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                                   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, 2005

                         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)

Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.                                   |_|*

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB.                                              |_|

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2of the Exchange Act).
                                                                  Yes |_| No |X|

The issuer's revenues for its most recent fiscal year were:  $16,102,000

As of March 27, 2006, the registrant had 1,785,616 shares of Common Stock issued
and outstanding. The aggregate market value of shares held by nonaffiliates on
such date was approximately $10.6 million based on the closing sale price of
$17.00 per share of the Registrant's Common Stock on March 27, 2006. For
purposes of this calculation, it is assumed that the 1,164,088 shares held by
directors and officers of the Registrant are shares held by affiliates.

Documents Incorporated by Reference: Parts II and III: Portions of the
registrants definitive proxy statement for the 2006 Annual Meeting.

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

----------------
* The issuer is required to file such reports.

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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, North East, Rising Sun, Cecilton, Aberdeen, Conowingo, and
Havre de Grace, Maryland.

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

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.

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.

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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 the 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.

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.


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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
adequately capitalized, subgroup A classification for the first assessment
period of 2006. Deposit insurance rates may be increased during 2006 or later
years.

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 in effect at December 31, 2005, required
bank holding companies with assets of $150 million or more and all 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 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 in effect at
December 31, 2005, required 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 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.

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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 2005, 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,
2005, the Bank was well capitalized as defined in the Federal Reserve's
regulations.

For additional information regarding the Company's and the Bank's compliance
with their respective regulatory capital requirements, see Note 12, "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.

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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.

Bank Secrecy Act and USA Patriot Act. Under the Bank Secrecy Act ("BSA"), a
financial institution is required to have systems in place to detect certain
transactions, based on the size and nature of the transaction. Financial
institutions are generally required to report cash transactions involving more
than $10,000 to the United States Treasury. In addition, financial institutions
are required to file suspicious activity reports for transactions that involve
more than $5,000 and which the financial institution knows, suspects, or has
reason to suspect involves illegal funds, is designed to evade the requirements
of the BSA, or has no lawful purpose. The Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act,
commonly referred to as the "USA Patriot Act" or the "Patriot Act", enacted in
response to the September 11, 2001, terrorist attacks, enacted prohibitions
against specified financial transactions and account relationships, as well as
enhanced due diligence standards intended to prevent the use of the United
States financial system for money laundering and terrorist financing activities.
The Patriot Act requires banks and other depository institutions, brokers,
dealers and certain other businesses involved in the transfer of money to
establish anti-money laundering programs, including employee training and
independent audit requirements meeting minimum standards specified by the act,
to follow standards for customer identification and maintenance of customer
identification records, and to compare customer lists against lists of suspected
terrorists, terrorist organizations and money launderers. The Patriot Act also
requires federal bank regulators to evaluate the effectiveness of an applicant
in combating money laundering in determining whether to approve a proposed bank
acquisition.

Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley")
established a broad range of corporate governance and accounting measures
intended to increase corporate responsibility and protect investors by improving
the accuracy and reliability of disclosures under federal securities laws. The
Company is subject to Sarbanes-Oxley because it is required to file periodic
reports with the SEC under the Securities and Exchange Act of 1934. Among other
things, Sarbanes-Oxley, its implementing regulations have established new
membership requirements and additional responsibilities for the Company's audit
committee, imposed restrictions on the relationship between the Company and its
outside auditors (including restrictions on the types of non-audit services our
auditors may provide to us), imposed additional financial statement
certification responsibilities for the Company's chief executive officer and
chief financial officer, expanded the disclosure requirements for corporate
insiders, and require management to evaluate the Company's disclosure controls
and procedures and report material changes in the Company's internal control
over financial reporting. Under current regulations, in future periods,
Sarbanes-Oxley will require the management to evaluate the Company's internal
control over financial reporting and will require Company's auditors to issue a
report on the Company's internal control over financial reporting.
Markets

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

Cecil Federal's executive office, two branches, and financial, corporate, and
loan centers are in Elkton, Maryland, and additional Cecil County branches are
located in North East, Rising Sun, Cecilton, and Conowingo, 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 include ATK Elkton, Basell USA,
Terumo Medical Corporation, Union Hospital of Cecil County, WL Gore &
Associates, and Wal-Mart/Sam's Club, as well as State, County and Local
Governments.

Cecil Federal also operates one branch in Aberdeen and 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 Autozoners, Home Depot, Klein's Super Markets,
Rite Aid of Maryland, SAIC, Target, Upper Chesapeake Health Systems, and
Wal-Mart/Sam's Club. 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. Cecil Federal offers
conventional mortgage loans on one- to four-family residential dwellings. Most
loans are originated in amounts up to $250,000, on single-family properties
located in Cecil Federal's primary market area. Cecil Federal makes conventional
mortgage loans, as well as loans guaranteed by the Rural Development (USDA
Housing Loans). 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 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, 2005, Cecil Federal originated $79.9 million
in adjustable-rate mortgage loans and $6.2 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 permanent loans.
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.

Land Loans. Cecil Federal also, from time to time, originates loans secured by
raw land. Land loans granted to individuals have a term of up to 10 years and
interest rates adjust every one, three or five years. Land loans granted to
developers have terms of up to three years. The substantial majority of 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.

                                       8
<PAGE>

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. 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, deposit 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 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
deposit account loans for up to 90% of the amount of the depositor's 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 deposit 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.

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, 2005, Cecil Federal's loans-to-one borrower
cannot exceed $3,156,600.

                                       9
<PAGE>

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, 2005, Cecil Federal was servicing $17.4 million in loans for other
financial institutions. For the years ended December 31, 2005 and 2004, Cecil
Federal recognized gross servicing income of $57,000 and $60,000, respectively,
and total loan fee income of $265,000 and $236,000, respectively.

Mortgage-Backed Securities. Cecil Federal maintains a portfolio of
mortgage-backed securities in the form of Government National Mortgage
Association ("GNMA") and FHLMC participation certificates. GNMA certificates are
guaranteed as to principal and interest by the full faith and credit of the
United States, while FHLMC certificates are guaranteed by the agency.
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.

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, 2005, 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, 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.

                                       10
<PAGE>

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 loan portfolio.
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 loans 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 Community Bankers Securities, LLC. 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 commercial banks, savings associations, 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.

The banking business in Maryland generally, and the Bank's primary service area
specifically, is 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 commercial banks, savings associations, and
credit unions, commercial banks such as Cecil Federal 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, 2006, the Company and the Bank employed 81 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.

ITEM 2. DESCRIPTION OF PROPERTY

Following are the locations of Cecil Federal at December 31, 2005. The Company
has no other locations.

       Popular Name                    Location
------------------------------ -------------------------------------------------
Main Office                    127 North Street, Elkton, MD  21921
*Cecil Financial Center        135 North Street, Elkton, MD  21921
Loan Center                    200 North Street, Elkton, MD  21921
Corporate Center               114 North Street, Elkton, MD  21921
*North East                    108 North East Plaza, North East, MD 21901
*Rising Sun                    56 Rising Sun Towne Centre, Rising Sun, MD  21911
Turkey Point                   1223 Turkey Point Road, North East, MD 21901
Cecilton                       122 West Main Street, Cecilton, MD 21913
*Crossroads                    114 E. Pulaski Hwy, Elkton, MD  21921
Aberdeen                       3 W. Bel Air Avenue, Aberdeen, MD  21001
Conowingo                      390 Conowingo Road, Conowingo, MD  21918
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

*Leased.

                                       11
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

In the normal course of business, Cecil Bancorp is 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 2005, through solicitation of proxies or otherwise.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASE OF EQUITY SECURITIES

Common shares of Cecil Bancorp are traded over the counter under the symbol
CECB. Shareholders received quarterly cash dividends totaling $0.20 per share in
both 2005 and 2004. The ratio of dividends per share to diluted net income per
share was 16.1% in 2005, compared to 21.3% for 2004. 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 4,561 in 2005 and 4,976 in
2004. All EPS amounts have been adjusted to give retroactive affect for the
two-for-one stock split approved by the Board of Directors in February 2004, and
the 1% stock dividend approved by the Board of Directors in December 2005.

The number of common shareholders of record was approximately 619 as of
March 27, 2006, excluding shareholders who hold in nominee or "street name."

Quarterly Stock Information

<TABLE>
<CAPTION>
                                                      2005                                                  2004
------------------------------------------------------------------------------------------------------------------------------------
                                       Stock Price Range                                     Stock Price Range
                                  --------------------------       Per Share            -------------------------         Per Share
Quarter                                Low            High          Dividend              Low               High          Dividend
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>               <C>                <C>             <C>               <C>                 <C>
1st                                  18.70             20.00              $.05            $11.64            $13.25              $.05
2nd                                  17.10             19.90               .05             13.00             16.05               .05
3rd                                  16.75             18.50               .05             16.05             18.85               .05
4th                                  15.55             16.65               .05             17.75             20.00               .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.


                                       12
<PAGE>

         The following table presents disclosure regarding equity compensation
plans in existence at December 31, 2005, 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 Based
Compensation Plan" in Note 13 to the consolidated financial statements).

                      Equity Compensation Plan Information

<TABLE>
<CAPTION>
------------------------------------ ------------------------------ ------------------------------- -------------------------------
           Plan category               Number of securities to be   Weighted average exercise price  Number of securities remaining
                                        issued upon exercise of         of outstanding options,      available for future issuance
                                     outstanding options, warrants        warrants and rights       under equity compensation plans
                                               and rights                         (b)                excluding securities reflected
                                                  (a)                                                       in column (a)
                                                                                                                  (c)
------------------------------------ ------------------------------ ------------------------------- -------------------------------
<S>                                              <C>                             <C>                               <C>
Equity compensation plans approved
        by security holders                      9,977                           $10.85                            0
------------------------------------ ------------------------------ ------------------------------- -------------------------------
  Equity compensation plans not
   approved by security holders                    0                               0                               0
------------------------------------ ------------------------------ ------------------------------- -------------------------------
               Total                             9,977                           $10.85                            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.

                               Private Placements

In December 2005, the Company completed a private placement of 129,467 shares of
newly issued common stock, par value $0.01 per share, at a price per share of
$14.40, for gross proceeds of $1,864,325. All purchasers were directors or
executive officers of Cecil Bancorp and Cecil Federal Bank or other accredited
investors as defined in Regulation D issued under the Securities Act of 1933
(the "1933 Act"). The stock issued in the private placement comprised 7.32% of
outstanding shares after issuance. The placement was not underwritten. Costs
were less than 1.5% of the proceeds.


In March 2003, the Company completed a private placement of 317,470 shares of
newly issued common stock, par value $0.01 per share, at a price per share of
$7.82, for gross proceeds of $2,508,013. All purchasers were directors or
executive officers of Cecil Bancorp and Cecil Federal Bank who are accredited
investors as defined in Regulation D issued under 1933 Act. The stock issued in
the private placement comprised 19.84% of outstanding shares after issuance. The
placement was not underwritten. Costs were less than 1.5% of the proceeds.

                                       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>
Five Year Summary of Selected Financial Data
(Dollars in thousands, except per share data)                 2005           2004            2003           2002              2001
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>             <C>            <C>               <C>
RESULTS OF OPERATIONS:
Interest Income                                            $ 14,987       $ 10,427        $  8,369       $  8,385          $  9,336
Interest Expense                                              5,679          3,116           2,649          3,191             4,729
    Net Interest Income                                       9,308          7,311           5,720          5,194             4,607
Provision for Loan Losses                                       625            370             220            569               190
Net Interest Income after Provision
    for Loan Losses                                           8,683          6,941           5,500          4,626             4,417
Noninterest Income                                            1,115          1,005             805            691               588
Noninterest Expenses                                          6,543          5,466           4,321          3,709             3,733
Income before Income Taxes                                    3,255          2,480           1,984          1,608             1,232
Income Tax Expense                                            1,193            948             749            613               471
Net Income                                                    2,062          1,532           1,235            995               761


PER SHARE DATA: (1)
Basic Net Income Per Share                                    $1.24           $.94            $.80           $.78              $.61
Diluted Net Income Per Share                                   1.24            .94             .79            .77               .60
Dividends Declared                                              .20            .20             .20            .20               .20
Book Value (at year end)                                      12.41          11.21           10.41          10.30              9.64
Tangible Book Value (at year end) (2)                         11.09           9.79            8.98           8.54              7.86

FINANCIAL CONDITION (at year end):
Assets                                                     $267,125       $200,380        $149,600       $123,120          $127,498
Loans, net                                                  233,307        173,790         126,887        101,571           101,393
Investment Securities                                         5,922          5,674           5,770         10,488            13,817
Deposits                                                    198,207        140,841         118,164         99,831           104,035
Stockholders' Equity                                         21,942         18,316          16,714         13,186            12,197

PERFORMANCE RATIOS (for the year):
Return on Average Assets                                        .89%           .89%            .91%           .81%              .61%
Return on Average Equity                                      10.54            8.70           7.79            7.86           6.41
Net Interest Margin                                            4.36            4.61           4.51            4.43           4.01
Efficiency Ratio (3)                                          62.77           65.73          66.22           63.02          72.63
Dividends Declared Per Share
  to Diluted Net Income Per Share                             16.13           21.28          25.32           25.97          33.33

CAPITAL AND CREDIT QUALITY RATIOS:
Average Equity to Average Assets                               8.45%          10.23%         11.72%          10.25%           9.48%
Allowance for Loan Losses to Loans                              .74             .68            .61             .60            .32
Nonperforming Assets to Total Assets                           1.21            1.06            .84             .50            .54
Net Recoveries (Charge-offs) to Average Loans                  (.04)            .02           (.04)           (.28)          (.28)
</TABLE>

(1) 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
and the 1% stock dividend approved by the Board of Directors on December 20,
2005.
(2) Total stockholders' equity, net of goodwill and other intangible assets,
divided by the number of shares of common stock outstanding at year end.
(3) The Efficiency Ratio equals noninterest expenses as a percentage of net
interest income plus noninterest income. In this ratio, noninterest expenses for
years prior to 2002 include amortization of the intangible asset related to the
September 27, 1999, acquisition of two branch offices from an unaffiliated
financial institution.


                                       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, North East, Rising Sun, Cecilton, Aberdeen, Conowingo, and
Havre de Grace, Maryland. Cecil Service Corporation, a subsidiary of the Bank
acts as leasing agent for the leased branches. The Bank offers a full range of
brokerage and investment services through a relationship with Community Bankers
Securities, LLC. Cecil Federal's business strategy is to operate as an
independent community-oriented financial institution funded primarily by retail
deposits.

