Edgar Filing: FREDERICK COUNTY BANCORP INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)

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

For the Quarterly Period Ended March 31, 2012

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

For the transition period from to

Commission File Number: 000-50407

FREDERICK COUNTY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland		20-0049496
(State of other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

9 North Market Street

Frederick, Maryland 21701

(Address of registrant’s principal executive offices)

301.620.1400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date. There were 1,516,949 shares of Common Stock outstanding as of April 30, 2012.

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FREDERICK COUNTY BANCORP, INC. AND SUBSIDIARY

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PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets, March 31, 2012 and December 31, 2011	3

	Consolidated Statements of Income, Three Months Ended March 31, 2012 and 2011	4

	Consolidated Statements of Comprehensive Income, Three Months Ended March 31, 2012 and 2011	5

	Consolidated Statements of Changes in Shareholders’ Equity, Three Months Ended March 31, 2012 and 2011	6

	Consolidated Statements of Cash Flows, Three Months Ended March 31, 2012 and 2011	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

Item 4.	Controls and Procedures	36

PART II	OTHER INFORMATION	36

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

	Signatures	39

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Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

	March 31,			December 31,
(dollars in thousands)	2012			2011
	(unaudited)
ASSETS
Cash and due from banks	$	2,527		$	1,680
Federal funds sold	—			1,105
Interest-bearing deposits in other banks	30,744			24,063
Cash and cash equivalents	33,271			26,848
Investment securities available-for-sale at fair value	41,619			36,423
Restricted stock	1,510			1,510
Loans	213,295			212,315
Less: Allowance for loan losses	(3,286		)	(3,216		)
Net loans	210,009			209,099
Bank premises and equipment	6,915			6,459
Bank owned life insurance	4,641			4,601
Foreclosed properties	3,391			3,491
Other assets	3,324			3,581
Total assets	$	304,680		$	292,012

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities
Deposits:
Noninterest-bearing deposits	$	45,985		$	43,030
Interest-bearing deposits	212,984			203,457
Total deposits	258,969			246,487
Short-term borrowings	2,700			2,700
Long-term borrowings	10,000			10,000
Junior subordinated debentures	6,186			6,186
Accrued interest and other liabilities	1,116			1,182
Total liabilities	278,971			266,555

Shareholders’ Equity
Common stock, per share par value $0.01; 10,000,000 shares authorized; 1,516,949 and 1,514,314 shares issued and outstanding	15			15
Additional paid-in capital	15,673			15,621
Retained earnings	9,312			9,018
Accumulated other comprehensive income	709			803
Total shareholders’ equity	25,709			25,457
Total liabilities and shareholders’ equity	$	304,680		$	292,012

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

	Three Months Ended
(dollars in thousands, except per share amounts)	March 31, 2012		March 31, 2011
Interest income:
Interest and fees on loans	$	2,978	$	3,128
Interest and dividends on investment securities:
Interest — taxable	155		160
Interest — tax exempt	95		86
Dividends	13		12
Other interest income	15		22
Total interest income	3,256		3,408
Interest expense:
Interest on deposits	401		623
Interest on short-term borrowings	20		4
Interest on long-term borrowings	80		79
Interest on junior subordinated debentures	34		101
Total interest expense	535		807
Net interest income	2,721		2,601
Provision for loan losses	65		115
Net interest income after provision for loan losses	2,656		2,486
Noninterest income:
Securities gains	—		3
Bank owned life insurance income	40		—
Service fees	77		79
Other operating income	85		48
Total noninterest income	202		130
Noninterest expense:
Salaries and employee benefits	1,303		1,222
Occupancy and equipment expenses	362		341
Other operating expenses	685		542
Total noninterest expense	2,350		2,105
Income before provision for income taxes	508		511
Provision for income tax expense	138		175
Net income	$	370	$	336
Basic earnings per share	$	0.24	$	0.23
Diluted earnings per share	$	0.24	$	0.22
Basic weighted average number of shares outstanding	1,516,445		1,473,508
Diluted weighted average number of shares outstanding	1,516,562		1,499,219
Dividends declared per share	$	0.05	$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended
(dollars in thousands)	March 31, 2012			March 31, 2011
Net income	$	370		$	336
Changes in net unrealized gains (losses) on securities available for sale, net of income tax benefits of $61 in 2012 and income taxes of $23 in 2011	(94		)	35
Reclassification adjustment for gains realized, net of income tax income taxes of $1 in 2011	—			(2		)
Total comprehensive income	$	276		$	369

