income is subsequently recognized only to the extent cash
        payments are received in excess of principal due.
  **Investment
        Securities**
  The
        Bank
        has investments in stock of the Federal Reserve System which is required
        for
        participation in the services offered. These investments are classified as
        restricted and are recorded at cost.
  **Leasehold
        improvements, Furniture and Equipment**
  Leasehold
        improvements, furniture and equipment are stated at cost less accumulated
        depreciation. Depreciation is computed by the straight-line method at rates
        based on the estimated useful lives of the related assets. Useful lives for
        equipment is normally between 3 and 10 years. Leasehold improvements are
        depreciated over the lease term or estimated life, whichever is shorter.
        Repair
        and maintenance costs are expensed as incurred.
  **Income
        Taxes**
  Deferred
        taxes are recognized for differences between the financial statement and
        tax
        bases of assets and liabilities that will result in taxable or deductible
        amounts in the future based on enacted tax laws and rates applicable to the
        periods in which the differences are expected to affect taxable
        income.
  **Use
        of Estimates**
  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 disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
  **Stock
        Based Compensation**
  The
        Company applies the provisions of Accounting Principles Board Opinion No.
        25,
“Accounting for Stock Issued to Employees” and related interpretations, in
        accounting for its stock-based compensation plans. Under Opinion 25,
        compensation cost is measured as the excess, if any, of the market price
        of the
        Company’s stock at the date of the grant above the amount an employee must pay
        to acquire the stock. No compensation expense is recognized when the exercise
        price is equal to the market value of the stock on the day of grant. The
        Financial Accounting Standards Board (“FASB”) published SFAS No. 123,
“Accounting for Stock-Based Compensation” (SFAS No. 123) on January 1, 1996
        which encourages, but does not require, companies to recognize compensation
        expense for grants of stock, stock options and other equity instruments to
        employees based on fair value accounting rules. Companies that do not adopt
        the
        fair value rules will continue to apply the existing rules, but are required
        to
        disclose pro forma net income or loss under the new method.
  8
  There
        were no common stock equivalents issued during the six months ended June
        30,
        2005 and all previously issued warrants were fully vested at December 31,
        2004.
  **Earnings
        Per Share**
  Earnings
        per share (EPS) are computed in accordance with SFAS No. 128, which requires
        dual presentation of basic and diluted EPS for entities with complex capital
        structures. Basic EPS is based on net income divided by the weighted-average
        number of shares outstanding during the period. Diluted EPS includes the
        dilutive effect of potential common stock using the treasury stock method
        only
        if the effect on EPS is dilutive.
  Earnings
        per common share are computed by dividing net income by the weighted-average
        number of shares outstanding for the year. The weighted-average number of
        common
        shares outstanding for basic and diluted earnings per share computations
        was
        1,680,000 for the six months ended June 30, 2005.
  The
        Company reported net losses for the six months ended June 30, 2005 and 2004.
        Accordingly, the dilutive effect of stock options and warrants is not considered
        in the net loss per share calculations for this period as the impact would
        have
        been antidilutive.
  **Comprehensive
        Income**
  Accounting
        principles generally require that recognized revenue, expenses, gains and
        losses
        be included in net income. Although certain changes in assets and liabilities,
        such as unrealized gains and losses on available for sale securities, are
        reported as a separate component of the equity section of the balance sheet,
        such items, along with net income, are components of comprehensive
        income.
  **New
        Accounting Pronouncements**
  FASB
        Statement 123R - On December 16, 2004, the Financial Accounting Standards
        Board
        (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payments
        which
        is a revision of FASB No. 123, Accounting for Stock-Based Compensation.
        Statement 123 (R) supersedes APB opinion No. 25, Accounting for Stock Issued
        to
        Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally,
        the approach in Statement 123 (R) is similar to the approach described in
        Statement 123. However, Statement 123 (R) requires all share-based payments
        to
        employees, including grants of employee stock options, to be recognized in
        the
        income statement based on their fair values. Pro forma disclosure will no
        longer
        be an alternative. The provisions of this statement become effective for
        our
        first interim period of 2006. Management has not yet determined the impact
        that
        this statement will have on our consolidated financial statements.
  **NOTE
        2.**   **LOANS**
  The
        components of loans at June 30, 2005 are summarized as follows:
  Commercial
              
              $
              5,669,000Consumer
                  installment
              
              
              636,000Real
                  estate
              
              
              10,342,00016,647,000Less
                  allowance for loan losses
              
              
              250,000$
              16,397,000
  9
  The
        change in the allowance for credit losses for 2005 is as follows:
  Balance
                  at beginning of year
              
              $
              100,000Provision
                  charged to operations
              
              
              150,000Loans
                  charged off
              
              
              3⁄4Recoveries
                  of loans previously charged off
              
              
              3⁄4Balance
                  at June 30, 2005
              
              $
              250,000
  The
        components of loans at December 31, 2004 are summarized as follows:
  Commercial
              
              $
              3,415,000Consumer
                  installment
              
              
              176,000Real
                  estate
              
              
              3,068,0006,659,000Less
                  allowance for loan losses
              
              
              100,000$
              6,559,000
  At
        June
        30, 2005, there were no loans which were contractually delinquent over ninety
        days that were continuing to accrue interest. In addition, there were no
        loans
        considered impaired, which should have been recognized in conformity with
        SFAS
        No. 114 and SFAS No. 118. No interest income on impaired loans was recognized
        for cash payments during the period ended June 30, 2005.
  **NOTE
        3.**   **SECURITIES**
  At
        June
        30, 2005 and December 31, 2004 securities consisted of the
        following:
  Amortized
                  Cost
              
              Gross
                  Unrealized Gains
              
              Gross
                  Unrealized (Losses)
              
              Estimated
                  Fair ValueFederal
                  Reserve Bank Stock
              
              $
              420,000
              
              $
              3⁄4
              
              $
              3⁄4
              
              $
              420,000
  **NOTE
        4.**   **RELATED
        PARTIES**
  Certain
        Directors and Officers of the Bank have depository accounts with the Bank.
        None
        of those deposit accounts have terms more favorable than those available
        to any
        other depositor.
  **NOTE
        5.**   **BANK
        PREMISES AND EQUIPMENT**
  The
        original cost and related accumulated depreciation at June 30, 2005 and December
        31, 2004 were as follows:
  June
                      30, 2005
                
                December
                    31, 2004Leasehold
                    improvements
                
                $
                505,000
                
                $
                504,000Furniture
                    and equipment
                
                
                782,000
                
                
                698,0001,287,000
                
                
                1,202,000Less
                    accumulated depreciation
                
                
                113,000
                
                
                21,000$
                1,174,000
                
                $
                1,181,000
  10
  **NOTE
        6.**   **DEPOSITS**
  Deposits
        at June 30, 2005 are summarized as follows:
  Amount
              
              PercentNoninterest
                  bearing demand
              
              $
              4,688,000
              
              
              29
              %Interest
                  bearing demand (NOW)
              
              
              756,000
              
              
              5
              %Money
                  market accounts
              
              
              6,260,000
              
              
              39
              %Savings
                  accounts
              
              
              187,000
              
              
              1
              %Certificates
                  of deposit, less than $100,000
              
              
              1,371,000
              
              
              8
              %Certificates
                  of deposit, $100,000 or greater
              
              
              2,860,000
              
              
              18
              %$
              16,122,000
              
              
              100
              %
 Deposits
        at December 31, 2004 are summarized as follows:
  Noninterest
                  bearing demand
              
              $
              1,739,000
              
              
              28
              %Interest
                  bearing demand (NOW)
              
              
              758,000
              
              
              12
              %Money
                  market accounts
              
              
              1,996,000
              
              
              32
              %Savings
                  accounts
              
              
              242,000
              
              
              4
              %Certificates
                  of deposit, less than $100,000
              
              
              284,000
              
              
              5
              %Certificates
                  of deposit, $100,000 or greater
              
              
              1,200,000
              
              
              19
              %$
              6,219,000
              
              
              100
              %
  At
        June
        30, 2005, the scheduled maturities of certificates of deposit were as
        follows:
  2005
              