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

(Dollars in thousands)
                                        2005                                   2004                               2003
------------------------------------------------------------------------------------------------------------------------------------
                       Average                 Yield/         Average                   Yield/     Average                   Yield/
                       Balance     Interest     Rate          Balance     Interest       Rate      Balance    Interest        Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>          <C>            <C>        <C>           <C>           <C>      <C>          <C>           <C>
Assets

Loans                 $   202,318  $   14,663     7.25%      $   148,588   $  10,246     6.90%    $   112,486  $   8,096     7.20%
Investment
securities                  5,768         187     3.25             5,768         106     1.85           9,772        212     2.17
Other earning
assets                      5,599         137     2.44             4,269          75     1.77           4,684         61     1.30
                      -----------------------                -----------------------              ----------------------
Total earning assets  $   213,682  $   14,987     7.01       $   158,265   $  10,427     6.57     $   126,942  $   8,369     6.59
Other assets               17,821                                 13,653                                8,318
                      -----------                            -----------                          ------------
     Total assets     $   231,503                            $   172,278                          $   135,260
                      ===========                            ===========                          ============
Liabilities and
   Stockholders'
   Equity:
Deposits                  169,801       4,132     2.43           129,623       2,405     1.86         108,155      2,212     2.05
FHLB advances              40,664       1,547     3.80            23,019         710     3.09           9,624        434     4.50
Advances from
   borrowers for
   taxes and
   insurance                    0           0        0               221           1      .50             691          3      .43
                      -----------------------                -----------------------              ----------------------
Total
   interest-bearing
   liabilities            210,465       5,679     2.70           152,863       3,116     2.04         118,470      2,649     2.23
                                   ----------                              ---------                           ---------
   Net interest
     income and
     spread                        $    9,308     4.31%                    $   7,311     4.53%                 $   5,720     4.36%
                                   ==========                              =========                           =========
Noninterest-bearing
   liabilities              1,465                                  1,795                                  942
                    --------------                           -----------                          -----------
Total  liabilities        211,930                                154,628                              119,412
Stockholders'
equity                     19,573                                 17,620                               15,848
                    --------------                           -----------                          -----------
     Total
       liabilities
       and
       stockholders'
       equity         $   231,503                            $   172,278                          $   135,260
                    ==============                           ============                         ===========


Net Interest Margin                               4.36%                                  4.61%                               4.51%
Average interest
   earning assets
   to interest
   bearing
   liabilities                                  101.53                                 103.53                              107.15
</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>

Comparison of Results of Operations
2005 versus 2004

Net income increased $530,000, or 34.6% to $2.0 million for the year ended
December 31, 2005, from $1.5 million for the same period in 2004. The increase
in net income is primarily the result of a $2.0 million, or 27.3%, increase in
net interest income and a $109,000, or 10.9%, increase in noninterest income,
partially offset by a $255,000 (68.9%) increase in the provision for loan
losses, a $1.1 million, or 19.7%, increase in noninterest expense, and a
$245,000 (25.8%) increase in income tax expense. Basic and diluted earnings per
share for 2005 were $1.24, up $0.30, or approximately 31.9%, over corresponding
2004 earnings per share amounts of $0.94. Earnings per share calculations have
been adjusted to give retroactive effect to the 1% stock dividend approved by
the Board of Directors on December 20, 2005. The annualized return on average
assets and annualized return on average equity were 0.89% and 10.54%,
respectively, for the year ended December 31, 2005. This compares to an
annualized return on average assets and the annualized return on average equity
of 0.89% and 8.70%, respectively, for the same period in 2004.

Net interest income, the Company's primary source of income, increased $2.0
million, or 27.3%, to $9.3 million for the year ended December 31, 2005, from
$7.3 million for the year ended December 31, 2004. The weighted average yield on
all interest-earning assets increased to 7.01% for the year ended December 31,
2005 from 6.57% for the year ended December 31, 2004. The weighted average rate
paid on interest bearing liabilities increased to 2.70% for the year ended
December 31, 2005 from 2.04% for the year ended December 31, 2004. The weighted
average yield earned and the weighted average rate paid increased due to the
increase in general market rates. The weighted average rate paid on interest
bearing liabilities increased more rapidly, as the Company has increased rates
on deposits in an attempt to gain market share. As a result, the net interest
spread decreased to 4.31% for 2005 from 4.53% for 2004 and the net interest
margin decreased to 4.36% for 2005 from 4.61% for 2004.

Interest and fees on loans receivable increased by $4.4 million, or 43.1%, to
$14.7 million for the year ended December 31, 2005 from $10.2 million for the
year ended December 31, 2004. The increase is attributable to an increase in the
average balance outstanding and the average yield earned. The average
outstanding balance increased $53.7 million, or 36.2%, to $202.3 million for the
year ended December 31, 2005 from $148.6 million for the year ended December 31,
2004. The weighted average yield increased to 7.25% for the year ended December
31, 2005 from 6.90% for the year ended December 31, 2004.

Interest on investment securities increased $81,000, or 75.7%, to $187,000 for
the year ended December 31, 2005 from $106,000 for the year ended December 31,
2004. The increase is the result of an increase in the weighted average yield
earned to 3.25% for the year ended December 31, 2005 from 1.85% for the year
ended December 31, 2004. The average outstanding balance remained consistent at
$5.8 million for the years ended December 31, 2005 and 2004.

Other earning assets consist of Federal Home Loan Bank stock, Federal Reserve
Bank stock, and interest bearing deposits with banks. Dividends on Federal Home
Loan and Federal Reserve Bank stock increased $49,000, or 90.8% to $103,000 for
the year ended December 31, 2005 from $54,000 for the year ended December 31,
2004 as a result of increases in the average balance outstanding and the
weighted average yield. The average outstanding balance increased $1.1 million,
or 77.3%, to $2.4 million for the year ended December 31, 2005 from $1.3 million
for the year ended December 31, 2004. The weighted average yield increased to
4.27% for the year ended December 31, 2005 from 3.97% for the year ended
December 31, 2004. Interest on the interest bearing deposits with banks
increased $13,000, or 57.0%, to $34,000 for the year ended December 31, 2005
from $21,000 for the year ended December 31, 2004 as a result of increases in
the average balance outstanding and the weighted average yield. The average
outstanding balance increased $278,000, or 9.6%, to $3.2 million for the year
ended December 31, 2005 from $2.9 million for the year ended December 31, 2004.
The weighted average yield increased to 1.05% for the year ended December 31,
2005 from 0.74% for the year ended December 31, 2004.

Interest expense on deposits increased $1.7 million, or 71.8%, to $4.1 million
for the year ended December 31, 2005 from $2.4 million for the year ended
December 31, 2004. The increase was the result of increases in the average
balance and the average cost of funds. The average outstanding balance increased
$40.2 million, or 31.0%, to $169.8 million for the year ended December 31, 2005
from $129.6 million for the year ended December 31, 2004. The weighted average
rate increased to 2.43% for the year ended December 31, 2005 from 1.86% for the
year ended December 31, 2004. Interest expense on borrowings increased $837,000,
or 117.7%, to $1.5 million for the year ended December 31, 2005 from $710,000
for the year ended December 31, 2004. The increase was a result of increases in
the average balance outstanding and the average cost of funds. The average
outstanding balance increased $17.6 million, or 76.7%, to $40.6 million for the
year ended December 31, 2005 from $23.0 million for the year ended December 31,
2004. The weighted average rate increased to 3.80% for the year ended
December 31, 2005 from 3.09% for the year ended December 31, 2004.

                                       16
<PAGE>

Effect of Volume and Rate Changes on Net Interest Income

<TABLE>
<CAPTION>
                                                                     2005 vs. 2004                         2004 vs. 2003
-----------------------------------------------------------------------------------------------------------------------------------
                                                         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                                                   $4,417       $3,871       $  546     $2,150         $2,502       $(352)
    Investment securities                                       81            0           81       (105)           (78)        (27)
    Other interest-earning assets                               62           27           35         14             (6)         20
                                                            ------                               ------
   Total Interest Income                                     4,560        3,822          738      2,059          2,083         (24)
                                                            ------                               ------
Interest expense:
    Interest-bearing deposits                                1,727          861          866        193            411        (218)
    FHLB advances                                              837          642          195        276            448        (172)
    Advances from borrowers for taxes
       and insurance                                            (1)          (1)           0         (2)            (2)          0
                                                            ------                               ------
        Total Interest Expense                               2,563        1,379        1,184        467            717        (250)
                                                            ------                               ------
            Net Interest Income                             $1,997       $2,444       $ (447)    $1,592         $1,366       $ 226
                                                            ======                               ======
</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 recognizes provisions 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 increased $255,000, or 68.9%, to
$625,000 for the year ended December 31, 2005 from $370,000 for the year ended
December 31, 2004 as a result of this analysis.
(See "Allowance for Loan Losses.")

Noninterest income increased $110,000, or 10.9%, to $1.1 million for the year
ended December 31, 2005 from $1.0 million for the year ended December 31, 2004.
Checking account fees increased $118,000, or 35.1%, to $453,000 for the year
ended December 31, 2005 from $335,000 for the year ended December 31, 2004 due
to growth in the deposit portfolio. ATM fees increased $20,000, or 28.7%, to
$87,000 for the year ended December 31, 2005 from $67,000 for the year ended
December 31, 2004. This increase is attributable to increased surcharge fees
resulting from increases in cardholder usage. Commission income remained stable
at $82,000 and $79,000 for the years ended December 31, 2005 and 2004,
respectively. Gains on the sale of real estate owned decreased $17,000, or 100%,
as there were no sales of other real estate owned for the year ended December
31, 2005. Gain on the sale of loans decreased $72,000, or 39.5%, to $110,000 for
the year ended December 31, 2005 from $182,000 for the year ended December 31,
2004. As market rates have risen, the volume of fixed rate originations has
slowed, and thus the sale of these loans in the secondary market has also
declined. Income from bank owned life insurance remained stable at $243,000 and
$236,000 for the years ended December 31, 2005 and 2004, respectively. Other
income increased $51,000, or 58.1%, to $140,000 for the year ended December 31,
2005 from $89,000 for the year ended December 31, 2004. This increase is due to
an increase in rental income earned on a commercial property purchased in July
2005 that the Company uses as an operations facility, as well as a full year of
income earned on an investment in Maryland Title Center, LLC.

                                       17
<PAGE>

Noninterest expense increased $1.0 million, or 19.7%, to $6.5 million for the
year ended December 31, 2005 from $5.5 million for the year ended December 31,
2004. The Company experienced an increase in salaries and employee benefits of
$785,000, or 23.2%, to $4.2 million for the year ended December 31, 2005 from
$3.4 million for the year ended December 31, 2004. This increase is attributable
to the hiring of additional employees to staff the new branches, as well as
increased sales and administrative staff, annual merit increases, and the
increase in expense associated with the supplemental executive retirement plan.
These increases are partially offset by a decrease in ESOP compensation expense,
as all of the ESOP shares had been allocated at December 31, 2004. Occupancy
expense increased $148,000, or 44.0%, to $484,000 for the year ended December
31, 2005 from $336,000 for the year ended December 31, 2004. This increase is
due to increases in rent expense from leases that were extended in 2005,
increases in repairs and maintenance and utilities with the branch expansion,
and increases in depreciation expense from the new properties acquired in 2004
and 2005. Equipment and data processing increased $117,000, or 18.9%, to
$740,000 for the year ended December 31, 2005 from $623,000 for the year ended
December 31, 2004 due to increased expense relating to equipment purchases
installed at the new branches and the related depreciation of this equipment, as
well as an increase in the fees for the Bank's data service processor. Checking
account expense remained stable at $124,000 for the year ended December 31, 2005
and $137,000 for the year ended December 31, 2004. Professional fees decreased
$52,000, or 32.6%, to $109,000 for the year ended December 31, 2005 from
$161,000 for the year ended December 31, 2004 due to an increase in the recovery
in previous paid loan collection related legal expenses from loan customers.
Stationery, printing, and supplies decreased $80,000, or 61.1%, to $52,000 for
the year ended December 31, 2005 from $132,000 for the year ended December 31,
2004 due in part to an increase in the allocation of deferred costs on loans
during the year. Advertising increased $35,000, or 43.1%, to $113,000 for the
year ended December 31, 2005 from $78,000 for the year ended December 31, 2004.
This increase is due to the increased marketing efforts to grow the Company and
the Bank. Other expenses increased $137,000, or 22.4%, to $752,000 for the year
ended December 31, 2005 from $615,000 for the year ended December 31, 2004,
primarily due to increases in loan collection expenses, insurance, charitable
contributions, and the loss on the disposal of premises and equipment.

Income tax expense for the years ended December 31, 2005 and 2004 was $1.2
million and $948,000, respectively, which equates to effective rates of 36.7%
and 38.2%, respectively.

Comparison of Results of Operations
2004 versus 2003

Net income increased $297,000, or 24.1%, to $1.5 million for the year ended
December 31, 2004, from $1.2 million for the same period in 2003. The increase
in net income is the result of a $1.6 million, or 27.8%, increase in net
interest income due mainly to increasing loan volumes and declining rates on
interest bearing liabilities; a $200,000, or 24.9%, increase in noninterest
income, due mainly to a $185,000 increase in income from bank owned life
insurance; offset by a $150,000 increase in the provision for loan losses and a
$1.1 million increase in noninterest expense, due mainly to the increase in
compensation and benefits of new sales staff, equipment and data processing,
occupancy expenses, and professional fees, partially offset by a decrease in ATM
expenses. Basic and diluted net income per share for 2004 were both $0.94, up
$0.14 and $0.15, or approximately 17.5% and 19.0%, over corresponding 2003
earnings per share amounts of $0.80 and $0.79. Earnings per share calculations
have been adjusted to give retroactive effect to the 1% stock dividend approved
by the Board of Directors on December 20, 2005. The annualized return on average
assets and annualized return on average equity were 0.89% and 8.70%
respectively, for the year ended December 31, 2004. This compares to an
annualized return on average assets and the annualized return on average equity
of 0.91% and 7.79%, respectively for the same period in 2003.

Net interest income, the Company's primary source of income, increased $1.6
million, or 27.8%, to $7.3 million for the year ended December 31, 2004, from
$5.7 million for the year ended December 31, 2003. The weighted average yield on
all interest-earning assets decreased to 6.57% for the year ended December 31,
2004 from 6.59% for the year ended December 31, 2003. The weighted average rate
paid on interest bearing liabilities decreased to 2.04% for the year ended
December 31, 2004 from 2.23% for the year ended December 31, 2003. The net
interest spread increased to 4.53% for 2004 from 4.36% for 2003 and the net
interest margin increased by 10 basis points to 4.61% for 2004 from 4.51% for
2003.

Interest and fees on loans receivable increased by $2.1 million, or 26.5%, to
$10.2 million for the year ended December 31, 2004 from $8.1 million for the
year ended December 31, 2003. 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 $36.1 million, or 32.1%, to $148.6
million for the year ended December 31, 2004 from $112.5 million for the year
ended December 31, 2003. The weighted average yield decreased to 6.90% for the
year ended December 31, 2004 from 7.20% for the year ended December 31, 2003.

Interest on investment securities decreased $106,000, or 49.7%, to $106,000 for
the year ended December 31, 2004 from $212,000 for the year ended December 31,
2003. 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 1.85%
for the year ended December 31, 2004 from 2.17% for the year ended December 31,
2003. The average outstanding balance decreased $4.0 million, or 41.0%, to $5.8
million for the year ended December 31, 2004 from $9.8 million for the year
ended December 31, 2003.

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 increased $19,000, or 55.8%, to
$54,000 for the year ended December 31, 2004 from $35,000 for the year ended
December 31, 2003 as a result of an increase in the average balance outstanding
offset in part by a decrease in the weighted average yield. Interest on the
remaining other earning assets decreased $5,000, or 17.8%, to $21,000 for the
year ended December 31, 2004 from $26,000 for the year ended December 31, 2003
as a result of a decrease in the average balance outstanding offset by an
increase in the weighted average yield. The average outstanding balance
decreased $937,000, or 24.4%, to $2.9 million for the year ended December 31,
2004 from $3.8 million for the year ended December 31, 2003. The weighted
average yield increased to 0.74% for the year ended December 31, 2004 from 0.68%
for the year ended December 31, 2003.

