FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the Year Ended December 31, 2003

                         Commission File Number 0-24926

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



            Maryland                                     52-1883546
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


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

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

        Securities registered pursuant to Section 12(b) of the Act: None.

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) 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 (2) has been subject to such filing
requirements for the past 90 days.
Yes    X       No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-KSB. []

State issuer's revenues for its most recent fiscal year:  $9,174,000

As of March 22, 2004, the registrant had 1,613,660 shares of Common Stock issued
and outstanding. The aggregate market value of shares held by nonaffiliates on
such date was $11,108,461 based on the closing sale price of $13 per share of
the Registrant's Common Stock on March 22, 2004. For purposes of this
calculation, it is assumed that the 759,163 shares held by directors and
officers of the Registrant, are shares held by affiliates.

Documents Incorporated by Reference: NA

Transitional small business disclosure format (check one):  Yes       No   X

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                    CAUTION ABOUT FORWARD-LOOKING STATEMENTS

         Cecil Bancorp, Inc. ("Cecil Bancorp" or the "Company") makes
forward-looking statements in this Form 10-KSB that are subject to risks and
uncertainties. These forward-looking statements include:
o        Statements of goals, intentions, and expectations;
o        Estimates of risks and of future costs and benefits;
o        Assessments of loan quality, probable loan losses, liquidity,
         off-balance sheet arrangements, and interest rate risks; and
o        Statements of Cecil Bancorp's ability to achieve financial and other
         goals.
These forward-looking statements are subject to significant uncertainties
because they are based upon or are affected by:
o        Management's estimates and projections of future interest rates and
         other economic conditions;
o        Future laws and regulations; and
o        A variety of other matters.
Because of these uncertainties, the actual future results may be materially
different from the results indicated by these forward-looking statements. In
addition, Cecil Bancorp's past results of operations do not necessarily indicate
its future results.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

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

Cecil Federal conducts it business through its main office in Elkton, Maryland,
branches in Elkton, Rising Sun, and North East, Maryland, and through the
Columbian Bank division's main office and a branch office in Havre de Grace,
Maryland.

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

The Company's and the Bank's principal executive office is at 127 North Street,
Elkton, Maryland 21921, and its telephone number is (410) 398-1650.



Regulation, Supervision, and Governmental Policy

Following is a brief summary of certain statutes and regulations that
significantly affect the Company and the Bank. A number of other statutes and
regulations affect the Company and the Bank but are not summarized below.

Bank Holding Company Regulation. The Company is registered as a bank holding
company under the Holding Company Act and, as such, is subject to supervision
and regulation by the Federal Reserve. As a bank holding company, The Company is
required to furnish to the Federal Reserve annual and quarterly reports of its
operations and additional information and reports. The Company is also subject
to regular examination by the Federal Reserve.


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Under the Holding Company Act, a bank holding company must obtain the prior
approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of any class of voting securities of any bank or bank
holding company if, after the acquisition, the bank holding company would
directly or indirectly own or control more than 5% of the class; (2) acquiring
all or substantially all of the assets of another bank or bank holding company;
or (3) merging or consolidating with another bank holding company.

Under the Holding Company Act, any company must obtain approval of the Federal
Reserve prior to acquiring control of the Company or the Bank. For purposes of
the Holding Company Act, "control" is defined as ownership of 25% or more of any
class of voting securities of the Company or the Bank, the ability to control
the election of a majority of the directors, or the exercise of a controlling
influence over management or policies of the Company or the Bank.

The Change in Bank Control Act and the related regulations of the Federal
Reserve require any person or persons acting in concert (except for companies
required to make application under the Holding Company Act), to file a written
notice with the Federal Reserve before the person or persons acquire control of
the Company or the Bank. The Change in Bank Control Act defines "control" as the
direct or indirect power to vote 25% or more of any class of voting securities
or to direct the management or policies of a bank holding company or an insured
bank.

The Holding Company Act also limits the investments and activities of bank
holding companies. In general, a bank holding company is prohibited from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of a company that is not a bank or a bank holding company or from
engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, providing services for its subsidiaries, non-bank
activities that are closely related to banking, and other financially related
activities. The activities of the Company are subject to these legal and
regulatory limitations under the Holding Company Act and Federal Reserve
regulations. In general, bank holding companies that qualify as financial
holding companies under federal law may engage in an expanded list of non-bank
activities some of which are subject to regulation and oversight by regulators
other than the Federal Reserve.

The Federal Reserve has the power to order a holding company or its subsidiaries
to terminate any activity, or to terminate its ownership or control of any
subsidiary, when it has reasonable cause to believe that the continuation of
such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that holding
company.

The Federal Reserve has adopted guidelines regarding the capital adequacy of
bank holding companies, which require bank holding companies to maintain
specified minimum ratios of capital to total assets and capital to risk-weighted
assets. See "Regulatory Capital Requirements."

The Federal Reserve has the power to prohibit dividends by bank holding
companies if their actions constitute unsafe or unsound practices. The Federal
Reserve has issued a policy statement on the payment of cash dividends by bank
holding companies, which expresses the Federal Reserve's view that a bank
holding company should pay cash dividends only to the extent that the company's
net income for the past year is sufficient to cover both the cash dividends and
a rate of earnings retention that is consistent with the company's capital
needs, asset quality, and overall financial condition.

Bank Regulation. The Bank became a Maryland chartered bank on October 1, 2002.
The Bank is a member of the Federal Reserve System and is subject to supervision
by Federal Reserve and the State of Maryland. Deposits of the Bank are insured
by the FDIC to the legal maximum of $100,000 for each insured depositor.
Deposits, reserves, investments, loans, consumer law compliance, issuance of
securities, payment of dividends, establishment of branches, mergers and
acquisitions, corporate activities, changes in control, electronic funds
transfers, responsiveness to community needs, management practices, compensation
policies, and other aspects of operations are subject to regulation by the
appropriate federal and state supervisory authorities. In addition, the Bank is
subject to numerous federal, state and local laws and regulations which set
forth specific restrictions and procedural requirements with respect to
extensions of credit (including to insiders), credit practices, disclosure of
credit terms and discrimination in credit transactions.

The Federal Reserve regularly examines the operations and condition of the Bank,
including, but not limited to, its capital adequacy, reserves, loans,
investments, and management practices. These examinations are for the protection
of the Bank's depositors and the federal deposit insurance funds. In addition,
the Bank is required to furnish quarterly and annual reports to the Federal
Reserve. The Federal Reserve's enforcement authority includes the power to
remove officers and directors and the authority to issue cease-and-desist orders
to prevent a bank from engaging in unsafe or unsound practices or violating laws
or regulations governing its business.


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The Federal Reserve has adopted regulations regarding the capital adequacy,
which require member banks to maintain specified minimum ratios of capital to
total assets and capital to risk-weighted assets. See "Regulatory Capital
Requirements." Federal Reserve and State regulations limit the amount of
dividends that the Bank may pay to the Company.

The Bank is subject to restrictions under federal law which limit the transfer
of funds by the Bank to Bancorp and its non-banking subsidiaries, whether in the
form of loans, extensions of credit, investments, asset purchases, or otherwise.
Such transfers by the Bank to Bancorp or any of Bancorp's non-banking
subsidiaries are limited in amount to 10% of the Bank's capital and surplus and,
with respect to Bancorp and all such non-banking subsidiaries, to an aggregate
of 20% of the Bank's capital and surplus. Furthermore, such loans and extensions
of credit are required to be secured in specified amounts.

The Bank is subject to restrictions imposed by federal law on extensions of
credit to, and certain other transactions with, the Company and other
affiliates, and on investments in their stock or other securities. These
restrictions prevent the Company and the Bank's other affiliates from borrowing
from the Bank unless the loans are secured by specified collateral, and require
those transactions to have terms comparable to terms of arms-length transactions
with third persons. In addition, secured loans and other transactions and
investments by the Bank are generally limited in amount as to the Company and as
to any other affiliate to 10% of the Bank's capital and surplus and as to the
Company and all other affiliates together to an aggregate of 20% of the Bank's
capital and surplus. Certain exemptions to these limitations apply to extensions
of credit and other transactions between the Bank and its subsidiaries. These
regulations and restrictions may limit the Company's ability to obtain funds
from the Bank for its cash needs, including funds for acquisitions and for
payment of dividends, interest, and operating expenses.

Under Federal Reserve regulations, banks must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit secured by liens or interests in real estate or are made for the purpose
of financing permanent improvements to real estate. These policies must
establish loan portfolio diversification standards; prudent underwriting
standards, including loan-to-value limits, that are clear and measurable; loan
administration procedures; and documentation, approval, and reporting
requirements. A bank's real estate lending policy must reflect consideration of
the Interagency Guidelines for Real Estate Lending Policies (the "Interagency
Guidelines") adopted by the federal bank regulators. The Interagency Guidelines,
among other things, call for internal loan-to-value limits for real estate loans
that are not in excess of the limits specified in the Guidelines. The
Interagency Guidelines state, however, that it may be appropriate in individual
cases to originate or purchase loans with loan-to-value ratios in excess of the
supervisory loan-to-value limits.

The FDIC has established a risk-based deposit insurance premium assessment
system for insured depository institutions. Under the system, the assessment
rate for an insured depository institution depends on the assessment risk
classification assigned to the institution by the FDIC, based upon the
institution's capital level and supervisory evaluations. Institutions are
assigned to one of three capital groups -- well-capitalized, adequately
capitalized, or undercapitalized -- based on the data reported to regulators.
Well-capitalized institutions are institutions satisfying the following capital
ratio standards: (i) total risk-based capital ratio of 10.0% or greater; (ii)
Tier 1 risk-based capital ratio of 6.0% or greater; and (iii) Tier 1 leverage
ratio of 5.0% or greater. Adequately capitalized institutions are institutions
that do not meet the standards for well-capitalized institutions but that
satisfy the following capital ratio standards: (i) total risk-based capital
ratio of 8.0% or greater; (ii) Tier 1 risk-based capital ratio of 4.0% or
greater; and (iii) Tier 1 leverage ratio of 4.0% or greater. Institutions that
do not qualify as either well-capitalized or adequately capitalized are deemed
to be undercapitalized. Within each capital group, institutions are assigned to
one of three subgroups on the basis of supervisory evaluations by the
institution's primary supervisory authority and such other information as the
FDIC determines to be relevant to the institution's financial condition and the
risk it poses to the deposit insurance fund. Subgroup A consists of financially
sound institutions with only a few minor weaknesses. Subgroup B consists of
institutions with demonstrated weaknesses that, if not corrected, could result
in significant deterioration of the institution and increased risk of loss to
the deposit insurance fund. Subgroup C consists of institutions that pose a
substantial probability of loss to the deposit insurance fund unless effective
corrective action is taken. The Bank has been informed that it is in the least
costly assessment category for the first assessment period of 2003. Deposit
insurance rates may be increased during 2004 or later years.


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Regulatory Capital Requirements. The Federal Reserve has established guidelines
for maintenance of appropriate levels of capital by bank holding companies and
member banks. The regulations impose two sets of capital adequacy requirements:
minimum leverage rules, which require bank holding companies and banks to
maintain a specified minimum ratio of capital to total assets, and risk-based
capital rules, which require the maintenance of specified minimum ratios of
capital to "risk-weighted" assets.

The regulations of the Federal Reserve require bank holding companies with
assets of $150 million or more and member banks to maintain a minimum leverage
ratio of "Tier 1 capital" (as defined in the risk-based capital guidelines
discussed in the following paragraphs) to total assets of 3.0%. The Company had
assets of less than $150 million during 2003, and was not subject to the holding
company risk- based capital rules. The capital regulations state, however, that
only the strongest bank holding companies and banks, with composite examination
ratings of 1 under the rating system used by the federal bank regulators, would
be permitted to operate at or near this minimum level of capital. All other bank
holding companies and banks are expected to maintain a leverage ratio of at
least 1% to 2% above the minimum ratio, depending on the assessment of an
individual organization's capital adequacy by its primary regulator. A bank or
bank holding company experiencing or anticipating significant growth is expected
to maintain capital well above the minimum levels. In addition, the Federal
Reserve has indicated that it also may consider the level of an organization's
ratio of tangible Tier 1 capital (after deducting all intangibles) to total
assets in making an overall assessment of capital.

In general, the risk-based capital rules of the Federal Reserve requires bank
holding companies with assets of $150 million or more and member banks to
maintain minimum levels based upon a weighting of their assets and off-balance
sheet obligations according to risk. The Company had assets of less than $150
million during 2003, and was not subject to the holding company risk- based
capital rules. The risk-based capital rules have two basic components: a core
capital (Tier 1) requirement and a supplementary capital (Tier 2) requirement.
Core capital consists primarily of common stockholders' equity, certain
perpetual preferred stock (noncumulative perpetual preferred stock with respect
to banks), and minority interests in the equity accounts of consolidated
subsidiaries; less all intangible assets, except for certain mortgage servicing
rights and purchased credit card relationships. Supplementary capital elements
include, subject to certain limitations, the allowance for losses on loans and
leases; perpetual preferred stock that does not qualify as Tier 1 capital;
long-term preferred stock with an original maturity of at least 20 years from
issuance; hybrid capital instruments, including perpetual debt and mandatory
convertible securities; subordinated debt, intermediate-term preferred stock,
and up to 45% of pre-tax net unrealized gains on available for sale equity
securities.

The risk-based capital regulations assign balance sheet assets and credit
equivalent amounts of off-balance sheet obligations to one of four broad risk
categories based principally on the degree of credit risk associated with the
obligor. The assets and off-balance sheet items in the four risk categories are
weighted at 0%, 20%, 50%, and 100%. These computations result in the total
risk-weighted assets.

The risk-based capital regulations require all commercial banks to maintain a
minimum ratio of total capital to total risk-weighted assets of 8%, with at
least 4% as core capital. For the purpose of calculating these ratios: (i)
supplementary capital is limited to no more than 100% of core capital; and (ii)
the aggregate amount of certain types of supplementary capital is limited. In
addition, the risk-based capital regulations limit the allowance for credit
losses that may be included in capital to 1.25% of total risk-weighted assets.

The federal bank regulatory agencies have established a joint policy regarding
the evaluation of commercial banks' capital adequacy for interest rate risk.
Under the policy, the Federal Reserve's assessment of a bank's capital adequacy
includes an assessment of the bank's exposure to adverse changes in interest
rates. The Federal Reserve has determined to rely on its examination process for
such evaluations rather than on standardized measurement systems or formulas.
The Federal Reserve may require banks that are found to have a high level of
interest rate risk exposure or weak interest rate risk management systems to
take corrective actions. Management believes its interest rate risk management
systems and its capital relative to its interest rate risk are adequate.

Federal banking regulations also require banks with significant trading assets
or liabilities to maintain supplemental risk-based capital based upon their
levels of market risk. The Bank did not have significant levels of trading
assets or liabilities during 2003, and was not required to maintain such
supplemental capital.

The Federal Reserve has established regulations that classify banks by capital
levels and provide for the Federal Reserve to take various "prompt corrective
actions" to resolve the problems of any bank that fails to satisfy the capital
standards. Under these regulations, a well-capitalized bank is one that is not
subject to any regulatory order or directive to meet any specific capital level
and that has a total risk-based capital ratio of 10% or more, a Tier 1
risk-based capital ratio of 6% or more, and a leverage ratio of 5% or more. An
adequately capitalized bank is one that does not qualify as well-capitalized but
meets or exceeds the following capital requirements: a total risk-based capital
ratio of 8%, a Tier 1 risk-based capital ratio of 4%, and a leverage ratio of
either (i) 4% or (ii) 3% if the bank has the highest composite examination
rating. A bank that does not meet these standards is categorized as
undercapitalized, significantly undercapitalized, or critically
undercapitalized, depending on its capital levels. A bank that falls within any
of the three undercapitalized categories established by the prompt corrective
action regulation is subject to severe regulatory sanctions. As of December 31,
2003, the Bank was well-capitalized as defined in the Federal Reserve's
regulations.



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For additional information regarding the Company's and the Bank's compliance
with their respective regulatory capital requirements, see Note 11. "Regulatory
Matters." To the consolidated financial statements.

Supervision and Regulation of Mortgage Banking Operations. The Company's
mortgage banking business is subject to the rules and regulations of the U.S.
Department of Housing and Urban Development ("HUD"), the Federal Housing
Administration ("FHA"), the Veterans' Administration ("VA"), and FNMA with
respect to originating, processing, selling, and servicing mortgage loans. Those
rules and regulations, among other things, prohibit discrimination and establish
underwriting guidelines, which include provisions for inspections and
appraisals, require credit reports on prospective borrowers, and fix maximum
loan amounts. Lenders such as the Company are required annually to submit to
FNMA, FHA and VA audited financial statements, and each regulatory entity has
its own financial requirements. The Company's affairs are also subject to
examination by the Federal Reserve, FNMA, FHA and VA at all times to assure
compliance with the applicable regulations, policies, and procedures. Mortgage
origination activities are subject to, among others, the Equal Credit
Opportunity Act, Federal Truth-in-Lending Act, Fair Housing Act, Fair Credit
Reporting Act, the National Flood Insurance Act and the Real Estate Settlement
Procedures Act and related regulations that prohibit discrimination and require
the disclosure of certain basic information to mortgagors concerning credit
terms and settlement costs. The Company's mortgage banking operations also are
affected by various state and local laws and regulations and the requirements of
various private mortgage investors.

The Holding Company Act permits the Federal Reserve to approve an application of
an adequately capitalized and adequately managed bank holding company to acquire
control of, or acquire all or substantially all of the assets of, a bank located
in a state other than that holding company's home state. The Federal Reserve may
not approve the acquisition of a bank that has not been in existence for the
minimum time period (not exceeding five years) specified by the statutory law of
the host state. The Holding Company Act also prohibits the Federal Reserve from
approving an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. The Holding Company
Act does not affect the authority of states to limit the percentage of total
insured deposits in the state which may be held or controlled by a bank or bank
holding company to the extent such limitation does not discriminate against
out-of-state banks or bank holding companies. The State of Maryland allows
out-of-state financial institutions to establish branches in Maryland, subject
to certain limitations.


Markets

The Company's primary market area comprises Cecil and Harford Counties in
northeastern Maryland.

Cecil Federal's home office and one branch are in Elkton, Maryland, and
additional Cecil County branches are located in North East and Rising Sun
Maryland. Elkton is the county seat, and has a population of approximately
12,000. The population of the Cecil County is approximately 86,000. Cecil County
is located in the extreme northeast of the Chesapeake Bay, at the crux of four
states - Maryland, Delaware, Pennsylvania, and New Jersey. Elkton is located
about 50 miles from Philadelphia and Baltimore. One-fifth of the U.S. population
resides within 300 miles of the County. Interstate I-95, the main north-south
East Coast artery, bisects the County. In addition, the four lane U.S. 40
parallels the Interstate. Cecil County has over 200 miles of waterfront between
five rivers and the Chesapeake Bay. Major employers in Cecil County are Perry
Point Veterans Hospital, medical services; W. L. Gore & Associates, GORE-TEX
fabric products; Union Hospital, medical services; Terumo Medical, medical
products; ATK Tactical Systems, rocket motors; as well as State, County and
Local Governments.

Cecil Federal also operates two banking offices in Havre de Grace, Maryland, in
Harford County. Harford County is twenty-three miles from Baltimore and twenty
miles from Wilmington Delaware. The county is a major transportation link;
Interstate 95 and mainlines for CSX Railroad and Conrail run through the County.
The County's major industrial centers along the I-95 Corridor are Aberdeen,
Belcamp, Edgewood and Havre de Grace. Major private employers in Harford County
are Upper Chesapeake Health Systems, Inc., Bata Shoe Co., Clorox Co.,
Constar/Crown, Cork and Seal, Cy-tec Industries, Frito-Lay, Inc., GAP Stores,
Mercedes, N.A., Saks Fifth Avenue and General Electric. The U.S. Army Aberdeen
Proving Ground is the major government employer in the county.


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Loans and Mortgage Backed Securities

One to Four Family Residential Real Estate Lending. The primary emphasis of
Cecil Federal's lending activity is the origination of conventional mortgage
loans on one- to four-family residential dwellings. Most loans are originated in
amounts up to $150,000, on single-family properties located in Cecil Federal's
primary market area of Cecil County, Maryland. Cecil Federal makes conventional
mortgage loans, as well as loans guaranteed by the Rural Development (USDA
Housing Loans) and loans originated under the Maryland Community Development
Administration ("CDA") loan program. Cecil Federal's mortgage loan originations
are generally for terms of 15, 20 and 30 years, amortized on a monthly basis
with interest and principal due each month. Residential real estate loans often
remain outstanding for significantly shorter periods than their contractual
terms as borrowers may refinance or prepay loans at their option, without
penalty. Conventional residential mortgage loans granted by Cecil Federal
customarily contain "due-on-sale" clauses that permit Cecil Federal to
accelerate the indebtedness of the loan upon transfer of ownership of the
mortgaged property. Cecil Federal uses standard Federal Home Loan Mortgage
Corporation ("FHLMC") documents, to allow for the sale of loans in the secondary
mortgage market. Cecil Federal's lending policies generally limit the maximum
loan-to-value ratio on mortgage loans secured by owner-occupied properties to
95% of the lesser of the appraised value or purchase price of the property, with
the condition that private mortgage insurance is required on loans with a
loan-to-value ratio in excess of 80%. Loans originated under Rural Development
and CDA programs have loan-to-value ratios of up to 100% due to the guarantees
provided by those agencies. The substantial majority of loans in Cecil Federal's
loan portfolio have loan-to-value ratios of 80% or less.