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

Three Months Ended March 31,

(dollars in thousands)	Shares Outstanding		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity

Balance, January 1, 2011	1,469,364		$	15	$	15,069		$	8,142		$	(31	)	$	23,195
Comprehensive income								336			33			369
Shares repurchased	(7,850	)			(105		)							(105		)
Shares issued under stock option transactions	15,240				153									153
Compensation expense from stock option transactions					47									47
Excess tax benefit from stock-based awards					24									24
Balance, March 31, 2011	1,476,754		$	15	$	15,188		$	8,478		$	2		$	23,683
Balance, January 1, 2012	1,514,314		$	15	$	15,621		$	9,018		$	803		$	25,457
Comprehensive income								370			(94		)	276
Dividends paid on common stock								(76		)				(76		)
Shares issued under stock option transactions	2,635				30									30
Compensation expense from stock option transactions					19									19
Excess tax benefit from stock-based awards					3									3
Balance, March 31, 2012	1,516,949		$	15	$	15,673		$	9,312		$	709		$	25,709

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended March 31,
(dollars in thousands)	2012			2011
Cash flows from operating activities:
Net income	$	370		$	336
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	93			73
Deferred income taxes (benefits)	124			(76		)
Provision for loan losses	65			115
Securities gains	—			(3		)
Net premium amortization on investment securities	106			81
Bank owned life insurance income	(40		)	—
Stock-based compensation expense	19			47
Provision for foreclosed properties	100			—
Excess tax benefit from stock-based awards	(3		)	(24		)
Decrease in accrued interest and other assets	136			186
(Decrease) increase in accrued interest and other liabilities	(4		)	30
Net cash provided by operating activities	966			765
Cash flows from investing activities:
Purchases of investment securities available for sale	(7,844		)	(9,037		)
Proceeds from sales of investment securities available for sale	—			1,274
Proceeds from maturities, prepayments and calls investment securities available for sale	2,386			1,042
Net (increase) decrease in loans	(975		)	1,629
Purchases of bank premises and equipment	(549		)	(921		)
Net cash used in investing activities	(6,982		)	(6,013		)
Cash flows from financing activities:
Net increase in NOW, money market accounts, savings accounts and noninterest-bearing deposits	12,978			3,857
Net decrease in time deposits	(496		)	(1,709		)
Proceeds from issuance of common stock	30			153
Repurchase of common stock	—			(105		)
Dividends paid on common stock	(76		)	—
Excess tax benefit from stock-based awards	3			24
Net cash provided by financing activities	12,439			2,220
Net increase (decrease) in cash and cash equivalents	6,423			(3,028		)
Cash and cash equivalents — beginning of period	26,848			42,065
Cash and cash equivalents — end of period	$	33,271		$	39,037
Supplemental cash flow disclosures:
Interest paid	$	540		$	809
Income taxes paid	$	—		$	92

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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FREDERICK COUNTY BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

Note 1. General:

Frederick County Bancorp, Inc. (the “Bancorp”), the parent company for its wholly-owned subsidiary Frederick County Bank (the “Bank” and together with Bancorp, the “Company”), was organized in September 2003. The Bank was incorporated under the laws of the state of Maryland in August 2000 and commenced banking operations in October 2001. The Bank provides its customers with various banking services. The Bank offers various loan and deposit products to its customers. The Bank’s customers include individuals and commercial enterprises within its principal market area consisting of Frederick County, Maryland. Additionally, the Bank maintains correspondent banking relationships and transacts daily federal funds sales on an unsecured basis with regional correspondent banks. Note 4 discusses the types of securities the Bank purchases. Note 5 discusses the types of lending in which the Bank engages. The Bank does not have any significant concentrations to any one industry or customer. The Bank has a direct subsidiary established to hold foreclosed properties known as FCB Hagerstown, LLC. Bancorp also has a subsidiary trust, established to issue trust preferred securities, and one direct subsidiary established to hold foreclosed properties known as FCB Holdings, Inc.. See Note 7 for additional disclosures related to the subsidiary trust, which issued trust preferred securities.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions for Form 10-Q, Regulation S-X, and general practices within the banking industry. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. These statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s 2011 Annual Report on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The results shown in this interim report are not necessarily indicative of results to be expected for any other period or for the full year ending December 31, 2012.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on information available as of the date of the consolidated financial statements and could differ from actual results.

