Marco Community Bancorp 10-Q 2009 Q1 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2009

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

For the transition period from _________ to _________

Commission file number 333-103651

MARCO COMMUNITY BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

1770 San Marco Road

Marco Island, Florida 34145

(Address of Principal Executive Offices)

(239) 389-5200

(Issuer's Telephone Number, Including Area Code)

______________________________________________________

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

Since Last Report)

Check whether the registrant: (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 ý       NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	ý
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o          NO ý

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date;

Common stock, par value $.01 per share	3,222,608 shares
(class)	Outstanding at April 30, 2009

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	Page
Condensed Consolidated Balance Sheets - At March 31, 2009 (unaudited) and at December 31, 2008	2
Condensed Consolidated Statements of Operations - Three Months ended March 31, 2009 and 2008 (unaudited)	3
Condensed Consolidated Statements of Changes in Stockholders' Equity - Three Months ended March 31, 2009 and 2008 (unaudited)	4
Condensed Consolidated Statements of Cash Flows – Three Months ended March 31, 2009 and 2008 (unaudited)	5
Notes to Condensed Consolidated Financial Statements (unaudited)	6-13
Review by Independent Registered Public Accounting Firm	14
Report of Independent Registered Public Accounting Firm	15
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	16-20
Item 4T.  Controls and Procedures	21
PART II. OTHER INFORMATION
Item 1.  Legal Proceedings	22
Item 5.  Other Information	22
Item 6.  Exhibits	23
SIGNATURES	24

1

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

($ in thousands, except per share amounts)

	March 31,			December 31,
Assets	2009			2008
	(Unaudited)
Cash and due from banks	$	11,520			1,587
Federal funds sold		-			7,237
Interest-bearing deposits		604			387
Total cash and cash equivalents		12,124			9,211
Securities available for sale		7,899			-
Securities held to maturity (fair value of $8,256)		-			8,147
Loans, net of allowance for loan losses of $5,058 in 2009
and $6,154 in 2008		114,851			106,554
Other real estate owned		3,422			3,202
Premises and equipment, net		3,320			3,357
Federal Reserve Bank stock, at cost		410			452
Federal Home Loan Bank stock, at cost		262			262
Accrued interest receivable		463			413
Deferred income taxes		5,080			5,005
Other assets		220			146
Total assets	$	148,051			136,749
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits		6,984			4,353
Savings, NOW and money-market deposits		46,523			34,776
Time deposits		73,515			76,971
Total deposits		127,022			116,100
Repurchase agreements		494			931
Official checks		983			332
Dividends payable		77			120
Accrued interest payable and other liabilities		655			651
Total liabilities		129,231			118,134
Stockholders' equity:
Preferred stock, no par value; 1,000,000 shares authorized,
298 shares outstanding		-			-
Preferred stock, series B, $51,000 liquidation value; 125 shares
authorized, 96 shares outstanding		4,896			4,896
Preferred stock, series C, $7,500 liquidation value, 750 shares
authorized, 202 shares outstanding		1,058			734
Common stock, $.01 par value; 9,000,000 shares authorized,
3,222,608 shares issued and outstanding in 2009 and 2008		32			32
Additional paid-in capital		21,031			21,024
Accumulated deficit		(8,280	)		(8,071	)
Accumulated other comprehensive income		83			-
Total stockholders' equity		18,820			18,615
Total liabilities and stockholders' equity	$	148,051			136,749

See Accompanying Notes to Condensed Consolidated Financial Statements.

2

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	March 31,
	2009			2008
Interest income:
Loans	$	1,585			2,016
Securities		93			86
Other interest-earning assets		7			147
Total interest income		1,685			2,249
Interest expense:
Deposits		815			1,267
Other borrowings		3			10
Total interest expense		818			1,277
Net interest income		867			972
Provision for loan losses		130			100
Net interest income after provision for loan losses		737			872
Noninterest income:
Service charges on deposit accounts		7			6
Gain on sale of securities		78			-
Other service charges and fees		44			41
Total noninterest income		129			47
Noninterest expenses:
Salaries and employee benefits		488			659
Occupancy and equipment		124			159
Advertising		22			42
Insurance		11			24
Data processing		75			67
Telephone		19			19
Regulatory assessments		158			98
Professional fees		107			111
Stationary and supplies		10			10
Other real estate owned		33			43
Loss on sale of other real estate owned		47			-
Other		106			140
Total noninterest expenses		1,200			1,372
Loss before income taxes		(334	)		(453	)
Income tax benefit		(125	)		(171	)
Net loss		(209	)		(282	)
Dividends on preferred stock		96			69
Net loss available to common stockholders	$	(305	)		(351	)
Net loss per common share, basic and diluted	$	(0.09	)		(0.11	)
Weighted-average number of common shares outstanding, basic and diluted		3,223			3,222

See Accompanying Notes to Condensed Consolidated Financial Statements.