Cecil Federal offers adjustable-rate mortgage loans with terms of up to 30
years. Adjustable-rate loans offered by Cecil Federal include loans which
reprice every one, three or five years and provide for an interest rate which is
based on the interest rate paid on U.S. Treasury securities of a corresponding
term.

Cecil Federal retains all adjustable-rate mortgages it originates, which are
designed to reduce Cecil Federal's exposure to changes in interest rates. Cecil
Federal's residential adjustable rate mortgages include caps on increases or
decreases of 2% per year, and 6% over the life of the loan. The retention of
adjustable-rate mortgage loans in Cecil Federal's loan portfolio helps reduce
Cecil Federal's exposure to increases in interest rates. However, there are
unquantifiable credit risks resulting from potential increased costs to the
borrower as a result of repricing of adjustable-rate mortgage loans. It is
possible that during periods of rising interest rates, the risk of default on
adjustable-rate mortgage loans may increase due to the upward adjustment of
interest cost to the borrower.

Cecil Federal also originates conventional fixed-rate mortgages with terms of
15, 20 or 30 years. Cecil Federal has originated all fixed-rate mortgage loans
in recent years for sale in the secondary mortgage market, and a substantial
majority of all fixed-rate loans originated since 1990 have been sold, primarily
to the Federal Home Loan Mortgage Corporation ("FHLMC"), with servicing retained
by Cecil Federal. Management assesses its fixed rate loan originations on an
ongoing basis to determine whether Cecil Federal's portfolio position warrants
the loans being sold or held in Cecil Federal's portfolio.

During the year ended December 31, 2003, Cecil Federal originated $18.2 million
in adjustable-rate mortgage loans and $14.1 million in fixed-rate mortgage
loans. Cecil Federal also offers second mortgage loans. These loans are secured
by a junior lien on residential real estate. The total of first and second liens
may not exceed a 90% loan to value ratio. Loans have terms of 5, 10 and 15 years
and have fixed rates. Cecil Federal offers home equity lines of credit, which
are secured by a junior lien on residential real estate. Customers are approved
for a line of credit that provides for an interest rate, which varies monthly,
and customers pay 2% of the balance per month.

Construction Lending. Cecil Federal's construction lending has primarily
involved lending to individuals for construction of single-family residences,
although Cecil Federal does lend funds for the construction of commercial
properties and multi-family real estate. All loans for the construction of
speculative sale homes have a loan value ratio of not more than 80%.
Substantially all construction loans originated convert to a permanent loan.
Cecil Federal has financed the construction of non-residential properties on a
case by case basis. A substantial majority of Cecil Federal's construction loans
(except loans to builders) are structured to convert to permanent loans upon
completion of construction, and usually have an initial construction loan term
of six months prior to converting to a permanent loan. Loan proceeds are
disbursed during the construction phase according to a draw schedule based on
the stage of completion. Construction projects are inspected by Cecil Federal's
officers. Construction loans are underwritten on the basis of the estimated
value of the property as completed and loan-to-value ratios must conform to the
requirements for the permanent loan.



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Land Loans. Cecil Federal also, from time to time, originates loans secured by
raw land. Land loans originated to individuals have a term of up to 10 years and
interest rates adjust every one, three or five years. Land loans originated to
developers have terms of up to three years. All land loans have a loan-to-value
ratio not exceeding 75%. Cecil Federal may expand its lending on raw land, as
market conditions allow, to qualified borrowers, experienced in the development
and sale of raw land. Loans involving construction financing and loans on raw
land have a higher level of risk than loans for the purchase of existing homes
since collateral values, land values, development costs and construction costs
can only be estimated at the time the loan is approved. Cecil Federal has sought
to minimize its risk in construction lending and in lending for the purchase of
raw land by offering such financing primarily to builders and developers to whom
Cecil Federal has loaned funds in the past and to persons who intend to occupy
the completed structure. Cecil Federal also limits construction lending and
loans on raw land to its market area, with which management is familiar.

Multi-Family and Commercial Real Estate Lending. Loans secured by multi-family
and commercial real estate generally are larger and involve greater risks than
one- to four-family residential mortgage loans. Because payments on loans
secured by such properties are often dependent on successful operation or
management of the properties, repayment of such loans may be subject to a
greater extent to adverse conditions in the real estate market or the economy.
Cecil Federal seeks to minimize these risks in a variety of ways, including
limiting the size and loan-to-value ratios of its multi-family and commercial
real estate loans and restricting such loans to its primary market area. Cecil
Federal's permanent multi-family and commercial real estate loans are secured by
improved property such as office buildings, apartment buildings, and retail
establishments that are located in Cecil Federal's primary market area.
Multi-family and commercial real estate loans generally have terms of 20 years,
are either tied to the prime rate or have interest rate adjustments every one,
three or five years, or amortize on the basis of a 30 year period and generally
require a balloon payment after three years. Multi-family and commercial
mortgages are generally made in amounts not exceeding 80% of the lesser of the
appraised value or purchase price of the property. All of Cecil Federal's
multi-family and commercial property loans require regular payments of principal
and interest. The interest rates on commercial real estate loans are negotiated
on a loan-by-loan basis.

Commercial Business Loans. Cecil Federal offers commercial business loans and
both secured and unsecured loans and letters of credit, or lines of credit for
businesses located in its primary market area. Most business loans have a six
month term, while lines of credit can remain open for longer periods. All
owners, partners, and officers must sign the loan agreement. The security for a
business loan depends on the amount borrowed, the business involved, and the
strength of the borrower's firm and position. Commercial business lending
entails significant risk, as the payments on such loans may depend upon the
successful operation or management of the business involved. Although Cecil
Federal attempts to limit its risk of loss on such loans by limiting the amount
and the term, and by requiring personal guarantees of principals of the business
(when additional guarantees are deemed necessary by management and such
guarantees are allowed by regulation), the risk of loss on commercial business
loans is substantially greater than the risk of loss from residential real
estate lending.

Consumer Lending. Consumer loans generally involve more risk than first mortgage
loans. Repossessed collateral for a defaulted loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of damage, loss,
or depreciation, and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In addition, loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be adversely affected by job loss, divorce, illness or
personal bankruptcy. Further, the application of various federal and state laws,
including federal and state bankruptcy and insolvency laws, may limit the amount
that can be recovered. These loans may also give rise to claims and defenses by
a borrower against Cecil Federal, and a borrower may be able to assert against
Cecil Federal claims and defenses that it has against the seller of the
underlying collateral.

Cecil Federal's consumer loans consist of automobile loans, savings account
loans, education loans, home improvement loans, and other consumer loans.
Consumer loans are generally offered for terms of up to five years at fixed
interest rates. Management expects to continue to promote consumer loans as part
of its strategy to provide a wide range of personal financial services to its
customers and as a means to increase the yield on Cecil Federal's loan
portfolio. Cecil Federal makes loans for automobiles and recreational vehicles,
both new and used, directly to the borrowers. The loans can be for up to 100% of
the purchase price or the retail value listed by the National


                                       8
<PAGE>


Automobile Dealers Association. The terms of the loans are determined by the
condition of the collateral. Collision insurance policies are required on all
these loans, unless the borrower has substantial other assets and income. Cecil
Federal makes savings account loans for up to 90% of the amount of the
depositor's savings account balance. The maximum amount of the loan takes into
consideration the amount of interest due. The term of the loan is either
interest due monthly on demand, or a term loan not to exceed 5 years. The
interest rate is 2% higher than the rate being paid on the savings account.
Cecil Federal's education loans are made to existing deposit customers, in
amounts of up to $10,000, and are paid out over four years, with $2,500
disbursed per year. Interest is payable annually until the student leaves school
and amortization over an eight year period then begins. Cecil Federal also makes
other consumer loans, which may or may not be secured. The term of the loans
usually depends on the collateral. Unsecured loans usually do not exceed
$100,000 and have a term of no longer than 12 months. Consumer loans are
generally originated at higher interest rates than residential mortgage loans
but also tend to have a higher risk than residential loans due to the loan being
unsecured or secured by rapidly depreciable assets (see discussion below).

Loan Solicitation and Processing. Cecil Federal's lending activities are subject
to written, non-discriminatory underwriting standards and loan origination
procedures outlined in loan policies established by its board of directors.
Detailed loan applications are obtained to determine the borrower's ability to
repay, and the more significant items on these applications are verified through
the use of credit reports, financial statements, and confirmations. Property
valuations required by policy are performed by independent outside appraisers
approved by the board of directors. With certain limited exceptions, the maximum
amount that Cecil Federal may lend to any borrower (including certain related
entities of the borrower) at any one time may not exceed 15% of the unimpaired
capital and surplus of the institution, plus an additional 10% of unimpaired
capital and surplus for loans fully secured by readily marketable collateral.
Under these limits, at December 31, 2003, Cecil Federal's loans-to-one borrower
cannot exceed $2,254,800.

Loan Originations and Sales. Loan originations are derived from a number of
sources. Residential mortgage loan originations primarily come from walk-in
customers and referrals by realtors, depositors, and borrowers. Applications are
taken at all offices, but are processed by Cecil Federal and submitted for
approval, as noted above. Cecil Federal has not purchased loans in the secondary
mortgage market. All fixed-rate loans are originated according to FHLMC
guidelines and, depending on market conditions, may be sold to FHLMC after
origination. Cecil Federal retains servicing on all loans sold.

Interest Rates and Loan Fees. Interest rates charged by Cecil Federal on
mortgage loans are primarily determined by competitive loan rates offered in its
market area. Mortgage loan interest rates reflect factors such as general market
interest rate levels, the supply of money available to the financial
institutions industry and the demand for such loans. These factors are in turn
affected by general economic conditions, the monetary policies of the Federal
government, including the Board of Governors of the Federal Reserve System (the
"Federal Reserve"), and general supply of money in the economy. In addition to
interest earned on loans, Cecil Federal receives fees in connection with loan
commitments and originations, loan modifications, late payments and for
miscellaneous services related to its loans. Income from these activities varies
from period to period with the volume and type of loans originated, which in
turn is dependent on prevailing mortgage interest rates and their effect on the
demand for loans in the markets served by Cecil Federal. Cecil Federal also
receives servicing fees on the loan amount of the loans that it services. At
December 31, 2003, Cecil Federal was servicing $13.3 million in loans for other
financial institutions. For the years ended December 31, 2003 and 2002 Cecil
Federal recognized gross servicing income of $42,000 and $26,000, respectively,
and total loan fee income of $118,000 and $101,000, respectively.

Mortgage-Backed Securities. Cecil Federal maintains a portfolio of
mortgage-backed securities in the form of Government National Mortgage
Association ("GNMA"), FNMA and FHLMC participation certificates and securities
issued by other nonagency organizations. GNMA certificates are guaranteed as to
principal and interest by the full faith and credit of the United States, while
FNMA and FHLMC certificates are each guaranteed by their respective agencies.
Mortgage-backed securities generally entitle Cecil Federal to receive a pro rata
portion of the cash flows from an identified pool of mortgages. Although
mortgage-backed securities yield from 30 to 100 basis points less than the loans
that are exchanged for such securities, they present substantially lower credit
risk and are more liquid than individual mortgage loans and may be used to
collateralize obligations of Cecil Federal. Because Cecil Federal receives
regular payments of principal and interest from its mortgage-backed securities,
these investments provide more consistent cash-flows than investments in other
debt securities, which generally only pay principal at maturity.


                                       9
<PAGE>


Mortgage-backed securities, however, entail certain unique risks. In a declining
rate environment, accelerated prepayments of loans underlying these securities
expose Cecil Federal to the risk that they will be unable to obtain comparable
yields upon reinvestment of the proceeds. In the event the mortgage-backed
security has been funded with an interest-bearing liability with a maturity
comparable to the original estimated life of the mortgage-backed security, Cecil
Federal's interest rate spread could be adversely affected. Conversely, in a
rising interest rate environment, Cecil Federal may experience a lower than
estimated rate of repayment on the underlying mortgages, effectively extending
the estimated life of the mortgage-backed security and exposing Cecil Federal to
the risk that it may be required to fund the asset with a liability bearing a
higher rate of interest. Cecil Federal seeks to minimize the effect of extension
risk by focusing on investments in adjustable-rate and/or relatively short-term
(seven years or shorter maturity) mortgage-backed securities.

Cecil Federal has historically invested in mortgage-backed securities as an
alternative to supplement its lending efforts and maintain compliance with
certain regulatory requirements. At December 31, 2003, Cecil Federal had no
mortgage derivative products that met the definition of high risk mortgage
securities.


Deposits and Borrowings

Deposits. Deposits are attracted principally from Cecil Federal's market area
through the offering of a variety of deposit instruments, including savings
accounts and certificates of deposit ranging in term from 91 days to 60 months,
as well as regular checking, NOW, passbook and money market deposit accounts.
Deposit account terms vary, principally on the basis of the minimum balance
required, the time periods the funds must remain on deposit and the interest
rate. Cecil Federal also offers individual retirement accounts ("IRAs"). Cecil
Federal's policies are designed primarily to attract deposits from local
residents. Cecil Federal does not accept deposits from brokers due to the
volatility and rate sensitivity of such deposits. Interest rates paid, maturity
terms, service fees and withdrawal penalties are established by Cecil Federal on
a periodic basis. Determination of rates and terms are predicated upon funds
acquisition and liquidity requirements, rates paid by competitors, growth goals
and federal regulations.

Borrowings. Deposits historically have been the primary source of funds for
Cecil Federal's lending and investment activities and for its general business
activities. Cecil Federal is authorized, however, to use advances from the FHLB
of Atlanta to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. Advances from the FHLB typically are secured by Cecil
Federal's stock in the FHLB and a portion of Cecil Federal's mortgage loans.
Cecil Federal utilized advances from FHLB during the year. The FHLB of Atlanta
functions as a central reserve bank providing credit for member financial
institutions. As a member, Cecil Federal is required to own capital stock in the
FHLB and is authorized to apply for advances on the security of such stock and
certain of its home mortgages and other assets (principally, securities which
are obligations of, or guaranteed by, the United States) provided certain
standards related to creditworthiness have been met.

Competition

The Company offers a wide range of lending and deposit services in its market
area. In addition, the Company offers a full range of brokerage and investment
services through its relationship with UVEST Investment Services. The Company
experiences substantial competition both in attracting and retaining deposits,
in making loans, and in providing investment, insurance, and other services.
Management believes the Bank is able to compete effectively in its primary
market area.

The primary factors in competing for loans are interest rates, loan origination
fees, and the range of services offered by lenders. Competitors for loan
originations include other savings associations, commercial banks, mortgage
bankers, mortgage brokers, and insurance companies. The Bank's principal
competitors for deposits are other financial institutions, including other
banks, savings associations, and credit unions located in the Bank's primary
market area of Cecil and Harford Counties in Maryland or doing business in the
market area through the internet, by mail, or by telephone. Competition among
these institutions is based primarily on interest rates and other terms offered,
service charges imposed on deposit accounts, the quality of services rendered,
and the convenience of banking facilities. Additional competition for
depositors' funds comes from U.S. Government securities, private issuers of debt
obligations and suppliers of other investment alternatives for depositors, such
as securities firms. Competition from credit unions has intensified in recent
years as historical federal limits on membership have been relaxed. Because
federal law subsidizes credit unions by giving them a general exemption from
federal income taxes, credit unions have a significant cost advantage over banks
and savings associations, which are fully subject to federal income taxes.
Credit unions may use this advantage to offer rates that are highly competitive
with those offered by banks and thrifts.


                                       10
<PAGE>

The banking business in Maryland generally, and the Bank's primary service areas
specifically, are highly competitive with respect to both loans and deposits.
The Bank competes with many larger banking organizations that have offices over
a wide geographic area. These larger institutions have certain inherent
advantages, such as the ability to finance wide-ranging advertising campaigns
and promotions and to allocate their investment assets to regions offering the
highest yield and demand. They also offer services, such as international
banking, that are not offered directly by the Bank (but are available indirectly
through correspondent institutions), and, by virtue of their larger total
capitalization, such banks have substantially higher legal lending limits, which
are based on bank capital, than does the Bank. The Bank can arrange loans in
excess of its lending limit, or in excess of the level of risk it desires to
take, by arranging participations with other banks. Other entities, both
governmental and in private industry, raise capital through the issuance and
sale of debt and equity securities and indirectly compete with the Bank in the
acquisition of deposits.

In addition to competing with other savings associations, commercial banks, and
credit unions, savings associations such as the Bank compete with nonbank
institutions for funds. For instance, yields on corporate and government debt
and equity securities affect the ability of commercial banks to attract and hold
deposits. Commercial banks also compete for available funds with mutual funds.
These mutual funds have provided substantial competition to banks for deposits,
and it is anticipated they will continue to do so in the future.



Employees

As of January 31, 2004, the Company and the Bank employed 55 persons. None of
The Company's or the Bank's employees is represented by a union or covered under
a collective bargaining agreement. Management of the Company and the Bank
consider their employee relations to be excellent.


                                       11
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

         Following are the locations of Cecil Federal at December 31, 2003. The
Company has no other locations.
<TABLE>
<CAPTION>

          Popular Name                                 Location
------------------------------------------- ---------------------------------------------------------
<S>                                         <C>
Main Office                                 127 North Street, Elkton, MD 21921
*Cecil Financial Center                     135 North Street, Elkton, MD  21921
*North East                                 108 North East Plaza, Elkton, MD 21901
*Rising Sun                                 56 Rising Sun Towner Centre, Rising Sun, MD  21911
*Crossroads                                 114 E. Pulaski Hwy, Elkton, MD  21921
Downtown Havre de Grace                     303-307 St John Street, Havre de Grace, MD 21078
Route 40 Havre de Grace                     1609 Pulaski Highway, Havre de Grace, MD 21078

</TABLE>
*Leased.

ITEM 3.  LEGAL PROCEEDINGS

         In the normal course of business, Cecil Bancorp is often subject to
various pending and threatened legal actions. The relief or damages sought in
some of these actions may be substantial. After reviewing pending and threatened
actions with counsel, management considers that the outcome of such actions will
not have a material adverse effect on Cecil Bancorp's financial position;
however, Cecil Federal is not able to predict whether the outcome of such
actions may or may not have a material adverse effect on results of operations
in a particular future period as the timing and amount of any resolution of such
actions and relationship to the future results of operations are not known.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of security holders during the fourth
quarter of 2003, through solicitation of proxies or otherwise.

                                       12
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR RCOMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Common shares of Cecil Bancorp are traded over the counter under the symbol
CECB. Shareholders received quarterly cash dividends totaling $.20 per share in
both 2003 and 2002. The ratio of dividends per share to diluted net income per
share was 25.2% in 2003, compared to 25.5% for 2002. The dividend amount is
established by the Board of Directors each quarter. In making its decision on
dividends, the Board considers operating results, financial condition, capital
adequacy, regulatory requirements, shareholder returns and other factors. Shares
issued under the dividend reinvestment plan totaled 5,858 in 2003 and 8,022 in
2002. All EPS amounts have been adjusted to give retroactive affect for the
two-for-one stock split approved by the Board of Directors on February 24, 2004.

The number of common shareholders of record was approximately 775 as of March
31, 2004, excluding shareholders who hold in nominee or "street name."

Quarterly Stock Information
<TABLE>
<CAPTION>

                                              2003                                          2002
------------------------------------------------------------------------------------------------------------------
                                Stock Price Range        Per Share            Stock Price Range         Per Share
                                -----------------                             -----------------
Quarter                          Low          High        Dividend          Low             High        Dividend
------------------------------------------------------------------------------------------------------------------
<C>                             <C>           <C>             <C>            <C>            <C>             <C>
1st                             9.26          11.50           $.05           $8.75          $9.15           $.05
2nd                            10.00          11.50            .05            8.84           9.25            .05
3rd                            10.25          11.00            .05            9.00           9.50            .05
4th                            10.68          12.38            .05            9.00           9.50            .05
                                                                --                                            --
   Total                                                      $.20                                          $.20
                                                                ==                                            ==
</TABLE>


(1)      Quotations reflect inter-dealer price, without retail mark-up,
mark-down or commissions, and may not represent actual transactions.

         The following table presents disclosure regarding equity compensation
plans in existence at December 31, 2003, consisting only of the stock option
plan (expired but having outstanding options that may still be exercised) which
was approved by shareholders (described further under the caption "Stock Option
Plan" in Note 12 to the consolidated financial statements).
<TABLE>
<CAPTION>

                      Equity Compensation Plan Information

------------------------------- ---------------------------- ---------------------------- ----------------------------
        Plan category           Number of securities to be    Weighted average exercise      Number of securities
                                  issued upon exercise of       price of outstanding        remaining available for
                                   outstanding options,         options, warrants and        future issuance under
                                    warrants and rights                rights              equity compensation plans
                                            (a)                          (b)                 excluding securities
                                                                                            reflected in column (a)
                                                                                                      (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                            <C>                          <C>                          <C>
  Equity compensation plans
 approved by security holders             16,528                       $14.26                          0
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
 approved by security holders                0                            0                            0
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
            Total                         16,528                       $14.26                          0
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

The above table does not include shares issued under the Management Recognition
Plan, for which no additional shares are available for issuance, or shares
acquired by the Employee Stock Ownership Plan. See Note 12 to the consolidated
financial statements.