Recent Accounting Pronouncements

The FASB issued new guidance under ASU 2011-03, Transfers and Servicing (Topic 860) — Reconsideration of Effective Control for Repurchase Agreements. This guidance is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This amendment removes from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to the criterion. ASU 2011-03 will be effective for the first interim or annual period beginning on or after December 15, 2011, and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The adoption of ASU 2011-03 did not have a significant impact on the Company’s financial statements.

The FASB issued new guidance under ASU 2011-04, Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. These amendments result in common fair value measurement and disclosure requirements in U.S. generally accepted accounting principles (“U.S. GAAP”) and International Financial Reporting Standards (“IFRSs”). Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 will be effective during interim and annual periods beginning after December 15, 2011, and should be applied prospectively. Early adoption is not permitted. The adoption of ASU 2011-04 did not have a significant impact on the Company’s financial statements.

The FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (Topic 220). This guidance requires companies to present comprehensive income in a single statement below net income or in a separate statement of comprehensive income immediately following the income statement. The guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity, which was our previous presentation. This guidance does not change which items are reported in other comprehensive income or the requirement to report reclassifications of items from other comprehensive income to net income. This guidance was effective for fiscal years and interim periods beginning after December 15, 2011 and required retrospective application for all periods presented.

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The FASB issued ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350). This guidance is designed to simplify how entities test goodwill for impairment. The amendments in this guidance permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. This guidance is effective for fiscal years and interim periods beginning after December 15, 2011. Early adoption is permitted. The adoption of ASU 2011-08 did not have a significant impact on the Company’s financial statements.

The FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220). This guidance defers the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income in ASU No. 2011-05. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

Note 2. Earnings Per Share:

Earnings per share (“EPS”) are disclosed as basic and diluted. Basic EPS is generally computed by dividing net income by the weighted-average number of common shares outstanding for the period, whereas diluted EPS essentially reflects the potential dilution in basic EPS that could occur if other contracts to issue common stock were exercised.

	Three Months Ended March 31,
(dollars in thousands, except per share amounts)	2012		2011
Net income	$	370	$	336
Basic earnings per share	$	0.24	$	0.23
Diluted earnings per share	$	0.24	$	0.22
Basic weighted average number of shares outstanding	1,516,445		1,473,508
Effect of dilutive securities — stock options	117		25,711
Diluted weighted average number of shares outstanding	1,516,562		1,499,219
Anti-dilutive securities outstanding	114,065		—

Note 3. Stock-Based Compensation Plans:

The Company’s 2001 Stock Option Plan (“2001 Plan”) and 2011 Stock Incentive Plan (“2011 Plan”) provide that 260,000 shares and 250,000 shares, respectively, of the Company’s common stock will be reserved for the award of incentive stock options (“ISO”) and non-incentive stock options (“NQSO”) to purchase shares of common stock, and under the 2011 Plan, shares of restricted stock and restricted stock units. Each plan has been presented to and approved by the Company’s shareholders. At March 31, 2012, there are 250,000 shares remaining that are reserved for future grants under the 2011 Plan, but no shares remaining under the 2001 Plan. The exercise price per share shall not be less than the fair market value of a share of common stock on the date on which such options were granted, subject to adjustments for the effects of any stock splits or stock dividends, and may be exercised not later than ten years after the grant date. No awards of stock-based compensation were made under the 2011 Plan during the three months ended March 31, 2012. The Company recognizes the cost of employee services received in exchange for a stock-based award based on the grant-date fair value of the award. That cost is recognized over the vesting period of the award. Stock-based compensation expense for the three months ended March 31, 2012 and 2011 was $19 thousand and $47 thousand, respectively. As of March 31, 2012, there was $3 thousand remaining of total unrecognized compensation cost related to non-vested stock options, which will be expensed in April 2012.

The following is a summary of stock option transactions during the three months ended March 31, 2012.