3

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity

Three Months Ended March 31, 2009 and 2008

($ in thousands)

													Accumulated
													Other
	Series B		Series C				Additional						Compre-			Total
	Preferred		Preferred		Common		Paid-In			Accumulated			hensive			Stockholders'
	Stock		Stock		Stock		Capital			Deficit			Income			Equity
Balance at December 31, 2007	$	4,896		-		32		20,874			(2,993	)		9			22,818
Comprehensive loss:
Net loss (unaudited)		-		-		-		-			(282	)		-			(282	)
Net change in unrealized gain
on security available for
sale, net of tax effect
(unaudited)		-		-		-		-			-			1			1
Comprehensive loss
(unaudited)																	(281	)
Dividends declared-preferred (unaudited)		-		-		-		(69	)		-			-			(69	)
Balance at March 31, 2008 (unaudited)	$	4,896		-		32		20,805			(3,275	)		10			22,468
Balance at December 31, 2008	$	4,896		734		32		21,024			(8,071	)		-			18,615
Comprehensive loss:
Net loss (unaudited)		-		-		-		(209	)		-			(209	)
Net change in unrealized gain
on security available for
sale, net of tax effect
(unaudited)		-		-		-		-			-			83			83
Comprehensive loss
(unaudited)																	(126	)
Issuance of preferred stock (unaudited)		-		324		-		103			-			-			427
Dividends declared-preferred (unaudited)		-				-		(96	)		-			-			(96	)
Balance at March 31, 2009 (unaudited)	$	4,896		1,058		32		21,031			(8,280	)		83			18,820

See Accompanying Notes to Condensed Consolidated Financial Statements.

4

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2009			2008
Cash flows from operating activities:
Net loss	$	(209	)		(282	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation		52			73
Provision for loan losses		130			100
Deferred income taxes		(125	)		402
Amortization of loan fees and costs, net		(17	)		(4	)
Gain on sale of securities available for sale		(78	)		-
(Increase) decrease in accrued interest receivable		(50	)		65
(Increase) decrease in other assets		(74	)		14
Loss on sale of other real estate owned		47			-
Increase in official checks, accrued interest payable and
other liabilities		655			1,141
Net cash provided by operating activities		331			1,509
Cash flows from investing activities:
Purchase of securities available for sale		(5,186	)		-
Proceeds from sale of securities available for sale		5,359			-
Principal payments securities available for sale		286			-
Principal payments security held to maturity		-			182
Redemption of Federal Home Loan Bank stock		-			31
Purchase of Federal Reserve Bank stock		-			(39	)
Redemption of Federal Reserve Bank stock		42			-
Net (increase) decrease in loans		(9,146	)		6,804
Proceeds from sale of other real estate owned		469			-
Purchase of premises and equipment		(15	)		(16	)
Net cash (used in) provided by investing activities		(8,191	)		6,962
Cash flows from financing activities:
Net increase in deposits		10,922			13,107
Net decrease in repurchase agreements		(437	)		(844	)
Net proceeds from issuance of preferred stock		427			-
Preferred dividends paid		(139	)		(81	)
Net cash provided by financing activities		10,773			12,182
Net increase in cash and cash equivalents		2,913			20,653
Cash and cash equivalents at beginning of period		9,211			11,174
Cash and cash equivalents at end of period	$	12,124			31,827
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest	$	968			1,214
Income taxes	$	-			(574	)
Noncash transactions:
Preferred dividends payable at beginning of period	$	120			35
Preferred dividends payable at end of period	$	77			23
Transfer of loans to other real estate owned	$	736			17
Transfer of securities held to maturity to available for sale	$	8,147			-
Net change in unrealized gain on security available for sale,
net of tax effect	$	83			1

See Accompanying Notes to Condensed Consolidated Financial Statements.

5

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.         Description of Business and Basis of Presentation

General. Marco Community Bancorp, Inc. (the "Holding Company") which was incorporated on January 28, 2003 owns 100% of the outstanding common stock of Marco Community Bank (the "Bank") and Commercial Lending Capital Corp. ("CLCC") (collectively the "Company").   The Holding Company's only business activity is the operation of the Bank and CLCC.  The Bank is a state (Florida) chartered commercial bank. The Bank offers a variety of community banking services to individual and corporate customers through its banking office located in Marco Island, Florida. The deposits of the Bank are insured up to the applicable limits by the Federal Deposit Insurance Corporation. CLCC was incorporated to provide commercial loans to customers that would otherwise seek financing elsewhere because of credit limit constraints.  Effective December 31, 2008, CLCC's operations were suspended due to economic conditions.