                                       13
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read this Management's Discussion and Analysis of the Company's
consolidated financial condition and results of operations in conjunction with
the Company's consolidated financial statements and the accompanying notes
<TABLE>
<CAPTION>

Four Year Summary of Selected Financial Data
(Dollars in thousands, except per share data)           2003        2002         2001         2000           1999
-------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS:
<S>                                                   <C>          <C>          <C>          <C>             <C>
Interest Income                                       $8,369       $8,385       $9,336       $9,363          $7,775
Interest Expense                                       2,649        3,191        4,729        4,875           3,994
    Net Interest Income                                5,720        5,194        4,607        4,488           3,781
Provision for Loan Losses                                220          569          190          305             125
Net Interest Income after Provision                    5,500        4,626        4,417        4,183           3,656
    for Loan Losses
Noninterest Income                                       805          691          588          573             417
Noninterest Expenses                                   4,321        3,709        3,733        3,570           2,928
Income before Income Taxes                             1,984        1,608        1,232        1,186           1,145
Income Tax Expense                                       749          613          471          467             475
Net Income                                             1,235       $  995       $  761       $  719          $  670

PER SHARE DATA: (3)
Basic Net Income Per Share                              $.81         $.79         $.62         $.60            $.57
Diluted Net Income Per Share                             .80          .78          .61          .59             .56
Dividends Declared                                       .20          .20          .20          .20             .20
Book Value (at year end)                               10.41        10.30         9.64         9.19            8.70
Tangible Book Value (at year end) (1)                   8.98         8.54         7.86         7.21            6.47

FINANCIAL CONDITION (at year end):
Assets                                              $149,600     $123,120     $127,498     $121,961        $114,924
Deposits                                             118,164       99,831      104,035       95,913         101,218
Loans, net                                           126,887      101,571      101,393      102,582          92,099
Investment Securities                                  5,770       10,488       13,817        7,948           9,733
Stockholders' Equity                                  16,714       13,186       12,197       11,416          10,706

PERFORMANCE RATIOS (for the year):
Return on Average Assets                                .91%          .81%         .61%         .59%            .63%
Return on Average Equity                               7.79          7.86         6.41         6.48            6.40
Net Interest Margin                                    4.51          4.43         4.01         3.89            3.66
Efficiency Ratio (2)                                  66.22         63.02        72.63        70.54           69.75
Dividends Declared Per Share
  to Diluted Net Income Per Share                     25.00         25.48        32.79        33.90           35.71

CAPITAL AND CREDIT QUALITY RATIOS:
Average Equity to Average Assets                      11.72%        10.25%        9.48%        9.09%          10.42%
Allowance for Loan Losses to Loans                      .61           .60          .32          .41             .47
Nonperforming Assets to Total Assets                    .84           .50          .54          .73             .95
Net Charge-offs to Average Loans                        .04           .28          .28          .31             .11
</TABLE>


(1) Total stockholders' equity, net of goodwill and other intangible assets,
divided by the number of shares of common stock outstanding at year end.
(2) The Efficiency Ratio equals noninterest expenses as a percentage net
interest income plus noninterest income. In this ratio, noninterest expenses for
years prior to 2003 include amortization of the intangible asset related to the
September 27, 1999, acquisition of two branch offices from an unaffiliated
financial institution. See Note 2 to the consolidated financial statements.
(3)All EPS amounts have been adjusted to give retroactive affect for the
two-for-one stock split approved by the Board of Directors on February 24, 2004.


                                       14
<PAGE>

Summary

Cecil Bancorp, Inc. (the "Company") is the bank holding company for Cecil
Federal Bank ("Cecil Federal" or the "Bank. The Bank is a community-oriented
commercial bank chartered under the laws of the State of Maryland and is a
member of the Federal Reserve System.

Cecil Federal is a community-oriented financial institution which commenced
operations in 1959 as a Federal mutual savings and loan association. Cecil
Federal conducts its business through its main office in Elkton, Maryland,
branches in Elkton, Rising Sun, and North East, Maryland, and through the
Columbian Bank Division's main office and a branch office in Havre de Grace,
Maryland. Cecil Service Corporation, a subsidiary of the Bank acts as leasing
agent for the North East Plaza Branch. The Bank offers a full range of brokerage
and investment services through a relationship with UVEST Investment Services.
Cecil Federal's business strategy is to operate as an independent
community-oriented financial institution funded primarily by retail deposits.

Consolidated Average Balances, Yields and Rates (1)
<TABLE>
<CAPTION>

                                                                    2003                          2002
-------------------------------------------------------------------------------------------------------------------
                                                         Average             Yield/  Average               Yield/
(Dollars in thousands)                                  Balance    Interest   Rate   Balance     Interest   Rate
-------------------------------------------------------------------------------------------------------------------
ASSETS
<S>                                                     <C>        <C>       <C>     <C>            <C>      <C>
Loans                                                   $112,486   $8,096    7.20%   $100,324     $7,847     7.82%
Investment securities                                      9,772      212    2.17      12,927        447     3.46
Other interest-earning assets                              4,684       61    1.30       4,017         91     2.27
                                                           -----    -----            --------      -----
   Total Earning Assets                                  126,942    8,369    6.59     117,268      8,385     7.15
                                                                                                   -----
Non-Interest earning assets                                8,318                       6,213
                                                           -----                     -------
   Total Assets                                         $135,260                    $123,481

LIABILITIES AND
   STOCKHOLDERS' EQUITY
Deposits                                                $108,155     2,212   2.05   $100,355       2,755     2.75
FHLB advances                                              9,624       434   4.50      9,220         432     4.68
Advances from borrowers for taxes
   and insurance                                             691         3    .43        678           4      .59
                                                           -----     -----            --------      -----
   Total Interest- Bearing Liabilities                   118,470     2,649   2.23    110,253       3,191     2.90
                                                                     -----                         -----
Non-Interest bearing liabilities                             942                         571
                                                        --------                    --------
   Total liabilities                                     119,412                     110,824
Stockholders' equity                                      15,848                      12,657
                                                        --------                    --------
   Total Liabilities and Stockholders' Equity           $135,260                    $123,481
                                                        ========                    ========
Net Interest income                                                 $5,720                       $5,194
Interest Rate Spread                                                         4.36                            4.25
Net Interest Margin                                                          4.51                            4.43
Ratio of average interest earning assets
   to average interest bearing liabilities                                 107.15                          106.36

</TABLE>

(1) Average balances are based upon month-end balances, which are not believed
to be materially different from daily averages.
(2)  Non-accrual loans are included in the average balances.


                                       15
<PAGE>


Results of Operations
2003 versus 2002

Net income increased $240,288, or 24.2% to $1,234,810 for the year ended
December 31, 2003, from $994,522 for the same period in 2002. The increase in
net income is the result of a $525,266, or 10.1%, increase in net interest
income due mainly to increasing loan volumes and declining rates on interest
bearing liabilities; a $348,667 decrease in the provision for loan losses; a
$114,077, or 16.5%, increase in noninterest income, due mainly a $122,477
increase in gains on sale of loans and to a $39,735 increase in commission
income; offset by $612,277 increase in noninterest expense, due mainly to the
increase in compensation and benefits of new sales staff, equipment and data
processing; and occupancy expenses.. Basic and diluted net income per share for
2002 were, $.81 and $.80, respectively, each up $0.02, or approximately 2.5%,
over corresponding 2002 earnings per share amounts, as the increase in net
income more than offset the effects of the greater number of shares issued in
the Company's 2003 private placement. The annualized return on average assets
and annualized return on average equity were 0.91% and 7.79% respectively, for
the year ended December 31, 2003. This compares to an annualized return on
average assets and the annualized return on average equity of 0.81% and 7.86%,
respectively for the same period in 2002.

Net interest income, the Company's primary source of income, increased $525,266,
or 10.1% to $5,719,598 for the year ended December 31, 2003, from $5,194,332 for
the year ended December 31, 2002. The weighted average yield on all
interest-earning assets decreased to 6.59% for the year ended December 31, 2003
from 7.15% for the year ended December 31, 2002. The weighted average rate paid
on interest bearing liabilities decreased to 2.23% for the year ended December
31, 2003 from 2.90% for the year ended December 31, 2002. As a result, the net
interest spread increased to 4.36% for 2003 from 4.25% for 2002. The net
interest margin increased by 8 basis points to 4.51% from 4.43%.

Interest and fees on loans receivable increased by $248,895, or 3.2% to
$8,096,135 for the year ended December 31, 2003 from $7,847,240 for the year
ended December 31, 2002. The increase is attributable to an increase in average
balance outstanding offset, in part, by a decrease in the average yield. The
average outstanding balance increased $12,162,028, or 12.1%, to $112,486,371 for
the year ended December 31, 2003 from $100,324,343 for the year ended December
31, 2002. The weighted average yield decreased to 7.20% for the year ended
December 31, 2003 from 7.82% for the year ended December 31, 2002.

Interest on investment securities decreased $234,918, or 52.6% to $211,726 for
the year ended December 31, 2003 from $446,644 for the year ended December 31,
2002. The decrease is a result of a decrease in the weighted average yield and a
decrease in the average balance. The weighted average yield decreased to 2.17%
for the year ended December 31, 2003 from 3.46% for the year ended December 31,
2002. The average outstanding balance decreased $3,155,729, or 24.4%, to
$9,771,572 for the year ended December 31, 2003 from $12,927,301 for the year
ended December 31, 2002.

Other earning assets primarily are Federal Home Loan Bank stock, Federal Reserve
Bank stock, and short-term liquidity accounts with variable rates. Dividends on
Federal Home Loan and Federal Reserve Bank stock decreased $20,749, or 37.4% to
$34,721 for the year ended December 31, 2003 from $55,470 for the year ended
December 31, 2002 as a result of a decrease in the weighted average yield offset
in part by an increase in the average balance outstanding. Interest on the
remaining other earning assets decreased $9,497, or 26.8% to $25,984 for the
year ended December 31, 2003 from $35,481 for the year ended December 31, 2002
as a result of a decrease in the weighted average yield offset by an increase in
the average balance outstanding. The average outstanding balance increased
$806,997, or 26.6%, from $3,035,788 for the year ended December 31, 2002 to
$3,842,785 for the year ended December 31, 2003. The weighted average yield
decreased from 1.17% for the year ended December 31, 2002 to 0.68% for the year
ended December 31, 2003.

Interest paid on deposits decreased $543,987, or 19.7% to $2,214,626 for the
year ended December 31, 2003 from $2,758,613 for the year ended December 31,
2002. The decrease was the result of a decrease in the average cost of funds,
offset in part by an increase in average balance.. The weighted average rate
decreased to 2.05% for the year ended December 31, 2003 from 2.75% for the year
ended December 31, 2002. The average outstanding balance

                                       16
<PAGE>

increased $7,799,441, or 7.8%, to $108,154,586 for the year ended December 31,
2003 from $100,355,145 for the year ended December 31, 2002. Interest expense
paid on borrowings increased $2,452, or 0.6% to $434,342 for the year ended
December 31, 2003 from $431,890 for the year ended December 31, 2002. The
increase was a result of increases in the average balance outstanding offset by
a decrease in the average cost of funds. The average outstanding balance
increased $403,425, or 4.4%, to $9,623,973 for the year ended December 31, 2003
from $9,220,548 for the year ended December 31, 2002. The weighted average rate
decreased to 4.51% for the year ended December 31, 2003 from 4.68% for the year
ended December 31, 2002.

Effect of Volume and Rate Changes on Net Interest Income
<TABLE>
<CAPTION>

                                                           2003 vs. 2002                   2002 vs. 2001
------------------------------------------------------------------------------------------------------------------
                                                 Increase       Due to Change     Increase     Due to Change
                  Or                           in Average:*          or         in Average:*
(Dollars in thousands)                          (Decrease)   Volume       Rate   (Decrease)   Volume       Rate
------------------------------------------------------------------------------------------------------------------
<S>                                                <C>        <C>        <C>        <C>        <C>        <C>
Interest income from earning assets:
    Loans                                          $   249    $   905    $  (656)   $ (779)    $ (158)    $ (621)
    Investment securities                             (235)       (93)      (142)     (104)       225       (329)
    Other interest-earning assets                      (30)        13        (43)      (68)        (7)       (61)
                                                    -------                          -----
   Total Interest Income                               (16)       664       (680)     (951)       198     (1,149)
                                                    -------                          -----
Interest expense:
    Interest-bearing deposits                         (543)       201       (744)   (1,375)       (46)    (1,329)
    FHLB advances                                        2         19        (17)     (159)       (63)       (96)
    Advances from borrowers for taxes
       and insurance                                    (1)         0         (1)       (4)        (1)        (3)
                                                    -------                          -----
        Total Interest Expense                        (542)       224       (766)   (1,538)      (101)    (1,437)
                                                    -------                          -----
            Net Interest Income                    $   526        440         86    $  587     $  299     $  288
                                                    =======                          =====
</TABLE>
* Variances are computed line-by-line and do not add to the totals shown.
Changes in rate-volume (changes in rate multiplied by the changes in volume) are
allocated between changes in rate and changes in volume in proportion to the
relative contribution of each.

The allowance for loan losses is increased by provisions charged to expense.
Charge-offs of loan amounts determined by management to be uncollectible
decrease the allowance, and recoveries of previous charge-offs are added to the
allowance. The Company makes provision for loan losses in amounts necessary to
maintain the allowance for loan losses at an appropriate level, based upon
management's reviews of probable losses inherent in the loan portfolio. The
provision for loan losses decreased $348,667, or 61.3% to $220,000 for the year
ended December 31, 2003 from $568,667 for the year ended December 31, 2002 as a
result of this analysis. (See "Allowance for Loan Losses.")

Non-interest income increased $114,078, or 16.5% to $805,050 for the year ended
December 31, 2003 from $690,972 for the year ended December 31, 2002. Checking
account fees increased $25,825 or 9.0% to $313,265 for the year ended December
31, 2003 from $287,440 for the year ended December 31, 2002. ATM fees increased
$15,941 or 14.9% to $123,187 for the year ended December 31, 2003 from $107,245
for the year ended December 31, 2002. Gain on the sale of loans increased
$122,477 or 170.9%. There were no gains on the sale of real estate as of
December 31, 2003. Commission income on alternative investment products
increased $39,735, or 89.7% to $84,026 for the year ended December 31, 2003 from
$44,291 for the year ended December 31, 2002. Other income increased $25,773 or
32.2% to $105,769 for the year ended December 31, 2003 from $79,996 for the year
ended December 31, 2002.

Non-interest expense increased $612,277, or 16.5% to $4,321,100 for the year
ended December 31, 2003 from $3,708,823 for the year ended December 31, 2002.
The Company experienced an increase in salaries and employee benefits of
$497,365, or 26.2% to $2,395,256 for the year ended December 31, 2003 from
$1,897,891 for the year ended December 31, 2002. The increase can be
attributable to increased number of employees due to increased sales staff, back
office staff, and personnel needed at the new Rising Sun office along with
increases in other personnel


                                       17
<PAGE>

and annual merit increases. Occupancy expense increased $74,697, or 33.2% to
$299,588 for the year ended December 31, 2003 from $224,891 for the year ended
December 31, 2002. The increase is attributable to the addition of the lease for
new Rising Sun office. The Company's SAIF premium decreased $40,942, or 71.7% to
$16,126 for the year ended December 31, 2003 as compared to $57,068 for the year
ended December 31, 2002. Other expenses decreased $55.799, or 5.8% to $903,490
for the year ended December 31, 2003 from $959,289 for the year ended December
31, 2002

Income tax expense for the year ended December 31, 2003 and December 31, 2002
was $748,738 and $613,293, respectively, which equates to effective rates of
37.7% and 38.1%, respectively.

2002 versus 2001

Net income increased $233,447, or 30.7% to $994,522 for the year ended December
31, 2002, from $761,075 for the same period in 2001. The increase in net income
is the result of a $587,532, or 12.7%, increase in net interest income due
mainly to declining rates on interest bearing liabilities and growth in average
investment securities; a $102,487, or 17.4%, increase in noninterest income, due
mainly to a $100,321 gain on sale of other real estate owned and a $71,679
increase in gains on sale of loans, and a $64,812 decrease in noninterest
expense, due mainly to the cessation of amortization of goodwill related to the
1999 branch acquisition; offset, in part, by a $379,167 increase in the
provision for loan losses. Basic and diluted net income per share for 2002 were,
$.79 and $.78, respectively, each up $0.17, or approximately 28%, over
corresponding 2001 earnings per share amounts.

The annualized return on average assets and annualized return on average equity
were 0.81% and 7.86% respectively, for the year ended December 31, 2002. This
compares to an annualized return on average assets and the annualized return on
average equity of 0.61% and 6.41%, respectively for the same period in 2001.

Net interest income increased $587,532, or 12.8% to $5,194,333 for the year
ended December 31, 2002, from $4,606,801 for the year ended December 31, 2001.
The weighted average yield on all interest-earning assets decreased to 7.15% for
the year ended December 31, 2002 from 8.13% for the year ended December 31,
2001. The weighted average rate paid on interest bearing liabilities decreased
to 2.90% for the year ended December 31, 2002 from 4.20% for the year ended
December 31, 2001. As a result, the net interest spread increased to 4.25% for
2002 from 3.93% for 2001. The net interest margin increased by 42 basis points
to 4.43%, from 4.01%

Interest and fees on loans receivable decreased by $779,021, or 9.0% to
$7,847,240 for the year ended December 31, 2002 from $8,626,261 for the year
ended December 31, 2001. The decrease is attributable to a decrease in the
average yield and, to a lesser extent, a decrease in average balance
outstanding. The weighted average yield decreased to 7.82% for the year ended
December 31, 2002 from 8.44% for the year ended December 31, 2001. The average
outstanding balance decreased $1,898,433, or 1.9%, to $100,324,343 for the year
ended December 31, 2002 from $102,222,776 for the year ended December 31, 2001.

Interest on investment securities decreased $104,342, or 18.9% to $446,644 for
the year ended December 31, 2002 from $550,986 for the year ended December 31,
2001. The decrease is a result of a decrease in the weighted average yield
offset in part by an increase in the average balance. The weighted average yield
decreased to 3.46% for the year ended December 31, 2002 from 6.60% for the year
ended December 31, 2001. The average outstanding balance increased $4,581,424,
or 54.9%, to $12,927,301 for the year ended December 31, 2002 from $8,345,877
for the year ended December 31, 2001. Other earning assets primarily are Federal
Home Loan and Federal Reserve Stock and short-term liquidity accounts with
variable rates. Dividends on Federal Home Loan and Federal Reserve Bank stock
decreased $6,338, or 10.3% to $55,470 for the year ended December 31, 2002 from
$61,808 for the year ended December 31, 2001 as a result of a decrease in the
weighted average yield offset in part by an increase in the average balance
outstanding. Interest on remaining other earning assets decreased $61,215, or
63.3% to $35,481 for the year ended December 31, 2002 from $96,696 for the year
ended December 31, 2001 as a result of a decrease in the weighted average yield
and the average balance outstanding. The average outstanding balance decreased
$235,205, or 7.2%, from $3,270,993 for the year ended December 31, 2001 to
$3,035,788 for the year ended December 31, 2002. The weighted average yield
decreased from 2.96% for the year ended December 31, 2001 to 1.17% for the year
ended December 31, 2002.


                                       18
<PAGE>

Interest paid on deposits decreased $1,378,966, or 33.3% to $2,758,612 for the
year ended December 31, 2002 from $4,137,578 for the year ended December 31,
2001. The decrease was the result of a decrease in the average cost of funds,
and, to a much smaller extent, to a decrease in the average balance. The
weighted average rate decreased to 2.75% for the year ended December 31, 2002
from 4.07% for the year ended December 31, 2001. The average outstanding balance
decreased $1,139,583, or 1.1%, to $100,355,145 for the year ended December 31,
2002 from $101,494,728 for the year ended December 31, 2001. Interest expense
paid on borrowings decreased $159,482, or 27.0% to $431,890 for the year ended
December 31, 2002 from $591,372 for the year ended December 31, 2001. The
decrease was a result of decreases in the average cost of funds and the average
balance outstanding. The average outstanding balance decreased $1,194,035, or
11.5%, to $9,220,548 for the year ended December 31, 2002 from $10,414,583 for
the year ended December 31, 2001. The weighted average rate decreased to 4.68%
for the year ended December 31, 2002 from 5.68% for the year ended December 31,
2001.

The provision for loan losses increased $379,167, or 200.1% to $568,667 for the
year ended December 31, 2002 from $189,500 for the year ended December 31, 2001.
(See "Allowance for Loan Losses.")

Non-interest income increased $102,487, or 17.4% to $690,972 for the year ended
December 31, 2002 from $588,485 for the year ended December 31, 2001. Checking
account fees decreased $9,448 or 3.2% to $287,440 for the year ended December
31, 2002 from $296,888 for the year ended December 31, 2001. ATM fees increased
$9,665 or 9.9% to $107,245 for the year ended December 31, 2002 from $97,580 for
the year ended December 31, 2001. Gain on the sale of loans increased $71,679 or
100.0%. Gain on the sale of real estate increased $104,938 to $100,321 for the
year ended December 31, 2002 from $(4,617) for the year ended December 31, 2001.
Commission income on alternative investment products decreased $38,030, or 46.2%
to $44,291 for the year ended December 31, 2002 from $82,321 for the year ended
December 31, 2001. Other income decreased $36,317 or 31.2% to $79,996 for the
year ended December 31, 2002 from $116,313 for the year ended December 31, 2001.