              $
              1,061,0002006
              
              
              2,372,0002007
              
              
              67,0002008
              
              
              02009
              
              
              02010
              
              
              731,000Total
              
              $
              4,231,000
 
 **NOTE
        7.**   **INCOME
        TAXES**
  Management
        has provided a 100% valuation allowance for its net deferred tax asset due
        to
        uncertainty of realization during the carry forward period.
  As
        of
        December 31, 2004, the Company had net tax operating loss carry forwards
        of
        approximately $191,000 that will ultimately expire in 2024 if not
        used.
  **NOTE
        8.**   **STOCK
        OPTIONS**
  The
        Company’s shareholders have approved a stock incentive plan designed to provide
        it with the flexibility to grant incentive stock options and non-qualified
        stock
        options to its executive and other officers. The purpose of the plan is to
        provide increased incentive for key employees to render services and to exert
        maximum effort for the success of the Company. The plan has a term of 10
        years.
        The plan is administered by the Board of Directors who have reserved 260,000
        shares for issuance. There are contractual obligations outstanding at June
        30,
        2005 and December 31, 2004 to issue options to purchase 150,000
        shares.
  11
  **NOTE
        9.**   **STOCK
        WARRANTS**
  The
        Company has two stock warrant plans at June 30, 2005 and December 31, 2004.
  Initial
        shareholders in the Company received warrants to purchase one share of common
        stock for every five shares of common stock purchases in the offering. A
        total
        of 336,000 warrants were issued. These warrants are exercisable at a price
        of
        $12.50 per share at any time until November 2, 2007.
  The
        Company’s organizers advanced funds for organizational and other preopening
        expenses. As consideration for the advances the organizers received warrants
        to
        purchase one share of common stock for every $20 advanced up to a limit of
        $100,000. A total of 96,750 warrants were issued. These warrants are exercisable
        at a price of $10.00 per share at any time until November 2, 2014.
  There
        were no additional warrants issued during the six months ended June 30,
        2005.
  **NOTE
        10.**   **ADVANCES
        FROM ORGANIZERS**
  The
        Company’s organizers advanced funds for organizational and other preopening
        expenses. The advances were non interest bearing and had no stated maturity.
        The
        Company repaid the advances by issuing shares of common stock at $10 per
        share.
  **NOTE
        11.**   **COMMITMENTS
        AND CONTINGENCIES**
  The
        Company is a party to financial instruments with off-balance sheet risk in
        the
        normal course of business to meet the financing needs of its customers. These
        financial instruments include commitments to extend credit and standby letters
        of credit. These instruments involve, to varying degrees, elements of credit
        risk in excess of the amount recognized in the accompanying balance sheets.
        The
        Company's exposure to credit loss in the event of nonperformance by the other
        party to the financial instruments for commitments to extend credit and standby
        letters of credit is represented by the contractual amount of those instruments.
        The Company uses the same credit policies in making commitments and conditional
        obligations as it does for on-balance sheet instruments. At June 30, 2005,
        the
        Company had commitments to extend credit and standby letters of credit of
        approximately $7,295,000 and $0, respectively. At December 31, 2004, the
        Company
        had commitments to extend credit and standby letters of credit of approximately
        $2,124,000 and $0, respectively.
  Commitments
        to extend credit are agreements to lend to a customer as long as there is
        no
        violation of any condition established in the contract. Commitments generally
        have fixed expiration dates or other termination clauses and may require
        payment
        of a fee. Since many of the commitments may expire without being drawn upon,
        the
        total commitment amounts do not necessarily represent future cash
        requirements.
  **Employment
        Agreements**
  The
        Company and the Bank have entered into employment agreements with the three
        officers of the Bank. The agreements are for an initial three-year term and
        are
        automatically renewable for an additional three years unless either party
        elects
        not to renew.
  The
        agreements provide for compensation and benefits including the issuance of
        options to acquire up to 140,000 shares of the Company’s common stock at $10 per
        share, exercisable within ten years from the date of grant. At June 30, 2005
        and
        December 31, 2004, these options had not been issued.
  The
        agreements further provide for termination payments in the event of a change
        in
        control, as defined in the employment agreements.
  12
  **NOTE
        12.**   **REGULATORY
        MATTERS**
  The
        Company is subject to various regulatory capital requirements administered
        by
        the federal banking agencies. Failure to meet minimum capital requirements
        can
        initiate certain mandatory and possibly additional discretionary actions
        by
        regulators that, if undertaken could have a direct material effect on the
        Company's financial statements. Under capital adequacy guidelines and the
        regulatory framework for prompt corrective action, the Company must meet
        specific capital guidelines that involve quantitative measures of the Company's
        assets, liabilities and certain off-balance-sheet items as calculated under
        regulatory accounting practices. The Company's capital amounts and
        classification are also subject to qualitative judgments by the regulators
        about
        components, risk weightings and other factors.
  Quantitative
        measures established by regulations to ensure capital adequacy require the
        Bank
        to maintain minimum amounts and ratios (set forth in the table below) of
        total
        and Tier I capital (as defined in the regulations) to risk-weighted assets
        (as
        defined), and of Tier I capital (as defined) to average assets (as defined).
        Management believes, as of June 30, 2005 and December 31, 2004, that the
        Bank
        meets all capital adequacy requirements to which it is subject.
  As
        of
        June 30, 2005 and December 31, 2004, the most recent notification from the
        Bank’s regulators categorized the Bank as well capitalized under the regulatory
        framework for prompt corrective action. To be categorized as well capitalized,
        the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier
        I
        leverage ratios as set forth in the table. There are no conditions or events
        since that notification that management believes have changed the institution's
        category.
  Actual
                
                
                For
                    Capital Adequacy Purposes
                
                
                To
                    Be Well Capitalized Under Prompt Corrective Action
                    ProvisionsAmount
                
                
                Ratio
                
                
                Amount
                
                
                Ratio
                
                
                Amount
                
                
                Ratio(000’s)
                
                
                
                
                
                (000’s)
                
                
                
                
                
                (000’s)**As
                  of June
                  30, 2005**Total
                    Capital (to Risk Weighted Assets)
                
                $
                13,051
                
                
                65.1
                %
                $
                1,603
                
                
                38.00
                %
                $
                2,004
                
                
                310.00
                %Tier
                    I Capital (to Risk Weighted Assets)
                
                
                12,801
                
                
                63.9
                %
                
                801
                
                
                34.00
                %
                
                1,202
                
                
                36.00
                %Tier
                    I Capital (to Average Assets)
                
                
                12,801
                
                
                49.2
                %
                
                1,039
                
                
                34.00
                %
                
                1,300
                
                
                35.00
                %
 
 Actual
              
              For
                  Capital Adequacy Purposes
              
              To
                  Be Well Capitalized Under Prompt Corrective Action
                  ProvisionsAmount
              
              Ratio
              
              Amount
              
              Ratio
              
              Amount
              
              Ratio(000’s)
              
              
              
              (000’s)
              
              
              
              (000’s)**As
                  of December 31, 2004**Total
                  Capital (to Risk Weighted Assets)
              
              $
              14,555
              
              
              147.98
              %
              $
              787
              
              
              38.00
              %
              $
              984
              
              
              310.00
              %Total
                  Capital (to Risk Weighted Assets)
              
              
              14,455
              
              
              146.96
              %
              
              393
              
              
              34.00
              %
              
              590
              
              
              36.00
              %Total
                  Capital (to Risk Weighted Assets)
              
              
              14,455
              
              
              82.94
              %
              
              669
              
              
              34.00
              %
              
              836
              
              
              35.00
              %
  13
  **NOTE
        13.**   **PREOPENING
        EXPENSES**
  As
        explained in Note 1, the Bank was in a development stage from December 23,
        2002
        to November 1, 2004 and incurred certain preopening costs. The preopening
        costs
        consisted of the following:
  Three
                  and Six Months
                Ended
                June
                  30, 2005
              
              Six
                  Months
                Ended
                June
                  30, 2004Regulatory
                  fees
              
              $
              0
              
              $
              0Professional
                  fees
              
              
              59,000
              
              
              80,000Consulting
                  fees
              
              
              123,000
              
              
              409,000Preoffering
                  consulting fees
              
              
              0
              
              
              0Preopening
                  operation expenses
              
              
              60,000
              
              
              0$
              242,000
              
              $
              489,000
  **NOTE
        14.**   **PARENT
        COMPANY CONDENSED FINANCIAL STATEMENTS**
  FIRST
                    METROPLEX CAPITAL, INC.
                  CONDENSED
                    BALANCE SHEET
                  JUNE
                    30, 2005
  ASSETSCash
                    and due from banks
                
                $
                715,000Fixed
                    assets
                
                
                12,000Investment
                    in subsidiary
                
                
                12,801,000Total
                    Assets
                
                $
                13,528,000LIABILITIES
                    AND CAPITALCapital
                
                
                13,528,000Total
                    Liabilities and Capital
                
                $
                13,528,000
  FIRST
                    METROPLEX CAPITAL, INC.
                  CONDENSED
                    INCOME STATEMENT
                  FOR
                    THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2005
  Three
                    Months
                
                
                Six
                    MonthsEquity
                    in loss from Bank
                
                $
                (369,000
                )
                $
                (824,000
                )Noninterest
                    expense:Professional
                    and administrative expenses
                
                
                86,000
                
                
                103,000Total
                
                
                86,000
                
                
                103,000Net
                    Loss
                
                $
                (455,000
                )
                $
                (927,000
                )
  14
  FIRST
                    METROPLEX CAPITAL, INC.
                  CONDENSED
                    STATEMENT OF CASH FLOWS
                  FOR
                    THE SIX MONTHS ENDED JUNE 30, 2005
  Cash
                    Flows from Operating Activities:Net
                    Loss
                
                $
                (927,000
                )Adjustments
                    to reconcile net lossTo
                    net cash provided by operating activitiesEquity
                    in loss of Bank
                
                
                824,000Changes
                    in operating assets and liabilities:Other
                    assets
                
                
                722,000Net
                    cash provided by operating activities
                
                
                619,000Cash
                    Flows from Investing ActivitiesNet
                    cash used in investing activities
                
                
                0Cash
                    Flows from Financing Activities
                
                
                0Net
                    cash provided from financing activities
                
                
                0Net
                    change in cash and cash equivalents
                
                
                619,000Cash
                    and cash equivalents, beginning of year
                
                
                96,000Cash
                    and cash equivalents, end of period
                
                $
                715,000Supplemental
                    Disclosure of Cash Flow InformationInterest
                    paid
                
                $
                3⁄4Income
                    tax paid
                
                $
                3⁄4
  FIRST
                    METROPLEX CAPITAL, INC.
                  CONDENSED
                    BALANCE SHEET
                  DECEMBER
                    31, 2004
  ASSETSCash
                    and due from banks
                
                $
                96,000Bank
                    premises and equipment, net
                
                
                457,000Accounts
                    receivable
                
                
                276,000Other
                    assets
                
                
                13,626,000Total
                    Assets
                
                $
                14,445,000LIABILITIES
                    AND CAPITALCapital
                
                
                14,455,000Total
                    Liabilities and Capital
                
                $
                14,455,000
 
 15
  FIRST
                    METROPLEX CAPITAL, INC.
                  CONDENSED
                    INCOME STATEMENT
                  FOR
                    THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004
  Noninterest
                    expense:
                