In the opinion of the management, the accompanying condensed consolidated financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at March 31, 2009 and the results of operations and cash flows for the three-month periods ended March 31, 2009 and 2008. The results of operations and other data for the three- month period ended March 31, 2009 are not necessarily indicative of results that may be expected for the year ending December 31, 2009.

2.        Loan Impairment and Loan Losses

Impaired collateral dependent loans were as follows (in thousands):

	Three Months Ended
	March 31,
	2009		2008
Balance at end of period	$	9,191		10,996
Total related allowance for losses	$	2,503		1,498
Average investment in impaired loans	$	8,629		10,580
Interest income recognized on impaired loans	$	-		-
Interest income received on impaired loans	$	-		-

(continued)

6

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

2.         Loan Impairment and Loan Losses, Continued

The activity in the allowance for loan losses follows (in thousands):

	Three Months Ended
	March 31,
	2009			2008
Beginning balance	$	6,154			3,794
Recoveries		72			-
Charge-offs		(1,298	)		(135	)
Provision for loan losses		130			100
Ending balance	$	5,058			3,759

3.         Non-Performing Assets

Non-performing loans include non-accrual loans and restructured loans.  Non-accrual loans represent loans of which interest accruals have been discontinued.  Restructured loans are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress.

The Company discontinues interest accruals when principal or interest is due and has remained unpaid for ninety days.  When a loan is placed on non-accrual status, all unpaid interest is reversed.  Non-accrual loans may not be restored to accrual status until all delinquent principal and interest has been paid.  At March 31, 2009 and 2008, the Company had no loans which were over ninety days past due and still accruing interest.

Non-performing loans are closely monitored on an ongoing basis as part of the Company's loan review and work-out process.  The potential risk of loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral or the present value of projected future cash flows.  Losses are recognized where appropriate.

Following is a summary of non-performing assets (in thousands):

	March 31,		March 31,
	2009		2008
Non-accrual loans	$	9,981		12,159
Restructured loans		1,099		-
Total non-performing loans		11,080		12,159
Other real estate owned		3,422		2,874
Total non-performing assets	$	14,502		15,033

(continued)

7

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

3.         Non-Performing Assets, Continued

Asset quality ratios:

	March 31,			March 31,
	2009			2008
Non-performing loans as a percent of total loans		9.24	%		10.42	%
Non-performing assets as a percent of total assets		9.80	%		9.25	%

The $1.1million decrease in non-performing loans results primarily from a $1.2 million charge-off of certain previously purchased loan pools which financed the acquisition and renovation of residential real estate properties located in Duval and Hillsborough Counties, Florida.  Due to the inability of the loans’ servicer to perform in accordance with its servicing agreements, the management of the Bank had previously concluded that the pool loans were to be considered impaired.  Since then, the Bank has acted aggressively to mitigate its residual exposure through the sales of individual loans within these pools or through foreclosure and subsequent disposal of the properties.

4.        Other Real Estate Owned

Other real estate owned ("OREO") is comprised of real estate properties obtained in partial or total satisfaction of loan obligations.  At March 31, 2009 OREO totaled $3.4 million which was comprised of twenty-four residential real estate lots obtained from the loan pools held for an average of two months, eight residential real estate lots held for an average of seventeen months, six residential properties held for an average of nine months and one commercial property held for an average of one month and recorded at estimated fair value less estimated selling costs.  Changes in the value subsequent to transfer are recorded in non-interest expense along with direct operating expenses.  Gains or losses not previously recognized resulting from the sale of OREO is recognized in non-interest expense on the date of sale.  During the three months ended March 31, 2009, the Company, recorded $470,000 in proceeds from the sale of three residential properties which resulted in a $47,000 loss.  The Company also recorded $33,000 in expenses to refurbish or maintain the properties held.

At the time of booking OREO, the Bank orders a current appraisal and books OREO at the lower of the carrying value or the fair market value less the cost to sell.  OREO is actively marketed by professional real estate individuals in an attempt to sell parcels at their current market value.  The Company is exposed to the weakening real estate conditions in the Florida markets including Orlando, Naples, Fort Myers and Tampa.  With the general economic downturn, the Company may not be able to sell its OREO property at the current market value and may experience an increase in OREO.

5.         Loss Per Common Share

Loss per share of common stock has been computed on the basis of the weighted-average number of shares of common stock outstanding. Outstanding stock options and convertible preferred stock are not considered dilutive securities for the three months ended March 31, 2009 and 2008 due to the net losses incurred by the Company.