                                       18
<PAGE>

Interest expense on deposits increased $191,000, or 8.6%, to $2.4 million for
the year ended December 31, 2004 from $2.2 million for the year ended
December 31, 2003. The increase was the result of an increase in the average
balance offset in part by a decrease in the average cost of funds. The average
outstanding balance increased $21.5 million, or 19.8%, to $129.6 million for the
year ended December 31, 2004 from $108.1 million for the year ended December 31,
2003. The weighted average rate decreased to 1.86% for the year ended
December 31, 2004 from 2.05% for the year ended December 31, 2003. During 2004,
the Company discontinued its escrow collection services for advance payments of
taxes and insurance by loan customers. Interest expense on borrowings increased
$276,000, or 63.5%, to $710,000 for the year ended December 31, 2004 from
$434,000 for the year ended December 31, 2003. The increase was a result of an
increase in the average balance outstanding offset by a decrease in the average
cost of funds. The average outstanding balance increased $13.4 million, or
139.2%, to $23.0 million for the year ended December 31, 2004 from $9.6 million
for the year ended December 31, 2003. The weighted average rate decreased to
3.09% for the year ended December 31, 2004 from 4.50% for the year ended
December 31, 2003.

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 provisions 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 increased $150,000, or 68.2%, to $370,000 for the year
ended December 31, 2004 from $220,000 for the year ended December 31, 2003 as a
result of this analysis. (See "Allowance for Loan Losses.")

Noninterest income increased $200,000, or 24.9%, to $1.0 million for the year
ended December 31, 2004 from $805,000 for the year ended December 31, 2003.
Checking account fees increased $22,000, or 7.0%, to $335,000 for the year ended
December 31, 2004 from $313,000 for the year ended December 31, 2003 due to an
increase in the volume of deposit accounts. ATM fees decreased $56,000, or
45.3%, to $67,000 for the year ended December 31, 2004 from $123,000 for the
year ended December 31, 2003. The decrease is a result of a change in the ATM
network used by the Bank during the third quarter of 2003. The new network nets
the income earned with the expenses incurred. Commission income on alternative
investment products decreased $5,000, or 6.2%, to $79,000 for the year ended
December 31, 2004 from $84,000 for the year ended December 31, 2003. Gains on
the sale of real estate owned were $17,000. There were no sales of other real
estate owned for the year ended December 31, 2003. Loss on the sale of
investments decreased 100%, as there were no sales of investments for the year
ended December 31, 2004. Gain on the sale of loans decreased $12,000, or 6.1%,
to $182,000 for the year ended December 31, 2004 from $194,000 for the year
ended December 31, 2003. This decrease is the result of a decrease in the volume
of loans originated and sold in the secondary market. Income from bank owned
life insurance increased $185,000, or 363.4%, to $236,000 for the year ended
December 31, 2004 from $51,000 for the year ended December 31, 2003. The
insurance was purchased in the third quarter of 2003, and thus only earned
income for one quarter in 2003, compared to a full year of income earned during
2004. Other income increased $34,000, or 61.6%, to $89,000 for the year ended
December 31, 2004 from $55,000 for the year ended December 31, 2003 as a result
of insurance proceeds received as settlement of a claim filed in 2003.

Noninterest expense increased $1.1 million, or 26.5%, to $5.5 million for the
year ended December 31, 2004 from $4.4 million for the year ended December 31,
2003. The Company experienced an increase in salaries and employee benefits of
$988,000, or 41.3%, to $3.4 million for the year ended December 31, 2004 from
$2.4 million for the year ended December 31, 2003. The increase can be
attributed to an increased number of employees due to increased sales and back
office staff and personnel needed at the new Turkey Point and Cecilton offices,
as well as annual merit increases, and the funding of the Company's supplemental
executive retirement plan created during the third quarter of 2003. Occupancy
expense increased $37,000, or 12.2%, to $336,000 for the year ended December 31,
2004 from $299,000 for the year ended December 31, 2003 due to the branch
expansion that took place during 2004. Equipment and data processing increased
$50,000, or 8.8%, to $623,000 for the year ended December 31, 2004 from $573,000
for the year ended December 31, 2003 due to increased expense relating to
equipment purchases to fill the new branches and the related depreciation of
this equipment. Professional fees increased $109,000, or 206.3%, to $161,000 for
the year ended December 31, 2004 from $52,000 for the year ended December 31,
2003. This increase is due to an increase in legal fees, primarily from the
final allocation of the ESOP shares and other employee benefit plan matters.
Accounting and audit fees also increased during 2004, as the Company received a
third party information technology audit during the year. ATM expenses decreased
88.7% to $14,000 for the year ended December 31, 2004 from $126,000 for the same
period in 2003. The decrease is a result of a change in the ATM network used by
the Bank during the third quarter of 2003. The new network nets the income
earned with the expenses incurred. Other expenses increased $72,000, or 12.2%,
to $662,000 for the year ended December 31, 2004 from $590,000 for the year
ended December 31, 2003, primarily due to increases in advertising, telephone,
and insurance expenses.

Income tax expense for the year ended December 31, 2004 and December 31, 2003
was $948,000 and $749,000, respectively, which equates to effective rates of
38.2% and 37.7%, respectively.

                                       19
<PAGE>

Comparison of Financial Condition
2005 versus 2004

The Company's assets increased by $66.8 million, or 33.3%, to $267.1 million at
December 31, 2005 from $200.3 million at December 31, 2004. The loans receivable
portfolio, net of the allowance for loan losses, increased by $59.5 million, or
34.3%, to $233.3 million at December 31, 2005 from $173.8 million at December
31, 2004. The increase in loans is due to the Company's growth strategy, with a
focus on increasing the commercial portfolio since the Bank's conversion from a
federal savings bank to a commercial bank in October 2002. The allowance for
loan losses increased by $549,000, or 46.1%, to $1.7 million at December 31,
2005 from $1.2 million at December 31, 2004. 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. (See "Allowance
for Loan Losses" below.) Cash and interest-bearing deposits with banks increased
$1.5 million, or 34.5%, to $5.7 million at December 31, 2005 from $4.2 million
at December 31, 2004 due to excess cash obtained from the more significant
increase in deposits and advances from the Federal Home Loan Bank of Atlanta as
compared to the increase in loans. Investments held to maturity increased by
$245,000, or 7.0%, to $3.7 million at December 31, 2005 due to investment of a
portion of the excess cash obtained. The Company's investments available for
sale remained stable at December 31, 2005 in comparison with the prior year.

Other real estate owned increased 100% to $385,000 due to the acquisition of a
property in satisfaction of one loan receivable. Premises and equipment, net of
accumulated depreciation, increased by $3.1 million, or 50.7%, to $9.2 million
at December 31, 2005 from $6.1 million at December 31, 2004. This increase
includes funds invested in new branches in Aberdeen and Conowingo that opened in
2005, as well as the purchase of a commercial property in Elkton that will be
used as an operations facility. Restricted investment securities, which consist
of Federal Home Loan and Federal Reserve Bank stock increased $328,000, or
14.4%, to $2.6 million at December 31, 2005 from $2.3 million at December 31,
2004. Cecil Federal was required to increase its investment in the Federal Home
Loan Bank based upon Cecil's increased asset size and borrowing levels. Accrued
interest receivable increased by $391,000, or 51.8%, to $1.1 million at
December 31, 2005 from $755,000 at December 31, 2004 due to growth in the loan
portfolio and an increase in general market rates. Other intangible assets,
consisting entirely of mortgage servicing rights, increased by $11,000, or 7.9%,
to $154,000 at December 31, 2005 from $143,000 at December 31, 2004, primarily
due to the continued sale of loans with servicing retained during 2005. Bank
owned life insurance increased $893,000, or 21.6%, to $5.0 million at
December 31, 2005 from $4.1 million at December 31, 2004 due to an additional
investment of $650,000 and $243,000 of income earned on the investment. Other
assets increased $397,000, or 37.9%, to $1.4 million at December 31, 2005 from
$1.0 million at December 31, 2004, primarily due to an increase in the Company's
deferred tax asset.

The Company's liabilities increased $63.1 million, or 34.7%, to $245.2 million
at December 31, 2005 from $182.1 million at December 31, 2004. Deposits
increased $57.4 million, or 40.7%, to $198.2 million at December 31, 2005 from
$140.8 million at December 31, 2004. This increase is due to marketing efforts
and competitive pricing in an attempt to attract local core funding. Other
liabilities increased $697,000, or 51.0%, to $2.1 million at December 31, 2005
from $1.4 million at December 31, 2004, primarily due to an increase in the
liability to fund the supplement executive retirement plan. Advances from the
Federal Home Loan Bank of Atlanta increased $5.1 million, or 12.7%, to $44.9
million at December 31, 2005 from $39.8 million at December 31, 2004, primarily
to complement the growth in deposits in funding the loan portfolio and the
Company's expansion efforts.

The Company's stockholders' equity increased by $3.6 million, or 19.8%, to $21.9
million at December 31, 2005 from $18.3 million at December 31, 2004. The
Company raised $1.8 million, net of offering costs, in new capital with a
private placement completed in December 2005. An additional $78,000 was raised
through the issuance of 4,561 shares under the dividend reinvestment plan.
Retained earnings increased by $1.4 million, or 14.5%, as a result of 2005
earnings of $2.0 million, net of cash dividends of $0.20 per share, or $336,000,
and the 1% stock dividend of $283,000.

Comparison of Financial Condition
2004 versus 2003

The Company's assets increased by $50.8 million, or 33.9%, to $200.4 million at
December 31, 2004 from $149.6 million at December 31, 2003. The loans receivable
portfolio, net of the allowance for loan losses, increased by $46.9 million, or
37.0%, to $173.8 million at December 31, 2004 from $126.9 million at
December 31, 2003. Cash and interest-bearing deposits with banks decreased $1.5
million, or 25.6%, to $4.2 million at December 31, 2004 from $5.7 million at
December 31, 2003 in order to fund growth in the loan portfolio and the
expenditure of funds for future expansion, offset partially by increases in
deposits and advances from the Federal Home Loan Bank of Atlanta. The Company's
investments held to maturity and investments available for sale remained stable
at December 31, 2004 in comparison with the prior year. Premises and equipment,
net of accumulated depreciation, increased by $2.7 million, or 78.1%, to $6.1
million at December 31, 2004 from $3.4 million at December 31, 2003. The
increase was the result of the Bank adding new branch locations on Turkey Point
Road, North East, MD and Main Street, Cecilton, MD, as well as the allocation of
funds for future expansion. Restricted investment securities, which consist of
Federal Home Loan and Federal Reserve Bank stock increased $1.4 million, or
161.3%, to $2.3 million at December 31, 2004 from $872,000 at December 31, 2003.
Cecil Federal was required to increase its investment in the Federal Home Loan
Bank as part of an ongoing review of the Bank's stock level by the FHLB. Accrued
interest receivable increased by $117,000, or 18.3%, to $755,000 at December 31,
2004 from $638,000 at December 31, 2003 due to growth in the loan portfolio.
Other intangible assets, consisting entirely of mortgage servicing rights,
increased by $41,000, or 40.5%, to $143,000 at December 31, 2004 from $102,000
at December 31, 2003, primarily due to the continued sale of loans with
servicing retained during 2004. Bank owned life insurance increased $886,000, or
27.3% to $4.1 million at December 31, 2004 from $3.2 million at December 31,
2003 due to an additional investment of $650,000 and a full year of income
earned on the investment. Other assets increased $289,000, or 38.2% to $1.0
million at December 31, 2004 from $758,000 at December 31, 2003.


                                       20
<PAGE>

The Company's liabilities increased $49.2 million, or 37.0%, to $182.0 million
at December 31, 2004 from $132.8 million at December 31, 2003. Deposits
increased $22.7 million, or 19.2%, to $140.8 million at December 31, 2004 from
$118.1 million at December 31, 2003. Advance payments by borrowers for property
taxes and insurance decreased by $451,000, or 100%, at December 31, 2004 from
the same period in 2003 due to the discontinuation of escrow collection services
for loan customers. Employee stock ownership plan debt decreased by $39,000, or
100%, due to the final payment on the loan to the ESOP in December 2004. Other
liabilities increased $883,000, or 183.0%, to $1.4 million at December 31, 2004
from $483,000 at December 31, 2003, primarily due to an increase in income taxes
payable and an increase in the liability to fund the supplement executive
retirement plan instituted in the fourth quarter of 2003. Advances from the
Federal Home Loan Bank of Atlanta increased $26.1 million, or 189.9%, to $39.8
million at December 31, 2004 from $13.7 million and at December 31, 2003,
primarily to fund growth in the loan portfolio.

The Company's stockholders' equity increased by $1.6 million, or 9.6%, to $18.3
million at December 31, 2004 from $16.7 million at December 31, 2003. The
increase was primarily due to an increase in retained earnings and an increase
in additional paid in capital. Retained earnings increased by $1.2 million, or
13.9%, as a result of 2004 earnings of $1.5 million, net of dividends of $0.20
per share, or $324,000. Additional paid in capital increased by $362,000, or
4.5%, primarily due to ESOP shares released during 2004, stock options exercised
during the year, ESOP activity, and issuance of shares under the dividend
investment plan.

Loans

Cecil Federal's total loans grew $60.1 million, or 34.3%, during 2005. Cecil
Federal's construction loans increased $1.9 million, or 12.8%, over the same
period in 2004, and accounted for 7.0% of the Bank's total portfolio. Cecil
Federal's one to four family residential and home equity loans increased $17.3
million, or 25.1%, over the same period in 2004, and accounted for 36.7% of the
Banks total portfolio. Cecil Federal's land loans increased $1.3 million, or
59.3%, over the same period in 2004, and accounted for 1.5% of the Banks total
portfolio. Cecil Federal's commercial real estate loans increased by $19.2
million, or 73.2%, and accounted for 19.3% of the total portfolio and commercial
business loans increased by $17.8 million, or 36.0%, and accounted for 28.6% of
the portfolio. Automobile loans increased by $520,000 (69.8%), deposit account
loans increased by $717,000 (98.2%), and personal loans increased by $1.3
million (16.8%). The following table shows the composition of the loan portfolio
at December 31.

                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                                                2005                                  2004
------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Percentage                             Percentage
(Dollars in thousands)                                                  Amount       of Total                  Amount       of Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>              <C>                   <C>             <C>
Real estate loans:
  Construction loans                                                   $ 16,414         6.98                  $ 14,556        8.32
  One- to four-family residential and home equity                        86,334        36.73                    69,012       39.44
  Multi-family residential                                                4,523         1.93                     4,422        2.53
  Land                                                                    3,477         1.48                     2,182        1.25
  Commercial                                                             45,338        19.29                    26,174       14.96
                                                                       --------       ------                  --------      ------
  Total real estate loans                                               156,086        66.41                   116,346       66.50
                                                                       --------       ------                  --------      ------
Commercial business loans                                                67,277        28.62                    49,474       28.27
                                                                       --------       ------                  --------      ------
Consumer loans:
  Automobile loans                                                        1,265         0.54                       745        0.42
  Education loans                                                            16         0.01                        18        0.01
  Deposit account loans                                                   1,447         0.61                       730        0.42
  Personal loans                                                          8,954         3.81                     7,666        4.38
                                                                       --------       ------                  --------      ------
  Total consumer loans                                                   11,682         4.97                     9,159        5.23
                                                                       --------       ------                  --------      ------
  Gross loans                                                           235,045       100.00                   174,979      100.00
                                                                                      ======                                ======
Less: Allowance for Loan Losses                                          (1,738)                                (1,189)
                                                                       --------                               --------
    Total loans                                                        $233,307                               $173,790
                                                                       ========                               ========
</TABLE>

The following table presents the composition of the loan and lease portfolio at
December 31 for the past five years.