                Three
                    Months
                
                Six
                    MonthsPreopening
                    expenses
                
                $
                242,000
                
                $
                489,000Total
                
                
                242,000
                
                
                489,000Net
                    Loss
                
                $
                (242,000
                )
                $
                (489,000
                )
  FIRST
                    METROPLEX CAPITAL, INC.
                  CONDENSED
                    STATEMENT OF CASH FLOWS
                  FOR
                    THE SIX MONTHS ENDED JUNE 30, 2004
  Cash
                    Flows from Operating Activities:Net
                    Loss
                
                $
                (489,000
                )Adjustments
                    to reconcile net lossTo
                    net cash provided by operating activitiesChanges
                    in operating assets and liabilities:Other
                    assets
                
                
                (197,000
                )Net
                    cash used in operating expenses
                
                
                (686,000
                )Cash
                    Flows from Investing ActivitiesPurchases
                    of bank premises and equipment
                
                
                (641,000
                )Net
                    cash used in investing activities
                
                
                (641,000
                )Cash
                    Flows from Financing Activities:Advance
                    from organizers
                
                
                1,153,000Net
                    cash provided from financing activities
                
                
                1,153,000Net
                    decrease in cash and cash equivalents
                
                
                (174,000
                )Cash
                    and cash equivalents, beginning of period
                
                
                343,000Cash
                    and cash equivalents, end of period
                
                $
                168,000Supplemental
                    Disclosure of Cash Flow InformationInterest
                    paid
                
                $
                3⁄4Income
                    tax paid
                
                $
                3⁄4
  16
  **ITEM
        2.**  **Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations**
  The
        following discussion and analysis presents our consolidated financial condition
        for the three months and six months ended June 30, 2005, and our consolidated
        results of operations as of December 31, 2004 and June 30, 2004. The discussion
        should be read in conjunction with our financial statements and the notes
        related thereto which appear elsewhere in this Quarterly Report on
        Form 10-QSB.
  Statements
        contained in this report that are not purely historical are forward-looking
        statements within the meaning of Section 21E of the Securities Exchange Act
        of
        1934, as amended, including our expectations, intentions, beliefs, or strategies
        regarding the future. Any statements in this document about expectations,
        beliefs, plans, objectives, assumptions or future events or performance are
        not
        historical facts and are forward-looking statements. These statements are
        often,
        but not always, made through the use of words or phrases such as
“may,”“should,”“could,”“predict,”“potential,”“believe,”“will likely
        result,”“expect,”“anticipate,”“seek,” 
“estimate,”“intend,”“plan,”“projection,”“would” and “outlook,” and similar
        expressions. Accordingly, these statements involve estimates, assumptions
        and
        uncertainties, which could cause actual results to differ materially from
        those
        expressed in them. Any forward-looking statements are qualified in their
        entirety by reference to the factors discussed throughout this document.
        All
        forward-looking statements concerning economic conditions, rates of growth,
        rates of income or values as may be included in this document are based on
        information available to us on the dates noted, and we assume no obligation
        to
        update any such forward-looking statements. It is important to note that
        our
        actual results may differ materially from those in such forward-looking
        statements due to fluctuations in interest rates, inflation, government
        regulations, economic conditions, customer disintermediation and competitive
        product and pricing pressures in the geographic and business areas in which
        we
        conduct operations, including our plans, objectives, expectations and intentions
        and other factors discussed under the section entitled “Risk Factors,” in our
        Annual Report on Form 10-KSB for the year ended December 31, 2004, including
        the
        following:
  ●
              we
                  have limited operating history upon which to base an estimate of
                  our
                  future financial performance;
  ●
              we
                  have incurred substantial start-up expenses associated with our
                  organization and our recent public offering and expect to sustain
                  losses
                  or achieve minimal profitability during our initial years of
                  operations;
  ●
              if
                  we are unable to implement our business plan and strategies, we
                  will be
                  hampered in our ability to develop business and serve or customers,
                  which,
                  in turn, could have an adverse effect on our financial
                  performance;
  ●
              if
                  we fail to retain our key employees, growth and profitability could
                  be
                  adversely affected;
  ●
              we
                  face substantial competition in our primary market
                  area;
  ●
              the
                  Bank’s current legally mandated lending limits are lower than those
                  of our
                  competitors, which may impair our ability to attract
                  borrowers;
  ●
              an
                  economic downturn, especially one affecting our primary service
                  area, may
                  have an adverse effect on our financial
                  performance;
  ●
              changes
                  in governmental economic and monetary policies, the Internal Revenue
                  Code
                  and banking and credit regulations, as well as other factors, will
                  affect
                  the demand for loans and the ability of the Bank to attract
                  deposits;
  ●
              changes
                  in the general level of interest rates and other economic factors
                  can
                  affect the Bank’s interest income by affecting the spread between
                  interest-earning assets and interest-bearing
                  liabilities;
  ●
              we
                  have no current intentions of paying cash
                  dividends;
  ●
              we
                  are subject to significant government regulation and legislation
                  that
                  increases the cost of doing business and inhibits our ability to
                  compete;
  17
  ●
              we
                  may not be able to raise additional capital on terms favorable
                  to us;
                  and
  ●
              our
                  directors and executive officers beneficially own a significant
                  portion of
                  our outstanding common stock.
  These
        factors and the risk factors referred to in our Annual Report on Form 10-KSB
        for
        the year ended December 31, 2004 could cause actual results or outcomes to
        differ materially from those expressed in any forward-looking statements
        made by
        us, and you should not place undue reliance on any such forward-looking
        statements. Any forward-looking statement speaks only as of the date on which
        it
        is made and we do not undertake any obligation to update any forward-looking
        statement or statements to reflect events or circumstances after the date
        on
        which such statement is made or to reflect the occurrence of unanticipated
        events. New factors emerge from time to time, and it is not possible for
        us to
        predict which will arise. In addition, we cannot assess the impact of each
        factor on our business or the extent to which any factor, or combination
        of
        factors, may cause actual results to differ materially from those contained
        in
        any forward-looking statements.
  **Executive
        Overview**
  ***Introduction***
  We
        are a
        bank holding company headquartered in Dallas, Texas, offering a broad array
        of
        banking services through our wholly owned banking subsidiary, T Bank. Our
        principal markets include North Dallas, Addison, Plano, Frisco and the
        neighboring Texas communities. As of June 30, 2005, we had, on a consolidated
        basis, total assets of $29.7 million, net loans of $16.4 million, total deposits
        of $16.1 million, and shareholders’ equity of $13.5 million. We currently
        operate through a main office located at 16000 Dallas Parkway, Dallas, Texas,
        and a branch office at 8100 North Dallas Parkway, Plano, Texas.
  We
        were
        incorporated under the laws of the State of Texas on December 23, 2002 to
        organize and serve as the holding company for the Bank. In 2004, we completed
        an
        initial public offering of our common stock, issuing. 1,680,000 shares at
        a
        price of $10.00 per share. The net proceeds that we received from the offering,
        after deducting offering expenses, were approximately $16.4 million. The
        Bank
        opened for business on November 2, 2004.
  The
        following discussion focuses on our financial condition for the three months
        and
        six months ended June 30, 2005 and our results of operations as of December
        31,
        2005 and June 30, 3005. Since the Bank did not open until November 2, 2004,
        comparison to the same periods in 2004 would not be meaningful. While
        comparisons are provided to the fiscal year ended December 31, 2004, those
        comparisons are affected significantly by the fact that the Bank did not
        begin
        operations until November 2004. There can be no assurance that the growth
        experienced by the Bank in its initial stage of development will be maintained.
  ***Key
        Performance Indicators at*** **June
        30, 2005**
  We
        believe the following were key indicators of our performance and results
        of
        operations through the first two quarters of 2005:
  ●
              our
                  total assets grew to $29.7 million at the end of the second quarter
                  of
                  2005, representing an increase of 43%, from $20.7 million at the
                  end of
                  2004 and an increase of 16% from $25.5 million at the end of the
                  first
                  quarter of 2005;
  ●
              our
                  total loans grew to $16.4 million at the end of the second quarter
                  of
                  2005, representing an increase of 148%, from $6.6 million at the
                  end of
                  2004 and an increase of 30% from $11.4 million at the end of the
                  first
                  quarter of 2005;
  ●
              our
                  total deposits grew to $16.1 million at the end of the second quarter
                  of
                  2005, representing an increase of 160%, from $6.2 million at the
                  end of
                  2004 and an increase of 40% from $11.5 million at the end of the
                  first
                  quarter of 2005;
  18
  ●
              our
                  total revenue grew to $378,000 in the second quarter of 2005 compared
                  to
                  $229,000 in the first quarter of 2005, representing an increase
                  of 6%;
                  and
  ●
              our
                  net loss was $455,000 in the second quarter of 2005, representing
                  a
                  decrease of 3%, from $472,000 in the first quarter of
                  2005.
  These
        items, as well as other factors, are discussed in further detail throughout
        this
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations” section of this Quarterly Report on Form 10-QSB.
  **Results
        of Operations**
 