(continued)

8

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

6.         Regulatory Capital

The Bank is required to maintain certain minimum regulatory capital requirements.  The following is a summary at March 31, 2009 of the regulatory capital requirements for a well capitalized financial institution and the Bank's actual capital on a percentage basis:

				Regulatory
	Actual			Requirement
Total capital to risk-weighted assets		12.25	%		10.00	%
Tier I capital to risk-weighted assets		10.96	%		6.00	%
Tier I capital to total assets - leverage ratio		8.72	%		5.00	%

7.         Share-Based Compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment ("SFAS 123(R)"), using the modified-prospective-transition method.  Under that transition method, compensation cost recognized includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value calculated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R).  The directors advisory stock option plan is being expensed over the vesting period based on the fair value of the option on the date the options become fully vested.  The Company recognizes stock-based compensation expense in salaries and employee benefits in the accompanying consolidated statements of operations on an accelerated basis over the vesting period.

In 2004, the Company adopted three stock option plans.  The Employees' Stock Option Plan is for the benefit of officers and other key employees of the Holding Company, the Bank and CLCC.  Stock options are granted at an exercise price equal to or greater than the fair market value of the common stock on the date of grant.  These options have ten year terms and vest 20% a year over a five year period.

The Directors' Stock Option Plan is for the benefit of directors of the Holding Company, the Bank and CLCC.  Stock options are granted at an exercise price equal to or greater than the fair market value of the common stock on the date of grant.  These options have ten year terms and have various vesting schedules.

The Advisory Directors' Stock Option Plan is for the benefit of advisory directors of the Company.  Stock options are granted at an exercise price equal to or greater than the fair market value of the common stock on the date of grant.  These options have six year terms and begin vesting one year after the date of grant at 25% a year over a four year period.

(continued)

9

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

7.         Share-Based Compensation, Continued

The plans were amended in 2007 to increase the size of the three Company plans so that the number of shares of common stock reserved for issuance under all three Company plans is a collective amount equal to 15% of the common stock outstanding, up to a maximum of 1,500,000 shares.  At March 31, 2009, an aggregate of 53,242 options remain available for grant in all three plans.

A summary of the plans is as follows (in thousands, except for share and per share information):

				Weighted-		Weighted-
				Average Per		Average
	Number			Share		Remaining		Aggregate
	of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
The Employees' Plan:
Options outstanding at December 31, 2008		219,750		$	6.01
Options granted		15,000			2.54
Options forfeited		(46,750	)		8.28
Options outstanding at March 31, 2009		188,000		$	5.17		8.93	$	71
Options exercisable at March 31, 2009		27,350		$	4.56		6.79	$	-
The Directors' Plan:
Options outstanding at December 31, 2008		90,000			7.12
Options granted		7,500			4.00
Options forfeited		(11,250	)		6.00
Options outstanding at March 31, 2009		86,250		$	6.99		7.45	$	1
Options exercisable at March 31, 2009		39,000		$	6.77		5.27	$	-
The Advisory Directors' Plan:
Options outstanding at December 31, 2008		20,814			8.57
Options granted		1,500			4.25
Options outstanding at March 31, 2009		22,314		$	8.28		.52	$	1
Options exercisable at March 31, 2009		14,245		$	7.08		.50	$	-

There were no options exercised during the three months ended March 31, 2009 and 2008.  At March 31, 2009, there was $367,000 of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the plans.  The cost is expected to be recognized over a period of five years.  Due to the effect of forfeited options, there was no compensation expense recognized during the three month period ended March 31, 2009 or 2008.

 (continued)

10

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

7. Share-Based Compensation, Continued

The fair value of each option granted for the three months ended March 31, 2009 and 2008 is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions ($ in thousands):

	Three Months Ended
	March 31,
	2009			2008
Weighted-average risk-free
interest rate		2.86	%		3.39	%
Weighted-average dividend yield		-	%		-	%
Weighted-average expected
stock volatility		24.33	%		70.64	%
Expected life in years	6.5 years			6.5 years
Per share weighted-average grant-date fair value of
options issued during the period	$	1.26			1.76

As part of its adoption of SFAS 123(R), the Company examined its historical pattern of option exercises in an effort to determine if there were any pattern based on certain employee populations.  From this analysis, the Company could not identify any patterns in the exercise of options.  As such, the Company used the guidance in Staff Accounting Bulletin No. 107 to determine the estimated life of options issued subsequent to the adoption of SFAS 123(R).  Expected volatility is based on historical volatility of the Company's stock.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.  The dividend yield assumption is based on the Company's history and expectation of dividend payments.

8.         Fair Value Measurements

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements for financial assets and liabilities.  This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.  This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements.  This standard does not apply to measurements related to share-based payments.

SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The following is a brief description of those three levels:

- Level 1:  Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

(continued)

11

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

8.         Fair Value Measurements, Continued

- Level 2:  Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities that are not active.  Such inputs may include interest rates and yield curves, volatilities, prepayment speeds, credit risks, and default rates.

- Level 3:  Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

Valuation of Available for Sale Securities. The value of the security available for sale is determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific security but rather by relying on the security's relationship to the other benchmark quoted security.  Accordingly, the fair value estimate for the available for sale security is classified as Level 2.