<TABLE>
<CAPTION>

(In thousands)                                       2005             2004             2003             2002             2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>              <C>              <C>              <C>
Real estate loans:
   Construction                                   $      16,414    $      14,556    $      10,177    $       5,871    $       6,496
   1-4 family residential and home equity                86,334           69,012           59,272           61,026           69,347
   Multi-family residential                               4,523            4,422            1,481            2,559            1,854
   Land                                                   3,477            2,182            4,021            1,781            2,626
   Commercial                                            45,338           26,174           21,760           14,803            8,593
                                                  -------------    -------------    -------------    -------------    -------------
      Total real estate loans                           156,086          116,346           96,711           86,040           88,916
                                                  -------------    -------------    -------------    -------------    -------------
Commercial business loans                                67,277           49,474           23,858            9,783            5,831
                                                  -------------    -------------    -------------    -------------    -------------
Consumer loans                                            1,265              745              893            1,528            2,204
   Automobile loans
   Education loans                                           16               18               19               18               30
   Deposit account loans                                  1,447              730            1,059              928              759
   Personal loans                                         8,954            7,666            5,132            3,887            3,979
                                                  -------------    -------------    -------------    -------------    -------------
      Total consumer loans                               11,682            9,159            7,103            6,361            6,972
                                                  -------------    -------------    -------------    -------------    -------------
      Gross loans                                       235,045          174,979          127,672          102,184          101,719
Less allowance for loan losses                           (1,738)          (1,189)            (786)            (613)            (326)
                                                  -------------    -------------    -------------    -------------    -------------
   Total loans                                    $     233,307    $     173,790    $     126,886    $     101,571    $     101,393
                                                  =============    =============    =============    =============    =============
</TABLE>

The following table shows the remaining maturities or next repricing date of
outstanding loans at December 31, 2005. Balances are not reduced for loans in
process or discounts.

<TABLE>
<CAPTION>
                                                                                        At December 31, 2005
                                                                        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                                                          $100,582          $ 44,775          $ 17,332          $162,689
   Home equity and second
      mortgages                                                            57               660             6,618             7,335
   Commercial                                                          64,266             1,934             1,207            67,407
   Consumer                                                               805             3,159             7,570            11,534
                                                                     --------          --------          --------          --------
        Total                                                        $165,710          $ 50,528          $ 32,727          $248,965
                                                                     ========          ========          ========          ========

Rate Terms:
    Fixed                                                            $  2,689          $  9,411          $ 16,157          $ 28,257
    Variable or adjustable                                            163,021            41,117            16,570           220,708
                                                                     --------          --------          --------          --------
        Total                                                        $165,710          $ 50,528          $ 32,727          $248,965
                                                                     ========          ========          ========          ========
</TABLE>


                                       22
<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. The allowance for
loan losses is provided through charges to income in an amount that management
believes will be adequate to absorb losses on existing loans that may become
uncollectible, based upon evaluations of the collectibility of loans and prior
loan loss experience. The allowance is based on careful, continuous review and
evaluation of the credit portfolio and ongoing, quarterly assessments of the
probable losses inherent in the loan portfolio. The Bank employs a systematic
methodology for assessing the appropriateness of the allowance, which includes
determination of a specific allowance, a formula allowance, and an unallocated
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, 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 rating, for loans categorized as
substandard or doubtful either by the Bank in its ongoing reviews or by bank
examiners in their periodic examinations, or (b) by type of loans, for other
credits without specific allowances. These factors are set by management to
reflect its assessment of the relative level of risk inherent in each category
of loans, based primarily on the credit risk factors employed by bank examiners
at their most recent periodic examination of the Bank. Bank regulatory
examinations usually occur each year. In these examinations, the examiners
review the credit portfolio, establish credit risk ratings for loans, identify
charge offs, and perform their own calculation of the allowance for loan losses.
The use of these credit risk factors based primarily upon periodic examinations
is intended to provide a self-correcting mechanism to reduce differences between
estimated and actual observed losses.

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

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

Management determined that the appropriate allowance for loan losses at December
31, 2005 was $1.7 million, (0.74% of total loans), an increase of $549,000, or
46.1%, from the $1.2 million allowance (0.68% of total loans) at December 31,
2004. Annual net charge-offs were 0.04% of average loans in 2005, while net
recoveries were 0.02% of average loans in 2004. The provision for loan losses
required for 2005 was $625,000, up $255,000 (68.9%), from $370,000 in 2004.

                                       23
<PAGE>

A summary of activity in the allowance is shown below.

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
(Dollars in thousands)                                         2005           2004        2003         2002         2001
-------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                         <C>            <C>          <C>          <C>          <C>
Balance of  allowance, January 1                           $   1,189      $     786    $    613     $    326     $    419
                                                           ---------      ---------    --------     --------     --------
Loan and lease charge-offs:
   Residential real estate                                        (5)             0           0            0         (55)
   Commercial loans                                              (29)            (9)          0         (49)         (68)
   Consumer                                                      (86)           (63)       (147)        (271)        (214)
                                                           ----------     ---------    --------     --------     --------
      Total charge-offs                                         (120)           (72)       (147)        (320)        (337)
Loan and lease recoveries:
   Residential real estate                                          0             0           0            0            0
   Commercial loans                                                 0             0           0            0            0
   Consumer                                                        44           105         100           38           55
                                                           ----------     ---------    --------     --------     --------
       Total recoveries                                            44           105         100           38           55
                                                           ----------     ---------    --------     --------     --------
Net recoveries (charge-offs)                                      (76)           33         (47)        (282)        (282)
Provision for loan losses                                         625           370         220          569          189
                                                           ----------     ---------    --------     --------     --------
Balance of allowance, December 31                          $    1,738     $   1,189    $    786     $    613     $    326
                                                           ==========     =========    ========     ========     ========

Net recoveries (charge-offs) to average loans and leases        (0.04)%        0.02%      (0.04)%      (0.28)%      (0.28)%
Allowance to total loans and leases                              0.74%         0.68%       0.61%        0.60%        0.32%
</TABLE>

The following table presents a five year history of the allocation of the
allowance for loan losses, reflecting the methodology described above, along
with the percentage of total loans in each category. The increase in the
allowance for 2005 was primarily the result of larger reserves for construction
loans, commercial real estate loans, and commercial business loans, reflecting
growth in those loan categories.

<TABLE>
<CAPTION>
                                                                            December 31,
-----------------------------------------------------------------------------------------------------------------------------------
                                       2005                2004                2003                 2002                 2001
-----------------------------------------------------------------------------------------------------------------------------------
                                            Credit              Credit              Credit              Credit               Credit
(Dollars in thousands)            Amount      Mix     Amount      Mix    Amount      Mix     Amount       Mix     Amount       Mix
-----------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>           <C>   <C>           <C>   <C>           <C>  <C>            <C>   <C>            <C>
Amount applicable to:
Real estate loans:
   Construction/ Speculation
      loans                      $    469      7%    $    216      8%    $      0      8%   $      0       6%    $      0       6%
   1-4 family residential and
      home equity                     118     37          170     39           39     46          41      59           50      68
   Multi-family residential             0      2            0      3            0      1           0       3            0       2
   Land                                98      1           78      1            0      3           0       2            0       3
   Commercial                         410     19           94     15           34     17          20      14           19       8
                                 --------------------------------------------------------------------------------------------------
     Total Real Estate Loans        1,095     66          558     66           73     75          61      84           69      87
                                 --------------------------------------------------------------------------------------------------
Commercial business loans             446     29          424     28          162     19         123      10           55       6
                                 --------------------------------------------------------------------------------------------------
Consumer loans:
   Automobile loans                    17      0           16      1          255      1         278       2          126       2
   Education loans                      0      0            0      0            0      0           0       0            0       0
   Savings account loans                0      1            0      1            0      1           0       0            0       1
   Personal                           180      4          191      4          296      4         151       4           76       4
                                 --------------------------------------------------------------------------------------------------
   Total Consumer Loans               197      5          207      6          551      6         429       6          202       7
                                 --------------------------------------------------------------------------------------------------
     Total allowance             $  1,738    100%    $  1,189   100%     $    786   100%    $    613    100%     $    326     100%
                                 ==================================================================================================
</TABLE>

                                       24
<PAGE>

Nonperforming Assets

Management reviews and identifies 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>
                                                                                     December 31,
(Dollars in thousands)                                 2005              2004              2003             2002            2001
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>               <C>               <C>              <C>
Non-accrual loans and leases (1)                   $     2,818     $       2,092     $         806     $        578     $      460
Loans and leases 90 days past due                           18                28               446               35            230
Restructured loans and leases                                0                 0                 0                0              0
                                                   -----------     -------------     -------------     ------------     ----------
   Total non-performing loans and leases (2)             2,836             2,120             1,252              613            690
Other real estate owned, net                               385                 0                 0                0              0
                                                                                                                        ----------
                                                   -----------     -------------     -------------     ------------
   Total non-performing assets                     $     3,221     $       2,120     $       1,252     $        613     $      690
                                                   ===========     =============     =============     ============     ==========

Non-performing loans and leases to total loans            1.21%             1.22%             0.99%            0.60%          0.68%
Non-performing assets to total assets                     1.21%             1.06%             0.84%            0.50%          0.54%
Allowance for loan and lease losses to
non-performing loans and leases                          61.28%            56.08%            62.78%           99.82%         47.25%
</TABLE>

   (1) Gross interest income that would have been recorded in 2005 if
non-accrual loans and leases had been current and in accordance with their
original terms was $237,000, while interest actually recorded on such loans was
$99,000.
   (2) Performing loans considered potential problem loans, as defined and
identified by management, amounted to $2,005,000 at December 31, 2005. 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 is shown below.

<TABLE>
<CAPTION>
(Dollars in thousands)                                                       2005                   2004                  2003
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                    <C>                     <C>
Available-for-Sale:(1)
   Mutual Funds-Mortgage Securities                                           $1,315                 $1,287                  $1,263
   Mutual Funds-U.S. Government Securities                                       710                    695                     685
   Mortgage-backed Securities                                                    162                    201                     276
                                                                              ------                 ------                  ------
      Total                                                                    2,187                  2,183                   2,224
                                                                              ------                 ------                  ------
Held-to-Maturity:
   U.S. Government and Agency  (2)                                             3,735                  3,491                   3,495
                                                                              ------                 ------                  ------
           Total Investment Securities (3)                                    $5,922                 $5,674                  $5,719
                                                                              ======                 ======                  ======
</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, 2005, 2004 or 2003

Maturities and weighted average yields for debt securities available-for-sale
and held-to-maturity at December 31, 2005 are presented below. All U.S.
Government and Agency securities, by contractual maturity, are due within one
year. All mortgage backed securities, by contractual maturity, are due after ten
years. Expected maturities may differ from contractual maturities because
borrowers may have the right to prepay obligations with or without prepayment
penalties.

<TABLE>
<CAPTION>
                                                                       Weighted
                                                                        Average
(Dollars in thousands)                                Amount             Yield
--------------------------------------------------------------------------------
<S>                                                     <C>               <C>
Available-for-Sale:
   Mortgage Backed Securities                           $  162            2.84%

Held-to-Maturity:
   U.S. Government and Agency                            3,735            2.96%
                                                        ------            -----
      Total Investment Securities                       $3,897            2.96%
                                                        ======            =====
</TABLE>

                                       25
<PAGE>

Deposits

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

<TABLE>
<CAPTION>
                                                                    2005                                        2004
------------------------------------------------------------------------------------------------------------------------------------
                                                                  Weighted                                    Weighted
                                                                   Average       % of                          Average      % of
(Dollars in thousands)                                Balance       Rate         Total              Balance     Rate        Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>         <C>                <C>          <C>        <C>
NOW and Money Market Accounts                         $ 27,065       0.89%       13.66%             $ 29,384     0.85%      20.86%
Savings accounts                                        19,184       0.76         9.68                18,722     0.76       13.29
Term Certificates                                      134,825       4.04        68.02                79,661     2.78       56.56
Checking Accounts                                       17,133       0.00         8.64                13,074     0.00        9.29
                                                      --------                  ------              --------               ------
   Total Deposits                                     $198,207                  100.00%             $140,841               100.00%
                                                      ========                  ======              ========               ======

<CAPTION>

                                                                    2003
---------------------------------------------------------------------------------------
                                                                  Weighted
                                                                   Average       % of
(Dollars in thousands)                                Balance       Rate         Total
---------------------------------------------------------------------------------------
<S>                                                   <C>            <C>         <C>
NOW and Money Market Accounts                         $ 28,777       0.88%       24.35%
Savings accounts                                        18,395       0.75        15.57
Term Certificates                                       61,488       3.09        52.04
Checking Accounts                                        9,504       0.00         8.04
                                                      --------                  ------
   Total Deposits                                     $118,164                  100.00%
                                                      ========                  ======
</TABLE>

Borrowings

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

<TABLE>
<CAPTION>
                                2005                                                            2004
-----------------------------------------------------------------  -----------------------------------------------------------
                    Maturity                                                          Maturity
Amount                Date           Rate              Type        Amount               Date            Rate         Type
-----------------------------------------------------------------  -----------------------------------------------------------
<S>                 <C>           <C>               <C>            <C>                 <C>           <C>          <C>
    $18,200         Demand        Variable          Overnight      $ 30,000            Demand        Variable     Overnight
     20,000           2006        Variable          Adjustable        6,000              2006          4.97       Fixed
      6,000           2006           4.97           Fixed             3,000              2006          4.13       Fixed
        714           2010           3.93           Fixed               857              2010          3.93       Fixed
    -------                                                        --------
    $44,914                                                        $ 39,857
    =======                                                        ========

<CAPTION>

                                2003
-----------------------------------------------------------------
                    Maturity
Amount                Date           Rate              Type
-----------------------------------------------------------------
<S>                 <C>           <C>               <C>
    $ 3,750         Demand        Variable          Overnight
      6,000           2006            4.97          Fixed
      3,000           2006            4.13          Fixed
      1,000           2010            3.78          Fixed
    -------
    $13,750
    =======
</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.

                                       26
<PAGE>

The Bank has implemented policies by generally emphasizing the origination of
one-year, three-year and five-year adjustable rate mortgage loans, adjustable
rate commercial loans and lines of credit, and short-term consumer loans. 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 and
commercial loans, and may include 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
decide 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, 2005, this
analysis indicated that shock decreases of 100, 200 and 300 basis points would
increase the market value of portfolio equity by 2.64%, 2.95%, and 2.82%,
respectively, while interest rate shock increases of 100, 200 and 300 basis
points would decrease the market value of portfolio equity by 3.28%, 6.77%, and
11.29%. These regulatory models also provide an analysis of interest rate shock
effects on net interest income. At December 31, 2005, this analysis indicated
that shock decreases of 100 and 200 basis points would increase net interest
income by 1.90% and 1.50%, respectively, while a shock decrease of 300 basis
points would decrease net interest income by 0.71%. Interest rate shock
increases of 100, 200 and 300 basis points would decrease net interest income by
2.47%, 5.23%, and 7.99%, respectively. Although the effects of 300 basis point
decreases in rates are calculated in these models, management believes that such
a decrease in general rates of that magnitude was not possible in the rate
environment prevailing at December 31, 2005.