 ***Net
        Interest Income and Net Interest Margin***
  Net
        interest income is the difference between interest income, principally from
        loan, lease and investment securities portfolios, and interest expense,
        principally on customer deposits and borrowings. Net interest income is our
        principal source of earnings. Changes in net interest income result from
        changes
        in volume, spread and margin. Volume refers to the average dollar level of
        interest-earning assets and interest-bearing liabilities. Spread refers to
        the
        difference between the average yield on interest-earning assets and the average
        cost of interest-bearing liabilities. Margin refers to net interest income
        divided by average interest-earning assets, and is influenced by the level
        and
        relative mix of interest-earning assets and interest-bearing
        liabilities.
  Net
        interest income increased by 58%, or $114,000, to $310,000 in the second
        quarter
        of 2005 from $196,000 for the first quarter of 2005. Our net interest margin
        increased to 5.0% from 4.0% for the same periods. Our net interest spread
        also
        increased to 2.65% from 2.16%. These increases primarily resulted from
        redeploying money invested in overnight fed funds into higher earning
        loans.
  Total
        interest income increased by 64% to $371,000 for the second quarter of 2005,
        as
        compared to $226,000 for the first quarter of 2005. This increase is
        attributable primarily to increased loan volumes. Average net loans increased
        by
        $6.3 million (73%), to $14.9 million, as compared to $8.6 million for the
        first
        quarter of 2005. We attribute this growth in loans to our ongoing marketing
        efforts.
  Total
        interest expense increased by 103% to $61,000 in the second quarter of 2005,
        compared to $30,000 in the first quarter of 2005. These increases resulted
        primarily from our ongoing marketing efforts to attract new deposits. The
        average interest rate we paid for interest-bearing deposits for the second
        quarter of 2005 was 2.4%, compared to 1.9% for the first quarter of 2005.
        Average interest-bearing liabilities increased by 64% to $10.2 million in
        the
        second quarter of 2005, compared to $6.2 million in the first quarter of
        2005.
  The
        following table sets forth our average balances of assets, liabilities and
        shareholders’ equity, in addition to the major components of net interest income
        and our net interest margin for the three months and six months ended June
        30,
        2005 and the three months ended December 31, 2004.
  19
  **QUARTERLY
                          FINANCIAL SUMMARY - UNAUDITED**Consolidated
                          Daily Average Balances, Average Yields and Rates(Dollars
                          in thousands except per share data)
  For
                          the three months ended
                      For
                          the six months ended
                      For
                          the three months endedJune
                          30, 2005
                      
                      
                      June
                          30, 2005
                      
                      December
                          31, 2004Average
                          Balance
                      RevenueExpense
                      Yield
                          Rate
                      Average
                          Balance
                      
                      Revenue
                          Expense
                      Yield
                          Rate
                      AverageBalance
                      Revenue
                          Expense
                      Yield
                          Rate**Assets**Interest-earning
                          assets:Loans
                      $15,110
                      $299
                      7.9%
                      $11,931
                      $457
                      7.7%
                      $4,903
                      $56
                      6.9%Less
                          reserve for loan loss
                      210
                      
                      
                      
                      166
                      
                      
                      
                      39Loans
                          net of reserve
                      14,900
                      
                      
                      
                      11,765
                      
                      
                      
                      4,864Federal
                          funds sold
                      9,106
                      66
                      2.9%
                      9,838
                      127
                      2.6%
                      9,074
                      31
                      2.0%Securities
                      420
                      
                      6
                      5.7%
                      420
                      13
                      6.2%
                      577
                      5
                      5.2%Total
                          earning assets
                      24,426
                      371
                      6.1%
                      22,023
                      597
                      5.4%
                      14,515
                      92
                      3.8%Cash
                          and other assets
                      2,294
                      
                      
                      
                      2,003
                      
                      
                      
                      1,405Total
                          assets
                      $26,720
                      
                      
                      
                      $24,026
                      
                      
                      
                      $15,920**Liabilities
                          and Shareholders’ Equity**NOW
                          accounts
                      $857
                      $1
                      0.5%
                      $840
                      $2
                      0.5%
                      $441
                      $0
                      0.5%Money
                          market accounts
                      6,139
                      36
                      2.3%
                      4,801
                      53
                      2.2%
                      701
                      2
                      1.7%Savings
                          accounts
                      228
                      
                      1
                      1.8%
                      230
                      
                      2
                      1.7%
                      131
                      0
                      1.8%Certificates
                          of deposit
                      820
                      
                      6
                      2.9%
                      633
                      
                      9
                      2.8%
                      165
                      1
                      2.9%Certificates
                          of deposit $100,000 or more
                      2,185
                      17
                      3.1%
                      1,720
                      25
                      2.9%
                      405
                      2
                      2.5%Total
                          interest bearing deposits
                      10,229
                      61
                      2.4%
                      8,224
                      91
                      2.2%
                      1,843
                      5
                      1.7%Noninterest
                          bearing deposits
                      3,459
                      
                      
                      
                      2,566
                      
                      
                      
                      644Other
                          liabilities
                      36
                      
                      
                      
                      26
                      
                      
                      
                      -Shareholders’
                          equity
                      12,996
                      
                      
                      
                      13,210
                      
                      
                      
                      13,433Total
                          liabilities and shareholders' equity
                      $26,720
                      
                      
                      
                      $24,026
                      
                      
                      
                      $15.920Net
                          interest Income
                      
                      310
                      
                      
                      506
                      
                      
                      87Net
                          interest spread
                      
                      
                      
                      3.7%
                      
                      
                      
                      3.2%
                      
                      
                      2.1%Net
                          interest margin
                      
                      
                      
                      5.1%
                      
                      
                      
                      4.6%
                      
                      
                      3.6%Provision
                          for loan loss
                      
                      76
                      
                      
                      150
                      
                      
                      100Non-interest
                          income
                      
                      
                      7
                      
                      
                      10
                      
                      
                      1Non-interest
                          expense
                      
                      696
                      
                      
                      1,293
                      
                      
                      363Income
                          (loss) before Income taxes
                      
                      (455)
                      
                      
                      (927)
                      
                      
                      (375)Income
                          taxes expense (benefit)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      -Net
                          income
                      
                      ($455)
                      
                      
                      ($927)
                      
                      
                      ($375)Earnings
                          (Loss) per share
                      
                      (0.27)
                      
                      
                      (0.49)
                      
                      
                      (0.22)Return
                          on average equity
                      
                      (14.0%)
                      
                      
                      (12.5%)
                      
                      
                      (16.8%)
  Changes
        in volume and changes in interest rates affect our interest income and interest
        expense. The effect of these changes is typically displayed in a volume,
        mix and
        rate analysis table which compares the changes in income and expense over
        periods. Since the Company has a limited operating history, data to analyze
        these changes is not currently available.
  ***Provision
        for Loan Losses***
  We
        determine a provision for loan losses that we consider sufficient to maintain
        an
        allowance to absorb probable losses inherent in our portfolio as of the balance
        sheet date. For additional information concerning this determination, see
        the
        section of this discussion and analysis captioned “Allowance for Loan
        Losses.”
  In
        the
        second quarter of 2005, our provision for loan and lease losses was $76,000
        compared to $74,000 for the first quarter of 2005. The provision amounts
        are
        directly related to loan volumes. Because the Bank recently opened, as with
        the
        first quarter of 2005, we did not have any charge-offs or non-performing
        loans
        during the second quarter of 2005.
  20
  ***Noninterest
        Income***
  As
        with
        the first quarter of 2005, our noninterest income for the quarter ended June
        30,
        2005 was attributable solely to service charges on depository accounts. Services
        charges for the second quarter of 2005 totaled $7,000, compared to $3,000
        for
        the first quarter of 2005. The increase in income from service charges is
        attributable to the increase in our number of transactional and savings
        accounts.
  ***Noninterest
        Expense***
  The
        following tables set forth a summary of noninterest expenses for the periods
        indicated:
  Three
                    months ended June 30, 2005
                
                
                Six
                    months ended June 30, 2005
                
                
                Three
                    months ended December 31, 2004Salaries
                    and employee benefits
                
                $
                350,000
                
                $
                702,000
                
                $
                239,000Net
                    occupancy expense
                
                
                116,000
                
                
                221,000
                
                
                60,000Office
                    expenses
                
                
                33,000
                
                
                49,000
                
                
                13,000Data
                    processing
                
                
                45,000
                
                
                72,000
                
                
                23,000Professional
                    fees
                
                
                58,000
                
                
                89,000
                
                
                8,000Advertising
                    and promotional
                
                
                11,000
                
                
                34,000
                
                
                4,000Other
                    expenses
                
                
                84,000
                
                
                126,000
                
                
                16,000Total
                    noninterest expenses
                
                $
                696,000
                
                
                1,293,000
                
                $
                363,000
  Our
        total
        noninterest expense increased to $696,000 in the second quarter of 2005,
        as
        compared to $597,000 for the first quarter of 2005, representing an increase
        of
        17%. This difference is attributable primarily to the expanded costs associated
        with the opening of the Bank and our initial business growth. While we
        anticipate that the overall volume of our noninterest expense will continue
        to
        increase as we grow, we are committed to controlling costs and efficiency
        and
        expect to moderate these increases relative to our revenue growth.
  Salaries
        and employee benefits totaled $350,000 for the second quarter of 2005, which
        is
        comparable with the first quarter of 2005. We had 14 full-time equivalent
        employees as of June 30, 2005. Our volume of assets per employee as of the
        end
        of the second quarter of 2005 was $580,000.
  Occupancy
        and equipment expenses totaled $116,000 for the second quarter of 2005,
        attributable primarily to lease expense and depreciation and amortization
        of
        leasehold improvements and furniture, fixtures and equipment.
  Professional
        fees and other expenses were $142,000 for the second quarter of 2005 compared
        to
        $73,000 for the first quarter of 2005. This is attributable primarily to
        professional fees and expenses associated with loan compliance, audit expenses,
        public reporting and other expenses generally associated with publicly-traded
        companies.
  ***Income
        Taxes***
  No
        federal tax expense has been recorded for the quarter ended June 30, 2005,
        based
        upon net operating losses. Based upon the Company’s limited operating history,
        the federal tax benefit of these losses has been fully reserved.
  21
  **Financial
        Condition**
 