Non-interest expense decreased $64,812, or 1.7% to $3,708,823 for the year ended
December 31, 2002 from $3,773,635 for the year ended December 31, 2001. The
Company experienced an increase in salaries and employee benefits of $96,808, or
5.4% to $1,897,891 for the year ended December 31, 2002 from $1,801,083 for the
year ended December 31, 2001. The increase can be attributable to increased
personnel and annual merit increases. Occupancy expense decreased $8,415, or
3.6% to $224,891 for the year ended December 31, 2002 from $233,306 for the year
ended December 31, 2001. The Company's SAIF premium decreased $10,917, or 16.1%
to $57,068 for the year ended December 31, 2002 as compared to $67,985 for the
year ended December 31, 2001. Amortization of goodwill decreased $281,567, or
100.0% due to a change in the accounting for intangible assets. See Notes 2 and
6 to the consolidated financial statements for details of the accounting change.
Other expenses increased $151,401, or 16.5% to $1,068,913 for the year ended
December 31, 2002 from $917,512 for the year ended December 31, 2001. The
increase is attributable to an increase in advertising and promotion expense,
loan expense, stationery and office supplies, postage, meeting expense, and
charitable contributions.

Income tax expense for the year ended December 31, 2002 and December 31, 2001
was $613,293 and $471,076, respectively, which equates to effective rates of
38.1% and 38.2%, respectively.

Comparison of Financial Condition.
2003 versus 2002

The Company's assets increased by $26,480,181, or 21.5% to $149,599,795 at
December 31, 2003 from $123,119,614 at December 31, 2002. The loans receivable
portfolio, net of the allowance for loan losses, increased by $25,315,680, or
24.9% to $126,886,555 at December 31, 2003 from $101,570,875 at December 31,
2002. Cash and interest-bearing deposits with banks increased $1,168,329 or
25.8% to $5,693,288 at December 31, 2003 from $4,524,959 at December 31, 2002.
The Company's investments held to maturity remained stable at December 31, 2003
in comparison with the prior year. Investments available for sale decreased
$4,719,999 or 67.5% to $2,274,387 at December 31, 2003 from $6,994,386 at
December 31, 2002. Premises and equipment net of accumulated depreciation
increased by $1,244,587, or 56.5% to $3,447,093 at December 31, 2003 from
$2,202,506 at December 31, 2002. The increase was the result of Bank's system
conversion to FiServ Vision which generated


                                       19
<PAGE>

the need for all new computer equipment. In addition, the Bank added a new
branch location in Rising Sun and purchased property on Turkey Point Road, North
East, MD. Restricted investment securities, which consist of Federal Home Loan
and Federal Reserve Bank stock decreased $200,950 or 18.7% to $871,900 at
December 31, 2003 from $1,072,850 at December 31, 2002. Cecil Federal was
required to reduce their investment from the Federal Home Loan Bank upon
acceptance as a Federal Reserve System member. Other assets increased $3,517,979
or 716.0% to $4,009,309 at December 31, 2003 from $491,330 at December 31, 2002.
The increase is attributable to the bank purchasing $3,250,000 of bank-owned
life insurance in order to fund employee benefit programs which are included in
other assets.

The Company's liabilities increased $22,952,131, or 20.9% to $132,885,438 at
December 31, 2003 from $109,933,307 at December 31, 2002. Deposits increased
$18,332,365, or 18.4% to $118,163,776 at December 31, 2003 from $99,831,411 at
December 31, 2002. Advances from the Federal Home Loan Bank of Atlanta increased
$4,750,000 or 52.8% to $13,750,000 at December 31, 2003 from $9,000,000 and at
December 31, 2002. Other liabilities remained stable in comparison with the
prior year.

The Company's stockholders' equity increased by $3,528,050, or 26.8% to
$16,714,357 at December 31, 2003 from $13,186,307 at December 31, 2002. The
increase was primarily due to the private placement of common stock and to an
increase in retained earnings of $917,525, or 11.8%, as a result of 2003
earnings, net of dividends The Company completed a private placement of 158,735
shares of newly issued common stock for net proceeds of $2,488,035. For the year
ended December 31, 2003, the Company paid an annualized dividend of $.20 per
share.

Comparison of Financial Condition.
2002 versus 2001

The Company's assets decreased by $4,378,427, or 3.4% to $123,119,614 at
December 31, 2002 from $127,498,041 at December 31, 2001. The loans receivable
portfolio, net of the allowance for loan losses, decreased by $177,384, or 0.2%
to $101,570,875 at December 31, 2002 from $101,393,491 at December 31, 2001.
Cash and interest-bearing deposits with banks decreased $1,021,283 or 18.4% to
$4,524,959 at December 31, 2002 from $5,546,242 at December 31, 2001. The
Company's investments held to maturity increased by $444,656, or 14.6% to
$3,494,020 at December 31, 2002 from $3,049,364 at December 31, 2001.
Investments available for sale decreased $3,773,417 or 35.0% to $6,994,386 at
December 31, 2002 from $10,767,803 at December 31, 2001. Premises and equipment
net of accumulated depreciation decreased by $117,454, or 5.1% to $2,202,506 at
December 31, 2002 from $2,319,960 at December 31, 2001. The decrease was the
result of the depreciation of the Bank's fixed assets. Restricted investment
securities, which consist of Federal Home Loan and Federal Reserve Bank stock
increased $117,850 or 12.3% to $1,072,850 at December 31, 2002 from $955,000 at
December 31, 2001. Cecil Federal was required to make an initial investment upon
acceptance as a Federal Reserve System member. Other assets decreased $65,571 or
11.8% to $491,330 at December 31, 2002 from $556,901 at December 31, 2001.

The Company's liabilities decreased $5,367,423, or 4.7% to $109,933,307 at
December 31, 2002 from $115,300,730 at December 31, 2001. Deposits decreased
$4,203,695, or 4.0% to $99,831,411 at December 31, 2002 from $104,035,106 at
December 31, 2001. Advances from the Federal Home Loan Bank of Atlanta decreased
$1,000,000 or 10.0% to 9,000,000 at December 31, 2002 from $10,000,000 and at
December 31, 2001. Other liabilities remained stable in comparison with the
prior year.

The Company's stockholders' equity increased by $988,996, or 8.1% to $13,186,307
at December 31, 2002 from $12,197,307 at December 31, 2001. The increase was
primarily due to an increase in retained earnings of $744,194, or 10.5%
primarily as a result of 2002 earnings, net of dividends. For the year ended
December 31, 2002, the Company paid an annualized dividend of $.20 per share.


                                       20
<PAGE>

Loans

Cecil Federal's total loans grew $25.5 million, or 24.9% during 2003. Cecil
Federal's construction loans increased $4.3 million, or 73.3% over the same
period in 2002, and accounted for 8% of the Banks total portfolio. Cecil
Federal's commercial real estate loans increased by $7.0 million, or 47.0%, and
accounted for approximately 17% of the total portfolio, up from approximately
14.5% at year-end 2002, and commercial business loans increased by almost $14
million, or 143.9%, and accounted for approximately 19% of the portfolio, up
from approximately 10% at year-end 2002. Land, Savings Accounts, and Personal
Loans also increased during 2003, while other categories decreased. The
following table shows the composition of the loan portfolio at December 31.
<TABLE>
<CAPTION>

                                                                     2003                             2002
--------------------------------------------------------------------------------------------------------------------
                                                                       Percentage                       Percentage
(Dollars in thousands)                                      Amount       of Total           Amount       of Total
--------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>              <C>            <C>
Real estate loans:
  Construction loans                                          $10,177       7.97%            $  5,871       5.75%
  One- to four-family residential and home equity              59,272      46.43               61,026      59.72
  Multi-family residential                                      1,481       1.16                2,559       2.50
  Land                                                          4,021       3.15                1,781       1.74
  Commercial                                                   21,760      17.04               14,803      14.49
                                                               ------      -----               ------      -----
     Total real estate loans                                   96,711      75.75               86,040      84.20
                                                               ------      -----               ------      -----
Commercial business loans                                      23,858      18.69                9,783       9.57
                                                               ------      -----               ------      -----
Consumer loans:
  Automobile loans                                                893        .70                1,528       1.50
  Education loans                                                  19        .01                   18        .02
  Savings account loans                                         1,059        .83                  928        .91
  Personal loans                                                5,132       4.02                3,887       3.80
                                                               ------      -----               ------      -----
  Total consumer loans                                          7,103       5.56                6,361       6.23
                                                               ------      -----               ------      -----
     Gross loans                                              127,672     100.00              102,184     100.00
                                                                          ======                          ======
Less: Allowance for Loan Losses                                  (786)                           (613)
                                                                 ----                             ---
    Total loans                                              $126,886                        $101,571
                                                              =======                         =======
</TABLE>

The following table shows the remaining maturities of outstanding loans at
December 31, 2003. Balances are not reduced for loans in process or discounts.
<TABLE>
<CAPTION>


                                                                        At December 31, 2003
                                                           Remaining Maturities of Selected Credits in Years
---------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)                                    1 or Less      Over 1-5         Over 5          Total
---------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>              <C>
Real estate:
   Mortgage                                               $ 13,184       $ 57,692       $ 20,087         $ 90,963
   Home equity and second
      mortgages                                              1,659            708          3,381            5,748
   Commercial                                               19,707          2,977          1,174           23,858
   Consumer                                                  3,835          2,471            797            7,103
                                                        -----------------------------------------------------------
        Total                                             $ 38,385       $ 63,848       $ 25,439         $127,672
                                                        ===========================================================

Rate Terms:
    Fixed                                                 $  8,863         13,798         22,502           45,163
    Variable or adjustable                                  29,522         50,050          2,937           82,509
                                                        -----------------------------------------------------------
        Total                                             $ 38,385        $63,848        $25,439         $127,672
                                                        ===========================================================
</TABLE>


                                       21
<PAGE>


Allowance for Loan Losses

The Bank records provisions for loan losses in amounts necessary to maintain the
allowance for loan losses at the level deemed appropriate. An allowance for loan
losses is provided through charges to income in an amount that management
believes will be adequate to absorb losses on existing loans that may become
uncollectible, based upon evaluations of the collectibility of loans and prior
loan loss experience. The allowance is based on careful, continuous review and
evaluation of the loan portfolio and ongoing, quarterly assessments of the
probable losses inherent in the loan portfolio. The Bank employs a systematic
methodology for assessing the appropriateness of the allowance, which includes
determination of specific allowances and a formula allowance. Specific
allowances are established in cases where management has identified significant
conditions or circumstances related to a credit that management believes
indicate the probability that a loss may be incurred in an amount different from
the amount determined by application of the formula allowance. The formula
allowance is calculated by applying loss factors to corresponding categories of
outstanding loans and leases, excluding loans for which specific allocations
have been made. Allowances are established for credits that do not have specific
allowances according to the application of these credit loss factors to groups
of loans based upon (a) their credit risk grading, for loans categorized as
substandard or doubtful either by the Bank in its ongoing reviews or by federal
examiners in their periodic examinations, or (b) by type of loans, for other
credits without specific allocations credits. These factors are set by
management to reflect its assessment of the relative level of risk inherent in
each grade or category of loans, based primarily on the credit risk factors
employed by federal examiners at their most recent periodic examination of the
Bank. Federal examinations usually occur each year. In these examinations, the
federal examiners review the loan portfolio, establish credit risk ratings for
loans, identify charge offs, and perform their own calculation of the allowance
for loan losses. The use of these credit risk factors based primarily upon
periodic examinations is intended to provide a self-correcting mechanism to
reduce differences between estimated and actual observed losses. Management
adjusts the credit risk factors from time to time, however, based upon current
conditions, which may include the nature and volume of the loan portfolio,
overall portfolio quality, and current economic conditions that may affect the
borrowers' ability to pay. Management also may establish an unallocated
allowance based upon its evaluation of various conditions that are not directly
measured in the formula and specific allowances. All of the allowance for loan
losses was allocated at year-end 2003 and 2002. Determining the amount of the
allowance for loan losses requires the use of estimates and assumptions, which
is permitted under generally accepted accounting principles. Actual results
could differ significantly from those estimates. While management uses available
information to estimate losses on loans, future additions to the allowances may
be necessary based on changes in economic conditions. In addition, as noted
above, federal and state financial institution examiners, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses, and may require the Bank to recognize additions to the allowances based
on their judgments about information available to them at the time of their
examination. During 2003, there were no changes in the Bank's methodology for
assessing the appropriateness of the allowance. Management determined that the
appropriate allowance for loan losses at December 31, 2003 was $785,814, (0.61%
of total loans), an increase of $173,135 from the $612,679 allowance (0.60% of
loans) at December 31, 2002. Annual net charge offs were 0.04% of average loans
in 2003 and 0.28% in 2002. Total non-performing loans at December 31, 2003 were
$1,252,440, up $638,619 (104.0%) from year-end 2002. At December 31, 2003,
one-to-four family residential and home equity loans, which generally are
assigned the lowest credit risk factors, comprise 46.43% of the portfolio,
compared to 59.72% at December 31, 2002, while commercial business loans, which
generally are assigned higher risk factors, comprise 18.69% of the portfolio,
compared to 9.57% at December 31, 2002. The provision for loans losses required
for 2003 was $220,000, down $348,667, from 2002.


                                       22
<PAGE>
<TABLE>
<CAPTION>

 A summary of activity in the allowance is shown below.

(Dollars in thousands)                                                        2003                 2002
<S>                                                                          <C>                  <C>
Balance at beginning of period                                               $  613               $   326
Loans charged-off:
   Residential real estate mortgage loans                                         0                     0
   Commercial                                                                     0                    49
   Consumer                                                                     147                   271
Total charge-offs                                                               147                   320
Recoveries:
   Residential real estate mortgage loans                                         -                     -
   Commercial                                                                     -                     -
   Consumer                                                                     100                    38
Total recoveries                                                                100                    38
Net loans charged-off                                                            46                   282
Provision for loan losses                                                       220                   569
Balance at end of period                                                    $   786               $   613
Net charge-offs to average loans
   outstanding during the period (annualized)                                   .04%                  .28%
Allowance for loan losses to loans                                              .61                   .60
Allowance for loan losses to nonperforming loans                              62.78                 99.82
</TABLE>


The following table presents a two year history of the allocation of the
allowance for loan losses, reflecting the methodology described above, along
with the percentage or total loans in each category. The increase in the
allowance for 2003 was primarily the result of larger reserves for commercial
business loans, reflecting growth in that loan category, and for automobile and
personal loans, primarily reflecting loss history.
<TABLE>
<CAPTION>

                                                                     2003                             2002
                                                                        % of Loans                     % of Loans
                                                                      in Category to                 in Category to
(Dollars in thousands)                                      Amount      Total Loans         Amount     Total Loans
<S>                                                          <C>            <C>              <C>            <C>
Real estate loans:
   Construction loans                                        $   -          7.97             $    -         5.75
  One-to four-family residential and home equity                39         46.43                 41        59.72
  Multi-family residential                                       -          1.16                  -         2.50
  Land                                                           -          3.15                  -         1.74
  Commercial                                                    34         17.04                 20        14.49
  Total Real Estate Loans                                       73         75.75                 61        84.20
Commercial business loans                                      162         18.69                123         9.57
Consumer loans:
  Automobile loans                                             255           .70                278         1.50
  Education loans                                                -           .01                  -          .02
  Savings account loans                                          -           .83                  -          .91
  Personal loans                                               296          4.02                151         3.80
  Total Consumer Loans                                         551          5.56                429         6.23
  Total                                                     $  786        100.00%            $  613       100.00%
</TABLE>



                                       23
<PAGE>

Nonperforming Assets

Management reviews and identifies all loans and investments that require
designation as nonperforming assets. Nonperforming assets are: loans accounted
for on a nonaccrual basis; loans past due by 90 days or more but still accruing;
troubled debt restructurings; and other real estate (assets acquired in
settlement of loans). The following tables set forth certain information with
respect to nonperforming assets at December 31:
<TABLE>
<CAPTION>

(Dollars in thousands)                                                        2003                 2002
<S>                                                                          <C>                  <C>
Nonaccrual loans(1)                                                          $  806               $   578
Loans 90 days or more past due                                                  446                    35
Restructured loans                                                                0                     0
Total Nonperforming Loans(2)                                                  1,252                   613
Other real estate owned, net                                                      0                     0
Total Nonperforming Assets                                                   $1,252               $   613
Nonperforming loans to total loans                                              .99%                  .60%
Nonperforming assets to total assets                                            .84                   .50
</TABLE>


(1) Gross interest income that would have been recorded in 2003 if non-accrual
loans and leases had been current and in accordance with their original terms
was $57,903, while interest actually recorded on such loans was $35,709.
(2) Performing loans considered potential problem loans, as defined and
identified by management, amounted to $806,271 at December 31, 2003. Although
these are loans where known information about the borrowers' possible credit
problems causes management to have doubts as to the borrowers' ability to comply
with the present loan repayment terms, most are well collateralized and are not
believed to present significant risk of loss. Loans classified for regulatory
purposes not included in nonperforming loans consist only of "other loans
especially mentioned" and do not, in management's opinion, represent or result
from trends or uncertainties reasonably expected to materially affect future
operating results, liquidity or capital resources or represent material credits
where known information about the borrowers' possible credit problems causes
management to have doubts as to the borrowers' ability to comply with the loan
repayment terms.

Investment Securities

The composition of investment securities at December 31 are shown below.
<TABLE>
<CAPTION>

(Dollars in thousands)                                             2003               2002
<S>                                                               <C>                <C>
Available-for-Sale:(1)
     Mutual Funds-Mortgage Securities                           $   1,313            $  4,948
   Mutual Funds-U.S. Government Securities                            685               1,658
   Mortgage-backed Securities                                         276                 388
     Total                                                          2,274               6,994
Held-to-Maturity:
   U.S. Government and Agency  (2)                                  3,495               3,494
           Total Investment Securities (3)                         $5,769           $  10,488
</TABLE>

(1) At estimated fair value.
(2) Issued by a U. S. Government Agency or secured by U.S. Government Agency
collateral.
(3) The outstanding balance of no single issuer, except for U.S. Government and
U.S. Government Agency securities,
exceeded ten percent of stockholders' equity at December 31, 2003 or 2002


                                       24
<PAGE>

Maturities and weighted average yields for debt securities available-for-sale
and held-to-maturity at December 31, 2003 are presented below. All such
securities are due within one year of December 31, 2003, with the exception of
$276,073 which matures in over five years. All such available for sale
securities are reported at fair value. Held to maturity securities appear in the
table at amortized cost. Maturities are stated by maturity adjusted for
estimated calls.
<TABLE>
<CAPTION>

                                                            Weighted
                                                             Average
(Dollars in thousands)                        Amount          Yield
<S>                                         <C>                <C>
Available for Sale:
   Mortgage-backed Securities               $1,589            5.52%
   Mutual Funds-US Government Securities       685            2.56
     Total                                 $ 2,274            2.92

Held-to-Maturity:
   U.S. Government and Agency               $3,495            .77%
   Mortgage-backed Securities                        -                            -
     Total                                   3,495            .77
     Total Investment Securities            $5,769           1.62
</TABLE>

Deposits

The following table sets forth the dollar amount of deposits in the various
types of accounts at December 31.
<TABLE>
<CAPTION>

                                                          2003                                 2002
                                                        Weighted                             Weighted
                                                         Average     % of                     Average     % of
(Dollars in thousands)                        Balance     Rate       Total           Balance   Rate     Deposits
<S>                                       <C>                     <C>             <C>       <C>         <C>
NOW and Money Market Accounts             $    28,777             .88%            24.35     $22,619     1.22%
22.66
Savings accounts                               18,395       .75      15.57             15,926   1.03      15.95
Term Certificates                              61,488      3.09      52.04             55,101   3.33      55.19
Checking Accounts                               9,504      0.00       8.04              6,185   0.00       6.20
   Total Deposits                         $   118,164               100.00%       $    99,831            100.00%
Borrowings
</TABLE>

Year-end advances from the Federal Home Loan Bank of Atlanta consisted of the
following: (in thousands)
<TABLE>
<CAPTION>

                           2003                                                   2002
                Maturity                                                 Maturity
Amount            Date         Rate          Type       Amount           Date         Rate       Type
<C>               <C>         <C>             <C>            <C>          <C>         <C>      <C>
$   3,750        Demand       Variable      Overnight    $ 6,000          2006        4.97%    Fixed
    6,000         2006          4.97        Fixed          3,000          2006        4.13     Fixed
    3,000         2006          4.13        Fixed              0
    1,000         2010          3.78        Fixed
$  13,750                                                $ 9,000
</TABLE>

Interest Sensitivity

The ability to maximize net interest income is largely dependent upon the
achievement of a positive interest rate spread (the difference between the
weighted average interest yields earned on interest-earning assets and the
weighted average interest rates paid on interest-bearing liabilities) that can
be sustained during fluctuations in prevailing interest rates. Asset/liability
management functions to maximize profitability within established guidelines for
interest rate risk, liquidity, and capital adequacy. The Company's
asset/liability management policies are designed to reduce the impact of changes
in interest rates on its net interest income by achieving a more favorable match
between the maturities or repricing dates of its interest-earning assets and
interest-bearing liabilities. Measurement and monitoring of liquidity, interest
rate risk, and capital adequacy are performed centrally through the
Asset/Liability Management Committee, and reported under guidelines established
by management, the Board of Directors and regulators. Oversight of this process
is provided by the Board of Directors.