Valuation of Impaired Loans. A loan is considered impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement.  The Company's impaired loans are normally collateral dependent and, as such, are carried at the lower of the Company's net recorded investment in the loan or the estimated fair value of the collateral less estimated selling costs. Adjustments to the recorded investment are made through specific valuation allowances that are recorded as part of the overall allowance for loan losses.  Estimates of fair value are determined based on a variety of information, including the use of available appraisals, estimates of the market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company's management related to values of properties in the Company's market areas.  These officers take into consideration the type and location of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value.  Accordingly, the fair value estimates for impaired loans is classified as Level 3.

Valuation of Other Real Estate Owned. Other real estate owned represents real estate acquired by the Company as a result of foreclosure or by deed in lieu of foreclosure and is carried, net of any allowance for losses if any, at the lower of cost or estimated fair value less estimated selling costs.  Fair value is estimated in the same manner as impaired loans and, as such, is also classified as Level 3.  As these properties are actively marketed, estimated fair value may be periodically adjusted through an allowance for losses to reflect changes in values resulting from changing market conditions.

(continued)

12

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

8.         Fair Value Measurements, Continued

Our listing of assets subject to fair value measurements on a recurring basis are as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active		Significant
	Fair Value		Markets for		Other		Significant
	as of		Identical		Observable		Unobservable
	March 31,		Assets		Inputs		Inputs
	2009		(Level 1)		(Level 2)		(Level 3)
Available for sale securities	$	7,899		-		7,899		-

Assets measured at fair value on a non-recurring basis are summarized below (in thousands):

	Net Carrying Value at March 31, 2009										Losses
											Recorded
											in Earnings
									Total		During
	Total		Level 1		Level 2		Level 3		Losses		2009
Impaired loans (1)	$	3,306		-		-		3,306		624		350
Other real estate owned	$	3,422		-		-		3,422		-		-

(1) In addition, loans with a carrying value of $3.4 million were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

9.         Preferred Stock

On February 28, 2009, Marco Community Bancorp, Inc. (the "Company") completed an offering of its Series C Preferred Stock ("Preferred Stock") and warrants to purchase 290,000 shares of common stock ("Warrants") by issuing 202 shares of the Preferred Stock and Warrants (the "Units").  These warrants have an exercise price of $3.75, $4.50 and $5.25 on or before December 31, 2009, 2010 and 2011, respectively.  The offering raised $1,515,000 in gross proceeds, at an offering price of $7,500 per Unit.  Directors of the Company and/or its subsidiaries purchased in excess of 53% of the shares sold.

In 2007, the Company issued ninety-six shares of Series B Preferred Stock ("Preferred Stock"). The shares have no voting rights, but have a liquidation preference value of $51,000 per share.  Cash dividends are payable in arrears within the first ten days of each March and September.  The dividends are not cumulative, are payable semiannually at an annual rate of $2,900 and are prorated for any partial period.  At the Company's discretion, on any dividend payment date occurring at least two years after issuance, each share of Preferred Stock is mandatorily convertible into 6,000 shares of common stock; provided, however, that the Company may also convert the Preferred Stock upon any change in control.

13

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith PA, the Company's independent registered public accounting firm, have made a limited review of the financial data as of March 31, 2009, and for the three-month periods ended March 31, 2009 and 2008 presented in this document, in accordance with standards established by the Public Company Accounting Oversight Board.

Their report furnished pursuant to Article 10 of Regulation S-X is included herein. 

14

Report of Independent Registered Public Accounting Firm

Marco Community Bancorp, Inc.

Marco Island, Florida:

We have reviewed the accompanying interim condensed consolidated balance sheet of Marco Community Bancorp, Inc. and Subsidiaries (the "Company") as of March 31, 2009 and the related interim condensed consolidated statements of operations, changes in stockholders' equity and cash flows for the three-month periods ended March 31, 2009 and 2008. These interim condensed financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet of the Company as of December 31, 2008, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated March 26, 2009, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Hacker, Johnson & Smith PA

HACKER, JOHNSON & SMITH PA

Tampa, Florida

May 1, 2009

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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations

Comparison of March 31, 2009 and December 31, 2008

General

Marco Community Bancorp, Inc. (the "Holding Company"), which was incorporated on January 28, 2003, owns 100% of the outstanding common stock of Marco Community Bank (the "Bank") and Commercial Lending Capital Corp. ("CLCC") (collectively the "Company"). The Holding Company's only business is the ownership and operation of the Bank and CLCC.  The Bank is a Florida state-chartered commercial bank and its deposits are insured up to the applicable limits by the Federal Deposit Insurance Corporation.  CLCC was incorporated to provide commercial loans to customers that would otherwise seek financing elsewhere because of credit limit constraints.  Effective December 31, 2008, CLCC's operations were suspended due to economic conditions.