 Our
        total
        assets as of June 30, 2005 were $29.7 million, compared to $25.5 million
        as of
        March 31, 2005 and $20.7 million as of December 31, 2004. The increase in
        our
        total assets during the first and second quarters of 2005 were primarily
        the
        result of increases in deposits.
  Our
        total
        deposits increased to $16.1 million as of June 30, 2005, compared to $11.4
        million as of March 31, 2005 and $6.2 million as of December 31, 2004.
        Our
        asset growth during the first and second quarters of 2005 was primarily the
        result of our continued marketing efforts to attract new clients.
  As
        of
        June 30, 2005, our shareholders’ equity was $13.5 million, compared to $14.0
        million as of March 31, 2005 and $14.5 million as of December
        31,
        2004. These decreases were the result of operating losses in the first and
        second quarters of 2005.
  ***Short-Term
        Investments and Interest-bearing Deposits in Other Financial
        Institutions***
  At
        June
        30, 2005, the Bank had $10.0 million in federal funds sold. At December 31,
        2004
        the Bank had $11.6 million federal funds sold. Federal funds sold allow the
        Bank
        to meet liquidity requirements and provide temporary holdings until the funds
        can be otherwise deployed or invested.
  ***Investment
        Securities***
  Our
        investment portfolio will primarily serve as a source of interest income
        and,
        secondarily, as a source of liquidity and a management tool for our interest
        rate sensitivity. We manage our investment portfolio according to a written
        investment policy established by our Board of Directors and implemented by
        our
        Investment/Asset-liability Committee.
  At
        June
        30, 2005 and December 31, 2004, the Bank’s securities consisted solely of
        Federal Reserve Bank Stock, having an amortized cost of $420,000, an estimate
        fair value of $420,000, and a weighted average yield of 5.7%.
  ***Loan
        Portfolio***
  Our
        primary source of income is interest on loans. The following table presents
        the
        composition of our loan portfolio by category as of the dates
        indicated:
  **As
                  of****June
                  30,**
              
              **As
                  of December 31,****2005**
              
              **2004**Real
                  estate - mortgage
              
              $
              7,585,000
              
              $
              1,732,000Commercial
                  and industrial
              
              
              5,669,000
              
              
              3,415,000Consumer
              
              
              636,000
              
              
              176,000Real
                  estate - construction
              
              
              2,757,000
              
              
              1,336,000Other
                  loans
              
              
              0
              
              
              0Gross
                  loans and leases
              
              $
              16,647,000
              
              $
              6,659,000Less:
                  Allowance for loan and lease losses
              
              
              250,000
              
              
              100,000Loans,
                  net
              
              $
              16,397,000
              
              $
              6,559,000
  As
        of
        June 30, 2005 and December 31, 2004, our total loans were $16.6 million and
        $6.7
        million, respectively. The increase in our loan volume during the second
        quarter
        of 2005 resulted from the continued growth of our operations. Our total loans
        as
        a percentage of total assets increased to 56% as of June 30, 2005, compared
        to
        45% as of March 31, 2005 and 32% as of December 31, 2004.
  22
  Our
        commercial loan portfolio is comprised of lines of credit for working capital
        and term loans to finance equipment and other business assets. Our lines
        of
        credit typically are limited to a percentage of the value of the assets securing
        the line. Lines of credit and term loans typically are reviewed annually
        and are
        supported by accounts receivable, inventory, equipment and other assets of
        our
        client’s businesses. At June 30, 2005 and December 31, 2004, funded loans
        totaled $5.7 million and $3.4 million, approximately 34% and 51% of our total
        funded loans, respectively.
  Our
        consumer loan portfolio consists of personal lines of credit and loans to
        acquire personal assets such as automobiles and boats. Our lines of credit
        generally have terms of one year and our term loans generally have terms
        of
        three to five years. Our lines of credit typically have floating rates. At
        June
        30, 2005 and December 31, 2004, funded consumer loans totaled $636,000 and
        $176,000, approximately 4% and 2.6% of our total funded loans,
        respectively.
  Our
        real
        estate loan portfolio is comprised of construction loans and short term mortgage
        loans. Construction loans consist primarily of single-family residential
        properties, have a term of less than one year and have floating rates and
        commitment fees. We typically make construction loans to builders that have
        an
        established record of successful project completion and loan repayment. Short
        term mortgage loans typically are secured by commercial properties occupied
        by
        the borrower, have terms of three to seven years with both fixed and floating
        rates. At June 30, 2005 and December 31, 2004, funded real estate loans totaled
        $10.3 million and $3.1 million, approximately 62% and 46% of our total funded
        loans, respectively.
  Loan
        concentrations are considered to exist when there are amounts loaned to multiple
        borrowers engaged in similar activities that would cause them to be similarly
        impacted by economic or other conditions. At June 30, 2005, our commercial
        loan
        portfolio included $4.1 million of loans, approximately 25% of our total
        funded
        loans, to fund the purchase of dental practices. We believe that these loans
        are
        well secured to credit worthy borrowers and are diversified geographically.
        As
        new loans are generated and the Bank continues to grow, the percentage of
        the
        total loan portfolio consisting of the foregoing concentration may remain
        constant thereby continuing the risk associated with industry
        concentration.
  Management
        may renew loans at maturity when requested by a customer whose financial
        strength appears to support such a renewal or when such a renewal appears
        to be
        in the best interest of the Bank. The Bank requires payment of accrued interest
        in such instances and may adjust the rate of interest, require a principal
        reduction, or modify other terms of the loan at the time of renewal.
  Our
        loan
        terms vary according to loan type. The following table shows the maturity
        distribution of our loans and leases as of June 30, 2005:
  **As
                  of June 30, 2005****Over
                  1 Year**
                **through
                  5 Years**
              
              **Over
                  5 Years****One
                  Year**
                **or
                  Less**
              
              **Fixed**
                **Rate**
              
              **Floating
                  or Adjustable Rate**
              
              **Fixed**
                **Rate**
              
              **Floating
                  or Adjustable Rate**
              
              **Total**Real
                  estate — construction
              
              $
              2,295,000
              
              $
              492,000
              
              $
              292,000
              
              $
              0
              
              $
              0
              
              $
              3,079,000Real
                  estate — secured
              
              
              201,000
              
              
              5,062,000
              
              
              2,000,000
              
              
              0
              
              
              0
              
              
              7,263,000Commercial
                  and industrial
              
              
              1,829,000
              
              
              3,105,000
              
              
              0
              
              
              735,000
              
              
              0
              
              
              5,669,000Consumer
              
              
              296,000
              
              
              340,000
              
              
              0
              
              
              0
              
              
              0
              
              
              636,000Leases
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Other
                  loans
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Total
              
              $
              4,621,000
              
              $
              8,999,000
              
              $
              2,292,000
              
              $
              735,000
              
              $
              0
              
              $
              16,647,000
  23
 
 ***Nonperforming
        Loans, Leases and Assets***
  Nonperforming
        assets consist of loans and leases on nonaccrual status, loans 90 days or
        more
        past due and still accruing interest, loans that have been restructured
        resulting in a reduction or deferral of interest or principal, OREO, and
        other
        repossessed assets. As of June 30, 2005, we had no nonperforming
        assets.
  A
        potential problem loan is defined as a loan where information about possible
        credit problems of the borrower is known, causing management to have serious
        doubts as to the ability of the borrower to comply with the present loan
        payment
        terms and which may result in the inclusion of such loan in one of the
        nonperforming asset categories. We maintain an internally classified loan
        list
        that helps management assess the overall quality of the loan portfolio and
        the
        adequacy of the allowance for loan losses. Loans classified as “special mention”
        are those that contain a weakness that, if left unattended, could develop
        into a
        problem affecting the ultimate collectibility of the loan. Loans classified
        as
“substandard” are those loans with clear and defined weaknesses such as highly
        leveraged positions, unfavorable financial ratios, uncertain repayment resources
        or poor financial condition, which may jeopardize recoverability of the loan.
        Loans classified as “doubtful” are those loans that have characteristics similar
        to substandard loans, but also have an increased risk that loss may occur
        or at
        least a portion of the loan may require a charge-off if liquidated at present.
        Although loans classified as substandard do not duplicate loans classified
        as
        doubtful, both substandard and doubtful loans may include some loans that
        are
        past due at least 90 days, are on nonaccrual status or have been restructured.
        Loans classified as “loss” are those loans that are in the process of being
        charged-off. The Bank had no loans classified in these categories at June
        30,
        2005.
  ***Allowance
        for Loan Losses***
  Implicit
        in our lending activities is the fact that loan losses will be experienced
        and
        that the risk of loss will vary with the type of loan being made and the
        creditworthiness of the borrower over the term of the loan. To reflect the
        currently perceived risk of loss associated with our loan portfolio, additions
        are made to our allowance for loan losses in the form of direct charges against
        income and our allowance is available to absorb possible loan losses. The
        factors that influence the amount include, among others, the remaining
        collateral and/or financial condition of the borrowers, historical loan loss,
        changes in the size and composition of the loan portfolio, and general economic
        conditions.
  The
        amount of the allowance equals the cumulative total of the provisions made
        from
        time to time, reduced by loan charge-offs and increased by recoveries of
        loans
        previously charged-off. Until management has adequate historical data upon
        which
        to base the estimate of the allowance for loan losses, a balance of
        approximately 1.5% of the outstanding principal will be used unless additional
        information regarding the ability of the borrower to repay the loan, current
        economic conditions or other pertinent factors indicate a different allowance
        is
        needed. Thus, our allowance was $250,000 and $100,000 as of June 30, 2005
        and
        December 31, 2004, respectively.
  Credit
        and loan decisions are made by management and the Board of Directors in
        conformity with loan policies established by the Board. The Bank’s practice is
        to charge-off any loan or portion of a loan when the loan is determined by
        management to be uncollectible due to the borrower’s failure to meet repayment
        terms, the borrower’s deteriorating or deteriorated financial condition, the
        depreciation of the underlying collateral, the loan’s classification as a loss
        by regulatory examiners, or other reasons. During the year ended December
        31,
        2004 and the first two quarters of 2005, we did not incur any charge-offs.
  The
        following table sets forth the specific allocation of the allowance for the
        periods indicated and the percentage of allocated possible loan losses in
        each
        category to total gross loans. An allocation for a loan classification is
        only
        for internal analysis of the adequacy of the allowance and is not an indication
        of expected or anticipated losses:
  24
  **As
                    of June 30,**
                  **2005**
                