                                       25
<PAGE>

The Bank has implemented policies by generally emphasizing the origination of
one-year, three-year and five-year adjustable rate mortgage loans and short-term
consumer lending. Since 1995, the Bank has, from time to time, originated fixed
rate mortgages for sale in the secondary market. The Bank is currently
originating loans for sale in the secondary market through the Federal Home Loan
Mortgage Corporation. Management has been monitoring the retention of fixed rate
loans through its asset/liability management policy. Management intends to
continue to concentrate on maintaining its interest rate spread in a manner
consistent with its lending policies, which are principally the origination of
adjustable-rate mortgages, with an appropriate blend of fixed-rate mortgage
loans in its primary market area.

The Company's net income is largely dependent on its net interest income. The
Company seeks to maximize its net interest margin within an acceptable level of
interest rate risk. Interest rate risk can be defined as the amount of
forecasted net interest income that may be gained or lost due to favorable or
unfavorable movements in interest rates. Interest rate risk, or sensitivity,
arises when the maturity or repricing characteristics of assets differ
significantly from the maturity or repricing characteristics of liabilities. Net
interest income is also affected by changes in the portion of interest-earning
assets that are funded by interest-bearing liabilities rather than by other
sources of funds, such as noninterest-bearing deposits and stockholders' equity.

The Company attempts to manage interest rate risk while enhancing net interest
margin by adjusting its asset/liability position. At times, depending on the
level of general interest rates, the relationship between long- and short-term
interest rates, market conditions and competitive factors, the Company may
determine to increase its interest rate risk position somewhat in order to
increase its net interest margin. The Company monitors interest rate risk and
adjusts the composition of its interest-related assets and liabilities in order
to limit its exposure to changes in interest rates on net interest income over
time. The Company's asset/liability committee reviews its interest rate risk
position and profitability, and recommends adjustments. The asset/liability
committee also reviews the securities portfolio, formulates investment
strategies, and oversees the timing and implementation of transactions.
Notwithstanding The Company's interest rate risk management activities, the
potential for changing interest rates is an uncertainty that can have an adverse
effect on net income.

Cecil Federal also analyzes interest rate risk based upon quantitative measures
of the percentage changes in fair value of equity capital (or market value of
portfolio equity) resulting from a hypothetical immediate change (or shock) of
plus or minus 100, 200, and 300 basis points in interest rate levels. This
analysis is based upon models, which are based upon a number of significant
assumptions regarding reactions of interest rates. At December 31, 2003, this
analysis indicated that shock decreases of 100, 200 and 300 basis points would
increase the market value of portfolio equity, while an interest rate shock of
100 basis points would decrease the market value of portfolio equity by 2.7%,
(14.76% of assets). These regulatory models also provide an analysis of interest
rate shock effects on net interest income, and indicate a maximum decrease of
net interest income, based upon the Bank's December 31, 2003 asset/liability
position, of 7.3% from a 300 basis point rate shock. Although the effects of 300
basis point decreases in rates shocks are calculated in these models, management
believes that such a decrease in general rates of that magnitude are down were
not possible in the low rate environment prevailing at December 31, 2003.

Liquidity

Liquidity is measured by a financial institution's ability to raise funds
through deposits, borrowed funds, capital, or the sale of highly marketable
assets such as residential mortgage loans and available for sale investments.
Additional sources of liquidity, including cash flow from the repayment of
loans, are also considered in determining whether liquidity is satisfactory.
Liquidity is also achieved through growth of deposits and liquid assets, and
accessibility to the capital and money markets. These funds are used to meet
deposit withdrawals, maintain reserve requirements, fund loans and operate the
organization.


                                       26
<PAGE>

Cash and cash equivalents increased $1.2 million during 2003. This increase was
the result of cash provided by financing activities (primarily increased
deposits) of $25.2 million offset by $2.6 million in cash used by operating
activities and $21.4 million in cash used by investing activities.

Cash and cash equivalents decreased $1.1 million during 2002. This decrease was
the result of cash used by financing activities (primarily decreased deposits)
of $5.4 million offset by $1.8 million in cash provided by operating activities
and $2.5 million in cash provided by investing activities..

Cecil Federal maintains liquid assets that can be invested in specified
short-term securities, and is also permitted to make certain other investments.
Liquidity levels may be increased or decreased depending upon the yields on
investment alternatives, management's judgment as to the attractiveness of the
yields then available in relation to other opportunities, its expectations of
the level of yield that will be available in the future and its projections as
to the short term demand for funds to be used in Cecil Federal's loan
origination and other activities. The general objectives of Cecil Federal's
investment policy are to (i) maintain liquidity levels sufficient to meet the
operating needs of Cecil Federal (ii) minimize interest rate risk by managing
the repricing characteristics of Cecil Federal's assets and liabilities, (iii)
reduce credit risk by investing primarily in U.S. Treasury and agency securities
and (iv) absorb excess liquidity when loan demand is low and/or deposit growth
is high. Cecil Federal's investment activities are conducted by senior
management (specifically Chief Executive Officer Halsey) and supervised by the
Board of Directors. Investments are governed by an investment policy adopted by
the Board, which currently provides for maintenance of an investment portfolio
for the purposes of providing earnings, ensuring a minimum liquidity reserve and
facilitating Cecil Federal's asset/liability management objectives (e.g.,
limiting the weighted average terms to maturity or repricing of Cecil Federal's
interest-earning assets). In accordance with the policy, management has
primarily invested in U.S. Treasury, government and agency securities and mutual
funds.

The Company's time deposits of $100,000 or more represented 19.72% of total
deposits at December 31, 2003, and are shown by maturity in the table below.

<TABLE>
<CAPTION>

                                                             Months to Maturity
                                             3 or          Over 3         Over 6           Over
(Dollars in thousands)                       less           to 6           to 12            12             TOTAL
<S>                                          <C>           <C>            <C>           <C>                <C>
Time deposits--$100 thousand or more           $3,443      7,020          6,549          6,288            $23,300
</TABLE>

Capital

Capital adequacy refers to the level of capital required to sustain asset growth
and to absorb losses. There are currently no regulatory capital guidelines or
requirements for the Company. The Board of Governors of the Federal Reserve
System ("Federal Reserve"), which is the Bank's principal regulator, has
established requirements for total and tier 1 (core) risk-based capital and
tangible capital. At December 31, 2003, the Bank exceeded all applicable capital
requirements, having a total risk based capital ratio of 12.75%, a tier 1
risk-based capital ratio of 12.08%, and a tangible capital ratio of 9.99%. As of
December 31, 2003, the Bank also met the criteria for classification as a
"well-capitalized" institution under the prompt correction action rules
promulgated under the Federal Deposit Insurance Act. Designation of the Bank as
a "well-capitalized" institution under these regulations does not constitute a
recommendation or endorsement of Cecil Federal Bank's regulators. See Note 11
"Regulatory Matters" in the notes to the consolidated financial statements.

         On March 4, 2003, The Board of Directors of Cecil Bancorp, Inc.
announced the completion of a private placement of 158,735 shares of newly
issued common stock, par value $0.01 per share, at a price per share of $15.80,
for gross proceeds of $2,508,013.

Off-Balance Sheet Arrangements

         In the normal course of business, Cecil Bancorp makes use of a number
of different financial instruments to help meet the financial needs of its
customers. In accordance with accounting principles generally accepted in the
U.S., the full notional amount of these transactions is not recorded in the
accompanying consolidated financial statements and is referred to as off-balance
sheet instruments. These transactions and activities include commitments to
extend credit, standby letters of credit, and lease obligations.


                                       27
<PAGE>

         Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Bank holds collateral
supporting those commitments for which collateral is deemed necessary. The
issuance of letters of credit is not a significant activity of the Bank.

         Commitments to extend credit are agreements to lend funds to customers
as long as there are no violations of any condition established in the loan
contracts. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Bank evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if it is deemed necessary by the Bank upon
extension of credit, is based on credit evaluation by management. Collateral
held varies but may include accounts receivable, inventory, property, plant and
equipment as well as income producing properties... Management believes that the
Bank has adequate resources to fund all loan commitments.

         The Bank has entered into leases for its branch and office space.

         For additional information regarding off-balance sheet arrangements,
please see Notes5 and14 to the Consolidated Financial Statements.



Critical Accounting Policies

         Cecil Bancorp's consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP") and follow general practices within the banking industry in
which it operates. Application of these principles requires management to make
estimates, assumptions, and judgments that affect the amounts reported in the
financial statements and accompanying notes. These estimates, assumptions, and
judgments are based on information available as of the date of the financial
statements; accordingly, as this information changes, the financial statements
may reflect different estimates, assumptions, and judgments. Certain policies
inherently rely more on the use of estimates, assumptions, and judgments and as
such have a greater possibility of producing results that could be materially
different than originally reported. Estimates, assumptions, and judgments are
necessary when assets and liabilities are required to be recorded at fair value,
when a decline in the value of an asset not carried on the financial statements
at fair value warrants an impairment write-down or valuation allowance to be
established, or when an asset or liability must be recorded contingent upon a
future event. Carrying assets and liabilities at fair value inherently results
in more financial statement volatility. The fair values and the information used
to record valuation adjustments for certain assets and liabilities are based
either on quoted market prices or are provided by other third-party sources,
when available.

         The allowance for loan losses is an estimate of the losses that may be
sustained in the loan portfolio. The allowance is based on two basic principles
of accounting: (1) Statement of Financial Accounting Standards ("SFAS") No. 5,
"Accounting for Contingencies", which requires that losses be accrued when they
are probable of occurring and estimable, and (2) SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan", which requires that losses be accrued when
it is probable that Cecil Bancorp will not collect all principal and interest
payments according to the loan's contractual terms.

         Management believes that the allowance is adequate. However, its
determination requires significant judgment, and estimates of probable losses
inherent in the credit portfolio can vary significantly from the amounts
actually observed. While management uses available information to recognize
probable losses, future additions to the allowance may be necessary based on
changes in the credits comprising the portfolio and changes in the financial
condition of borrowers, such as may result from changes in economic conditions.
In addition, regulatory agencies, as an integral part of their examination
process, periodically review the credit portfolio and the allowance. Such review
may result in additional provisions based on their judgments of information
available at the time of each examination.


                                       28
<PAGE>

         Cecil Bancorp's systematic methodology for assessing the
appropriateness of the allowance includes determination of a formula allowance
and specific allowances, as described above under "Allowance for Loan Losses"
and in Note 6 to the Consolidated Financial Statements. At December 31, 2003. a
10% decrease or increase in all categories of risk rated credits for which
specific allowances had not been recorded would have resulted in a corresponding
decrease or increase of approximately $8,021 in the recommended allowance,
assuming no change in other elements considered in the methodology.


                                       29

<PAGE>



ITEM 7.  FINANCIAL STATEMENTS



                                       30

<PAGE>
                      CECIL BANCORP, INC. AND SUBSIDIARIES

                        REPORT ON AUDITS OF CONSOLIDATED
                              FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED
                           DECEMBER 31, 2003 AND 2002




































   No extracts from this report may be published without our written consent.

                                Stegman & Company
<PAGE>


                                TABLE OF CONTENTS







INDEPENDENT AUDITORS' REPORT



CONSOLIDATED FINANCIAL STATEMENTS                                    Page


         Balance Sheets                                              F-1 - F-2


         Statements of Income                                          F-3


         Statements of Changes in Stockholders' Equity                 F-4


         Statements of Cash Flows                                    F-5 - F-6



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                          F-7 - F-29



<PAGE>




                          INDEPENDENT AUDITORS' REPORT





Audit Committee of the Board of Directors and Stockholders
Cecil Bancorp, Inc.
Elkton, Maryland


         We have audited the accompanying consolidated balance sheets of Cecil
Bancorp, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the accompanying consolidated balance sheets as of
December 31, 2003 and 2002, and the related consolidated statements of income
and cash flows for the years then ended present fairly, in all material
respects, the financial position of Cecil Bancorp, Inc. and subsidiaries as of
December 31, 2003 and 2002, and the results of its operations and cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America.








Baltimore, Maryland
January 23, 2004

<PAGE>




                      CECIL BANCORP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2003 AND 2002

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                 2003                    2002
                                                                              --------------         ----------------
<S>                                                                             <C>                        <C>
Cash and due from banks                                                       $    1,032,536        $         986,389
Interest bearing deposits with banks                                               4,660,752                3,538,570
Investment securities:
   Securities available-for-sale at fair value                                     2,274,387                6,994,386

   Securities held-to-maturity (fair value of $3,496,945
     in 2003 and $3,491,406 in 2002)                                               3,495,372                3,494,020

Loans                                                                            127,672,369              102,183,554
   Less allowance for loan losses                                                   (785,814)                (612,679)
                                                                              --------------         ----------------

       Net loans                                                                 126,886,555              101,570,875
                                                                              --------------         ----------------

Premises and equipment - net                                                       3,447,093                2,202,506
Restricted investment securities                                                     871,900                1,072,850
Accrued interest receivable                                                          638,142                  524,892
Goodwill                                                                           2,182,144                2,182,144
Other intangible assets                                                              101,605                   61,652
Bank owned life insurance                                                          3,250,951                        -
Other assets                                                                         758,358                  491,330
                                                                              --------------         ----------------

       TOTAL ASSETS                                                             $149,599,795             $123,119,614
                                                                              ==============         ================
</TABLE>


See accompanying notes.


                                       F-1
<PAGE>

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                                                     2003                   2002
                                                                                 --------------         ----------------
<S>                                                                                <C>                    <C>
LIABILITIES:
   Savings deposits                                                                $118,163,776          $  99,831,411
   Advance payments by borrowers for property
     taxes and insurance                                                                450,615                544,961
   Employee stock ownership plan debt                                                    38,508                 77,016
   Other liabilities                                                                    482,539                479,919
   Advances from Federal Home Loan Bank of Atlanta                                   13,750,000              9,000,000
                                                                                 --------------         ----------------

       Total liabilities                                                            132,885,438            109,933,307
                                                                                 --------------         ----------------



STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value; authorized 4,000,000
     shares, issued and outstanding 1,606,200 shares in
     2003 and 1,281,118 shares in 2002                                                   16,062                 12,810
   Additional paid in capital                                                         8,014,713              5,420,749
   Employee stock ownership plan ("ESOP") debt                                          (38,508)               (77,016)
   Deferred compensation - Management Recognition Plan                                   (7,405)               (11,655)
   Retained earnings                                                                  8,721,268              7,803,743
   Accumulated other comprehensive income, net                                            8,227                 37,676
                                                                                 --------------         ----------------

       Total stockholders' equity                                                    16,714,357             13,186,307
                                                                                 --------------         ----------------

       TOTAL LIABILITIES AND STOCKHOLDERS'
         EQUITY                                                                    $149,599,795           $123,119,614
                                                                                 ==============         ================

</TABLE>
See acommpanying notes


                                       F-2
<PAGE>


                      CECIL BANCORP, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
<TABLE>
<CAPTION>

                                                                                        2003                    2002
                                                                                 --------------         ----------------
<S>                                                                                 <C>                     <C>
INTEREST INCOME:
   Interest and fees on loans                                                       $8,096,135              $7,847,240
   Interest on investment securities                                                   211,726                 446,644
   Dividends on Federal Home Loan Bank of Atlanta stock                                 34,721                  55,470
   Other interest-earning assets                                                        25,984                  35,481
                                                                                 --------------         ----------------

         Total interest income                                                       8,368,566               8,384,835
                                                                                 --------------         ----------------

INTEREST EXPENSE:
   Interest expense on deposits                                                      2,214,626               2,758,612
   Interest expense on Federal Home Loan Bank
     of Atlanta advances                                                               434,342                 431,890
                                                                                 --------------         ----------------

         Total interest expense                                                      2,648,968               3,190,502
                                                                                 --------------         ----------------

NET INTEREST INCOME                                                                  5,719,598               5,194,333

PROVISION FOR LOAN LOSSES                                                              220,000                 568,667
                                                                                 --------------         ----------------

NET INTEREST INCOME AFTER PROVISION
   FOR LOAN LOSSES                                                                   5,499,598               4,625,666
                                                                                 --------------         ----------------

NONINTEREST INCOME:
   Checking account fees                                                               313,265                 287,440
   ATM fees                                                                            123,187                 107,245
   Commission income                                                                    84,026                  44,291
   Gain on sale of real estate owned                                                         0                 100,321
   Loss on sale of investment securities                                               (15,353)                      0
   Gain on sale of loans                                                               194,156                  71,679
   Other                                                                               105,769                  79,996
                                                                                 --------------         ----------------

         Total noninterest income                                                      805,050                 690,972
                                                                                 --------------         ----------------

NONINTEREST EXPENSE:
   Salaries and employee benefits                                                    2,395,256               1,897,891
   Occupancy expense                                                                   299,588                 224,891
   Equipment and data processing expense                                               572,393                 460,060
   SAIF deposit insurance premium                                                       16,126                  57,068
   Checking account expense                                                            134,247                 109,624
   Professional fees                                                                    52,706                 186,439
   Stationery, printing and supplies                                                   134,460                 107,876
   ATM expense                                                                         126,310                 109,083
   Other                                                                               590,014                 555,891
                                                                                 --------------         ----------------

         Total noninterest expense                                                   4,321,100               3,708,823
                                                                                 --------------         ----------------

INCOME BEFORE INCOME TAXES                                                           1,983,548               1,607,815

INCOME TAX EXPENSE                                                                     748,738                 613,293
                                                                                 --------------         ----------------

NET INCOME                                                                        $  1,234,810             $   994,522
                                                                                 ==============         ================

Basic net income per common share                                                      $0.81                    $0.79
                                                                                 ==============         ================

Diluted net income per common share                                                    $0.80                    $0.78
                                                                                 ==============         ================

</TABLE>


See accompanying notes.

                                       F-3

<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>



                                                                                                        Deferred
                                                    Total                          Employee          Compensation -
                                                   Common          Additional        Stock            Management
                                                   Stockholders'     Paid-in        Ownership           Recognition
                                                    Stock          Capital            Plan                 Plan
                                                    Equity

<S>                                                  <C>            <C>                <C>                <C>
BALANCES AT JANUARY 1, 2002                          $12,662        $5,260,577        $(115,524)          $(17,483)

   Comprehensive income:
     Net income                                       -                 -                -                  -
     Other comprehensive income, net of
       related income tax effect                      -                 -                -                  -
         Total comprehensive income                   -                 -                -                  -
   Cash dividends paid                                -                 -                -                  -
   Repayment of ESOP debt                             -                  -               38,508             -
   Release of ESOP shares                             -                 38,508           -                  -
   Deferred compensation amortization                 -                 -                -                   5,828
   Stock purchased by dividend
     reinvestment plan                                    80            73,789           -                  -
   Stock options exercised                                68            30,593           -                  -
   ESOP expense                                       -                 17,282              -               -
                                                     --------        ---------          --------          ---------

BALANCES AT DECEMBER 31, 2002                         12,810         5,420,749          (77,016)           (11,655)

   Comprehensive income:
     Net income                                       -                 -                -                  -
     Other comprehensive loss, net of
       related income tax benefit                    -                  -                -                  -
         Total comprehensive income                   -                 -                -                  -
   Cash dividends paid                                -                 -                -                  -
   Sale of common stock                                3,174         2,484,861           -                  -
   Repayment of ESOP debt                             -                 -                38,508             -
   Release of ESOP shares                             -                 38,508           -                  -
   Stock purchased by dividend
     reinvestment plan                                    58            59,615           -                   4,250
   Stock options exercised                                20            10,980           -                  -
                                                     --------        ---------          --------          ---------

BALANCE AT DECEMBER 31, 2003                         $16,062        $8,014,713         $(38,508)           $(7,405)
                                                     ========        =========          ========          =========

</TABLE>
<TABLE>
<CAPTION>




                                                Retained           Accumulated
                                                Earnings            Other          Total
                                                                Comprehensive      Stockholders'
                                                                Income (Loss)      Equity
<S>                                             <C>                 <C>             <C>
 BALANCES AT JANUARY 1, 2002                    $7,059,549          $(2,470)         $12,197,311

    Comprehensive income:
      Net income                                   994,522           -                   994,522
      Other comprehensive income, net of
        related income tax effect                        -           40,146               40,146
                                                                                      ----------
          Total comprehensive income                     -                -            1,034,668
    Cash dividends paid                           (250,328)               -             (250,328)
    Repayment of ESOP debt                               -                -               38,508
    Release of ESOP shares                               -                -               38,508
    Deferred compensation amortization                   -                -                5,828
    Stock purchased by dividend
      reinvestment plan                                  -                -               73,869
    Stock options exercised                              -                -               30,661
    ESOP expense                                         -                -               17,282
                                                ----------      ------------         -------------

 BALANCES AT DECEMBER 31, 2002                   7,803,743           37,676           13,186,307

    Comprehensive income:
      Net income                                 1,234,810           -                 1,234,810
      Other comprehensive loss, net of
        related income tax benefit                       -          (29,449)             (29,449)
                                                                                      ----------
          Total comprehensive income                     -                -            1,205,361
    Cash dividends paid                           (317,285)          -                  (317,285)
    Sale of common stock                                 -                -            2,488,035
    Repayment of ESOP debt                               -                -               38,508
    Release of ESOP shares                               -                -               38,508
    Stock purchased by dividend
      reinvestment plan                                  -                -               63,923
    Stock options exercised                              -                -               11,000
                                                ----------      ------------         -------------

 BALANCE AT DECEMBER 31, 2003                   $8,721,268           $8,227          $16,714,357
                                                ==========      ============         =============

</TABLE>



See accompanying
notes.