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.

Cash and cash equivalents increased $1.5 million during 2005. This increase was
the result of $64.0 million in cash provided by financing activities and $2.5
million in cash provided by operating activities, partially offset by $65.0
million in cash used by investing activities.

Cash and cash equivalents decreased $1.5 million during 2004. This decrease was
the result of $52.2 million in cash used by investing activities partially
offset by cash provided by financing activities of $48.2 million and $2.5
million in cash provided by operating activities.

                                       27
<PAGE>

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 20.83% of total
deposits at December 31, 2005, 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               $3,727           $13,304           $10,314           $13,942           $41,287
</TABLE>

Capital

Capital adequacy refers to the level of capital required to sustain asset growth
and to absorb losses. During 2004, the Company became subject to regulatory
capital guidelines, as it surpassed $150 million in total consolidated assets.
The Board of Governors of the Federal Reserve System ("Federal Reserve"), which
is the Company's and the Bank's principal regulator, has established
requirements for total and tier 1 (core) risk-based capital and tangible
capital. At December 31, 2005, the Company exceeded applicable capital
requirements, having a total risk based capital ratio of 10.31%, a tier 1
risk-based capital ratio of 9.46%, and a tangible capital ratio of 7.63%. At
December 31, 2005, the Bank also exceeded applicable capital requirements to be
well capitalized, having a total risk based capital ratio of 10.05%, a tier 1
risk-based capital ratio of 9.22%, and a tangible capital ratio of 7.51%. See
Note 12 "Regulatory Matters" in the notes to the consolidated financial
statements.

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
United States of America, 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.

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
Note 15 to the Consolidated Financial Statements.

                                       28
<PAGE>

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. 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 those that 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.

Cecil Bancorp's systematic methodology for assessing the appropriateness of the
allowance includes determination of specific, formula, and unallocated
components, as described above under "Allowance for Loan Losses" and in Notes 1
and 4 to the Consolidated Financial Statements. At December 31, 2005, 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 $65,000 in the recommended allowance, assuming no
change in other elements considered in the methodology.


                                       29
<PAGE>





                              [Intentionally blank]



                                       30
<PAGE>

ITEM 7.    FINANCIAL STATEMENTS


                                TABLE OF CONTENTS


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


CONSOLIDATED FINANCIAL STATEMENTS


           Balance Sheets


           Statements of Income


           Statements of Changes in Stockholders' Equity


           Statements of Cash Flows



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       31
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To 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, 2005 and 2004, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

             We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Cecil
Bancorp, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results
of their operations and cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.



Stegman & Company

Baltimore, Maryland
February 23, 2006


                                       32
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2005 AND 2004
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                     ASSETS

                                                                                                      2005                   2004
                                                                                                   ---------              ---------
<S>                                                                                                <C>                    <C>
Cash and due from banks                                                                            $   1,317              $   1,299
Interest bearing deposits with banks                                                                   4,378                  2,935
Investment securities:
   Securities available-for-sale at fair value                                                         2,187                  2,183

   Securities held-to-maturity (fair value of $3,735
      in 2005 and $3,490 in 2004)                                                                      3,735                  3,491

Restricted investment securities - at cost                                                             2,607                  2,278
Loans receivable                                                                                     235,045                174,979
   Less: Allowance for loan losses                                                                    (1,738)                (1,189)
                                                                                                   ---------              ---------

        Net loans receivable                                                                         233,307                173,790
                                                                                                   ---------              ---------

Other real estate owned                                                                                  385                     --
Premises and equipment - net of accumulated depreciation                                               9,253                  6,139
Accrued interest receivable                                                                            1,146                    755
Goodwill                                                                                               2,182                  2,182
Other intangible assets                                                                                  154                    143
Bank owned life insurance                                                                              5,030                  4,137
Other assets                                                                                           1,444                  1,048
                                                                                                   ---------              ---------

        TOTAL ASSETS                                                                               $ 267,125              $ 200,380
                                                                                                   =========              =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       33
<PAGE>

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                                                     2005                   2004
                                                                                                   ---------              ---------
<S>                                                                                                <C>                    <C>
LIABILITIES:
   Deposits                                                                                        $ 198,207              $ 140,841
   Other liabilities                                                                                   2,062                  1,366
   Advances from Federal Home Loan Bank of Atlanta                                                    44,914                 39,857
                                                                                                   ---------              ---------

        Total liabilities                                                                            245,183                182,064
                                                                                                   ---------              ---------



STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value; authorized 4,000,000
      shares, issued and outstanding 1,768,082 shares in
      2005 and 1,634,054 shares in 2004                                                                   18                     16
   Additional paid in capital                                                                         10,578                  8,377
   Retained earnings                                                                                  11,372                  9,929
   Accumulated other comprehensive loss, net                                                             (26)                    (6)
                                                                                                   ---------              ---------

        Total stockholders' equity                                                                    21,942                 18,316
                                                                                                   ---------              ---------

        TOTAL LIABILITIES AND STOCKHOLDERS'
           EQUITY                                                                                  $ 267,125              $ 200,380
                                                                                                   =========              =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       34
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                        2005                  2004
                                                                                                       -------               -------
<S>                                                                                                    <C>                   <C>
INTEREST INCOME:
   Interest and fees on loans                                                                          $14,663               $10,246
   Interest on investment securities                                                                       187                   106
   Dividends on FHLB and FRB stock                                                                         103                    54
   Other interest-earning assets                                                                            34                    21
                                                                                                       -------               -------

           Total interest income                                                                        14,987                10,427
                                                                                                       -------               -------

INTEREST EXPENSE:
   Interest expense on deposits                                                                          4,132                 2,406
   Interest expense on advances from FHLB                                                                1,547                   710
                                                                                                       -------               -------

           Total interest expense                                                                        5,679                 3,116
                                                                                                       -------               -------

NET INTEREST INCOME                                                                                      9,308                 7,311

PROVISION FOR LOAN LOSSES                                                                                  625                   370
                                                                                                       -------               -------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                                                      8,683                 6,941
                                                                                                       -------               -------

NONINTEREST INCOME:
   Checking account fees                                                                                   453                   335
   ATM fees                                                                                                 87                    67
   Commission income                                                                                        82                    79
   Gain on sale of other real estate owned                                                                  --                    17
   Gain on sale of loans                                                                                   110                   182
   Income from bank owned life insurance                                                                   243                   236
   Other                                                                                                   140                    89
                                                                                                       -------               -------

           Total noninterest income                                                                      1,115                 1,005
                                                                                                       -------               -------

NONINTEREST EXPENSE:
   Salaries and employee benefits                                                                        4,169                 3,384
   Occupancy expense                                                                                       484                   336
   Equipment and data processing expense                                                                   740                   623
   Checking account expense                                                                                124                   137
   Professional fees                                                                                       109                   161
   Stationery, printing and supplies                                                                        52                   132
   Advertising                                                                                             113                    78
   Other                                                                                                   752                   615
                                                                                                       -------               -------

           Total noninterest expense                                                                     6,543                 5,466
                                                                                                       -------               -------

INCOME BEFORE INCOME TAXES                                                                               3,255                 2,480

INCOME TAX EXPENSE                                                                                       1,193                   948
                                                                                                       -------               -------

NET INCOME                                                                                             $ 2,062               $ 1,532
                                                                                                       =======               =======

Earnings per common share - basic                                                                      $  1.24               $  0.94
                                                                                                       =======               =======

Earnings per common share - diluted                                                                    $  1.24               $  0.94
                                                                                                       =======               =======

Dividends paid per common share                                                                        $  0.20               $  0.20
                                                                                                       =======               =======
</TABLE>

See accompanying notes to consolidated financial statements.


                                       35
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                  Deferred
                                                                      Employee  Compensation-            Accumulated
                                                          Additional   Stock      Management                 Other         Total
                                                 Common     Paid-in   Ownership  Recognition   Retained  Comprehensive Stockholders'
                                                  Stock     Capital     Plan        Plan       Earnings  Income (Loss)    Equity
                                                 --------   --------   --------    --------    --------  ------------  ------------
<S>                                              <C>        <C>        <C>         <C>         <C>         <C>           <C>
BALANCES AT JANUARY 1, 2004                      $     16   $  8,015   $    (39)   $     (7)   $  8,721    $      8      $ 16,714

   Comprehensive income:
      Net income                                       --         --         --          --       1,532          --         1,532
      Other comprehensive loss, net of
        related income tax effect                      --         --         --          --          --         (14)          (14)
                                                                                                                         --------
           Total comprehensive income                  --         --         --          --          --          --         1,518
   Cash dividends paid                                 --         --         --          --        (324)         --          (324)
   Repayment of ESOP debt                              --         --         39          --          --          --            39
   Release of ESOP shares                              --        161         --          --          --          --           161
   Deferred compensation amortization                  --         --         --           7          --          --             7
   Stock purchased by dividend
    reinvestment plan                                  --         70         --          --          --          --            70
   Stock options exercised                             --        126         --          --          --          --           126
   Stock option expense                                --          5         --          --          --          --             5
                                                 --------   --------   --------    --------    --------    --------      --------

BALANCES AT DECEMBER 31, 2004                          16      8,377         --          --       9,929          (6)       18,316

   Comprehensive income:
      Net income                                       --         --         --          --       2,062          --         2,062
      Other comprehensive loss, net of
        related income tax effect                      --         --         --          --          --         (20)          (20)
                                                                                                                         --------
           Total comprehensive income                  --         --         --          --          --          --         2,042
   Cash dividends paid                                 --         --         --          --        (336)         --          (336)
   Sale of common stock                                 2      1,840         --          --          --          --         1,842
   Stock purchased by dividend
    reinvestment plan                                  --         78         --          --          --          --            78
   Stock dividend                                      --        283         --          --        (283)         --            --
                                                 --------   --------   --------    --------    --------    --------      --------

BALANCES AT DECEMBER 31, 2005                    $     18   $ 10,578   $     --    $     --    $ 11,372    $    (26)     $ 21,942
                                                 ========   ========   ========    ========    ========    ========      ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       36
<PAGE>





                      CECIL BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                          2005               2004
                                                                                                        --------           --------
<S>                                                                                                     <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                                       $  2,062           $  1,532
       Adjustments to reconcile net income to net cash
         provided by operating activities:
         Depreciation and amortization                                                                       313                290
         Provision for loan losses                                                                           625                370
         Gain on sale of loans                                                                              (110)              (182)
         Gain on sale of real estate owned                                                                    --                (17)
         Loss on disposal of premises and equipment                                                           11                 --
         Increase in cash surrender value of bank owned life insurance                                      (243)              (236)
         Deferred income taxes                                                                              (430)              (301)
         Excess servicing rights                                                                             (49)               (82)
         Distribution from management recognition plan trust                                                  --                  7
         Reinvested dividends on investments                                                                 (76)               (42)
         Originations of loans held for sale                                                              (4,051)            (6,265)
         Proceeds from sales of loans held for sale                                                        4,123              6,492
         Net change in:
            Accrued interest receivable and other assets                                                    (345)                62
            Other liabilities                                                                                696                888
                                                                                                        --------           --------

               Net cash provided by operating activities                                                   2,526              2,516
                                                                                                        --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of investment securities held-to-maturity                                                    (7,139)            (7,951)
    Proceeds from sales, maturities, calls and principal payments
       of investment securities available-for-sale                                                            38                 72
    Proceeds from maturities, calls and principal payments
       of investment securities held-to-maturity                                                           7,000              8,000
    Net purchase of stock in Federal Home Loan Bank of Atlanta                                              (328)            (1,406)
    Net increase in loans                                                                                (60,489)           (47,411)
    Proceeds from sale of real estate owned                                                                   --                109
    Purchase of bank owned life insurance                                                                   (650)              (650)
    Purchases of premises and equipment - net                                                             (3,504)            (2,983)
                                                                                                        --------           --------

                Net cash used by investing activities                                                    (65,072)           (52,220)
                                                                                                        --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net increase in deposits                                                                              57,366             22,677
    Decrease in advance payments by borrowers
       for property taxes and insurance                                                                       --               (450)
    Proceeds from issuance of common stock                                                                 1,920                196
    Net increase (decrease) in advances from Federal Home Loan Bank:
         Short-term                                                                                        8,200             26,250
         Long-term                                                                                        (3,143)              (143)
    ESOP compensation decrease                                                                                --                 39
    Payments of cash dividends                                                                              (336)              (324)
                                                                                                        --------           --------

                Net cash provided by financing activities                                                 64,007             48,245
                                                                                                        --------           --------
</TABLE>

                                       37
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Continued)
                 For the Years Ended December 31, 2005 and 2004
                             (dollars in thousands)


<TABLE>
<CAPTION>
                                                                                                           2005              2004
                                                                                                          -------           -------
<S>                                                                                                       <C>               <C>
Increase (decrease) in cash and cash equivalents                                                          $ 1,461           $(1,459)

Cash and cash equivalents at beginning of year                                                              4,234             5,693
                                                                                                          -------           -------

Cash and cash equivalents at end of year                                                                  $ 5,695           $ 4,234
                                                                                                          =======           =======

Supplemental disclosure of cash flows information:

   Cash paid for income taxes                                                                             $ 1,463           $   924
                                                                                                          =======           =======

   Cash paid for interest                                                                                 $ 5,606           $ 3,067
                                                                                                          =======           =======

   Interest capitalized during the period                                                                 $    29           $    --
                                                                                                          =======           =======

Supplemental disclosure of noncash investing and financing activities:
   Transfer of loans receivable to real estate owned                                                      $   385           $    92
                                                                                                          =======           =======

Sale of real estate owned:
   Carrying value                                                                                         $    --           $    92
   Charge-off                                                                                                  --                --
   Financed sale                                                                                               --                --
   Gain on sale                                                                                                --                17
                                                                                                          -------           -------

   Cash received from sale                                                                                $    --           $   109
                                                                                                          =======           =======
</TABLE>

See accompanying notes to consolidated financial statements.


                                       38
<PAGE>

                      CECIL BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004


1. SIGNIFICANT ACCOUNTING POLICIES

           The accounting and reporting policies of Cecil Bancorp, Inc. (the
"Corporation") and its wholly-owned subsidiary, 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.

           Certain reclassifications have been made to amounts previously
reported to conform to the classifications made in 2005. The following is a
summary of the more significant accounting policies:

           Nature of Operations

                Through its subsidiary bank, the Company conducts full-service
commercial banking. Services to individuals and businesses include accepting
deposits, and extending real estate, consumer and commercial loans and lines of
credit. The Company primarily 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 Company and its subsidiary. Consolidation has resulted in the elimination of
all significant intercompany balances and transactions. The financial statements
of the Company (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 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. Material estimates that are particularly susceptible to significant
change in the near-term relate to the determination of the allowance for credit
losses and other-than-temporary impairment of investment securities.

           Cash and Cash Equivalents

                For purposes of the consolidated statement of cash flows, highly
liquid investments with original maturities of three months or less are
classified as cash and cash equivalents. Assets categorized in the balance sheet
as cash and due from banks and interest bearing deposits with banks are
considered cash and cash equivalents. Interest bearing deposits with banks
generally exceed balances that are recoverable under FDIC insurance.