                
                **As
                    of December 31,**
                  **2004****Amt.**
                
                
                **Loan
                    Category to Gross Loans**
                
                
                **Amt.**
                
                
                **Loan
                    Category to Gross Loans****Allocated:**Real
                    estate3⁄4construction
                
                $
                41,000
                
                
                16
                %
                $
                20,000
                
                
                20
                %Real
                    estate3⁄4secured
                
                
                114,000
                
                
                46
                
                
                26,000
                
                
                26Commercial
                    and industrial
                
                
                85,000
                
                
                34
                
                
                51,000
                
                
                51Consumers
                
                
                10,000
                
                
                4
                
                
                3,000
                
                
                3Leases
                
                
                0
                
                
                
                
                
                0Other
                    loans
                
                
                0
                
                
                
                
                
                0Total
                    allowance for loan and lease losses
                
                $
                250,000
                
                
                100
                %
                $
                100,000
                
                
                100
                %
  ***Nonearning
        Assets***
  Premises,
        leasehold improvements and equipment, net of accumulated depreciation and
        amortization, totaled $1.2 million at June 30, 2005 and $1.2 million at December
        31, 2004. We have no definitive agreements regarding acquisition or disposition
        of owned or leased facilities and, for the near-term future, we do not expect
        significant changes in our total occupancy expense.
  ***Deposits***
  Deposits
        are our primary source of funds. The following table sets forth, for the
        periods
        indicated, the distribution of our average deposit account balances and average
        cost of funds on each category of deposits:
  **Three
                    Months Ended June 30,**
                
                
                **Six
                    Months Ended June
                    30,**
                
                
                **Year
                    Ended December 31,****2005**
                
                
                **2004****Average**
                  **Balance**
                
                
                **Percent
                    of Deposits**
                
                
                **Average**
                  **Rate**
                
                
                **Average
                    Balance**
                
                
                **Percent
                    of Deposits**
                
                
                **Average
                    Rate**
                
                
                **Average
                    Balance**
                
                
                **Percent
                    of Deposits**
                
                
                **Average
                    Rate**Noninterest-bearing
                  demand
                    deposits
                
                $
                3,459,000
                
                
                25
                %
                
                0.0
                %
                $
                2,566,000
                
                
                24
                %
                
                0.0
                %
                $
                644,000
                
                
                26
                %
                
                0.0
                %Money
                    market
                  deposits
                
                
                6,139,000
                
                
                45
                %
                
                2.3
                %
                
                4,801,000
                
                
                44
                %
                
                2.2
                %
                
                701,000
                
                
                28
                %
                
                1.7
                %NOW
                    deposits
                
                
                857,000
                
                
                6
                %
                
                0.5
                %
                
                840,000
                
                
                8
                %
                
                0.5
                %
                
                441,000
                
                
                18
                %
                
                0.5
                %Savings
                    deposits
                
                
                228,000
                
                
                2
                %
                
                1.8
                %
                
                230,000
                
                
                2
                %
                
                1.7
                %
                
                131,000
                
                
                5
                %
                
                1.3
                %Time
                    certificates of
                  deposit
                    in
                  denominations
                    of
                  $100,000
                    or more
                
                
                2,185,000
                
                
                16
                %
                
                3.1
                %
                
                1,720,000
                
                
                16
                %
                
                2.9
                %
                
                404,000
                
                
                16
                %
                
                2.7
                %Other
                    Time deposits
                
                
                820,000
                
                
                6
                %
                
                2.9
                %
                
                633,000
                
                
                6
                %
                
                2.8
                %
                
                165,000
                
                
                7
                %
                
                2.7
                %Total
                    deposits
                
                $
                13,688,000
                
                
                100
                %
                
                1.8
                %
                $
                10,790,000
                
                
                100
                %
                
                1.7
                %
                $
                2,486,000
                
                
                100
                %
                
                1.2
                %
  Total
        deposits at June 30, 2005 and December 31, 2004 were $16.1 million and $6.2
        million respectively, representing an increase of $4.6 million, or 40%, during
        the second quarter of 2005. The Bank is constantly searching for ways to
        attract
        additional deposits.
  25
  The
        following table sets forth the amount and maturities of the time
        deposits of $100,000 or more as of the periods indicated:
  **June
                  30,**
                **2005**
              
              **December
                  31,**
                **2004**Three
                  months or less
              
              $
              253,000
              
              $
              250,000Over
                  three months through six months
              
              
              1,000,000
              
              
              950,000Over
                  six months through 12 months
              
              
              1,195,000
              
              
              0Over
                  12 months
              
              
              412,000
              
              
              0Total
              
              $
              2,860,000
              
              $
              1,200,000
  ***Return
        on Equity and Assets***
  The
        following table sets forth certain information regarding the Company’s return on
        equity and assets for the periods indicated:
  At
                    June 30,
                  2005
                
                
                At
                    December 31,2004Return
                    of assets
                
                
                (6.8
                )%
                
                (8.3
                )%Return
                    on equity
                
                
                (12.5
                )%
                
                (11.9
                )%Dividend
                    payout ratio
                
                
                0
                %
                
                0
                %Equity
                    to assets ratio
                
                
                45
                %
                
                70
                %
  ***Off-Balance
        Sheet Arrangements***
  Neither
        the Company nor the Bank has any material off-balance sheet arrangements
        other
        than the Bank’s commitments to extend credit.
  ***Borrowings***
  The
        Company has access to a variety of borrowing sources including federal funds
        purchased.
  At
        June
        30, 2005 and December 31, 2004, the Company had outstanding loan origination
        commitments and unused commercial and retail lines of credit of $2.7 million
        and
        $2.1 million, respectively, and no standby letters of credit. Management
        believes the Bank has sufficient funds available to meet current origination
        and
        other lending commitments. Certificates of deposit that are scheduled to
        mature
        within one year totaled $1.9 million and $1.5 million at June 30, 2005 and
        December 31, 2004, respectively.
  The
        following table summarizes the Bank’s significant contractual obligations and
        other potential funding needs at June 30, 2005:
  **As
                  of June 30, 2005****Less
                  than One Year**
              
              **One
                  Year to Three Years**
              
              **Over
                  Three Years to Five Years**
              
              **Over
                  Five Years**Time
                  deposits
              
              $
              3,434,000
              
              $
              66,000
              
              $
              730,000
              
              $
              0Operating
                  leases
              
              
              164,000
              
              
              345,000
              
              
              355,000
              
              
              541,000Total
              
              $
              3,598,000
              
              $
              411,000
              
              $
              1,085,000
              
              $
              541,000
  ***Capital
        Resources and Capital Adequacy Requirements***
  The
        risk-based capital regulations established and administered by the banking
        regulatory agencies discussed previously are applicable to the Bank. Risk-based
        capital guidelines are designed to make regulatory capital requirements more
        sensitive to differences in risk profiles among banks, to account for
        off-balance sheet exposure, and to minimize disincentives for holding liquid
        assets. Under the regulations, assets and off-balance sheet items are assigned
        to broad risk categories, each with appropriate weights. The resulting capital
        ratios represent capital as a percentage of total risk weighted assets and
        off-balance sheet items. Under the prompt corrective action regulations,
        to be
        adequately capitalized a bank must maintain minimum ratios of total capital
        to
        risk-weighted assets of 8.00%, Tier 1 capital to risk-weighted assets of
        4.00%,
        and Tier 1 capital to total assets of 4.00%. Failure to meet these capital
        requirements can initiate certain mandatory, and possibly additional
        discretionary, actions by regulators that, if undertaken, could have a direct
        material effect on the Bank’s financial statements.
  As
        of
        June 30, 2005, the Bank was categorized as well-capitalized. A well-capitalized
        institution must maintain a minimum ratio of total capital to risk-weighted
        assets of at least 10.00%, a minimum ratio of Tier 1 capital to risk weighted
        assets of at least 6.00%, and a minimum ratio of Tier 1 capital to total
        assets
        of at least 5.00% and must not be subject to any written order, agreement,
        or
        directive requiring it to meet or maintain a specific capital level.
  **Actual**
                
                
                **For
                    Capital Adequacy Purposes**
                
                
                **To
                    Be Well Capitalized Under Prompt Corrective Action
                    Problems****Amount**
                
                
                **Ratio**
                
                
                **Amount**
                
                
                **Ratio**
                
                
                **Amount**
                
                
                **Ratio****As
                    of June 30, 2005**Total
                    Capital (to risk-weighted assets)
                
                $
                13,051,000
                
                
                65.1
                %
                $
                1,603,000
                
                
                >8
                %
                $
                2,004,000
                
                
                >10
                %Tier
                    1 capital (to risk-weighted assets)
                
                
                12,801,000
                
                
                63.9
                %
                
                801,000
                
                
                >4
                %
                
                1,202,000
                
                
                >6
                %Tier
                    1 capital (to average assets)
                
                
                12,801,000
                
                
                49.2
                %
                
                1,039,000
                
                
                >4
                %
                
                1,300,000
                
                
                >5
                %**As
                    of December 31, 2004**Total
                    Capital (to risk-weighted assets)
                
                $
                14,555,000
                
                
                147.9
                %
                $
                787,000
                
                
                >8
                %
                $
                984,000
                
                
                >10
                %Tier
                    1 capital (to risk-weighted assets)
                