	Options Issued and Outstanding	Weighted-Average Exercise Price
Balance at January 1, 2012	119,700	$	11.33
Exercised	2,635	11.35
Balance at March 31, 2012	117,065	$	11.33
Exercisable at March 31, 2012	70,545	$	11.32

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Note 4. Investment Portfolio:

The following tables set forth certain information regarding the Company’s investment portfolio at March 31, 2012 and December 31, 2011:

Available-for-sale portfolio

March 31, 2012

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Average Yield
State and political subdivisions:
Due after five years through ten years	$	6,028	$	288	$	—	$	6,316	4.74	%
Due after ten years	6,111		406		—		6,517		5.43	%
	12,139		694		—		12,833
Small business administration:
Due after ten years	839		32		—		871		3.75	%
Residential mortgage-backed debt securities	27,171		505		61		27,615		2.69	%
Equity securities	300		—		—		300		—	%
	$	40,449	$	1,231	$	61	$	41,619	3.41	%

December 31, 2011

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Average Yield
State and political subdivisions:
Due after five years through ten years	$	6,038	$	399	$	—	$	6,437	4.74	%
Due after ten years	6,814		415		—		7,229		5.49	%
	12,852		814		—		13,666
Small business administration:
Due after ten years	889		35		—		924		3.69	%
Residential mortgage-backed debt securities	21,055		481		3		21,533		2.65	%
Equity securities	300		—		—		300		—	%
	$	35,096	$	1,330	$	3	$	36,423	3.56	%

March 31, 2012

	Continuous unrealized losses existing for less than 12 months				Continuous unrealized losses existing for 12 months and greater				Total
(dollars in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Residential mortgage-backed debt securities	$	6,183	$	61	$	—	$	—	$	6,183	$	61
Total temporarily impaired securities	$	6,183	$	61	$	—	$	—	$	6,183	$	61

December 31, 2011

	Continuous unrealized losses existing for less than 12 months				Continuous unrealized losses existing for 12 months and greater				Total
(dollars in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Residential mortgage-backed debt securities	$	1,351	$	3	$	—	$	—	$	1,351	$	3
Total temporarily impaired securities	$	1,351	$	3	$	—	$	—	$	1,351	$	3

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Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. This analysis requires management to consider various factors, which include: (1) duration and magnitude of the decline in value; (2) the financial condition of the issuer or issuers; and (3) the structure of the security. An impairment loss is recognized in earnings only when: (1) we intend to sell the debt security; (2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or (3) we do not expect to recover the entire amortized cost basis of the security. In situations where we intend to sell or when it is more likely than not that we will be required to sell the security, the entire impairment loss must be recognized in earnings. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders’ equity as a component of other comprehensive income, net of deferred taxes. Credit loss is determined by calculating the present value of future cash flows of the security compared to the amortized cost of the security. Realized gains or losses on the sale of investment and mortgage-backed securities are reported in earnings and determined using the amortized cost of the specific security sold.

Restricted Stock

The following table shows the amounts of restricted stock as of March 31, 2012 and December 31, 2011:

	March 31,		December 31,
(dollars in thousands)	2012		2011
Federal Home Loan Bank of Atlanta	$	890	$	890
Federal Reserve Bank	580		580
Atlantic Central Bankers Bank	40		40
	$	1,510	$	1,510

Note 5. Loans and Allowance for Loan Losses:

Loans consist of the following:

	March 31,			% of		December 31,			% of
(dollars in thousands)	2012			Loans		2011			Loans
Construction and land development	$	18,360		9	%	$	18,996		9	%
Real estate:
Commercial properties	130,347			61	%	131,329			62	%
Residential properties	35,986			17	%	35,863			17	%
Total real estate	166,333			78	%	167,192			79	%
Commercial and industrial	26,643			12	%	24,273			11	%
Consumer	1,959			1	%	1,854			1	%
	213,295			100	%	212,315			100	%
Less allowance for loan losses	(3,286		)			(3,216		)
Net loans	$	210,009				$	209,099

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Allowance for loan losses and recorded investment in loans for the three months ended March 31, 2012 and 2011 are summarized as follows:

March 31, 2012

(dollars in thousands)	Construction and Land Development		Commercial Real Estate			Residential Real Estate		Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	326	$	2,064		$	460	$	351		$	15		$	3,216
Charge-offs	—		—			—		—			—			—
Recoveries	—		—			—		5			—			5
Provisions	69		(22		)	47		(28		)	(1		)	65
Ending balance	$	395	$	2,042		$	507	$	328		$	14		$	3,286
Ending balance: individually evaluated for impairment	$	169	$	81		$	109	$	—		$	—		$	359
Ending balance: collectively evaluated for impairment	$	226	$	1,961		$	398	$	328		$	14		$	2,927

Loans:
Ending balance	$	18,360	$	130,347		$	35,986	$	26,643		$	1,959		$	213,295
Ending balance: individually evaluated for impairment	$	4,017	$	10,026		$	2,711	$	4,024		$	16		$	20,794
Ending balance: collectively evaluated for impairment	$	14,343	$	120,321		$	33,275	$	22,619		$	1,943		$	192,501

Allowance for loan losses and recorded investment in loans for the three months ended March 31, 2011 is summarized as follows:

March 31, 2011

(dollars in thousands)	Construction and Land Development			Commercial Real Estate		Residential Real Estate			Commercial and Industrial		Consumer			Total
Allowance for loan losses:
Beginning balance	$	273		$	2,546	$	432		$	455	$	12		$	3,718
Charge-offs	(1		)	—		—			—		—			(1		)
Recoveries	—			—		—			10		—			10
Provisions	(63		)	243		(76		)	14		(3		)	115
Ending balance	$	209		$	2,789	$	356		$	479	$	9		$	3,842
Ending balance: individually evaluated for impairment	$	155		$	1,213	$	11		$	206	$	—		$	1,585
Ending balance: collectively evaluated for impairment	$	54		$	1,576	$	345		$	273	$	9		$	2,257

Loans:
Ending balance	$	13,892		$	130,988	$	35,598		$	25,708	$	1,580		$	207,766
Ending balance: individually evaluated for impairment	$	2,198		$	12,454	$	1,566		$	4,171	$	20		$	20,409
Ending balance: collectively evaluated for impairment	$	11,694		$	118,534	$	34,032		$	21,537	$	1,560		$	187,357

Credit quality indicators as of March 31, 2012 and December 31, 2011 are as follows:

Internally assigned grade:

Pass — loans in this category have strong asset quality and liquidity along with a multi-year track record of profitability.

Special mention — loans in this category are currently protected but are potentially weak. The credit risk may be relatively minor, yet constitute an increased risk in light of the circumstances surrounding a specific loan.

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Substandard — loans in this category show signs of continuing negative financial trends and unprofitability and therefore, is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Doubtful — loans in this category contain weaknesses that make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as loss is deferred until its more exact status may be determined.

Loss - loans classified in this category are considered uncollectible and of such little value that their continuance as bankable loans is not warranted. This classification does not mean that the loan has no recovery value, but that it is not practical to defer writing it off, even though partial recovery may be affected in the future. Such credits should be recommended for charge-off.

Commercial credit exposure - Credit risk profile by internally assigned grade

March 31, 2012

(dollars in thousands)	Construction and Land Development		Commercial Real Estate		Commercial and Industrial
Pass	$	12,809	$	116,800	$	19,724
Special mention	1,534		4,364		2,230
Substandard	4,017		9,183		4,689
Total	$	18,360	$	130,347	$	26,643

December 31, 2011

(dollars in thousands)	Construction and Land Development		Commercial Real Estate		Commercial and Industrial
Pass	$	12,637	$	116,689	$	17,207
Special mention	2,087		5,434		1,129
Substandard	4,272		9,206		5,937
Total	$	18,996	$	131,329	$	24,273

Consumer credit exposure - Credit risk profile by internally assigned grade

March 31, 2012

(dollars in thousands)	Residential Real Estate		Consumer
Pass	$	33,230	$	1,885
Special mention	710		—
Substandard	2,046		74
Total	$	35,986	$	1,959

December 31, 2011

(dollars in thousands)	Residential Real Estate		Consumer
Pass	$	33,122	$	1,777
Special mention	714		—
Substandard	2,027		77
Total	$	35,863	$	1,854

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An age analysis of past due loans as of March 31, 2012 and December 31, 2011 are as follows:

March 31, 2012

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total		Greater than 90 Days and Still Accruing
Construction and land development	$	—	$	—	$	1,049	$	1,049	$	17,311	$	18,360	$	—
Commercial real estate	1,534		1,476		601		3,611		129,736		130,347		—
Residential real estate	—		143		—		143		35,843		35,986		—
Commercial and industrial	213		—		—		213		26,430		26,643		—
Consumer	16		1		—		17		1,942		1,959		—
Total	$	1,763	$	1,620	$	1,650	$	5,033	$	208,262	$	213,295	$	—

December 31, 2011

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total		Greater than 90 Days and Still Accruing
Construction and land development	$	—	$	—	$	1,049	$	1,049	$	17,947	$	18,996	$	—
Commercial real estate	1,104		1,094		795		2,993		128,336		131,329		—
Residential real estate	364		49		148		561		35,302		35,863		—
Commercial and industrial	116		—		32		148		24,125		24,273		—
Consumer	2		26		—		28		1,826		1,854		—
Total	$	1,586	$	1,169	$	2,024	$	4,779	$	207,536	$	212,315	$	—

The Company’s charge-off policy states after all collection efforts have been exhausted and the loan is deemed to be a loss, it will be charged to the Company’s established allowance for loan losses. Consumer loans subject to the Uniform Retail Credit Classification are charged-off as follows: (a) closed end loans are charged-off no later than 120 days after becoming delinquent; (b) consumer loans to borrowers who subsequently declare bankruptcy, where the Company is an unsecured creditor, are charged-off within 60 days of receipt of the notification from the bankruptcy court; (c) fraudulent loans are charged-off within 90 days of discovery; and (d) death of a borrower will cause a charge-off to be incurred at such time an actual loss is determined. All other types of loans are generally evaluated for loss potential at the 90th day past due threshold; and any loss is recognized no later than the 120th day past due threshold; each loss is evaluated on its specific facts regarding the appropriate timing to recognize the loss.

The Company has not recorded any partial charge-offs for any loans in 2012, but has recorded $563 thousand in partial charge-offs in prior years that are still in the loan portfolio as of March 31, 2012.

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Information on impaired loans for the three months ended March 31, 2012 and 2011 are as follows:

March 31, 2012

	As of March 31, 2012						For the three months ended March 31, 2012
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Construction and land development	$	3,012	$	3,012	$	—	$	2,761	$	52
Commercial real estate	9,337		9,900		—		9,277		143
Residential real estate	1,960		1,960		—		1,955		22
Commercial and industrial	4,024		4,024		—		4,594		58
Consumer	16		16		—		17		—
Total with no allowance	$	18,349	$	18,912	$	—	$	18,604	$	275
With an allowance recorded:
Construction and land development	$	1,005	$	1,005	$	169	$	1,388	$	18
Commercial real estate	689		689		81		689		12
Residential real estate	751		751		109		471		11
Commercial and industrial	—		—		—		16		—
Total with an allowance	$	2,445	$	2,445	$	359	2,564		$	41
Grand total:
Construction and land development	$	4,017	4,017		$	169	$	4,149	$	70
Commercial real estate	10,026		10,589		81		9,966		155
Residential real estate	2,711		2,711		109		2,426		33
Commercial and industrial	4,024		4,024		—		4,610		58
Consumer	16		16		—		17		—
Grand total	$	20,794	$	21,357	$	359	$	21,168	$	316

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December 31, 2011

	As of December 31, 2011						For the three months ended March 31, 2011
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Construction and land development	$	2,510	$	2,510	$	—	$	1,936	$	41
Commercial real estate	9,217		10,059		—		7,913		86
Residential real estate	1,950		1,950		—		707		—
Commercial and industrial	5,163		5,163		—		3,968		40
Consumer	17		17		—		10		—
Total with no allowance	$	18,857	$	19,699	$	—	$	14,534	$	167
With an allowance recorded:
Construction and land development	$	1,771	$	1 ,771	$	100	$	365	$	5
Commercial real estate	689		689		81		4,870		77
Residential real estate	191		191		46		517		8
Commercial and industrial	32		32		1		414		6
Total with an allowance	$	2,683	$	2,683	$	228	$	6,166	$	96
Grand total:
Construction and land development	$	4,281	$	4,281	$	100	$	2,301	$	46
Commercial real estate	9,906		10,748		81		12,783		163
Residential real estate	2,141		2,141		46		1,224		8
Commercial and industrial	5,195		5,195		1		4,382		46
Consumer	17		17		—		10		—
Grand total	$	21,540	$	22,382	$	228	$	20,700	$	263