                                       39
<PAGE>

           Investment Securities

                Securities that the Company has the positive intent and ability
to hold to maturity are classified as held-to-maturity and recorded at amortized
cost. 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. Securities not classified as held-to-maturity or 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 Company designates securities into one of the three
categories at the time of purchase.

                Premiums and discounts on investments are recognized in interest
income over the terms of the securities using methods that approximate the
interest method. Declines in the fair value of held-to-maturity and
available-for-sale securities below their cost that are deemed to be other than
temporary are reflected in earnings as realized losses. In estimating
other-than-temporary impairment losses, management considers (1) the length of
time and the extent to which the fair value has been less than cost, (2) the
financial condition and near-term prospects of the issuer, and (3) the intent
and ability of the Company to retain its investment in the issuer for a period
of time sufficient to allow for any anticipated recovery in fair value. Gains
and losses on the sale of securities are recorded on the trade date and are
determined using the specific identification method.

           Restricted Investment Securities

                Restricted investment securities consist of Federal Reserve Bank
("FRB") and Federal Home Loan Bank of Atlanta ("FHLB") stock which are required
by law and are restricted as to marketability. Because the investment securities
are not marketable, they are reported at cost. The FRB and FHLB perform ongoing
reviews of the Company's stock level to be sure it meets the minimum
requirements. The FRB requires a minimum stock balance based on the balance of
the Bank's common stock and surplus. The FHLB required stock balance is based on
total assets as of December 31 of the previous year and total FHLB advances
currently outstanding. As of December 31, 2005 and 2004, the Company met all
requirements set forth by the FRB and FHLB.

           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 Company 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 Company 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 Company'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.

                                       40
<PAGE>

           Loans Held for Sale

                Residential mortgage loans originated for sale are carried at
the lower of cost or market, which may be indicated by the committed sale price,
determined on an individual basis. The Company had no loans held for sale as of
December 31, 2005 and 2004.

           Allowance for Loan Losses

                The allowance for loan losses is established as losses are
estimated to have occurred through a provision for loan losses charged to
earnings. Loan losses are charged against the allowance when management believes
the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if
any, are credited to the allowance.

                The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the collectibility
of the loans in light of historical experience, the nature and volume of the
loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral and prevailing economic
conditions. This evaluation is inherently subjective as it requires estimates
that are susceptible to significant revision as more information becomes
available.

                The allowance consists of specific, general and unallocated
components. 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 specific component relates to loans
that are classified as either doubtful, substandard or special mention. For such
loans that are also classified as impaired, an allowance is established when the
discounted cash flows (or collateral value or observable market price) of the
impaired loan is lower than the carrying value of that loan. The general
component covers non-classified loans and is based on historical loss experience
adjusted for qualitative factors. The unallocated component is based upon
management's evaluation of various conditions that are not directly measured in
the determination of the specific and general components. These conditions may
include the nature and volume of the loan portfolio, overall portfolio quality,
and current economic conditions that may affect the borrowers' ability to repay
the loan.

           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, which range from three to seven
years for furniture, fixtures and equipment to forty years for buildings.
Leasehold improvements are amortized over the shorter of their estimated useful
economic lives or 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. Interest costs on the
original purchase, significant repairs, and construction expenditures relating
to bank premises are capitalized at the Bank's average cost of funds and
depreciated over the life of the building.

                                       41
<PAGE>

           Other Real Estate Owned

                Other 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.

           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 Company 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.

           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. Appreciation in the value of the insurance policies is classified as
noninterest income.

           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.


                                       42
<PAGE>

           Advertising

                Advertising costs are expensed as incurred. Advertising expense
was $113,000 and $79,000 for the years ended December 31, 2005 and 2004,
respectively.

           Earnings Per Share

                Basic earnings per share (EPS) are calculated by dividing net
income available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share are calculated
by adjusting the numerator and denominator of the basic earnings per share
computation for the effects of all dilutive potential common shares outstanding
during the period. The dilutive effects of options, warrants, and their
equivalents are computed using the treasury stock method. Earnings per share
have been calculated to give retroactive effect to the 1% stock dividend
approved by the Board of Directors on December 20, 2005.

           Stock-Based Compensation

                Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, encourages all entities to adopt a fair
value based method of accounting for employee stock compensation plans, whereby
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, whereby compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. The Company has elected to
continue with the accounting methodology in Opinion No. 25. Stock options issued
under the Company's stock option plan have no intrinsic value at the grant date,
and under Opinion No. 25, no compensation cost is recognized for them.

                The following table (in thousands, except per share data)
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of SFAS No. 123 to all stock
option awards. Earnings per share have been calculated to give retroactive
effect to the 1% stock dividend approved by the Board of Directors on
December 20, 2005.

<TABLE>
<CAPTION>
                                                                                         For the Year Ended December 31,
                                                                                         -------------------------------
                                                                                               2005           2004
                                                                                            ---------      ---------
<S>                                                                                         <C>            <C>
Net income, as reported                                                                     $   2,062      $   1,532
Less: total option expense determined under
  fair value method for all option awards, net
  of related tax effects                                                                           --             (6)
                                                                                            ---------      ---------
Pro forma net income                                                                        $   2,062      $   1,526
                                                                                            =========      =========

Pro forma net income per share:
  Basic - as reported                                                                       $    1.24      $     0.94
                                                                                            =========      =========
  Basic - pro forma                                                                         $    1.24      $     0.93
                                                                                            =========      =========
  Diluted - as reported                                                                     $    1.24      $     0.94
                                                                                            =========      =========
  Diluted - pro forma                                                                       $    1.24      $     0.93
                                                                                            =========      ==========
</TABLE>

                                       43
<PAGE>

                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 Company'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, 2005 or 2004.

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

           Comprehensive Income

                The Company 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
Company's only significant element of comprehensive income is unrealized gains
and losses on available-for-sale securities.

2. RECENT ACCOUNTING PRONOUNCEMENTS

           In December 2005, the Financial Accounting Standards Board ("FASB")
issued Statement No. 123(R), "Share-Based Payment." This statement replaces SFAS
No. 123 and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees." SFAS No. 123(R) will require compensation costs related to
share-based payment transactions to be recognized in the financial statements
(with limited exceptions). The amount of compensation cost will be measured
based on the grant-date fair value of the equity or liability instruments
issued. Compensation cost will be recognized over the period that an employee
provides service in exchange for the award. The Company is evaluating the
requirements of implementation and plans to adopt the provisions under the
prospective method beginning January 1, 2006. The impact of this Statement on
the Company in 2006 and beyond will depend upon various factors, among them
being the Company's future compensation strategy.

           In May 2005, the FASB issued Statement No. 154 ("SFAS No. 154"),
"Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20
and FASB Statement No. 3." This new standard replaces APB Opinion No. 20,
"Accounting Changes," and FASB Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements." Among other changes, SFAS No. 154 requires that a
voluntary change in accounting principle be applied retrospectively with all
prior period financial statements presented on the new accounting principle,
unless it is impracticable to do so. SFAS No. 154 also provides that (1) a
change in method of depreciating or amortizing a long-lived nonfinancial asset
be accounted for as a change in estimate (prospectively) that was effected by a
change in accounting principle, and (2) correction of errors in previously
issued financial statements should be termed a "restatement." The new standard
is effective for accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005. The Company does not anticipate this
revision will have a material effect on its financial statements.

           On November 3, 2005, the FASB issued FSP Nos. FAS 115-1 and FAS 124-1
to address the determination as to when an investment is considered impaired,
whether that impairment is other than temporary, and the measurement of the
impairment loss. The FSP also includes guidance on the accounting subsequent to
the recognition of an other-than-temporary impairment and requires additional
disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. The guidance in this FAS amends FASB Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The
guidance in this FSP shall be applied to reporting periods beginning after
December 15, 2005. This revision will not have a material effect on the
Company's financial statements.

                                       44
<PAGE>

3. INVESTMENT SECURITIES

           Investment securities have been classified in the consolidated
balance sheets according to management's intent and ability to hold the
investment to maturity.

           Investment securities at December 31, 2005 and 2004 are summarized in
the following table (in thousands).

<TABLE>
<CAPTION>
                                                                                                              2005
                                                                                    ------------------------------------------------
                                                                                                  Gross         Gross      Estimated
                                                                                    Amortized   Unrealized    Unrealized      Fair
                                                                                       Cost        Gains        Losses        Value
                                                                                     --------     --------     --------     --------
<S>                                                                                  <C>          <C>          <C>          <C>
Available-for-Sale:
   Mutual funds - mortgage securities                                                $  1,348     $     --     $     33     $  1,315
   Mutual funds - U.S. Government securities                                              714           --            4          710
   Mortgage-backed securities                                                             167           --            5          162
                                                                                     --------     --------     --------     --------

                                                                                     $  2,229     $     --     $     42     $  2,187
                                                                                     ========     ========     ========     ========

Held-to-Maturity:
   U. S. Treasury securities and obligations
      of U. S. Government and Federal agencies                                       $  3,735     $     --     $     --     $  3,735
                                                                                     ========     ========     ========     ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                                              2004
                                                                                    ------------------------------------------------
                                                                                                  Gross         Gross      Estimated
                                                                                    Amortized   Unrealized    Unrealized      Fair
                                                                                       Cost        Gains        Losses        Value
                                                                                     --------     --------     --------     --------
<S>                                                                                  <C>          <C>          <C>          <C>
Available-for-Sale:
   Mutual funds - mortgage securities                                                $  1,298     $     --     $     11     $  1,287
   Mutual funds - U.S. Government securities                                              688            7           --          695
   Mortgage-backed securities                                                             207           --            6          201
                                                                                     --------     --------     --------     --------

                                                                                     $  2,193     $      7     $     17     $  2,183
                                                                                     ========     ========     ========     ========

Held-to-Maturity:
   U. S. Treasury securities and obligations
      of U. S. Government and Federal agencies                                       $  3,491     $     --     $      1     $  3,490
                                                                                     ========     ========     ========     ========
</TABLE>

           At December 31, 2005 and 2004, investment securities with a carrying
value of $3.8 million and $3.6 million, respectively, were pledged to secure
deposits of municipalities.

           The tax effect of the net unrealized holding gains or losses of
available-for-sale securities is included as a component of the net deferred tax
asset and the remaining portion of the holding gain or loss is included as a
component of accumulated other comprehensive income. At December 31, 2005, a
deferred tax asset of $17,000 and accumulated other comprehensive loss of
$26,000 relate to the unrealized holding loss on available-for-sale securities.
At December 31, 2004, a deferred tax asset of $4,000 and accumulated other
comprehensive loss of $6,000 relate to the unrealized holding loss on
available-for-sale securities.

                                       45
<PAGE>

           The U. S. Treasury securities and obligations of the U.S. Government
and Federal agencies at December 31, 2005, by contractual maturities, are due
within one year. All mortgage-backed securities at December 31, 2005, by
contractual maturities, are due after ten years. Expected maturities may differ
from contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.

           As of December 31, 2005, unrealized losses (in thousands) on
securities were comprised of the following based on the length of time that the
securities have been in a continuous loss position:

<TABLE>
<CAPTION>
                                                                      Less than             More than
                                                                      12 months             12 months                 Total
                                                                ---------------------   ---------------------   --------------------
                                                                  Fair     Unrealized     Fair     Unrealized    Fair     Unrealized
                                                                 Value        Loss       Value        Loss       Value        Loss
                                                                --------   ----------   --------   ----------   --------  ----------
<S>                                                             <C>         <C>         <C>         <C>         <C>         <C>
Available-for-Sale:

Mutual funds -
  mortgage securities                                           $     --    $     --    $  1,315    $     33    $  1,315    $     33
Mutual funds -
  US Government securities                                           710           4          --          --         710           4
Mortgage-backed securities                                            --          --         162           5         162           5
                                                                --------    --------    --------    --------    --------    --------

                                                                $    710    $      4    $  1,477    $     38    $  2,187    $     42
                                                                ========    ========    ========    ========    ========    ========
</TABLE>

           The securities with unrealized holding losses are impaired due to
declines in fair value resulting from changes in interest rates. None of these
securities have exhibited a decline in value due to changes in credit risk.
Additionally, the Company has the intent and ability to hold the mortgage-backed
securities until they mature, and the mutual funds until the foreseeable future,
and does not expect to realize losses on any of the investments. Therefore,
management does not consider the declines in fair value to be other than
temporary.

           There were no sales of investment securities during the years ended
December 31, 2005 and 2004.



                                       46
<PAGE>

4. LOANS AND ALLOWANCE FOR LOAN LOSSES

           The Company's lending activities are predominantly conducted in Cecil
and Harford Counties in the State of Maryland. A summary of loans (in thousands)
follows:

<TABLE>
<CAPTION>
                                                                                                    2005                     2004
                                                                                                 ---------                ---------
<S>                                                                                              <C>                      <C>
First mortgage loans:
  1 - 4 dwelling units                                                                           $  79,574                $  64,273
  5 or more                                                                                          4,523                    4,423
  Nonresidential                                                                                    45,338                   26,174
  Land                                                                                               3,477                    2,182
  Construction                                                                                      29,777                   20,733
                                                                                                 ---------                ---------
                                                                                                   162,689                  117,785
                                                                                                 ---------                ---------
Other loans:
  Home equity loans                                                                                  7,335                    5,398
  Commercial loans                                                                                  67,407                   49,474
  Consumer loans                                                                                    10,072                    8,410
  Loans on deposit accounts                                                                          1,447                      730
  Education loans                                                                                       15                       19
                                                                                                 ---------                ---------
                                                                                                    86,276                   64,031
                                                                                                 ---------                ---------

          Total loans                                                                              248,965                  181,816
Less:
  Undisbursed proceeds on loans in process                                                         (13,086)                  (6,178)
  Deferred loan fees and costs                                                                        (834)                    (659)
                                                                                                 ---------                ---------

                                                                                                 $ 235,045                $ 174,979
                                                                                                 =========                =========
</TABLE>

           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
then 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 (in
thousands):

<TABLE>
<CAPTION>
                                                                                                             2005            2004
                                                                                                          ---------       ---------
<S>                                                                                                       <C>             <C>
Balance at beginning of year                                                                              $   1,332       $   2,006
Loans to new directors at beginning of year                                                                     299              --
New loans and additional borrowings                                                                           3,859           1,749
Participations sold                                                                                            (538)         (1,878)
Repayments                                                                                                   (1,315)           (545)
                                                                                                          ---------       ---------
Balance at end of year                                                                                    $   3,637       $   1,332
                                                                                                          =========       =========
</TABLE>

         An analysis of the allowance for loan losses for the years ended
December 31, 2005 and 2004 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                            2005             2004
                                                                                                         ---------        ---------
<S>                                                                                                      <C>              <C>
Balance at beginning of period                                                                           $   1,189        $     786
Provision charged to operations                                                                                625              370
Charge-offs                                                                                                   (120)             (72)
Recoveries                                                                                                      44              105
                                                                                                         ---------        ---------
Balance at end of period                                                                                 $   1,738        $   1,189
                                                                                                         =========        =========
</TABLE>

                                       47
<PAGE>

           Management reviews and identifies loans and investments that require
designation as nonperforming assets. Nonperforming assets include loans
accounted for on a non-accrual basis, loans past due by 90 days or more but
still accruing, restructured loans, and other real estate owned. Information (in
thousands) with respect to nonperforming assets at December 31, 2005 and 2004 is
as follows:

<TABLE>
<CAPTION>
                                                                                                               2005           2004
                                                                                                            ---------      ---------
<S>                                                                                                         <C>            <C>
Non-accrual loans                                                                                           $   2,818      $   2,092
Loans 90 days or more past due and still accruing                                                                  18             28
Restructured loans                                                                                                 --             --
                                                                                                            ---------      ---------

Total nonperforming loans                                                                                       2,836          2,120
Other real estate owned, net                                                                                      385             --
                                                                                                            ---------      ---------

Total nonperforming assets                                                                                  $   3,221      $   2,120
                                                                                                            =========      =========
</TABLE>

           Impaired loans include nonperforming loans and other loans that
management has identified where it is probable that all amounts due will not be
collected in accordance with the contractual terms of the loan. Loans that are
returned to accrual status are no longer considered to be impaired.