                                       F-4
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
<TABLE>
<CAPTION>


                                                                                       2003                     2002
                                                                                --------------          ----------------
<S>                                                                                <C>                        <C>
OPERATING ACTIVITIES:
      Adjustments to reconcile net income to net cash
        provided by operating activities:
        Net income                                                                 $ 1,234,810            $     994,522
        Depreciation and amortization                                                  138,527                  269,829
        Provision for loan losses                                                      220,000                  568,667
        Gain on sale of real estate owned                                               -                      (100,321)
        Gain on sale of loans                                                         (194,156)                 (71,679)
        Increase in cash surrender value of bank owned life insurance                   50,951                        -
        Deferred income taxes                                                           83,079                  (65,242)
        Excess servicing rights                                                        (90,769)                 (37,384)
        Distribution from management recognition plan trust                              4,250                    5,828
        Dividends reinvested                                                          (165,475)                       -
        Originations of loans held for sale                                         (9,544,415)              (2,857,316)
        Proceeds from loans held for sale                                            9,350,259                2,928,995
        Net change in:
          Accrued interest receivable and other assets                                 574,306                  222,846
          Other liabilities                                                              2,620                  (18,449)
                                                                                --------------          ----------------

             Net cash (used) provided by operating activities                          555,375                1,840,296
                                                                                --------------          ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of investment securities available-for-sale                           (14,550,000)             (11,858,820)
    Purchase of investment securities held-to-maturity                             (12,967,521)              (9,460,652)
    Proceeds from maturities, calls and principal payments
      of investment securities available-for-sale                                   19,373,240               15,707,253
    Proceeds from maturities, calls and principal payments
      of investment securities held-to-maturity                                     13,000,000                9,000,000
    Sale of stock in Federal Home Loan Bank of Atlanta                                 200,950                        -
    Purchase of stock in Federal Reserve Bank                                                -                 (117,850)
    Net increase in loans                                                          (25,147,369)                (823,549)
    Proceeds from sale of foreclosed real estate                                             -                  177,819
    Purchase of bank owned life insurance                                           (3,200,000)                       -
    Purchases of premises and equipment - net                                       (1,364,297)                 (85,306)
                                                                                --------------          ----------------

           Net cash (used) provided by investing activities                        (24,654,997)               2,538,895
                                                                                --------------          ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase (decrease) in deposits                                             18,332,365               (4,203,695)
    ESOP expense                                                                             -                   17,282
    Decrease in advance payments by borrowers
      for property taxes and insurance                                                 (94,346)                (106,771)
    Proceeds from issuance of common stock                                           2,558,708                  104,530
    Net increase (decrease) in advances from Federal Home Loan Bank                  4,750,000               (1,000,000)
    Unearned ESOP compensation decrease                                                 38,508                   38,508
    Payments of cash dividends                                                        (317,284)                (250,328)
                                                                                --------------          ----------------

             Net cash provided (used) by financing activities                       25,267,951               (5,400,474)
                                                                                --------------          ----------------

</TABLE>

See accompanying notes

                                       F-5
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>


                                                                                       2003                   2002
                                                                                --------------          ----------------
<S>                                                                                <C>                      <C>
INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                                 $1,168,329             $(1,021,283)

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF YEAR                                                              4,524,959               5,546,242
                                                                                --------------          ----------------

CASH AND CASH EQUIVALENTS
   AT END OF YEAR                                                                  $ 5,693,288              $4,524,959
                                                                                ==============          ================


Supplemental disclosure of cash flows information:
   Cash paid for income taxes                                                      $   757,806             $   760,516
                                                                                ==============          ================

   Cash paid for interest                                                           $2,653,562              $3,190,574
                                                                                ==============          ================

Supplemental disclosure of noncash investing
   and financing activities:
   Conversion of loans receivable to real estate owned                        $         -                 $     77,498
                                                                                ==============          ================

Sale of real estate owned:
   Carrying value                                                             $         -                 $     77,498
   Charge-off                                                                           -                       -
   Financed sale                                                                        -                       -
   Gain on sale                                                                         -                      100,321
                                                                                --------------          ----------------

   Cash received from sale                                                     $        -                  $   177,819
                                                                                ==============          ================
</TABLE>



See accompanying notes.

                                       F-6
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



1.   SIGNIFICANT ACCOUNTING POLICIES

         The accounting and reporting policies of Cecil Bancorp, Inc. and its
wholly-owned subsidiary (the "Corporation"), Cecil Federal Bank (the "Bank"),
together with its subsidiaries, Cecil Service Corporation and Cecil Financial
Services Corporation, conform to accounting principles generally accepted in the
United States of America and to general practice within the financial services
industry.

         Certain reclassifications have been made to amounts previously reported
to conform to the classifications made in 2003. The following is a summary of
the more significant accounting policies:

         Nature of Operations

         Through its subsidiary bank, the Corporation conducts full-service
commercial banking. Services to individuals and businesses include accepting
deposits, extending real estate and consumer and commercial loans and lines of
credit. The Corporation operates in the two Maryland counties of Cecil and
Harford, and has a concentration in loans secured by residential and commercial
real estate.

         Policy for Consolidation

         The consolidated financial statements include the accounts of the
Corporation and its subsidiaries. Consolidation has resulted in the elimination
of all significant intercompany balances and transactions. The financial
statements of the Corporation (parent only) include its investment in the Bank
under the equity method of accounting.

         Use of Estimates

         The preparation of the 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 reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.


                                       F-7
<PAGE>

         Investments Securities

         Debt securities that the Corporation has the positive intent and
ability to hold to maturity are classified as held to maturity and recorded at
amortized cost. Debt and equity securities are classified as trading securities
if bought and held principally for the purpose of selling them in the near term.
Trading securities are reported at estimated fair value, with unrealized gains
and losses included in earnings. Debt securities not classified as held to
maturity and debt and equity securities not classified as trading securities are
considered available for sale and are reported at estimated fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of stockholders' equity, net of tax effects, in accumulated other
comprehensive income.

         The Corporation designates securities into one of the three categories
at the time of purchase. If a decline in value of an individual security
classified as held to maturity or available for sale is judged to be other than
temporary, the cost basis of that security is reduced to its fair value and the
amount of the write-down is reflected in earnings. Estimated fair value is
determined based on bid prices published in financial newspapers or bid
quotations received from securities dealers. Gains or losses on the sales of
investments are calculated using a specific identification basis and are
determined on a trade-date basis. Premiums and discounts on investment and
mortgage-backed securities are amortized over the term of the security using
methods that approximate the interest method.

         Loans

         Loans are stated at their principal balance outstanding net of any
deferred fees and costs. Interest income on loans is accrued at the contractual
rate based on the principal outstanding. The Corporation places loans, except
for consumer loans, on nonaccrual when any portion of the principal or interest
is ninety days past due and collateral is insufficient to discharge the debt in
full. Interest accrual may also be discontinued earlier if, in management's
opinion, collection is unlikely. Generally, consumer installment loans are not
placed on nonaccrual, but are charged off when they are three months past due.

         Loans are considered impaired when, based on current information, it is
probable that the Corporation will not collect all principal and interest
payments according to contractual terms. Generally, loans are considered
impaired once principal or interest payments become ninety days or more past due
and they are placed on nonaccrual. Management also considers the financial
condition of the borrower, cash flows of the loan and the value of the related
collateral. Impaired loans do not include large groups of smaller balance
homogeneous credits such as residential real estate and consumer installment
loans, which are evaluated collectively for impairment. Loans specifically
reviewed for impairment are not considered impaired during periods of "minimal
delay" in payment (ninety days or less) provided eventual collection of all
amounts due is expected. The impairment of a loan is measured based on the
present value of expected future cash flows discounted at the loan's effective
interest rate, or the fair value of the collateral if repayment is expected to
be provided by the collateral. Generally, the Corporation's impairment on such
loans is measured by reference to the fair value of the collateral. Interest
income generally is not recognized on specific impaired loans unless the
likelihood of further loss is remote. Interest payments received on such loans
are applied as a reduction of the loan principal balance. Interest income on
other nonaccrual loans is recognized only to the extent of interest payments
received.


                                       F-8

<PAGE>

         Allowance for Loan Losses

         The allowance for loan losses represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans that may become uncollectible. The allowance for loan losses consists of
an allocated component and an unallocated component. The components of the
allowance for loan losses represent an estimation done pursuant to either
Statement of Financial Accounting Standards ("SFAS") No. 5, Accounting for
Contingencies, or SFAS No. 114, Accounting by Creditors for Impairment of a
Loan. The adequacy of the allowance for loan losses is determined through
careful and continuous review and evaluation of the loan portfolio and involves
the balancing of a number of factors as outlined below to establish a prudent
level. Loans deemed uncollectible are charged against, while recoveries are
credited to, the allowance. Management adjusts the level of the allowance
through the provision for loan losses, which is recorded as a current period
operating expense. The Corporation's methodology for assessing the
appropriateness of the allowance consists of several key elements, which include
the formula allowance, specific allowances and the unallocated allowance.

         The formula allowance is calculated by applying loss factors to
corresponding categories of outstanding loans. Loss factors are based on the
Corporation's historical loss experience. The use of these loss factors is
intended to reduce the difference between estimated losses inherent in the
portfolio and observed losses.

         Specific allowances are established in cases where management has
identified significant conditions or circumstances related to a loan that
management believes indicate the probability that a loss may be incurred in an
amount different from the amount determined by application of the formula
allowance. Allowances are established for credits that do not have specific
allowances according to the application of these credit loss factors to groups
of loans based upon (a) their credit risk grading for loans categorized as
substandard or doubtful, either by the Bank in its ongoing reviews or by federal
examiners in their periodic examinations, or (b) by type of loans, for other
credits.

         The unallocated allowance is based upon management's evaluation of
various conditions that are not directly measured in the determination of the
formula and specific allowances. Such conditions include general economic and
business conditions affecting key lending areas, credit quality trends
(including trends in delinquencies and nonperforming loans expected to result
from existing conditions), loan volumes and concentrations, specific industry
conditions within portfolio categories, recent loss experience in particular
loan categories, duration of the current business cycle, bank regulatory
examination results, and management's judgment with respect to various other
conditions including loan administration and management and the quality of risk
identification systems. Executive management reviews these conditions quarterly.

         Management believes that the allowance for loan losses is adequate.
However, the determination of the allowance requires significant judgment, and
estimates of probable losses inherent in the loan portfolio can vary
significantly from the amounts actually observed. While management uses
available information to recognize probable losses, future additions to the
allowance may be necessary based on changes in the loans comprising the loan
portfolio and changes in the financial condition of borrowers, such as may
result from changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's loan portfolio and allowance for loan losses. Such review may result
in recognition of additions to the allowance based on their judgments of
information available to them at the time of their examination.

                                       F-9
<PAGE>


         Premises and Equipment

         Premises and equipment are stated at cost less accumulated depreciation
and amortization. Premises and equipment, including costs related to developing
or obtaining software for internal use, are depreciated on a straight-line basis
over their useful lives range from three to seven years for furniture, fixtures
and equipment and forty years for buildings. Leasehold improvements are
amortized over the lives of the leases. Maintenance and repairs are charged to
expense as incurred, while improvements which extend the useful life are
capitalized and depreciated over the remaining life.

         Real Estate Owned

         Real estate owned comprises properties acquired in partial or total
satisfaction of problem loans. The properties are recorded at the lower of cost
or fair value at the date acquired. Losses arising at the time of acquisition of
such properties are charged against the allowance for loan losses. Subsequent
write-downs that may be required are added to a valuation reserve. Gains and
losses realized from sales, as well as valuation adjustments, are included in
noninterest income. Expenses of operation are included in noninterest expense.

         Restricted Investment Securities

         Restricted investment securities consist of Federal Reserve Bank and
Federal Home Loan Bank of Atlanta ("FHLB") stock which are required by law and
are restricted as to marketability.

         Goodwill

         Goodwill represents the excess of the cost of assets acquired in
business combinations accounted for under the purchase method over the fair
value of the net assets at dates of acquisition and is tested annually for
impairment.

         Mortgage Servicing Rights

         The cost of mortgage servicing rights is amortized in proportion to,
and over the period of, estimated net servicing revenue. Impairment of mortgage
servicing rights is assessed based on the fair value of those rights. Fair
values are estimated using discounted cash flows based on a current market
interest rate. The amount of impairment recognized is the amount by which the
capitalized mortgage servicing rights exceed their fair value.

         When participating interests in loans sold have an average contractual
interest rate, adjusted for normal servicing fees, that differs from the agreed
yield to the purchaser, gains or losses are recognized equal to the present
value of such differential over the estimated remaining life of such loans. The
resulting "excess servicing receivable" or "deferred servicing revenue" is
amortized over the estimated life using a method approximating the interest
method.

         Quoted market prices are not available for the excess servicing
receivables. Thus, the excess servicing receivables and the amortization thereon
are periodically evaluated in relation to estimated future servicing revenue,
taking into consideration changes in interest rates, current repayment rates,
and expected future cash flows. The Corporation evaluates the carrying value of
the excess servicing receivables by estimating the future servicing income of
the excess servicing receivables based on management's best estimate of
remaining loan lives discounted at the original discount rate.

                                       F-10
<PAGE>

         Bank-Owned Life Insurance

         The Bank is the beneficiary of insurance policies on the lives of
officers of the Bank. The Bank has recognized the amount that could be realized
under the insurance policies as an asset in the consolidated balance sheets.

         Income Taxes

         Income tax expense is based on the results of operations, adjusted for
permanent differences between items of income or expense reported in the
financial statements and those reported for tax purposes. Under the liability
method, deferred income taxes are determined based on the differences between
the financial statement carrying amounts and the income tax bases of assets and
liabilities and are measured at the enacted tax rates that will be in effect
when these differences reverse.

         Advertising

         Advertising costs are expensed as incurred. Advertising expense was
$57,778 and $53,416 for the years ended December 31, 2003 and 2002,
respectively.

         Earnings Per Share

         Basic earnings per share (EPS) is calculated by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding during the period less unallocated ESOP shares. Diluted earnings per
share is calculated by dividing such net income by the weighted average number
of common shares used to compute basic EPS plus the incremental amount of
potential common stock determined by the treasury stock method. All EPS amounts
have been adjusted to give retroactive effect for the two-for-one stock split
approved by the Board of Directors on February 24, 2004.

             Stock Based Compensation

         The Corporation's stock-based compensation plan is accounted for based
on the intrinsic value method set forth in Accounting Principles Board Opinion
("APB") No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Compensation expense for stock options is generally not
recognized if the exercise price of the option equals or exceeds the fair market
value of the stock on the date of grant.

         The table on the following page illustrates the effect on net income
and earnings per share if the Corporation had applied the fair value recognition
provisions of SFAS 123 to all stock option awards.

                                       F-11
<PAGE>
<TABLE>
<CAPTION>


                                                                                           For the Year Ended
                                                                                   ---------------------------------
                                                                                      2003                   2002
                                                                                   -----------             ---------
          <S>                                                                       <C>                     <C>
             Net income, as reported                                                $1,234,810             $994,522
             Less:  total option expense determined under
               fair value method for all option awards, net
               of related tax effects                                                   (6,549)              (6,549)
                                                                                   -----------             ---------

             Pro forma net income                                                   $1,228,261             $987,973
                                                                                   ===========             =========

             Pro forma net income per share:
               Basic - as reported                                                     $0.81                  $0.79
                                                                                   ===========             =========
               Basic - pro forma                                                       $0.80                  $0.79
                                                                                   ===========             =========
               Diluted - as reported                                                   $0.80                  $0.78
                                                                                   ===========             =========
               Diluted - pro forma                                                     $0.79                  $0.78
                                                                                   ===========             =========

</TABLE>


         The fair values of stock options granted were estimated at the date of
grant using the Black-Scholes option pricing model. The Black-Scholes option
pricing model was originally developed for use in estimating the fair value of
traded options, which have different characteristics from the Corporation's
employee stock options. The model is also sensitive to changes in assumptions,
which can materially affect the fair value estimate. There were no options
granted in the years ended December 31, 2003 or 2002.

         Comprehensive Income

         The Corporation reports comprehensive income which includes net income,
as well as other changes in stockholders' equity that result from transactions
and economic events other than those with stockholders. The Corporation's only
significant element of comprehensive income is unrealized gains and losses on
available-for-sale securities.

2.   RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2003, the Financial Accounting Standards Board ("FASB") issued
and the Corporation adopted SFAS No. 149, Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The adoption of SFAS No. 149 did not have a material impact
on the Corporation's financial statements.


                                       F-12
<PAGE>

         In November 2002, the FASB issued and the Corporation adopted
Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. This interpretation expands the disclosures to be made by a guarantor in
its financial statements about its obligations under certain guarantees and
requires the guarantor to recognize a liability for the fair value of an
obligation assumed under a guarantee. The adoption of FIN 45 did not have a
material impact on the Corporation's financial statements.

         In January 2003, the FASB issued and the Corporation adopted
Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities.
This interpretation provides new accounting guidance on how to identify a
variable interest entity ("VIE") and determine when the assets, liabilities,
non-controlling interest and results of operation of a VIE need to be included
in a Corporation's consolidated financial statements. The adoption of FIN 46 did
not have a material impact on the Corporation's financial statements.

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. Some of the provisions
of this Statement are consistent with the current definition of liabilities in
FASB Concepts Statement No. 6, Elements of Financial Statements. The remaining
provisions of this Statement are consistent with the Board's proposal to revise
that definition to encompass certain obligations that a reporting entity can or
must settle by issuing its own equity shares, depending on the nature of the
relationship established between the holder and the issuer. While the Board
still plans to revise that definition through an amendment to Concepts Statement
6, the Board decided to defer issuing that amendment until it has concluded its
deliberations on the next phase of this project. That next phase will deal with
certain compound financial instruments including puttable shares, convertible
bonds, and dual-indexed financial instruments. These provisions of SFAS No. 150
are effective for financial statements for fiscal years ending after June 15,
2003. The application of SFAS No. 150 did not have a material impact on the
Corporation's operations.

3.   INVESTMENT SECURITIES

         Investment securities have been classified in the consolidated
statements of financial position according to management's intent and ability to
hold the investment to maturity.

         Investment securities at December 31, 2003 and 2002 are summarized as
follows:

<TABLE>
<CAPTION>

                                                                                          2003
                                                           -------------------------------------------------------------
                                                                                Gross          Gross        Estimated
                                                            Amortized       Unrealized      Unrealized          Fair
                                                                Cost            Gains          Losses          Value
                                                           ------------    ------------   ------------      ------------
<S>                                                          <C>              <C>          <C>               <C>
Available for sale:
   Mutual funds - mortgage securities                         $1,261,854       $  1,771   $    -              $1,263,625
   Mutual funds - U.S. Government securities                     668,187         16,502        -                 684,689
   Mortgage-backed securities                                    280,943         -              4,870            276,073
   Investment in capital partnership                              50,000         -             -                  50,000
                                                           ------------    ------------   ------------      ------------

                                                              $2,260,984        $18,273        $4,870         $2,274,387
                                                           =============   ============   ============      ============
</TABLE>


                                       F-13
<PAGE>

<TABLE>
<CAPTION>

                                                                                          2002
                                                           -------------------------------------------------------------
                                                                                Gross           Gross         Estimated
                                                            Amortized       Unrealized       Unrealized           Fair
                                                                 Cost           Gains           Losses           Value
                                                           ------------    ------------   ------------      ------------
<S>                                                          <C>              <C>          <C>               <C>
Available for sale:
   Mutual funds - mortgage securities                         $4,928,050         $19,861      $  -             $4,947,911
   Mutual funds - U.S. Government securities                   1,601,869          55,812         -              1,657,681
   Mortgage-backed securities                                    390,662         -                 1,868          388,794
                                                             ------------    ------------   ------------      ------------

                                                              $6,920,581         $75,673          $1,868       $6,994,386
                                                             =============   ============   ============      ============

</TABLE>
<TABLE>
<CAPTION>

                                                                                           2003
                                                           -------------------------------------------------------------
                                                                                Gross            Gross        Estimated
                                                             Amortized     Unrealized         Unrealized          Fair
                                                               Cost             Gains            Losses          Value
                                                             ------------    ------------   ------------      ------------
<S>                                                          <C>              <C>          <C>               <C>
Held to Maturity -
   U. S. Treasury securities and obligations
     of U. S. Government and Federal agencies                 $3,495,372         $1,573      $    -             $3,496,945
                                                             =============   ============   ============      ============
</TABLE>
<TABLE>
<CAPTION>
                                                                                           2002
                                                           -------------------------------------------------------------
                                                                                Gross            Gross        Estimated
                                                             Amortized     Unrealized          Unrealized           Fair
                                                                Cost            Gains            Losses           Value
                                                             ------------    ------------   ------------      ------------
<S>                                                          <C>              <C>          <C>               <C>
Held to Maturity -
   U. S. Treasury securities and obligations
     of U. S. Government and Federal agencies                 $3,494,020   $    -                $2,614         $3,491,406
                                                             =============   ============   ============      ============
</TABLE>


         The amortized costs and estimated fair values of U. S. Treasury
securities and obligations of the U.S. Government and Federal agencies at
December 31, 2003 by contractual maturities are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties:
<TABLE>
<CAPTION>

                                                                                                         Estimated
                                                                              Amortized                      Fair
                                                                                   Cost                     Value
                                                                             -------------                -------------
        <S>                                                                     <C>                        <C>
         Due in one year or less                                                $3,495,372                 $3,496,945
         Due in one year through five years                                         -                          -
         Due after five years through ten years                                     -                          -
         Due after ten years                                                        -                          -
</TABLE>
                                       F-14

<PAGE>

         As of December 31, 2003, unrealized losses on securities were comprised
of the following:
<TABLE>
<CAPTION>

                                                                            2003
                                        -------------------------------------------------------------------------------
                                                    Less than                More than
                                                    12 months                12 months                    Total
                                        -------------------------   --------------------------   ----------------------
                                          Market     Unrealized       Market       Unrealized     Market     Unrealized
                                          Value           Loss          Value           Loss       Value          Loss
                                        ---------   ------------    ----------     -----------   ---------   ----------
<S>                                      <C>            <C>          <C>              <C>          <C>           <C>
Available for sale:
     Mortgage-backed securities          $   -       $    -           $276,076        $4,870       $276,076      $4,870
                                        =========   ============    ==========     ===========   ==========  ==========


</TABLE>


         During 2003, the Corporation sold FHLB of Atlanta stock at its book
value of $200,950.