Information on performing and nonaccrual loans as of March 31, 2012 and December 31, 2011 is as follows:

	March 31,		December 31,
(dollars in thousands)	2012		2011
Impaired performing loans:
Construction and land development	$	2,968	$	3,232
Commercial real estate	7,153		7,022
Residential real estate	1,402		873
Commercial and industrial	3,756		4,875
Troubled debt restructurings:
Construction and land development	—		—
Commercial real estate	2,087		2,089
Residential real estate	1,117		1,120
Commercial and industrial	268		288
Consumer	16		17
Total impaired performing loans	18,767		19,516
Impaired nonperforming loans (nonaccrual):
Construction and land development	989		988
Commercial real estate	232		236
Residential real estate	192		148
Commercial and industrial	—		32
Consumer	—		—
Troubled debt restructurings:
Construction and land development	60		61
Commercial real estate	554		559
Residential real estate	—		—
Commercial and industrial	—		—
Total impaired nonperforming loans (nonaccrual):	2,027		2,024
Total impaired loans	$	20,794	$	21,540

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Information on troubled debt restructurings for the three months ended March 31, 2012 and 2011 is as follows:

Three months ended March 31, 2012

Three months ended March 31, 2011

Number
of
contracts

Pre-
modification
outstanding
recorded
investment

Post-
modification
outstanding
recorded
investment

Number of
contracts

Pre-
modification
outstanding
recorded
investment

Post-
modification
outstanding
recorded
investment

Troubled debt restructurings:

Construction and land development

—

Commercial real estate

—

Residential real estate

—

Commercial and industrial

—

Troubled debt restructurings that subsequently defaulted:

Construction and land development

—

Commercial real estate

—

Residential real estate

—

Commercial and industrial

—

Note 6. Deposits:

The following table provides a summary of the Company’s deposit base at the dates indicated.

	March 31,		December 31,
(dollars in thousands)	2012		2011
Noninterest-bearing demand deposits	$	45,985	$	43,030
Interest-bearing demand deposits:
NOW accounts	17,216		17,116
Money market accounts	80,549		72,074
Savings accounts	6,538		5,090
Certificates of deposit:
$100,000 or more	41,329		39,652
Less than $100,000	67,352		69,525
Total deposits	$	258,969	$	246,487

Note 7. Trust preferred securities/junior subordinated debentures and other long-term borrowings:

In December 2006, Bancorp completed the private placement of an aggregate of $6.00 million of trust preferred securities through FCBI Statutory Trust I (the “Trust”), a trust subsidiary organized under Connecticut law, of which Bancorp owns all of the common securities of $186 thousand. The principal asset of the Trust is a similar amount of Bancorp’s junior subordinated debentures. The interest rate on the junior subordinated debentures was a fixed rate of 6.5375% through December 15, 2011, and is adjusted quarterly thereafter to 163 basis points over three-month LIBOR. On March 15, 2011, the most recent interest reset date, the interest rate was adjusted to 2.10365% for the period ending June 15, 2012. The junior subordinated debentures mature on December 15, 2036, and may be redeemed at par, at Bancorp’s option, on any interest payment date. The obligations of Bancorp with respect to the Trust’s preferred securities constitute a full and unconditional guarantee by Bancorp of Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantee. Subject to certain exceptions and limitations, Bancorp may elect from time to time to defer interest payments on the junior subordinated debentures, resulting in a deferral of distribution payments on the related trust preferred securities. If the Company defers interest payments on the junior subordinated debentures, or otherwise is in default of the obligations, the Company would be prohibited from making dividend payments to its shareholders.

The trust preferred securities may be included in Tier 1 capital for regulatory capital adequacy purposes up to 25% of Tier 1 capital, net of goodwill after its inclusion. The portion of the trust preferred securities not qualifying as Tier 1 capital may be included as part of total qualifying capital in Tier 2 capital, subject to limitation.