                $
                14,455,000
                
                
                146.9
                %
                $
                393,000
                
                
                >4
                %
                $
                590,000
                
                
                >6
                %Tier
                    1 capital (to average assets)
                
                $
                14,455,000
                
                
                82.4
                %
                $
                669,000
                
                
                >4
                %
                $
                836,000
                
                
                >5
                %
  ***Liquidity
        Management***
  Our
        stock
        offering closed October 29, 2004 with 1,680,000 shares sold representing
        $16.8
        million in gross total capital raised. Of this sum $403,000 was used for
        offering expenses and $14 million was injected into the Bank. Pre-opening
        costs
        totaled $1.6 million and consisted of professional fees of $282,000, consulting
        fees of $763,000 and operational expenses of $523,000. In addition, the Company
        funded certain expenses and the purchase of certain capital assets totaling
        $733,000 that was reimbursed and purchased by the Bank in early 2005. At
        June
        30, 2005 the Company (excluding the Bank) had approximately $715,000 in
        remaining cash proceeds. These funds can be used for Company operations,
        investment and for later infusion into the Bank and other corporate activities.
        The primary source of liquidity for the Company will be dividends paid by
        the
        Bank. The Bank is currently restricted from paying dividends without regulatory
        approval which will not be granted until the accumulated deficit has been
        eliminated.
  The
        Bank’s liquidity is monitored by its staff, the Investment/Asset-Liability
        Committee and the Board of Directors, who will review historical funding
        requirements, current liquidity position, sources and stability of funding,
        marketability of assets, options for attracting additional funds, and
        anticipated future funding needs, including the level of unfunded commitments.
  26
  The
        Bank’s primary sources of funds will be retail and commercial deposits, loan and
        securities repayments, other short-term borrowings, and other funds provided
        by
        operations. While scheduled loan repayments and maturing investments are
        relatively predictable, deposit flows and early loan prepayments are more
        influenced by interest rates, general economic conditions, and competition.
        The
        Bank will maintain investments in liquid assets based upon management’s
        assessment of (1) the need for funds, (2) expected deposit flows, (3) yields
        available on short-term liquid assets, and (4) objectives of the asset/liability
        management program. We anticipate eliminating the need for borrowed funds
        upon
        infusion of additional cash and cash equivalents.
  As
        loan
        demand increases, greater pressure will be exerted on the Bank’s liquidity.
        However, it is our intention to maintain a conservative loan to deposit ratio
        in
        the range of 70% over time. Given this goal, we will not aggressively pursue
        lending opportunities if sufficient funding sources ( *i.e* .,
        deposits, Fed Funds, etc.) are not available, nor will we seek to attract
        transient volatile, non-local deposits with above market interest rates.
        As of
        June 30, 2005, the loan to deposit ratio was 103%.
  The
        Bank
        had cash and cash equivalents of $11.7 million, or 39% of total Bank assets,
        at
        June 30, 2005. We believe that, with the capital injection from the proceeds
        of
        the offering, the Bank should have more than adequate liquidity to meet
        anticipated future funding needs.
  The
        Bank
        is subject to various regulatory capital requirements administered by federal
        and state banking agencies, which could affect its ability to pay dividends
        to
        the Company. Failure to meet minimum capital requirements can initiate certain
        mandatory and discretionary actions by regulators that, if undertaken, could
        have a direct material adverse effect on our financial statements. The minimum
        ratios required for the Bank to be considered “well capitalized” for regulatory
        purposes, and therefore eligible to consider the payment of dividends to
        the
        Company, will be 10% total capital to risk weighted assets, 6% tier 1 capital
        to
        risk weighted assets and 5% tier 1 capital to average assets. At June
        30,
        2005, the Bank was considered “well capitalized” by regulatory standards.
  ***Quantitative
        and Qualitative Disclosure About Market Risks***
  Interest
        rate risk is the most significant market risk affecting us. Other types of
        market risk, such as foreign currency risk and commodity price risk, do not
        arise in the normal course of our business activities. Interest rate risk
        can be
        defined as the exposure to a movement in interest rates that could have an
        adverse effect on our net interest income or the market value of our financial
        instruments. The ongoing monitoring and management of this risk is an important
        component of our asset and liability management process, which is governed
        by
        policies established by the Company’s Board of Directors and carried out by the
        Bank’s Investment/Asset-liability Committee. The Investment/Asset-liability
        Committee’s objectives are to manage our exposure to interest rate risk over
        both the one year planning cycle and the longer term strategic horizon and,
        at
        the same time, to provide a stable and steadily increasing flow of net interest
        income.
  Our
        primary measurement of interest rate risk is earnings at risk, which is
        determined through computerized simulation modeling. The primary simulation
        model assumes a static balance sheet, using the balances, rates, maturities
        and
        repricing characteristics of all of the Bank’s existing assets and liabilities.
        Net interest income is computed by the model assuming market rates remaining
        unchanged and compares those results to other interest rate scenarios with
        changes in the magnitude, timing and relationship between various interest
        rates. At June 30, 2005, we modeled rising ramp and declining interest
        rate
        simulations in 100 basis point increments over a 12-month period. The impact
        of
        imbedded options in such products as callable and mortgage-backed securities,
        real estate mortgage loans and callable borrowings were considered. Changes
        in
        net interest income in the rising and declining rate scenarios are then measured
        against the net interest income in the rates unchanged scenario. The
        Investment/Asset-liability Committee utilizes the results of the model to
        quantify the estimated exposure of net interest income to sustained interest
        rate changes.
  In
        the
        June 30, 2005 simulation, our model indicated an exposure in the level of
        net
        interest income to rising rates for a 12-month period. The hypothetical rate
        scenarios consider an up or down change of 100, 200, 300 and 400 basis points
        during a 12-month period. At June 30, 2005, the net interest income at risk
        for
        year one in the 100 basis point falling rate scenario was calculated at $90,000,
        or 6.8% lower than the net interest income in the rates unchanged scenario,
        and
        $181,000, or 13.8%, lower than the net interest income in the rates unchanged
        scenario at the June 30, 2005 simulation with a 200 basis point decrease.
        These
        exposures are well within our policy guidelines of 20%. At June 30, 2005,
        the
        net interest income for year one in the 100 basis point rising rate scenario
        was
        calculated to be $73,000, or 5.6%, higher than the net interest income in
        the
        rates unchanged scenario, and $143,000, or 10.9%, higher than the net interest
        income in the rate unchanged scenario at the June 30, 2005 simulation with
        a 200
        basis point increase. Computation of prospective effects of hypothetical
        interest rate changes are based on numerous assumptions, including relative
        levels of market interest rates, loan and security prepayments, deposit run-offs
        and pricing and reinvestment strategies and should not be relied upon as
        indicative of actual results. Further, the computations do not contemplate
        any
        actions we may take in response to changes in interest rates. We cannot assure
        you that our actual net interest income would increase or decrease by the
        amounts computed by the simulations. The following table indicates the estimated
        impact on net interest income under various interest rate scenarios as of
        June
        30, 2005:
  27
  Change
                    in Future Net Interest IncomeAt
                    June 30, 2005Dollar
                  Change
                
                
                Percentage
                    Change+400
                    basis points over one year
                
                $
                283,000
                
                
                21.6
                %+300
                    basis points over one year+
                
                
                212,000
                
                
                16.2
                %+200
                    basis points over one year
                
                
                143,000
                
                
                10.9
                %+100
                    basis points over one year
                
                
                73,000
                
                
                5.6
                %—100
                    basis points over one year
                
                
                (90,000
                )
                
                (6.8
                )%—200
                    basis points over one year
                
                
                (181,000
                )
                
                (13.8
                )%—300
                    basis points over one year
                
                
                (273,000
                )
                
                (20.8
                )%—400
                    basis points over one year
                
                
                (365,000
                )
                
                (27.8
                )%
 
 We
        also
        monitor the repricing terms of our assets and liabilities through gap matrix
        reports for the rates in unchanged, rising and falling interest rate scenarios.
        The reports illustrate, at designated time frames, the dollar amount of assets
        and liabilities maturing or repricing.
  The
        following table sets forth, on a stand-alone basis, the Bank’s amounts of
        interest-earning assets, interest-bearing liabilities and the nominal amount
        of
        interest rate swaps outstanding at June 30, 2005, which we anticipate, based
        upon certain assumptions, to reprice or mature in each of the future time
        periods shown. The projected repricing of assets and liabilities anticipates
        prepayments and scheduled rate adjustments, as well as contractual maturities
        under an interest rate unchanged scenario within the selected time intervals.
        While we believe such assumptions are reasonable, we cannot assure you that
        assumed repricing rates will approximate our actual future deposit activity.
  28
    **As
                  of June 30, 2005****Volumes
                  Subject to Repricing Within****0-1
                  Days**
              
              
              **2-90
                  Days**
              
              
              **91-365
                  Days**
              
              
              **1-3
                  Years**
              
              
              **Over
                  3 Years**
              
              
              **Non-Interest
                  Sensitive**
              
              
              **Total****Assets:**Short-term
                  investments and federal funds sold
              
              $
              10,065,000
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              10,065,000Investment
                  securities
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              420,000
              
              
              0
              
              
              420,000Loans
              
              
              4,781,000
              
              
              2,205,000
              
              
              4,489,000
              
              
              2,901,000
              
              
              2,271,000
              
              
              0
              
              
              16,647,000Fixed
                  and other assets
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              2,559,000
              
              
              2,559,000Total
                  Assets
              
              $
              14,846,000
              
              $
              2,205,000
              
              $
              4,489,000
              
              $
              2,901,000
              
              $
              2,691,000
              
              $
              2,559,000
              
              $
              29,691,000**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  checking, savings and money market accounts
              