The Company is exposed to the weakening real estate conditions in the Florida markets of Naples, Fort Myers and Tampa.  The Company believes the challenging market conditions are primarily attributable to a regional softening in demand for real estate assets as well as an oversupply of residential and commercial properties, particularly within the Company's local markets.

A March 2009 report by the Regional Economic Research Institute of Florida Gulf Coast University (http://www.fgcu.edu/cob/reri/indicators/indicators200903.pdf) noted that unemployment rates for the region have continued to rise with Lee County's unemployment rate reaching 11.5 percent and Collier County reaching 8.8% in January 2009.  The report also notes that unemployment levels are expected to remain relatively high through 2010.  There are some positive indications for the regional economy in that existing home sales are continuing at higher levels reflecting more affordable price levels.

In response to the general economic down turn, the Company has focused its lending resources upon nominal loan growth, while specifically addressing any asset challenges presented by its existing loan portfolios.  Pricing of loans remains competitive with current lending initiatives focused primarily upon Marco Island opportunities.

Liquidity and Capital Resources

Liquidity

Liquidity management involves monitoring sources and uses of funds in order to meet day-to-day cash flow requirements while maximizing profits.  Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities.  Asset liquidity is provided by cash and assets which are readily marketable, which can be pledged, or which will mature in the near future.

In addition to deposits, within its geographic market place, the sources of funds available to the Banks for lending and other business purposes include loan repayments, sales of loans and securities, national market funding sources, and contributions from the Holding Company.  Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by competition, general interest rates and money market conditions.  Borrowings may be used on a short-term basis to compensate for reductions in other sources, such as deposits at less than projected levels and may be used to fund the origination of mortgage loans designated to be sold in the secondary market.

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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations, Continued

Liquidity and Capital Resources, Continued

At March 31, 2009, the Company had no outstanding borrowings from any correspondent Bank and there was $15 million in other available lines from correspondents.

Managements regularly reviews the Bank's liquidity position and has implemented internal policies that establish guidelines for sources of asset-backed liquidity and limit the total amount of purchased funds used to support the balance sheet and funding from non-core sources.

Capital

The Federal Reserve Bank and other bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%.  Under the risk-based standard, capital is classified into two tiers.  Tier 1 capital consists of common stockholders' equity, excluding the unrealized gain (loss) on available for sale securities, minus certain intangible assets.  Tier 2 capital consists of the general allowance for credit losses subject to certain limitations.  An institution's qualifying capital base for purposes of its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital.  Bank holding companies and banks are also required to maintain capital at a minimum level based on total average assets as defined by a leverage ratio.

The Bank was considered well capitalized as of March 31, 2009.  The Bank's Tier 1 Leverage ratio, Tier 1 risk-based capital ratio and Tier 2 risk-based capital ratio were 8.72%, 10.96% and 12.25%, respectively, as of March 31, 2009.

Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include unused lines of credit.  These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet.  The contract or notional amounts of those instruments reflect the extent of the Company's involvement in particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for unused lines of credit is represented by the contractual amount of those instruments.  The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations, Continued

Off-Balance Sheet Arrangements, Continued

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's credit worthiness on a case-by-case basis.  The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty.

Unused lines of credit typically result in loans with a market interest rate when funded.

A summary of the Company's financial instruments with off-balance sheet risk at March 31, 2009 follows (in thousands):

	Contract
	Amount
Unused lines of credit	$	10,944

Management believes that the Company has adequate resources to fund all of its commitments.

Selected Ratios

The following table shows selected ratios for the periods ended or at the dates indicated:

	Three Months						Three Months
	Ended			Year Ended			Ended
	March 31,			December 31,			March 31,
	2009			2008			2008
Average equity as a percentage
of average assets		13.15	%		14.36	%		14.31	%
Total equity to total assets at end of period		12.71	%		13.61	%		13.82	%
Return on average assets (1)		(0.60	)%		(3.44	)%		(0.72	)%
Return on average common stockholders
equity (1)		(10.22	)%		(32.14	)%		(7.97	)%
Noninterest expense to average assets (1)		3.45	%		4.04	%		3.49	%

_______________________________

(1)  Annualized for the three months ended March 31, 2009 and 2008.

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MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Results of Operations

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average costs; (iii) net interest/dividend income; (iv) interest-rate spread; and (v) net interest margin. Yields and costs were derived by dividing annualized income or expense by the average balance of assets or liabilities, respectively, for the periods shown.