4.   LOANS AND ALLOWANCE FOR LOAN LOSSES

         The Corporation's lending activities are predominantly conducted in
Cecil and Harford Counties in the State of Maryland.

         A summary of loans follows:
<TABLE>
<CAPTION>

                                                                                    2003                          2002
                                                                               -------------                -------------
        <S>                                                                    <C>                           <C>
         First mortgage loans:
           1 - 4 dwelling units                                                 $ 53,344,452                $  54,868,523
           5 or more                                                               1,481,450                    2,558,614
           Nonresidential                                                         21,760,074                   14,802,871
           Land                                                                    4,021,010                    1,780,841
           Construction                                                           16,534,542                   13,489,219
                                                                               -------------                -------------
                                                                                  97,141,528                   87,500,068
                                                                               -------------                -------------
         Other loans:
           Home equity loans                                                       5,747,533                    6,669,878
           Commercial loans                                                       23,448,700                    9,769,296
           Consumer loans                                                          5,948,292                    5,299,728
           Loans on savings deposits                                               1,059,490                      927,979
           Education                                                                  18,604                       18,151
                                                                               -------------                -------------
                                                                                  36,222,619                   22,685,032
                                                                               -------------                -------------

                  Total loans                                                    133,364,147                  110,185,100

         Less:
           Undisbursed proceeds on loans in process                               (5,304,454)                  (7,618,320)
           Deferred loan fees and costs                                             (387,324)                    (383,226)
                                                                               -------------                -------------

                                                                                $127,672,369                 $102,183,554
                                                                               =============                =============

</TABLE>


         At December 31, 2003 and 2002, the Bank was servicing loans for others
amounting to approximately $14,985,000 and $9,300,000, respectively. Servicing
loans for others generally consists of collecting mortgage payments, maintaining
escrow accounts, disbursing payments to investors and foreclosure processing.
Loan servicing income is recorded upon receipt and includes servicing fees from
investors and certain charges collected from borrowers, such as late payment
fees. Mortgage servicing rights had a carrying value of $101,605 and $61,651 as
of December 31, 2003 and 2002, respectively. Estimated fair values of these
servicing rights approximate carrying value. Amortization expense of servicing
rights was $50,816 and $22,048 for the years ended December 31, 2003 and 2002,
respectively.



                                       F-15
<PAGE>

         In the normal course of banking business, loans are made to officers
and directors and their affiliated interests. These loans are made on
substantially the same terms and conditions as those prevailing at the time for
comparable transactions with outsiders and are not considered to involve more
than the normal risk of collectibility. As of December 31, activity in such
loans outstanding, both direct and indirect (including guarantees), to
directors, their associates and policy-making officers were as follows:
<TABLE>
<CAPTION>

                                                                                   2003                     2002
                                                                               -------------              ----------
<S>                                                                            <C>                          <C>
         Balance at beginning of year                                          $       6,382                $45,744
         Loans to new directors at beginning of year                               1,785,279                 -
         New loans and additional borrowings                                         717,000                 -
         Repayments                                                                  286,028                 39,362
                                                                               -------------              ----------

         Balance at end of year                                                   $2,222,633                $ 6,382
                                                                               =============              ==========
</TABLE>


         An analysis of the allowance for loan losses for the years ended
December 31, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>


                                                                                      2003                 2002
                                                                                 -------------            ----------

<S>                                                                                   <C>                  <C>
         Balance at beginning of period                                               $612,679             $325,815
         Provision charged to operations                                               220,000              568,667
         Charge-offs, net                                                              (46,865)            (281,803)
                                                                                 -------------             ----------

         Balance at end of period                                                     $785,814             $612,679
                                                                                 =============            ==========
</TABLE>

         Commercial and commercial real estate loans are considered impaired
when it is probable that the Corporation will not collect all amounts due in
accordance with the contractual terms of the loan. Except for certain
restructured loans, impaired loans are loans that are on nonaccrual status.
Loans that are returned to accrual status are no longer considered to be
impaired.

         Information with respect to impaired loans at December 31, 2003 and
2002 and for the years then ended is as follows:
<TABLE>
<CAPTION>

                                                                                       2003                 2002

<S>                                                                                  <C>                   <C>
         Impaired loans with a valuation allowance                                   $  806,271            $   613,821
         Impaired loans without a valuation allowance                                   446,169                568,455


                  Total impaired loans                                               $1,252,440             $1,182,276

         Allowance for loan losses related to impaired loans                        $   252,721            $   226,111
         Allowance for loan losses related to other than
           impaired loans                                                               533,093                386,568

                  Total allowance for loan losses                                    $  785,814            $   612,679

         Average impaired loans for the year                                            967,301             $1,372,629
         Interest income on impaired loans
           recognized on the cash basis                                             $    35,709           $     76,649

</TABLE>

                                       F-16
<PAGE>


5.    PREMISES AND EQUIPMENT

         Premises and equipment are summarized by major classifications as
follows:
<TABLE>
<CAPTION>

                                                                                       2003                    2002

<S>                                                                                <C>                      <C>
           Land                                                                    $   299,500              $   298,500
           Buildings and improvements                                                2,570,821                1,790,833
           Furniture, fixtures and equipment                                         1,642,994                1,229,950
           Leasehold improvements                                                      422,872                  252,614
                                                                                     4,936,187                3,571,897
           Accumulated depreciation                                                  1,489,093                1,369,391

                                                                                    $3,447,094               $2,202,506
</TABLE>


         Depreciation expense for the years ended December 31, 2003 and 2002 was
$245,819 and $202,760, respectively.

         The Bank leases three of its branch facilities and one operations
building under operating lease agreements which provide for the payment of
utilities and taxes by the lessee. Future minimum payments for each of the five
succeeding years under noncancelable leases consisted of the following at
December 31, 2003:

                  Year ending December 31:
                         2004                               $  92,666
                         2005                                  75,760
                         2006                                  77,334
                         2007                                  77,334
                         2008                                  80,482
                         Thereafter                           239,076

         Rent expense was $80,292 and $63,995 for the years ended December 31,
2003 and 2002, respectively.

6.   GOODWILL AND OTHER INTANGIBLE ASSETS

         Goodwill and other intangible assets represent the excess of the cost
of assets acquired in business combinations accounted for under the purchase
method of accounting over the fair value of the net assets acquired at the dates
of acquisition and mortgage servicing rights. Prior to the adoption of SFAS Nos.
141 and 142, the excess purchase price was being amortized using the
straight-line method over varying periods not exceeding ten years. Effective
January 1, 2003, goodwill will no longer be amortized but rather tested for
impairment under the provisions of SFAS No. 142.


                                       F-17
<PAGE>

         The significant components of goodwill and intangible assets are as
follows:
<TABLE>
<CAPTION>

                                             2003                                              2002
                                                         Weighted                                               Weighted
                     Gross                        Net     Average          Gross                       Net       Average
                  Carrying   Accumulated     Carrying   Remaining       Carrying   Accumulated     Carrying    Remaining
                  Amount     Amortization    Amount          Life         Amount   Amortization     Amount          Life

<S>              <C>            <C>          <C>         <C>           <C>            <C>          <C>            <C>
Goodwill         $2,815,669     $633,525     $2,182,144  -             $2,815,669     $633,525     $2,182,144     -
Mortgage
 servicing
 rights             204,785      103,180        101,605   17.8 years      114,016       52,364         61,652     17.7 years

                 $3,020,454     $736,705     $2,283,749                $2,929,685     $685,889     $2,243,796
</TABLE>

7.    SAVINGS DEPOSITS

         The following is a summary of savings deposits as of December 31:
<TABLE>
<CAPTION>

                                                                              2003                      2002
                                                                              Weighted                         Weighted
                                                                               Average                          Average
                                                               Amount            Rate            Amount            Rate

<S>                                                        <C>                   <C>            <C>                <C>
     N.O.W. and Money Market accounts                      $  28,776,990         0.88%          $22,619,451        1.22%
     Savings accounts                                         18,395,217         0.75            15,926,458        1.03
     Term certificates                                        61,488,223         3.09            55,100,770        3.33
     Checking accounts                                         9,503,346         0.00             6,184,732

                                                            $118,163,776                        $99,831,411
</TABLE>


         A summary of certificate accounts by maturity as of December 31, 2003
follows: (in thousands)

                        Three months or less                           $10,891
                        Three months through twelve months              25,484
                        twelve months to thirty-six months              14,203
                        Over thirty-six months                          10,910

                                                                       $61,488

         Eligible savings deposits are insured up to $100,000 by the Federal
Deposit Insurance Corporation.

         Term certificates include certificates of deposit in denominations of
$100,000 or more aggregating $25,902,079 and $16,587,399 as of December 31, 2003
and 2002, respectively.

         Officers' and directors' deposit accounts amounted to approximately
$1,713,458 and $1,106,716 at December 31, 2003 and 2002, respectively.


                                       F-18
<PAGE>

8.   ADVANCES FROM FHLB

         At December 31 advances from the FHLB consisted of the following:
<TABLE>
<CAPTION>

                                          2003                                           2002
                           Maturity      Interest                                   Maturity      Interest
         Amount               Date         Rate        Type             Amount         Date          Rate     Type

<S>     <C>              <C>             <C>        <C>               <C>               <C>         <C>       <C>
        $3,750,000       On Demand       Variable   Overnight
         6,000,000           2006          4.97%       Fixed           $6,000,000       2006        4.97%     Fixed
         3,000,000           2006          4.13%       Fixed            3,000,000       2006        4.13%     Fixed
         1,000,000            2010        3.93%       Fixed

       $13,750,000                                                     $9,000,000
</TABLE>

         The Bank has lines of credit with the FHLB with a total maximum
available balance of $29,920,000. As of December 31, 2003, $16,170,000 was
available to be drawn against the lines of credit.

         Wholly owned first mortgage loans on 1 - 4 dwelling units with unpaid
principal balances of approximately $59,272,000 were pledged to the FHLB as
collateral on advances.

9.    INCOME TAXES

         Income tax expense for the years ended December 31 consists of:
<TABLE>
<CAPTION>

                                                                                   2003                       2002

<S>                                                                             <C>                          <C>
           Current income taxes:
              Federal                                                             $549,620                    $527,391
              State                                                                104,399                     114,604
                                                                                   654,019                     641,995
           Deferred income taxes:
              Federal                                                               77,551                     (23,500)
              State                                                                 17,168                      (5,202)
                                                                                    94,719                     (28,702)

                  Total income tax expense                                        $748,738                    $613,293
</TABLE>


         The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
are presented below:
<TABLE>
<CAPTION>

                                                                                   2003                       2002

<S>                                                                             <C>                         <C>
           Deferred tax assets:
              Deferred loan origination fees                                      $149,585                    $148,002
              Loan loss allowance                                                  303,481                     225,031
              Deferred compensation                                                102,294                      96,171
              Tax basis of goodwill in excess of book                               -                           25,824
              Other                                                                 22,362                      18,818

                  Total gross deferred tax assets                                  577,722                     513,846

</TABLE>


                                       F-19
<PAGE>

<TABLE>
<CAPTION>


                                                                                   2003                       2002

<S>                                                                             <C>                          <C>
           Deferred tax liabilities:
              FHLB stock dividends                                               $  27,691                   $  27,691
              Tax reserves for bad debts                                            -                           17,483
              Mortgage servicing rights                                             39,240                      23,809
              Carrying value in excess of tax basis of goodwill                     69,139                     -
              Tax accumulated depreciation in excess of book                       148,466                      68,598
              Net unrealized gain on available-for-sale
                securities                                                           5,177                      28,503

                  Total gross deferred tax liabilities                             289,713                     166,084

           Net deferred tax assets                                                $288,009                    $347,762
</TABLE>

         A two year reconcilement of the difference between the statutory
federal income tax rate and the effective tax rate for the Corporation is as
follows:
<TABLE>
<CAPTION>

                                                                                        2003               2002

<S>                                                                                     <C>                <C>
           Federal income tax rate                                                      34.0%              34.0%
              Increase resulting from:
                State income taxes, net of federal
                  income tax benefit                                                     4.5                4.5
                Other    (.8)                                                          (.4)

           Effective tax rate                                                           37.7%              38.1%
</TABLE>

         At December 31, 2003 and 2002, there is no valuation allowance
maintained against the deferred tax assets. The Corporation expects to fully
realize the benefit of the deferred tax assets.

10.   STOCKHOLDERS' EQUITY

         The Corporation has a dividend reinvestment and stock purchase plan,
which provides stockholders with the opportunity to increase their equity
ownership by electing to have cash dividends automatically reinvested in
additional shares of common stock without payment of any brokerage commission or
service charge. Pursuant to the plan, stockholders are also permitted to make
optional quarterly cash purchases of stock, subject to minimum and maximum
dollar amounts. The Board has reserved 60,000 shares for issuance under the
plan.

11.   REGULATORY MATTERS

         The Corporation and the Bank are 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 Corporation's and the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.


                                       F-20
<PAGE>



         Quantitative measures established by regulation to ensure capital
adequacy require the Corporation and the Bank to maintain amounts and ratios
(set forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). As of December 31, 2003 and 2002, the
capital levels of the Company and the Bank substantially exceed all capital
adequacy requirements to which they are subject.

         As of December 31, 2003, the Bank was 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 1 risk-based,
and Tier 1 leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
Corporation's or the Bank's category.

         The Bank's actual capital amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>


                                                                                                To Be Well
                                                                                            Capitalized Under
                                                                                            Prompt Corrective
                                                                    Actual                   Action Provisions
                                                        Amount            Ratio            Amount          Ratio
                                                               (in thousands)                   (in thousands)

<S>                                                     <C>               <C>               <C>            <C>
As of December 31, 2003:
   Total risk-based capital
     (to risk-weighted assets)                            $15,032          12.75%            $11,793        10.00%
   Tier I capital
     (to risk-weighted assets)                             14,246          12.08               7,076         6.00
   Tier I capital
     (to adjusted total assets)                            14,246           9.99               7,132         5.00
   Tangible capital
     (to adjusted total assets)                            14,246           9.99               2,140         1.50


As of December 31, 2002:
   Total risk-based capital
     (to risk-weighted assets)                            $11,412          15.01%             $7,605        10.00%
   Tier I capital
     (to risk-weighted assets)                             10,799          14.20               4,563         6.00
   Tier I capital
     (to adjusted total assets)                            10,799           8.99               6,009         5.00
   Tangible capital
     (to adjusted total assets)                            10,799           8.99               6,009         1.50
</TABLE>


                                       F-21
<PAGE>

12.    OFFICER, DIRECTOR AND EMPLOYEE BENEFIT PLANS

           Employee Stock Ownership Plan

         The Board of Directors approved a contributory Employee Stock Ownership
Plan (ESOP) for employees who have attained age 21 and completed one year of
service with the Corporation or its subsidiaries, effective January 1, 1994. The
ESOP acquired 38,508 shares of common stock in November 1994 for $385,080
financed by a loan from the Corporation. Shares acquired with such loan proceeds
are to be held in a suspense account for allocation among the participants as
the loan is repaid. The loan agreement is secured by a pledge of the common
stock owned by the ESOP and purchased with the proceeds of the loan. The
outstanding loan balance is included as a liability in the accompanying
consolidated balance sheet, and the Corporation's obligation related to the ESOP
debt is reflected as a reduction in stockholders' equity. The loan is to be paid
in annual installments of $38,508 plus interest at prime plus 1%. (5.00% at
December 31, 2003) over a ten-year period. Payments began on December 31, 1995.
The Bank contributes sufficient cash funds to the ESOP to repay the loan, plus
such other amounts as the Corporation's Board of Directors may determine in its
discretion.

         The Corporation accounts for its ESOP in accordance with Statement of
Position 93-6. Accordingly, the debt of the ESOP is recorded as debt and shares
pledged as collateral are reported as unearned ESOP shares, a reduction of
stockholders' equity. As shares are released from collateral, the Bank records
compensation expense in an amount equal to the fair value of the shares, and the
shares become outstanding for earnings per share computations. Compensation
expense is also recognized for Corporation dividends on unallocated shares paid
or added to participant accounts. Compensation expense is reduced by the amount
of the annual interest paid by the ESOP to service the loan issued to acquire
the shares of stock. ESOP compensation expense was $79,651 and $71,848 in 2003
and 2002, respectively.

         The fair value of unreleased ESOP shares at December 31, 2003 was
$93,456.

         Stock-Based Compensation Plans

         In 1995, the Corporation formed a Management Recognition Plan (MRP),
which was authorized to acquire 4% of the shares of common stock issued on the
date of conversion to a stock corporation to provide them with a proprietary
interest in the Corporation in a manner designed to encourage such employees to
remain with the Corporation. Compensation expense in connection with the MRP was
$6,776 and $5,848 for the years ended December 31, 2003 and 2002, respectively.



                                       F-22
<PAGE>

         The Corporation adopted stock option plans in 1992 and 1995 for the
benefit of Directors, selected officers, and other key employees. The Plans
provide for the granting of options for the common shares of the Corporation at
the fair market value at the time the options are granted. The term of each
option awarded is to be determined by a committee of the Board of Directors, but
shall not exceed ten years. The term of an option shall not exceed five years
for employees and directors owning more than 10% of the outstanding common stock
at the time the option is granted. Discretionary stock appreciation rights may
be granted in conjunction with, or independently of, any options granted under
the Plans. Upon exercise of a stock appreciation right, the related option, or
portion thereof, is cancelled.

         In accordance with the stock option plans, a total of 57,838 shares of
unissued common stock are reserved for issuance pursuant to incentive stock
options.

         The Corporation's 1995 Stock Option Plan has authorized the grant of
options to management personnel for up to 44,519 shares of the Corporation's
common stock. All options granted have 10 year terms and vest over a period of 5
years.

         A summary of the Corporation's stock option activity, and related
information for the years ended December 31 is as follows: 2003 2002 Weighted-
Weighted- Average Average Shares Exercise Price Shares Exercise Price

<TABLE>
<CAPTION>


<S>                                                    <C>             <C>                 <C>               <C>
         Outstanding at beginning of year              35,056          $7.04               41,934            $6.62
         Granted                                          -                               -                   -
         Exercised                                     (2,000)          5.50               (6,878)            4.41

         Outstanding at end of year                    33,056          $7.14               35,056            $7.04

         Options exercisable at year end               31,512          $6.78               31,150            $6.54
</TABLE>


         The following table summarizes information about stock options
outstanding at December 31, 2003:
<TABLE>
<CAPTION>

                                                  Options Outstanding                 Options Exercisable

                                                                Remaining                                    Remaining
                Exercise                 Number                      Life                Number                     Life
                   Price             Outstanding                   (Years)              Exercisable             (Years)

<S>               <C>                     <C>                        <C>                    <C>                   <C>
                  5.50                    25,352                     2.7                    25,352                2.7
                 12.50                     7,704                     5.3                     6,160                5.3
</TABLE>


         No stock options were granted in the years ended December 31, 2003 and
2002.

         As of December 31, 2003, 12,676 of the Corporation's outstanding stock
options were considered to be in the money.


                                       F-23
<PAGE>

         The Corporation has adopted a Retirement Plan for non-employee
directors under which each participating director would receive monthly benefits
upon termination of service based on a benefits formula. The Corporation is
accruing this liability over the remaining service period for each participating
director. There was no compensation expense incurred by the Corporation in
connection with the Plan for the years ended December 31, 2003 or 2002.

         Deferred Compensation

         During 2003, the Bank has entered into deferred compensation agreements
with some of its executive officers. Under the agreements, the Bank is obligated
to provide for the officer or his beneficiaries after the employee's death,
disability or retirement, annual benefits. The estimated present value of future
benefits to be paid is being accrued over the period from the effective date of
the agreements until the full eligibility dates of the participants. The expense
incurred for this plan for the year ended December 31, 2003 was $32,137. The
Bank is the beneficiary of life insurance policies, with aggregate cash
surrender value of $3,250,951 at December 31, 2003, that was purchased as a
method of partially financing benefits under this plan.