           Information with respect to impaired loans at December 31, 2005 and
2004 and for the years then ended is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                                2005          2004
                                                                                                             ---------     ---------
<S>                                                                                                          <C>           <C>
Impaired loans with a valuation allowance                                                                    $   1,350     $   1,996
Impaired loans without a valuation allowance                                                                     1,686           124
                                                                                                             ---------     ---------

          Total impaired loans                                                                               $   3,036     $   2,120
                                                                                                             =========     =========

Allowance for loan losses related to impaired loans                                                          $     167     $     490
Allowance for loan losses related to other than
  impaired loans                                                                                                 1,571           699
                                                                                                             ---------     ---------

          Total allowance for loan losses                                                                    $   1,738     $   1,189
                                                                                                             =========     =========

Average impaired loans for the year                                                                          $   2,444     $   1,766
                                                                                                             =========     =========
Interest income on impaired loans
  recognized on the cash basis                                                                               $      99     $      56
                                                                                                             =========     =========
</TABLE>

5. SERVICING

             At December 31, 2005 and 2004, the Bank was servicing loans for
others amounting to approximately $17.4 million and $18.8 million, 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 $154,000
and $143,000 as of December 31, 2005 and 2004, respectively. Estimated fair
value of the servicing rights approximates carrying value. Amortization expense
of servicing rights was $38,000 and $41,000 for the years ended December 31,
2005 and 2004, respectively.

                                       48
<PAGE>

             The following table summarizes the activity pertaining to mortgage
servicing rights (in thousands):

<TABLE>
<CAPTION>
                                                                                                            2005             2004
                                                                                                         ---------        ---------
<S>                                                                                                      <C>              <C>
Balance at beginning of period                                                                           $     143        $     102
Mortgage servicing rights capitalized                                                                           49               82
Mortgage servicing rights amortized                                                                            (38)             (41)
                                                                                                         ---------        ---------

Balance at end of period                                                                                 $     154        $     143
                                                                                                         =========        =========
</TABLE>

6. PREMISES AND EQUIPMENT

             Premises and equipment are summarized by major classifications as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                             2005            2004
                                                                                                           ---------       ---------
<S>                                                                                                        <C>             <C>
Land                                                                                                       $   1,700       $   1,690
Buildings and improvements                                                                                     6,986           3,862
Furniture, fixtures and equipment                                                                              2,097           1,937
Leasehold improvements                                                                                           425             431
                                                                                                           ---------       ---------
                                                                                                              11,208           7,920
Less: accumulated depreciation                                                                                 1,955           1,781
                                                                                                           ---------       ---------

                                                                                                           $   9,253       $   6,139
                                                                                                           =========       =========
</TABLE>

             Depreciation expense for the years ended December 31, 2005 and 2004
was $379,000 and $292,000, 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 (in thousands) for
each of the five succeeding years under noncancelable leases consisted of the
following at December 31, 2005:

<TABLE>
<CAPTION>
       Year ending December 31:
<S>                                                                <C>
               2006                                                $126
               2007                                                 128
               2008                                                 130
               2009                                                 133
               2010                                                 106
               Thereafter                                           249
</TABLE>

             Rent expense was $134,000 and $101,000 for the years ended
December 31, 2005 and 2004, respectively.

7. GOODWILL

             Goodwill represents 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. 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. Goodwill is no longer amortized but rather tested annually for impairment
under the provisions of SFAS No. 142. A schedule of goodwill (in thousands) is
as follows:

                                       49
<PAGE>

<TABLE>
<CAPTION>
                                     2005 and 2004
                ------------------------------------------------------
                 Gross                                         Net
                Carrying            Accumulated             Carrying
                 Amount             Amortization             Amount
                --------            ------------            --------
<S>             <C>                      <C>                <C>
                $2,816                   $634               $2,182
</TABLE>

8. DEPOSITS

             The following is a summary of deposits (in thousands) as of
December 31:

<TABLE>
<CAPTION>
                                                                            2005                               2004
                                                              -------------------------------      ----------------------------
                                                                                   Weighted                            Weighted
                                                                                   Average                             Average
                                                                 Amount              Rate              Amount            Rate
                                                              ------------        -----------       -------------    ----------

<S>                                                              <C>                 <C>               <C>              <C>
      N.O.W. and Money Market accounts                           $  27,065           0.89%             $ 29,384         0.85%
      Savings accounts                                              19,184           0.76                18,722         0.76
      Term certificates                                            134,825           4.04                79,661         2.78
      Checking accounts                                             17,133           0.00                13,074         0.00
                                                                ----------                             --------

                                                                  $198,207                             $140,841
                                                                  ========                             ========
</TABLE>

            A summary of certificate accounts (in thousands) by maturity as of
December 31, 2005 follows:

<TABLE>
<S>                                                                            <C>
                  Three months or less                                         $13,133
                  Three months to twelve months                                 58,738
                  Twelve months to twenty-four months                           43,119
                  Twenty-four months to thirty-six months                       11,278
                  Thirty-six months to forty-eight months                        4,948
                  Forty-eight months to sixty months                             3,609
                  Over sixty months                                                  -
                                                                              --------
                                                                              $134,825
                                                                              ========
</TABLE>

            Eligible 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 approximately $41,287,000 and $22,245,000 as of
December 31, 2005 and 2004, respectively.

            Officers' and directors' deposit accounts amounted to approximately
$1,887,000 and $2,058,000 at December 31, 2005 and 2004, respectively.

9. ADVANCES FROM FHLB

             At December 31, advances from the FHLB consisted of the following
(in thousands):

<TABLE>
<CAPTION>
                                2005                                                                   2004
   --------------------------------------------------------------           -------------------------------------------------------
                     Maturity          Interest                                               Maturity       Interest
     Amount            Date              Rate             Type                Amount            Date           Rate           Type
   -----------       ----------        --------          -------            -----------       ----------     ---------      --------
<S>                 <C>               <C>              <C>                    <C>             <C>            <C>           <C>
     $18,200         On Demand        Variable         Overnight              $30,000         On Demand      Variable      Overnight
      20,000           2006           Variable         Adjustable               6,000           2006           4.97%         Fixed
       6,000           2006            4.97%             Fixed                  3,000           2006           4.13%         Fixed
         714           2010            3.93%             Fixed                    857           2010           3.93%         Fixed
     -------                                                                  -------
     $44,914                                                                  $39,857
     =======                                                                  =======
</TABLE>


                                       50
<PAGE>

             The Bank has lines of credit with the FHLB with a total maximum
available balance of $66,807,000. As of December 31, 2005, $21,893,000 was
available to be drawn against the lines of credit.

             Wholly owned first mortgage loans on 1 - 4 family and multifamily
dwelling units, commercial real estate loans, and second mortgages and home
equity lines of credit with unpaid principal balances of approximately
$174,089,000 were pledged to the FHLB as collateral on advances as of December
31, 2005.

             The Bank has an unsecured line of credit with the Community Bankers
Bank with a total maximum available balance of $5,000,000. As of December 31,
2005 the entire $5,000,000 was available to be drawn against the line of credit.

10. INCOME TAXES

             Income tax expense (in thousands) for the years ended December 31
consists of:

<TABLE>
<CAPTION>
                                                                                          2005                  2004
                                                                                       ----------            ----------
<S>                                                                                       <C>                  <C>
             Current income taxes:
                Federal                                                                   $ 1,335              $   958
                State                                                                         288                  291
                                                                                          -------              -------
                                                                                            1,623                1,249
                                                                                          -------              -------
             Deferred income taxes:
                Federal                                                                      (351)                (244)
                State                                                                         (79)                 (57)
                                                                                          -------              -------
                                                                                             (430)                (301)
                                                                                          -------              -------

                     Total income tax expense                                             $ 1,193              $   948
                                                                                          =======              =======
</TABLE>

             The tax effects (in thousands) 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>
                                                                                                2005            2004
                                                                                             ----------      ----------

<S>                                                                                            <C>             <C>
             Deferred tax assets:
                Deferred loan origination fees                                                 $   322         $   255
                Loan loss allowance                                                                671             459
                Deferred compensation                                                              492             244
                Net unrealized loss on available-for-sale securities                                17               4
                State net operating loss carry-forwards                                             53              52
                Other                                                                               64              48
                                                                                               -------         -------
                     Total gross deferred tax assets                                             1,619           1,062
                                                                                               -------         -------

             Deferred tax liabilities:
                FHLB stock dividends                                                                28              28
                Mortgage servicing rights                                                           59              55
                Carrying value in excess of tax basis of goodwill                                  217             143
                Tax accumulated depreciation in excess of book                                     221             186
                                                                                               -------         -------
                          Total gross deferred tax liabilities                                     525             412
                                                                                               -------         -------

             Net deferred tax assets before valuation allowance                                  1,094             650
             Valuation allowance                                                                   (53)            (52)
                                                                                               -------         -------
             Net deferred tax assets                                                           $ 1,041         $   598
                                                                                               =======         =======
</TABLE>



                                       51
<PAGE>

             At December 31, 2005 and 2004, the Company had state net operating
loss carry-forwards of approximately $1,038,000 and $1,038,000, respectively,
which, due to the uncertainty of realization, have a full valuation allowance
established. The loss carry-forwards begin to expire in 2009.

             A two year reconcilement of the difference between the statutory
federal income tax rate and the effective tax rate for the Company is as
follows:

<TABLE>
<CAPTION>
                                                                                                  2004             2003
                                                                                                 ------           ------

<S>                                                                                              <C>               <C>
             Federal income tax rate                                                             34.0%             34.0%
                Increase (decrease) resulting from:
                  State income taxes, net of federal
                     income tax benefit                                                           4.5               4.5
                  Other                                                                          (1.8)             (0.3)
                                                                                                 ----              ----

             Effective tax rate                                                                  36.7%             38.2%
                                                                                                 ====              ====
</TABLE>

11. STOCKHOLDERS' EQUITY

             The Company 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. During the year ended December 31, 2005, there were 4,561 shares issued
under the plan.

             In December 2005, the Company completed a private placement of
129,467 shares of newly issued common stock, par value $0.01 per share, at a
price per share of $14.40, for net proceeds of $1,841,468. All purchasers were
directors or executive officers of Cecil Bancorp and Cecil Federal Bank or other
accredited investors as defined in Regulation D issued under the Securities Act
of 1933. The stock issued in the private placement comprised 7.32% of
outstanding shares after issuance. The placement was not underwritten. Costs
were less than 1.5% of the gross proceeds.

12. REGULATORY MATTERS

             The Company 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 Company'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.

             Quantitative measures established by regulation to ensure capital
adequacy require the Company 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, 2005 and 2004, the
capital levels of the Company and the Bank substantially exceed all capital
adequacy requirements to which they are subject. There are no subsequent
conditions or events that management believes have changed the Company's or the
Bank's category. The Company's and the Bank's actual capital amounts and ratios
are also presented in the table below.


                                       52
<PAGE>

<TABLE>
<CAPTION>
                                                                               To Be Well
                                                                            Capitalized Under
                                                                            Prompt Corrective                  For Capital
                                                Actual                      Action Provisions               Adequacy Purposes
                                          ------------------               -------------------              -------------------
                                          Amount       Ratio               Amount        Ratio              Amount        Ratio
                                          ------       -----               ------        -----              ------        -----
                                            (in thousands)                   (in thousands)                   (in thousands)
<S>                                          <C>        <C>                   <C>          <C>                  <C>           <C>
As of December 31, 2005:

   Total risk-based capital
      (to risk-weighted assets)
        Consolidated                        $21,295    10.31%                    N/A         N/A              $16,530        8.00%
        The Bank                             20,995    10.05                  20,896       10.00               16,716        8.00
   Tier I capital
      (to risk-weighted assets)
        Consolidated                         19,557     9.46                     N/A         N/A                8,265        4.00
        The Bank                             19,257     9.22                  12,537        6.00                8,358        4.00
   Tier I capital
      (to adjusted total assets)
        Consolidated                         19,557     7.63                     N/A         N/A               10,251        4.00
        The Bank                             19,257     7.51                  12,814        5.00               10,251        4.00

As of December 31, 2004:

   Total risk-based capital
      (to risk-weighted assets)
        Consolidated                        $16,589    10.16%                    N/A         N/A              $13,057        8.00%
        The Bank                             16,465     9.95                  16,548       10.00               13,239        8.00
   Tier I capital
      (to risk-weighted assets)
        Consolidated                         15,400     9.44                     N/A         N/A                6,529        4.00
        The Bank                             15,276     9.23                   9,929        6.00                6,619        4.00
   Tier I capital
      (to adjusted total assets)
       Consolidated                          15,400     8.04                     N/A         N/A                7,664        4.00
        The Bank                             15,276     7.97                   9,580        5.00                7,664        4.00
</TABLE>

13. 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 Company 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 Company.
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 loan was repaid in annual installments of $38,508 plus
interest at prime plus 1% over a ten-year period. Payments began on December 31,
1995. As of December 31, 2004, the loan had been paid in full, and thus the
related liability and reduction in stockholders' equity have been eliminated.

                The Company accounts for its ESOP in accordance with Statement
of Position 93-6. Accordingly, the debt of the ESOP was recorded as debt and
shares pledged as collateral were reported as unearned ESOP shares, a reduction
of stockholders' equity. As shares were released from collateral, the Bank
recorded compensation expense in an amount equal to the fair value of the
shares, and the shares became outstanding for earnings per share computations.
All shares were released from collateral as of December 31, 2004, as the loan
balance has been paid in full. 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.
There was not any ESOP compensation expense recorded in 2005. ESOP compensation
expense was $109,000 in 2004.


                                       53
<PAGE>

           Stock-Based Compensation Plans

                In 1995, the Company 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 Company in a manner designed to encourage such employees to
remain with the Company. Compensation expense in connection with the MRP was
zero and $4,000 for the years ended December 31, 2005 and 2004, respectively.

                The Company 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 Company 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 115,676
shares of unissued common stock are reserved for issuance pursuant to incentive
stock options.

                The Company's 1995 Stock Option Plan has authorized the grant of
options to management personnel for up to 96,442 shares of the Company's common
stock. All options granted have 10 year terms and vest over a period of 5 years.

                The Company's stock options have been adjusted to give
retroactive effect to the 1% stock dividend approved by the Board of Directors
on December 20, 2005.