	Three Months Ended March 31,
	2009							2008
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Cost			Balance		Dividends		Cost
	($ in thousands)
Interest-earning assets:
Loans	$	115,683		1,585		5.56	%	$	123,493		2,016		6.55	%
Investment securities		8,027		93		4.70			6,510		86		5.30
Other interest-earning assets (1)		4,051		7		0.70			17,537		147		3.36
Total interest-earning assets		127,761		1,685		5.35			147,540		2,249		6.11
Noninterest-earning assets		12,282							10,500
Total assets	$	140,043						$	158,040
Interest-bearing liabilities:
Savings		6,777		21		1.26			10,146		56		2.21
Money market and NOW deposits		33,740		116		1.39			30,069		145		1.93
Time deposits		73,743		678		3.73			88,740		1,066		4.82
Total interest-bearing deposits		114,260		815		2.89			128,955		1,267		3.94
Repurchase agreements		642		3		1.90			826		10		4.86
Total interest-bearing liabilities		114,902		818		2.89			129,781		1,277		3.95
Noninterest-bearing liabilities		6,729							5,642
Stockholders' equity		18,412							22,617
Total liabilities and stockholders' equity	$	140,043						$	158,040
Net interest income			$	867						$	972
Interest-rate spread (2)						2.46	%						2.17	%
Net interest-earning assets, net margin (3)	$	12,859				2.76	%	$	17,759				2.64	%
Ratio of interest-earning assets to
interest-bearing liabilities		1.11							1.14

_____________________

(1) Includes interest-earning deposits, federal funds sold, Federal Reserve Bank stock and Federal Home Loan Bank stock.

(2) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(3) Net interest margin is annualized net interest income divided by average interest-earning assets.

19

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Comparison of the Three-Month Periods Ended March 31, 2009 and 2008

General.  Net losses for the three months ended March 31, 2009 were $209,000 or $0.09 per basic and diluted common share compared to net losses of $282,000 or $0.11 per basic and diluted earnings per common share for the three months ended March 31, 2008.

Interest Income and Expense.  Interest income decreased to $1.7 million for the three months ended March 31, 2009 from $2.2 million for the three months ended March 31, 2008.  Interest income on loans decreased $431,000 due to lower yields in the portfolio.

Interest expense on interest-bearing deposits decreased to $818,000 for the three months ended March 31, 2009 compared to $1.3 million, for the three months ended March 31, 2008.  Interest expense on interest-bearing deposits decreased due to a decrease in the weighted interest rate paid on deposits, and a decrease in the average balance.

Provision for Loan Losses.  The provision for loan losses was $130,000 for the three months ended March 31, 2009 compared to $100,000 at March 31, 2008. The allowance for loan losses is $5.1 million at March 31, 2009. While management believes that its allowance for loan losses is adequate as of March 31, 2009, future adjustments to the Company's allowance for loan losses may be necessary if economic conditions differ substantially from the assumptions used in making the initial determination.

Noninterest Income.  Noninterest income increased to $129,000 during the three month period ended March 31, 2009 compared $47,000 for the same period in 2008.  Noninterest income increased due to the increase in gain on sale of securities.

Noninterest Expenses.  Noninterest expenses decreased to $1.2 million during the three-month period ended March 31, 2009 compared to $1.4 million for the same period in 2008.  Noninterest expense decreased primarily due to a decrease in other real estate owned expenses and a decrease in salary and occupancy expenses, somewhat offset by an increase in data processing and regulatory assessments.

Income Taxes.  The Company recorded an income tax benefit of $125,000 for the three-month period ended March 31, 2009 (an effective rate of 37.4%) compared to an income tax benefit of $171,000 for the 2008 period (an effective rate of 37.7%).

20

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Item 4T.  Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon management's evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, our Principal Executive Officer and Principal Financial Officer concluded that, subject to the limitations noted below, the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms.

(b) Changes in Internal Controls

We have made no significant changes in our internal controls over financial reporting during the quarter ended March 31, 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

(c) Limitations on the Effectiveness of Controls

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

21

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

On Thursday, August 22,2008, Marco Community Bancorp, Inc's (the "Company") wholly owned subsidiary, Marco Community Bank (the "Bank"), instituted an action (Marco Community Bank v. Atlantic Capital Associates, Inc., Florida Capital Bank N.A. and Allen C. Ewing & Co., Case No. 08-6362 CA)in the Circuit Court of the Twentieth Judicial Circuit in and for Collier County, Florida against each of Atlantic Capital Assoc., Inc. ("ACA"), Florida Capital Bank, N.A. ("FCB") and Allen C. Ewing & Co. ("Ewing" and collectively with ACA and FCB, the "Defendants").

Specifically, the Bank alleges that ACA, the loan originator, loan servicer, lender and underwriter, along with its agents, FCB and Ewing, failed to underwrite mortgage loans in conformity with their own offering documents, servicing agreements and industry standards. In addition, the Bank alleges that the Defendants also failed to perform as required under their agreements with the Bank and that all of these failures and conflicts led up to the issuance of loan pools, which were impaired securities founded on material misstatements and omissions in the offering documents, servicing agreements and other material documents delivered in connection with the purchases bythe Bank of these loan pools.