              
              2,901,000
              
              
              0
              
              
              0
              
              
              4,303,000
              
              
              0
              
              
              4,688,000
              
              
              11,892,000Certificates
                  of deposit
              
              
              0
              
              
              334,000
              
              
              3,100,000
              
              
              66,000
              
              
              730,000
              
              
              0
              
              
              4,230,000Borrowed
                  funds
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Other
                  liabilities
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              41,000
              
              
              41,000Shareholders’
                  equity
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              13,528,000
              
              
              13,528,000Total
                  liabilitiesandshareholders’equity
              
              
              2,901,000
              
              
              334,000
              
              
              3,100,000
              
              
              4,369,000
              
              
              730,000
              
              
              18,257,000
              
              
              29,691,000Period
                  gap
              
              
              11,945,000
              
              
              1,871,000
              
              
              1,389,000
              
              
              (1,468,000
              )
              
              1,961,000Cumulativegap
              
              
              11,945,000
              
              
              13,816,000
              
              
              15,205,000
              
              
              13,737,000
              
              
              15,698,000Period
                  gap tototal
                  assets
              
              
              40
              %
              
              6
              %
              
              10
              %
              
              (5
              )
              
              7
              %%Cumulative
                  gapto
                  total assets
              
              
              40
              %
              
              47
              %
              
              51
              %
              
              46
              %
              
              43
              %
  Certain
        shortcomings are inherent in the method of analysis presented in the gap
        table.
        For example, although certain assets and liabilities may have similar maturities
        or periods of repricing, they may react in different degrees to changes in
        market interest rates. Additionally, certain assets, such as adjustable-rate
        loans, have features that restrict changes in interest rates, both on a
        short-term basis and over the life of the asset. More importantly, changes
        in
        interest rates, prepayments and early withdrawal levels may deviate
        significantly from those assumed in the calculations in the table. As a result
        of these shortcomings, we focus more on earnings at risk simulation modeling
        than on gap analysis. Even though the gap analysis reflects a ratio of
        cumulative gap to total assets within acceptable limits, the earnings at
        risk
        simulation modeling is considered by management to be more informative in
        forecasting future income at risk.
  29
  Finally,
        we also monitor core funding utilization in each interest rate scenario as
        well
        as market value of equity. These measures are used to evaluate long-term
        interest rate risk beyond the two-year planning horizon.
  ***Aggregate
        Contractual Obligations***
  The
        following table represents our on and off-balance sheet aggregate contractual
        obligations, other than deposit liabilities, to make future payments to third
        parties as of the date specified:
  **As
                  of June 30, 2005****Less
                  than One Year**
              
              **One
                  Year to Three Years**
              
              **Over
                  Three Years to Five Years**
              
              **Over
                  Five Years**Operating
                  Leases
              
              $
              164,000
              
              $
              345,000
              
              $
              355,000
              
              $
              541,000Total
              
              $
              164,000
              
              $
              345,000
              
              $
              355,000
              
              $
              541,000
  **ITEM
        3.**  **Quantitative
        and Qualitative Disclosures about Market Risk**
  The
        information contained in the section captioned “Management’s Discussion and
        Analysis of Financial Condition and Results of Operations” as set forth in Part
        I, Item 2 of this Quarterly Report on Form 10-QSB is incorporated herein
        by
        reference.
  **ITEM
        4.**  **Controls
        and Procedures**
  As
        of the end of the period covered by this Quarterly Report on Form 10-QSB
        for the
        quarter ended June 30, 2005, we carried out an evaluation, under the
        supervision and with the participation of our management, including our chief
        executive officer and chief financial officer, of the effectiveness of the
        design and operation of our “disclosure controls and procedures,” as such term
        is defined under Exchange Act Rule 13a-15(e).
  Based
        on
        this evaluation, our chief executive officer and chief financial officer
        concluded that, as of the end of the fiscal quarter covered by this report,
        such
        disclosure controls and procedures were reasonably designed to ensure that
        information required to be disclosed by us in the reports we file or submit
        under the Exchange Act is: (a) recorded, processed, summarized and reported
        within the time periods specified in the rules and forms of the Securities
        and
        Exchange Commission, and (b) accumulated and communicated to our management,
        including our chief executive officer and chief financial officer, as
        appropriate to allow timely decisions regarding required
        disclosure.
  In
        designing and evaluating the disclosure controls and procedures, our management
        recognized that any controls and procedures, no matter how well designed
        and
        operated, can provide only reasonable assurance of achieving the desired
        control
        objectives and in reaching a reasonable level of assurance our management
        necessarily was required to apply its judgment in evaluating the cost-benefit
        relationship of possible controls and procedures.
  There
        were no changes in our internal controls over financial reporting during
        the
        quarter ended June 30, 2005 that materially affected, or were reasonably
        likely
        to materially affect, our internal controls over financial
        reporting.
  30
  **PART
        II.**  **OTHER
        INFORMATION**
  **ITEM
        1.**  **Legal
        Proceedings**
  There
        are
        no material pending legal proceedings to which the Company or the Bank is
        a
        party or to which any of our properties are subject; nor are there material
        proceedings known to the Company, in which any director, officer or affiliate
        or
        any principal shareholder is a party or has an interest adverse to the Company
        or the Bank.
  **ITEM
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
  On
        April
        30, 2004, the Securities and Exchange Commission declared effective our
        Registration Statement on Form SB-2 (File No. 333-111153) related to our
        initial
        public offering our common stock, $0.01 par value. In addition, on December
        1,
        2004, we filed a Form SB-2 MEF under Rule 462 registering additional shares
        of
        common stock and warrants to purchase our common stock under our public
        offering. We registered a total of 2,116,000 shares of our common stock,
        of
        which 436,000 shares are issuable under registered common stock warrants
        (warrants to purchase an aggregate of 336,000 shares of common stock at an
        exercise price of $12.50 per share issued to the initial shareholders of
        the
        Company in connection with the offering, and warrants to purchase an aggregate
        of 100,000 shares of common stock at an exercise price of $10.00 per share
        issued to the organizers of the Company). On October 29, 2004, we completed
        our
        initial public offering having sold 1,680,000 shares at $10.00 per share,
        for an
        aggregate of $16.8 million.
  The
        Company incurred $403,000 in offering expenses, none of which was paid to
        directors, officers, ten percent or greater shareholders, any of their
        associates, or affiliates of the Company. None of those expenses were paid
        to
        underwriters or for underwriting discounts and commissions or finders’ fees. The
        net offering proceeds to the Company after deducting the foregoing expenses
        were
        approximately $16.4 million.
  The
        following is a reasonable estimate of the application of net offering proceeds
        through June 30, 2005:
  Gross
                  proceeds from sale of shares
              
              $
              16,800,000Offering
                  expenses
              
              $
              403,000Organizational
                  expenses
              
              $
              1,568,000Contribution
                  to the capital of the Bank
              
              $
              14,000,000Holding
                  company operating expenses
              
              $
              114,000Remaining
                  net proceeds
              
              $
              715,000
 
 **ITEM
        3.**  **Defaults
        Upon Senior Securities**
  None.
  **ITEM
        4.**  **Submission
        of Matters to a Vote of Security Holders**
  At
        our
        Annual Shareholders’ Meeting on June 2, 2005, shareholders elected each of the
        director nominees and approved the 2005 Stock Incentive Plan.
  31
  **Voted
                    For**
                
                **Withheld**1.
                    To elect a board of directors to hold office until the next annual
                    shareholders’
                  meeting
                    or until their respective successors have been elected or
                    appointed.Patrick
                    Adams
                
                1,002,121
                
                4,500Stanley
                    Allred
                
                1,000,621
                
                6,000Dan
                    Basso
                
                996,621
                
                10,000Frankie
                    Basso
                
                995,621
                
                11,000Darrell
                    Cain
                
                999,121
                
                7,500David
                    Carstens
                
                997,121
                
                9,500Ron
                    Denheyer
                
                996,121
                
                10,500Mark
                    Foglietta
                
                997,121
                
                9,500Frank
                    Hundley
                
                997,121
                
                9,500Hunter
                    Hunt
                
                997,121
                
                9,500Steven
                    Jones
                
                996,321
                
                10,300Eric
                    Langford
                
                997,121
                
                9,500Steven
                    Lugar
                
                999,121
                
                7,500Charles
                    Mapes
                
                998,121
                
                8,500Thomas
                    McDougal
                
                996,121
                
                10,500Daniel
                    Meyer
                
                997,121
                
                9,500Cyvia
                    Noble
                
                997,121
                
                9,500Anthony
                    Pusateri
                
                997,121
                
                9,500James
                    Rose
                
                997,121
                
                9,500Gordon
                    Youngblood
                
                997,121
                
                9,500
  32
  **Voted
                    For**
                
                **Voted
                      Against**
                
                **Abstain**
                
                **Broker
                    Non-**
                  **Votes**2.
                    To approve 2005 Stock Incentive Plan.
                
                976,871
                
                19,750
                
                10,000
                
                0
 
 **ITEM
        5.**  **Other
        Information**
  Not
        applicable.
  **ITEM
        6.**  **Exhibits**
  **Exhibit
                  Number**
              
              **Description
                  of Exhibit**31.1
              
              Rule
                  13a-14(a) Certification of Chief Executive Officer.31.2
              
              Rule
                  13a-14(a) Certification of Chief Financial Officer.32
              
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
  33
 
 **SIGNATURES**
  Pursuant
        to the requirements of the Securities Act of 1934, the registrant has duly
        caused this Report to be signed on its behalf by the undersigned, thereunto
        duly
        authorized.
  FIRST
                  METROPLEX CAPITAL, INC.Date:
                  August 15, 2005
              By:
              /s/
                  Patrick G. AdamsPatrick
                  G. Adams
                President
                  and Chief Executive Officer
  34