                                       54
<PAGE>




                A summary of the Company's stock option activity, and related
information for the years ended December 31 is as follows:

<TABLE>
<CAPTION>
                                                                         2005                                      2004
                                                               -------------------------                ----------------------------
                                                                             Weighted-                                   Weighted-
                                                                              Average                                     Average
                                                               Shares     Exercise Price                 Shares       Exercise Price
                                                               ------     --------------                 ------       --------------

<S>                                                             <C>             <C>                       <C>                 <C>
           Outstanding at beginning of year                     9,977           $10.85                    33,084              $7.07
           Granted                                                  -                -                         -                  -
           Exercised                                                -                -                   (23,107)              5.45
                                                                -----                                    -------

           Outstanding at end of year                           9,977           $10.85                     9,977             $10.85
                                                                =====           ======                     =====             ======

           Options exercisable at year end                      9,977           $10.85                     9,977             $10.85
                                                                =====           ======                     =====             ======
</TABLE>






                The following table summarizes information about stock options
outstanding at December 31, 2005:

                                          Options Outstanding and Exercisable
                                        ---------------------------------------
                                                                      Remaining
                 Exercise                  Number                       Life
                  Price                 Outstanding                    (Years)
                -----------             -----------                  -----------

                   5.45                    2,196                        0.7
                  12.38                    7,781                        3.3

                No stock options were granted in the years ended December 31,
2005 and 2004.

                As of December 31, 2005, all of the Company's outstanding stock
options were considered to be in the money.

                The Company had 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 Company accrued the
liability over the service period for each participating director. All
participating directors are now receiving fixed payments from the liability
accrued in accordance with the Plan. The Plan has been frozen and there are not
any current directors covered by the Plan, thus there is no compensation cost to
the Company for the years ended December 31, 2005 and 2004.

           Deferred Compensation

                The Bank has entered into deferred compensation agreements with
some of its executive officers. Under the agreements, the Bank is obligated to
provide annual benefits for the officers or their beneficiaries, after the
officer's death, disability, or retirement. The estimated present value of the
service cost 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
estimated present value of the interest cost to be paid is being accrued over
the expected life of the participants based on current life expectancy tables.
The expense incurred for this plan for the years ended December 31, 2005 and
2004 was $662,000 and $386,000, respectively. The Bank is the beneficiary of
life insurance policies, with an aggregate cash surrender value of $5,030,000
and $4,137,000 at December 31, 2005 and 2004, respectively, that were purchased
as a method of partially financing the benefits under this plan.


                                       55
<PAGE>

14. PROFIT SHARING PLAN

                The Bank 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 Bank 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 Bank may also make a discretionary
profit sharing contribution to the Plan as determined by the Board of Directors.
For the years ended December 31, 2005 and 2004, the Bank's expense related to
the Plan was $156,000 and $121,000, respectively.



15. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

                In the normal course of business, the Bank 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
Bank's clients. The associated credit risk is controlled by subjecting such
activity to the same credit and quality controls that exist for the Bank'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 Bank. 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 approximately $32,917,000 at December 31,
2005, and $21,998,000 at December 31, 2004. These commitments are contingent
upon continuing customer compliance with the terms of the agreement.

                Unused portions of home equity lines at year-end amounted to
approximately $2,171,000 in 2005 and $2,287,000 in 2004. The Bank's home equity
line accounts are secured by the borrower's residence.

                Irrevocable letters of credit, totaling $11,197,000 at December
31, 2005 and $11,731,000 at December 31, 2004, 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.

16. EARNINGS PER SHARE

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


                                       56
<PAGE>

                Earnings per share calculations have been adjusted to give
retroactive effect to the 1% stock dividend approved by the Board of Directors
on December 20, 2005.

                The calculation of net income per common share for the years
ended December 31 is as follows:

<TABLE>
<CAPTION>
                                                                                             2005                     2004
                                                                                           ---------               ---------
<S>                                                                                        <C>                     <C>
BASIC:
      Net income available to common stockholders                                          $2,062,000              $1,532,000
                                                                                           ==========              ==========
      Average common shares outstanding                                                     1,658,231               1,633,001
                                                                                           ==========              ==========
           Basic net income per share                                                      $     1.24              $     0.94
                                                                                           ==========              ==========

DILUTED:
      Net income available to common stockholders                                          $2,062,000              $1,532,000
                                                                                           ==========              ==========

      Average common shares outstanding                                                     1,658,231               1,633,001
      Stock option adjustment                                                                   3,866                   3,090
                                                                                           ----------              ----------

      Average common shares outstanding - diluted                                           1,662,097               1,636,091
                                                                                           ==========              ==========
           Diluted net income per share                                                    $     1.24              $     0.94
                                                                                           ==========              ==========
</TABLE>


17. FAIR VALUE OF FINANCIAL INSTRUMENTS

                SFAS No. 107 Disclosure About Fair Value of Financial
Instruments requires that the Company 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 Company'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 approximate their carrying values.

                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.

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

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


                                       57
<PAGE>

                Deposits - The fair values of deposits are estimated using a
                discounted cash flow calculation, adjusted for estimated decay
                rates, that applies interest rates currently offered for funding
                sources with similar maturities. Assumptions regarding discount
                rates and decay estimates are judgmentally determined by using
                available market information.

                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 Company charges fees for
                commitments to extend credit. Interest rates on loans for which
                these commitments are extended are normally committed for
                periods of less than one month. Fees charged on standby letters
                of credit and other financial guarantees are deemed to be
                immaterial and these guarantees are expected to be settled at
                face amount or expire unused. It is impractical to assign any
                fair value to these commitments.



                The estimated fair values of financial instruments (in
thousands) at December 31, 2005 are as follows:

<TABLE>
<CAPTION>
                                                                                                                Estimated
                                                                                             Carrying             Fair
                                                                                               Value              Value
                                                                                          --------------      -------------

<S>                                                                                         <C>                  <C>
           Financial assets:
             Cash and cash equivalents                                                      $  5,695             $  5,695
             Investment securities:
                Available-for-sale                                                             2,187                2,187
                Held-to-maturity                                                               3,735                3,735
             Loans                                                                           235,045              241,442
             Restricted investment securities                                                  2,607                2,607
             Accrued interest receivable                                                       1,146                1,146
           Financial liabilities:
             Deposits                                                                        198,207              193,304
             Advances from FHLB                                                               44,914               44,916
</TABLE>


                                       58
<PAGE>




           The estimated fair values of financial instruments (in thousands) at
December 31, 2004 are as follows:

<TABLE>
<CAPTION>
                                                                                                                Estimated
                                                                                             Carrying             Fair
                                                                                               Value              Value
                                                                                          --------------      -------------

<S>                                                                                         <C>                  <C>
           Financial assets:
             Cash and cash equivalents                                                      $  4,234             $  4,234
             Investment securities:
                Available-for-sale                                                             2,183                2,183
                Held-to-maturity                                                               3,491                3,490
             Loans                                                                           174,979              176,164
             Restricted investment securities                                                  2,278                2,278
             Accrued interest receivable                                                         755                  755
           Financial liabilities:
             Deposits                                                                        140,841              137,729
             Advances from FHLB                                                               39,857               39,868
</TABLE>






















                                       59
<PAGE>




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

             The following condensed balance sheets (in thousands) as of
December 31, 2005 and 2004 and condensed statements of income and cash flows (in
thousands) for the years then ended for Cecil Bancorp, Inc. should be read in
conjunction with the consolidated financial statements and notes thereto.


                                 BALANCE SHEETS



<TABLE>
<CAPTION>
                                                           ASSETS

                                                                                            2005                       2004
                                                                                        -------------             --------------

<S>                                                                                          <C>                       <C>
       Cash                                                                                  $    304                  $     65
       Investment in subsidiary bank                                                           21,642                    18,192
       Other assets                                                                                11                        59
                                                                                             --------                  --------

             Total assets                                                                    $ 21,957                  $ 18,316
                                                                                             ========                  ========


                                             LIABILITIES AND STOCKHOLDERS' EQUITY

       Other liabilities                                                                     $     15                  $      -
                                                                                             --------                  --------

       Stockholders' equity:
       Common stock, $.01 par value, authorized
           4,000,000 shares, issued and outstanding
           1,768,082 shares in 2005 and
           1,634,054 shares in 2004                                                                18                        16
       Additional paid-in capital                                                              10,578                     8,377
       Retained earnings                                                                       11,372                     9,929
       Accumulated other comprehensive loss, net                                                  (26)                       (6)
                                                                                             --------                  --------

                                                                                               21,942                    18,316
                                                                                             --------                  --------

             Total liabilities and stockholders' equity                                      $ 21,957                  $ 18,316
                                                                                             ========                  ========
</TABLE>


                                       60
<PAGE>




                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                             Years Ended December 31
                                                                                              2005            2004
                                                                                             ------          ------

<S>                                                                                          <C>              <C>
       Income:
           Dividend from subsidiary bank                                                     $  100           $    -
           Equity in undistributed earnings of subsidiary bank                                1,969            1,541
                                                                                             ------           ------

                Total income                                                                  2,069            1,541
                                                                                             ------           ------

       Operating expenses:
           Compensation and benefits                                                             12               15
           Other                                                                                  6                6
                                                                                             ------           ------

                Total operating expenses                                                         18               21
                                                                                             ------           ------

       Net income before income taxes                                                         2,051            1,520

       Income tax benefit                                                                        11               12
                                                                                             ------           ------

       Net income                                                                            $2,062           $1,532
                                                                                             ======           ======
</TABLE>

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             Years Ended December 31
                                                                                             2005               2004
                                                                                            ------             ------

<S>                                                                                         <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                               $ 2,062            $ 1,532
   Adjustments to reconcile net income to net cash
     provided by operating activities:
      Equity in undistributed earnings of subsidiary                                         (1,969)            (1,541)
      Net change in other assets and other liabilities                                           62                (22)
      Distribution from Management Recognition
        Plan Trust                                                                                -                  7
                                                                                            -------            -------

             Net cash flows provided (used) by operating activities                             155                (24)
                                                                                            -------            -------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid                                                                              (336)              (324)
   ESOP compensation expense                                                                      -                 39
   Proceeds from sale of common stock                                                         1,920                 70
   Proceeds from exercise of stock options                                                        -                126
   Investment in subsidiary                                                                  (1,500)                 -
                                                                                            -------            -------

             Net cash provided (used) by financing activities                                    84                (89)
                                                                                            -------            -------

NET INCREASE (DECREASE) IN CASH                                                                 239               (113)

CASH AT BEGINNING OF PERIOD                                                                      65                178
                                                                                            -------            -------

CASH AT END OF PERIOD                                                                       $   304            $    65
                                                                                            =======            =======
</TABLE>


                                       61
<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
Officer and the 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, 2005,
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.

ITEM 8B. OTHER INFORMATION.

           None.
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.

Other Executive Officers
Following are the name, age (as of December 31, 2005) 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                       46      Executive Vice President/Chief Operating Officer of Cecil Federal
Sandra D. Feltman                   56      Sr. Vice President/Director of Lending of Cecil Federal
Thomas L. Lofland*                  53      President/Chief Executive Officer of Columbian Division
Brian L. Lockhart                   41      Vice President/Business Development Officer
R. Lee Whitehead                    28      Vice President/Chief Financial Officer
</TABLE>
-------------------
* No longer employed by the Company or Cecil Federal.


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.



                                       62
<PAGE>

THOMAS W. LOFLAND Is no longer employed by Cecil Bancorp or Cecil Federal Until
January 2006, Mr. Lofland was 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. Mr. Lofland
resigned his position with Cecil in January 2006.

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, Mr. Lockhart is a past president of the Rising Sun Business
Association, a member of the Union Hospital's Health Services Board of
Directors, a member of Mount Aviat Board of Directors, a member of Good Shepherd
Parish, and Member/Owner of Chesapeake Bay Golf Course. Brian resides in Rising
Sun, Maryland.

R. LEE WHITEHEAD is Vice President/Chief Financial Officer of Cecil Federal. Mr.
Whitehead has previously served as accounting manager since joining Cecil
Federal in April 2004 before being appointed Chief Financial Officer in May
2005. In his present capacity, Mr. Whitehead's responsibilities include the
administration of all accounting and financial reporting functions. Lee resides
in Aberdeen, 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. INDEX TO EXHIBITS
           (a)  Documents Filed as Part of this Report

           (1)  Financial Statements.
           The following financial statements are filed in Item 7 of this
           report:
                    Report of Independent Registered Public Accounting Firm
                    Consolidated Balance Sheets as of December 31, 2005 and 2004
                    Consolidated Statements of Income for the Years Ended
                    December 31, 2005 and 2004 Consolidated Statements of
                    Changes in Stockholders' Equity for the Years Ended December
                    31, 2005 and 2004
                    Consolidated Statements of Cash Flows for the Years Ended
                    December 31, 2005 and 2004
                    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.


                                       63
<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, 2003, SEC File No. 0-24926.

3.3                Articles of Incorporation of Cecil Federal Bank, Inc.       Exhibit 3.3 to Form 10-KSB for the year ended
                                                                               December 31, 2004, 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, 2004, 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, Inc., Cecil     Exhibit 10.1 to Registration Statement on Form  S-1
                   Federal Savings Bank and Mary Halsey                        (File No. 33-81374)

10.2*              Cecil Bancorp, Inc. Stock Option and Incentive Plan         Exhibit to Company's Proxy Statement for its 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 ended
                   Non-Employee Directors                                      December 31, 1994, SEC File No. 0-24926.

10.5*              Columbian Bank, a Federal Savings Bank 1994 Stock Option    Columbian Bank, a Federal saving Bank, Registration
                   and  Incentive Plan                                         Statement on Form S-B.

10.6*              Cecil Federal Bank Supplemental Executive Retirement Plan   Exhibit 10.1 to the Company's Quarterly Report on
                   covering Charles F. Sposato, Chairman; Mary B. Halsey,      Form 10-QSB for the quarterly period ending June 30,
                   President and Chief Executive Officer; and Brian J. Hale,   2004
                   Executive Vice President and Chief Operating Officer and
                   related agreements with such officers

21                 Subsidiaries
</TABLE>


                                       64
<PAGE>

<TABLE>
<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.

--------------


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 to Form 10-KSB.



                                       65
<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 24, 2006                        By: /s/ Mary B. Halsey
                                      Mary B. Halsey
                                      President and Chief Executive Officer

March 24, 2006                        By: /s/ Robert Lee Whitehead
                                      Robert Lee Whitehead
                                      Vice President and Chief Financial 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:  March 24, 2006
Mary B. Halsey
President and Chief Executive Officer
(Principal Executive Officer)

By: /s/ Robert Lee Whitehead                            Date:  March 24, 2006
Robert Lee Whitehead
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

By: /s/ Charles F. Sposato                              Date:  March 24, 2006
 Charles F. Sposato
 Chairman of the Board

By: /s/ Donald F. Angert                                Date:  March 24, 2006
 Donald F. Angert
 Director

By: /s/ Robert L. Johnson                               Date:  March 24, 2006
 Robert L. Johnson
 Director

By: /s/Matthew G. Bathon                                Date:  March 24, 2006
 Matthew G. Bathon
 Director

By: /s/ Mark W. Saunders                                Date:  March 24, 2006
 Mark W. Saunders
 Director

By: /s/ Thomas L. Vaughan, Sr.
 Thomas L. Vaughan, Sr.                                 Date: March 24, 2006
 Director


                                       66