The Bank has instituted the action alleging violations of the Florida Securities and Investor Protection Act, breach of contract and negligence. The Bank is seekingto recover damages sustained, pre-judgment interest, attorney's fees and cost in connection with its purchase of more than $19 million of loan pools from the Defendants.

Item 5.  Other Information

On August 14, 2007, the Bank entered into a Written Agreement with the Federal Reserve Bank of Atlanta ("FRB") and the Florida Office of Financial Regulation ("OFR"). The purpose of the Written Agreement is for the Bank to address the FRB's and OFR's supervisory and regulatory concerns primarily related to the volume of certain loan pools which are described elsewhere in this Form 10-Q, as well as other loan quality issues. Pursuant to the Written Agreement, the Bank must take corrective actions within specified time frames, which may be extended with the consent of the FRB and the OFR although the Bank has not yet had to request any extensions.  When the FRB and OFR have determined that the Bank is in full compliance with the Written Agreement and that the issues that precipitated the Written Agreement are unlikely to occur, we expect that they will release the Bank from the Written Agreement. Failure to comply with the terms of the Written Agreement could result in the assessment of civil money penalties against the Bank and its Board of Directors. The actions to be taken include an evaluation by the Bank's Board of Directors of its current management and staffing to determine if any additional or replacement personnel are needed; the preparation and implementation of a strategic business plan and budget designed to improve the Bank's financial condition and credit risk management; a review and adoption of any necessary revisions to the Bank's loan policy and loan review/grading program; a reduction of the Bank's volume of adversely classified assets; and the continual monitoring of the Bank's allowance for loan and lease losses. In addition, the Bank may not make any loans to borrowers who previously had loans charged-off by the Bank; not because of any specific concern with the Bank, but because such provision is typically included in such written agreements as a proactive preventive measure; must prepare a plan to effectively manage the Bank's capital relative to its volume of adversely classified assets, anticipated growth and risk profile; and may not pay any dividends without regulatory consent.

22

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Item 5. Other Information, Continued

Since entering into the Written Agreement, the Company has made certain material changes to its operations. These changes include: confining its lending activities to Collier County; increasing the level of detail and analysis contained in its loan underwriting files; restructuring its loan policy and methodology for determining its allowance for loan losses; broadening marketing efforts to utilize more forms of media and to emphasize increased community involvement; cross-training employees to increase their skill sets and better serve the Company's customers; and increasing lobby hours for the convenience of customers.

Item 6. Exhibits

(a) Exhibits

The exhibits denominated with (a) were filed with the Company's Form SB-2 which was filed with the Securities and Exchange Commission on March 7, 2003, those denominated with (b) were filed with the Company's Form 10-Q which was filed with the Securities and Exchange Commission on August 14, 2007, those denominated with (c) were filed with the Company's Form 10-K which was filed with the Securities and Exchange Commission on March 19, 2008, those denominated with (d) were filed with the Company's Definitive Schedules 14-A which was filed with the Securities and Exchange Commission on March 21, 2007 and March 20, 2008 and those denominated with (e) were file with the Company's Form 10-K which was filed with the Securities and Exchange Commission on March 31, 2009.

Exhibit No.		Description of Exhibit
(a)	3.1	Articles of Incorporation of Marco Community Bancorp, Inc. as filed with the Florida Department of State
(a)	3.2	Bylaws of Marco Community Bancorp, Inc.
(e)	3.3	Articles of Amendment to the Articles of Incorporation
(e)	3.4	Articles of Amendment to the Articles of Incorporation
(a)	4.1	Specimen Common Stock Certificate
(d)	10.1	Employees' Stock Option Plan, as amended
(d)	10.2	Directors' Stock Option Plan, as amended
(d)	10.3	Advisory Directors' Stock Option Plan, as amended
(c)	10.4	Employee Severance Agreement with Paul Nidasso
(c)	10.5	Employee Severance Agreement with Anthony Iannotta
(c)	10.6	Employee Severance Agreement with David Klein
(b)	10.8	Written Agreement with the Federal Reserve Bank of Atlanta and the Florida Office of Financial Regulation
	31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act
	31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

23

MARCO COMMUNITY BANCORP, INC. AND SUBSIDIARIES

SIGNATURES

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

		MARCO COMMUNITY BANCORP, INC.
		(Registrant)
Date:	May 4, 2009	By:	/s/Richard Storm, Jr.
			Richard Storm, Jr., Principal Executive Officer
Date:	May 4, 2009	By:	/s/Thomas J. Mitchusson
			Thomas J. Mitchusson, Senior Vice President
			and Principal Financial Officer

24