13.   PENSION PLANS

         The Corporation has established a defined contribution 401(k) profit
sharing plan for the benefit of its employees. The Plan covers all full-time
employees who meet certain eligibility requirements as to age and length of
service. Contributions to the 401(k) section of the plan are based on the
amounts contributed by employees. The employees may contribute a percentage of
their annual compensation to the Plan. The Corporation makes a discretionary
matching contribution equal to a uniform percentage of the amount of the
employees' contribution. In applying the matching contribution, only employee
salary reductions up to 2% will be considered. The Corporation may also make a
discretionary contribution to the Plan as determined by the Board of Directors.
For the years ended December 31, 2003 and 2002, the Corporation's expense
related to the Plan was $97,913 and $97,776, respectively.

14.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

         In the normal course of business, the Corporation has various
outstanding credit commitments which are properly not reflected in the financial
statements. These commitments are made to satisfy the financing needs of the
Corporation's clients. The associated credit risk is controlled by subjecting
such activity to the same credit and quality controls as exist for the Company's
lending and investing activities. The commitments involve diverse business and
consumer customers and are generally well collateralized. Management does not
anticipate that losses, if any, which may occur as a result of these commitments
would materially affect the stockholders' equity of the Corporation. Since a
portion of the commitments have some likelihood of not being exercised, the
amounts do not necessarily represent future cash requirements.

         Loan and credit line commitments, excluding unused portions of home
equity lines of credit, totaled $13,989,420 at December 31, 2003, and
$13,752,791 at December 31, 2002. These commitments are contingent upon
continuing customer compliance with the terms of the agreement.


                                       F-24
<PAGE>


         Unused portions of equity lines at year-end amounted to $2,158,161 in
2003 and $2,410,370 in 2002. The Corporation's home equity line accounts are
secured by the borrower's residence.

         Irrevocable letters of credit, totaling $5,748,000 at December 31, 2003
and $4,853,787 at December 31, 2002, are obligations to make payments under
certain conditions to meet contingencies related to customers' contractual
agreements. They are primarily used to guarantee a customer's contractual and/or
financial performance and are seldom exercised.

15.   EARNINGS PER SHARE

         In the following table, basic earnings per share is derived by dividing
net income available to common stockholders by the weighted-average number of
common shares outstanding, and does not include the impact of any potentially
dilutive common stock equivalents. The diluted earnings per share is derived by
dividing net income by the weighted-average number of shares outstanding,
adjusted for the dilutive effect of outstanding stock options.

         The calculation of net income per common share for the years ended
December 31 was as follows:
<TABLE>
<CAPTION>

                                                                                     2003                    2002
<S>                                                                               <C>                     <C>
BASIC:
     Net income available to common stockholders                                   $1,234,810                $994,522
     Average common shares outstanding                                             $1,531,018              $1,251,236
         Basic net income per share                                                   $0.81                   $0.79

DILUTED:
     Net income available to common stockholders                                   $1,234,810                $994,522

     Average common shares outstanding                                              1,531,018               1,251,236
     Stock option adjustment                                                           20,045                  19,510

     Average common shares outstanding - diluted                                    1,551,063               1,270,746
         Diluted net income per share                                                 $0.80                   $0.78
</TABLE>

All per share amounts have been adjusted to give retroactive effect to the
two-for-one stock split approved by the Board of Directors on February 24, 2004.


16.   FAIR VALUE OF FINANCIAL INSTRUMENTS

         SFAS No. 107 Disclosure About Fair Value of Financial Instruments
requires that the Corporation disclose estimated fair values for both its on and
off-balance-sheet financial instruments. The following methods and assumptions
were used to estimate the fair value of the Corporation's financial instruments.
Changes in estimates and assumptions could have a significant impact on these
fair values.

         Cash and Cash Equivalents - The fair values of cash and cash
         equivalents approximates their carrying values.


                                       F-25
<PAGE>


         Investment Securities - The fair values of investment securities are
         based on quoted market prices, where available. If a quoted market
         price is not available, fair value is estimated using quoted market
         prices of comparable instruments.

         Loans - The fair value of the loan portfolio is estimated by evaluating
         homogeneous categories of loans with similar financial and credit risk
         characteristics. Loans are segregated by types, such as residential
         mortgage, commercial real estate and consumer. Each loan category is
         further segmented into fixed and adjustable-rate interest terms.

         The fair values of each loan category are estimated by discounting
         contractual cash flows adjusted for estimated prepayments. Assumptions
         regarding prepayment estimates and discount rates are judgmentally
         determined by using available market information.

         Restricted Investment Securities - The fair value of the Corporation's
         investment in stock of the FHLB and FAB approximates its carrying
         value.

         Accrued Interest Receivable - The fair value of the Corporation's
         interest receivable approximates its carrying value.

         Savings Deposits and Advance Payments by Borrowers - The fair values of
         passbook accounts, NOW accounts, demand deposit accounts and variable
         rate money market accounts approximates their carrying values. The fair
         values of fixed rate certificates of deposit are estimated using a
         discounted cash flow calculation that applies interest rates currently
         offered for deposits of similar remaining maturities.

         Employee Stock Ownership Plan Debt - The fair value of the
         Corporation's employee stock ownership plan debt is estimated using a
         discounted cash flow analysis based on current market rates for debt
         with similar terms and remaining maturity.

         Advances from the FHLB - The fair value of FHLB advances was estimated
         by computing the discounted value of contractual cash flows payable at
         current interest rates for obligations with similar remaining terms.

         Commitments to Extend Credit - The Corporation's adjustable rate
         commitments to extend credit move with market rates and are not subject
         to interest rate risk. The rates and terms of the Corporation's fixed
         rate commitments to extend credit are competitive with others in the
         various markets in which the Corporation operates.


                                       F-26
<PAGE>


         The estimated fair values of financial instruments at December 31, 2003
are as follows:
<TABLE>
<CAPTION>

                                                                                                       Estimated
                                                                               Carrying                    Fair
                                                                                  Value                    Value

<S>                                                                             <C>                     <C>
         Financial assets:
           Cash and cash equivalents                                            $5,693,288               $5,693,288
           Investment securities:
              Available for sale                                                 2,274,387                2,274,387
              Held to maturity                                                   3,495,372                3,496,945
           Loans                                                               127,672,369                     -
           Restricted investment securities                                        871,900                  871,900
           Accrued interest receivable                                             638,142                  638,142
         Financial liabilities:
           Savings deposits and advance payments by borrowers                  118,614,391                   -
           Employee stock ownership plan debt                                       38,508                   38,508
           Advances from FHLB of Atlanta                                        13,750,000                   -

</TABLE>


         The estimated fair values of financial instruments at December 31, 2002
are as follows:
<TABLE>
<CAPTION>

                                                                                                      Estimated
                                                                                Carrying                  Fair
                                                                                  Value                  Value

<S>                                                                         <C>                      <C>
      Financial assets:
           Cash and cash equivalents                                         $   4,524,959            $   4,524,959
           Investment securities:
           Available for sale                                                    6,994,386                6,994,386
           Held to maturity                                                      3,494,020                3,491,406
           Loans                                                               102,183,554              105,954,127
           Restricted investment securities                                      1,072,850                1,072,850
           Accrued interest receivable                                             524,892                  524,892
         Financial liabilities:
           Savings deposits and advance payments by borrowers                  100,376,372               98,649,898
           Employee stock ownership plan debt                                       77,016                   77,016
           Advances from FHLB of Atlanta                                         9,000,000                9,645,000

</TABLE>


         Off-balance sheet financial assets:
<TABLE>
<CAPTION>

                                                                    2003                              2002

                                                           Estimated       Estimated       Estimated        Estimated
                                                             Amount        Fair Value       Amount          Fair Value

<S>                                                          <C>             <C>             <C>             <C>
           Commitments to extend credit                      $8,439,000      $8,439,000      $16,163,000     $16,163,000
           Letters of credit                                  5,748,000       5,748,000        4,854,000       4,854,000
</TABLE>


                                       F-27
<PAGE>

17.   CECIL BANCORP, INC. - HOLDING COMPANY
         ONLY FINANCIAL INFORMATION

         The following condensed balance sheets as of December 31, 2003 and 2002
and condensed statements of income and cash flows for the years then ended for
Cecil Bancorp, Inc. should be read in conjunction with the consolidated
financial statements and notes thereto.



                                 BALANCE SHEETS



                                     ASSETS
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                2003                     2002

<S>                                                                         <C>                        <C>
      Cash                                                                  $     178,527              $    120,756
      Investment in subsidiary banks                                           16,542,959                13,116,782
      Other assets                                                                 41,892                    29,647

           Total assets                                                       $16,763,378               $13,267,185
</TABLE>

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>




<S>                                                                         <C>                      <C>
      Other liabilities                                                     $      10,513            $        3,862
      Employee stock ownership plan debt                                           38,508                    77,016
                                                                                   49,021                    80,878

      Stockholders' equity:
      Common stock, $.01 par value, authorized
           4,000,000 shares, issued and outstanding
           1,606,200 shares in 2003 and 1,281,118
            shares in 2002                                                         16,062                    12,810
      Additional paid-in capital                                                8,014,713                 5,420,749
      Employee stock ownership plan debt                                          (38,508)                  (77,016)
      Deferred Compensation Management Recognition Plan                            (7,405)                  (11,655)
      Retained earnings                                                         8,721,268                 7,803,743
      Accumulated other comprehensive income                                        8,227                    37,676

                                                                               16,714,357                13,186,307

           Total liabilities and stockholders' equity                         $16,763,378               $13,267,185

</TABLE>


                                       F-28
<PAGE>


                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                                 Years Ended December 31
                                                                               2003                        2002
<S>                                                                    <C>                              <C>
      Income:
         Interest income                                                $        -                    $       1,718
         Equity in earnings of subsidiary banks                                1,255,626                  1,017,697

              Total income                                                     1,255,626                  1,019,415

      Operating expenses:
         Compensation and benefits                                                16,188                     29,724
         Other                                                                    12,623                     15,041
                                                                                  28,811                     44,765

      Net income before income taxes                                           1,226,815                    974,650

      Income tax benefit                                                           7,995                     19,872

      Net income                                                              $1,234,810                $   994,522
</TABLE>


                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                                Years Ended December 31
                                                                                2003                       2002

<S>                                                                        <C>                          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income         $1,234,810                                           $     994,522
   Adjustments to reconcile net income to net cash
     provided by operating activities:
     Equity in undistributed earnings of subsidiary                           (1,255,626)                (1,017,697)
     Net change in other assets and other liabilities                             (5,595)                   (12,843)
     Distribution from Management Recognition
       Plan Trust                                                                  4,250                      5,828

           Net cash flows used in operating activities                           (22,161)                   (30,190)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid                                                               (317,284)                  (250,328)
   Unearned ESOP compensation expense                                             38,508                     38,508
   Proceeds from sale of common stock                                          2,547,708                     73,869
   Proceeds from exercise of stock options                                        11,000                     30,661
   Contribution to subsidiary                                                 (2,200,000)                   -

           Net cash provided (used) by financing activities                       79,932                   (107,290)

NET INCREASE (DECREASE)  IN CASH                                                  57,771                   (137,480)

CASH AT BEGINNING OF PERIOD                                                      120,756                    258,236

CASH AT END OF PERIOD $    178,527                                          $    120,756
</TABLE>


                                       F-29

<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None

ITEM 8A. CONTROLS AND PROCEDURES.

         The Company's management, under the supervision and with the
participation of its Chief Executive and Chief Financial Officer, evaluated as
of the last day of the period covered by this report, the effectiveness of the
design and operation of its disclosure controls and procedures, as defined in
Rule 13a-15 under the Securities Exchange Act of 1934. Based on that evaluation,
the Chief Executive and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were adequate. There were no significant
changes in the Company's internal controls over financial reporting (as defined
in Rule 13a-15 under the Securities Act of 1934) during the quarter ended
December 31, 2003, that have materially effected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

Other Executive Officers
Following are the name, age (as of December 31, 2003) and principal position of
executive officers of the Company and Cecil Federal who are not directors.
<TABLE>
<CAPTION>

Name                           Age    Title
<S>                            <C>    <C>
Brian J. Hale                  44     Executive Vice President/Chief Operating Officer of Cecil Federal
Sandra D. Feltman              54     Sr. Vice President/Director of Lending of Cecil Federal
Thomas L. Lofland              51     President/Chief Executive Officer of Columbian Division
Brian L. Lockhart              39     Vice President/Business Development
</TABLE>

BRIAN J. HALE is Executive Vice President/Chief Operating Officer of Cecil
Federal. Before joining Cecil Federal, Mr. Hale was employed at County Banking
and Trust Company, Elkton, Maryland for 17 years in various capacities, finally
as Assistant Vice President in charge of loan operations. Since joining Cecil
Federal in 1995, Mr. Hale's responsibilities as Chief Operating Officer include
the administration of all human resource, lending, savings, and operational
activities of Cecil Federal. Mr. Hale is currently a Director of the United Way
of Cecil County. Mr. Hale resides in North East, Maryland.

SANDRA D. FELTMAN is Senior Vice President/Director of Lending of Cecil Federal.
Ms. Feltman has previously served in various capacities since joining Cecil
Federal in 1972 and has served in her present capacity as Director of Lending
since 1982. Her responsibilities include carrying out Cecil Federal's lending
policies and acting as the Community Reinvestment Act Officer. Ms. Feltman has
previously served as the President and Director of the Greater Elkton Chamber of
Commerce as well as a member in the committee to select a new Elkton Police
Chief and the Teacher Recruitment/Retention Committee. She also participates in
various activities for the Business and Education Partnership Advisory Council.
Ms. Feltman is a member and past chairman of the Finance Committee of the Cecil
County Board of Realtors. Ms. Feltman is also a past director of the Cecil
County Home Builders Association.

THOMAS W. LOFLAND is President of the Columbian Bank Division. Before joining
Cecil in 2000, Mr. Lofland was employed by People's Bank of Elkton, for six
years as President, Chief Operating Officer and Director. Prior to that Mr.
Lofland spent 21 years in various capacities at County Banking and Trust Company
located in Elkton, Maryland. Mr. Lofland was appointed to serve on the Economic
and Development Commission for the State of Maryland and the Cecil Community
College Foundation Board. He also is a member of Union Hospital of Cecil


                                       31
<PAGE>

County Heath Systems, Inc., participating on the Finance, Audit and Quality
Control committees, and Trustee of the Cecil County Paramedic Foundation, Inc.
He is a member of the Business Education Partnership Advisory Council, a
director of the Town of Elkton Revitalization Committee. Mr. Lofland is a past
Chairman of the Maryland Bankers Association Young Bankers Committee, the Cecil
County Chamber of Commerce, Elkton Rotary Club, Cecil County Red Cross, Elkton
Chamber of Commerce, Cecil County Arts Council, and the Chesapeake Hospice. Mr.
Lofland, formerly of Havre de Grace, resides in Fair Hill, Maryland.

BRIAN L. LOCKHART is Vice President/Business Development Officer of Cecil
Federal. Mr. Lockhart was employed with Waste Management for 16 years in its
Sales Department before joining Cecil Federal in 2002. A lifelong Cecil County
resident, Brian has been on Cecil Federal Bank's advisory board for the past 3
years. He is also a past president of the Rising Sun Business Association,
member of the Union Hospital's Health Services Board of Directors, Mount Aviat
Board of Directors, member of Good Shepherd Parish, and Member/Owner of
Chesapeake Bay Golf Course. Brian resides in Rising Sun, Maryland.

Other information required by this item is incorporated by reference from the
registrant's definitive proxy statement pursuant to General Instruction E to
Form 10-KSB.

ITEM 10. EXECUTIVE COMPENSATION

Information required by this item is incorporated by reference from the
registrant's definitive proxy statement pursuant to General Instruction E to
Form 10-KSB.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS

Information required by this item is incorporated by reference from the
registrant's definitive proxy statement pursuant to General Instruction E to
Form 10-KSB.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is incorporated by reference from the
registrant's definitive proxy statement pursuant to General Instruction E to
Form 10-KSB.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
         (a)  Documents Filed as Part of this Report

         (1)  Financial Statements.
         The following financial statements are filed in Item 7 of this report:
                  Independent Auditors' Report
                  Consolidated  Balance Sheets as of December 31, 2003 and 2002
                  Consolidated  Statements of Income for the Years Ended
                    December 31, 2003 and 2002
                  Consolidated Statements of  Changes in Stockholders' Equity
                    for the Years Ended December 31, 2003 and 2002
                  Consolidated  Statements  of Cash Flows for the Years Ended
                    December 31, 2003 and 2002
                  Notes to Consolidated Financial Statements.

         (2) Financial Statement Schedules. All schedules for which provision is
made in the applicable accounting regulations of the SEC are omitted because of
the absence of conditions under which they are required or because the required
information is included in the consolidated financial statements and related
notes thereto.


                                       32
<PAGE>

         (3) Exhibits. The following exhibits are filed as a part of this
report:
<TABLE>
<CAPTION>

Exhibit No.                           Description                    Incorporated by Reference to:
----------------- -------------------------------------------------- -----------------------------------------------
<S>               <C>                                                <C>
3.1               Articles of Incorporation of Cecil Bancorp, Inc.   Exhibit 3.1 to Registration Statement on
                                                                     Form  S-1 (File No. 33-81374)
3.2               Bylaws of Cecil  Bancorp, Inc.                     Exhibit 3.2 to Form 10-KSB for the year ended
                                                                     December 31,2001, SEC File No. 0-24926.
3.3               Articles of Incorporation of Cecil Federal Bank,   Exhibit 3.3 to Form 10-KSB for the year ended
                  Inc.                                               December 31,2002, SEC File No. 0-24926.
3.4               Bylaws of Cecil Federal Bank                       Exhibit 3.4 to Form 10-KSB for the year ended
                                                                     December 31,2002, SEC File No. 0-24926.
4                 Form of Common Stock Certificate                   Exhibit 4 to Registration Statement on Form
                                                                     S-1 (File No. 33-81374)
10.1*             Employment Agreement between Cecil Bancorp,        Exhibit 10.1 to Registration Statement on
                  Inc., Cecil Federal Savings Bank and Mary Halsey   Form  S-1 (File No. 33-81374)
10.2*             Cecil Bancorp, Inc. Stock Option and Incentive     Exhibit to Company's Proxy Statement for its
                  Plan                                               Annual Meeting of May 25, 1995 (File No.
                                                                     0-24926).
10.3*             Cecil Bancorp, Inc. Management Recognition Plan    Exhibit to Company's Proxy Statement for its
                                                                     Annual Meeting of May 25, 1995 (File No.
                                                                     0-24926).
10.4*             Cecil Federal Savings Bank Retirement Plan for     Exhibit 10.4 to Form 10-KSB for the year
                  Non-Employee Directors                             ended December 31,1994, SEC File No. 0-24926.
10.5*             Columbian Bank, a Federal Savings Bank 1994        Columbian Bank, a Federal saving Bank,
                  Stock Option and  Incentive Plan                   Registration Statement on Form S-B.
10.6*             Form of Cecil Federal Bank Supplemental            Exhibit 10.1 to the Company's Quarterly
                  Executive Retirement Plan covering Charles F.      Report on Form 10-QSB for the quarterly
                  Sposato, Chairman; Mary B. Halsey, President and   period ending June 30, 2003
                  Chief Executive Officer; and Brian J. Hale,
                  Executive Vice President and Chief Operating
                  Officer
21                Subsidiaries

</TABLE>

                                       33
<PAGE>
<TABLE>
<CAPTION>

<S>               <C>
23                Consent of Stegman & Company
31                Rule 13a-14(a)/15d-14(a) Certification
32                18 U.S.C. Section 1350 Certification
99                Letter to Shareholders Accompanying Annual
                  Report on Form 10-KSB
</TABLE>

* Management Contract or Compensatory Plan or Arrangement.

______________
         (b)  Reports on Form 8-K.
         None
         (c)  Exhibits.  See (a)(3) above for all exhibits filed herewith and
              the Exhibit Index.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item is incorporated by reference from the
registrant's definitive proxy statement pursuant to General Instruction E to
Form 10-KSB.



                                       34
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                        CECIL BANCORP, INC.

March 30, 2004                          By: /s/ Mary B. Halsey
                                        Mary B. Halsey
                                        President and Chief Executive Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.

By: /s/ Mary B. Halsey                                    Date:
Mary B. Halsey
President and Chief Executive Officer
(Principal Executive Officer)

By: /s/ Mary B. Halsey                                    Date:  March 30, 2004
Mary B. Halsey
President and Chief Executive Officer
(Principal Financial and Accounting Officer)

By: /s/ Charles F. Sposato                                Date:  March 30, 2004
 Charles F. Sposato
 Chairman of the Board

By: /s/ Doris P. Scott                                    Date:  March 30, 2004
 Doris P. Scott
 Director

By: /s/ Donald F. Angert                                  Date:  March 30, 2004
 Donald F. Angert
 Director

By: /s/ Robert L. Johnson                                 Date:  March 30, 2004
 Robert L. Johnson
 Director

By: /s/Matthew G. Bathon                                  Date:  March 30, 2004
 Matthew G. Bathon
 Director

By: /s/ Thomas L. Vaughan, Sr.
Thomas L. Vaughan, Sr.                                    Date: March 30, 2004
Director




                                       35