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At March 31, 2012 and December 31, 2011, the Company had a total of $10.00 million in borrowings under its credit facility from the Federal Home Loan Bank of Atlanta (“FHLB”). This amount consists of two (2) $5.00 million borrowings with fixed interest rates of 3.29% and 3.05%, with a maturity of November 19, 2015. Outstanding advances are secured by collateral consisting of a blanket lien on qualifying loans in the Bank’s residential mortgage loan portfolio and certain commercial real estate loans.

Note 8. Noninterest Expense:

Noninterest expense consists of the following:

	Three Months Ended March 31,
(dollars in thousands)	2012			2011

Salaries	$	1,052		$	971
Stock-based compensation	19			47
Bonus	20			—
Deferred Personnel Costs	(23		)	(26		)
Payroll Taxes	98			88
Employee Insurance	84			79
Other Employee Benefits	53			63
Depreciation	93			73
Rent	97			115
Utilities	36			27
Repairs and Maintenance	59			60
ATM Expense	25			22
Other Occupancy and Equipment Expenses	52			44
Postage and Supplies	19			20
Data Processing	105			99
Advertising and Promotion	110			70
Provision for foreclosed properties	100			—
FDIC insurance	60			94
Legal	17			20
Insurance	16			21
Consulting	14			10
Courier	4			4
Audit Fees	50			48
Other	190			156
	$	2,350		$	2,105

Note 9. 401(k) Profit Sharing Plan:

The Company has a Section 401(k) profit sharing plan covering employees meeting certain eligibility requirements as to minimum age and years of service. Employees may make voluntary contributions to the Plan through payroll deductions on a pre-tax basis. The Company has the discretion to make matching contributions of 100% of the employee’s contributions up to 4% of the employee’s salary. A participant’s account under the Plan, together with investment earnings thereon, is normally distributable, following retirement, death, disability or other termination of employment, in a single lump-sum payment.

The Company made matching contributions of $41 thousand and $48 thousand for the three months ended March 31, 2012 and 2011, respectively.

Note 10. Shareholders’ Equity:

Capital:

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 consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company, once it exceeds $500 million in assets, and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes that the Company and the Bank met all capital adequacy requirements to which they are subject as of March 31, 2012.

As of March 31, 2012, the most recent notification from the regulatory agency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification which management believes have changed the Bank’s category.

The Company’s and the Bank’s actual capital amounts and ratios at March 31, 2012 and December 31, 2011 are presented in the following tables.

March 31, 2012

									Minimum To Be Well
									Capitalized Under
					For Capital				Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 Capital
To Risk-Weighted Assets
Company	$	31,004	12.76	%	$	9,715	4.00	%	N/A		N/A
Bank	$	30,212	12.60	%	$	9,595	4.00	%	$	14,392	6.00	%

Total Capital
To Risk-Weighted Assets
Company	$	34,040	14.01	%	$	19,431	8.00	%	N/A		N/A
Bank	$	33,214	13.85	%	$	19,189	8.00	%	$	23,987	10.00	%

Tier 1 Capital
To Average Assets
Company	$	31,004	10.48	%	$	11,830	4.00	%	N/A		N/A
Bank	$	30,212	10.31	%	$	11,722	4.00	%	$	14,653	5.00	%

December 31, 2011

									Minimum To Be Well
									Capitalized Under
					For Capital				Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Tier 1 Capital
To Risk-Weighted Assets
Company	$	30,654	12.69	%	$	9,662	4.00	%	N/A		N/A
Bank	$	29,897	12.53	%	$	9,541	4.00	%	$	14,312	10.00

Total Capital
To Risk-Weighted Assets
Company	$	33,676	13.94	%	$	19,323	8.00	%	N/A		N/A
Bank	$	32,882	13.79	%	$	19,083	8.00	%	$	23,853	10.00

Tier 1 Capital
To Average Assets
Company	$	30,654	10.51	%	$	11,671	4.00	%	N/A		N/A
Bank	$	29,897	10.35	%	$	11,559	4.00	%	$	14,449	5.00

On June 26, 2007, the Company authorized the repurchase of up to 146,000 shares of its common stock, for an aggregate expenditure of not more than $4.5 million, through June 30, 2012, or earlier termination of the program by the Board of Directors. Repurchases, if any, by the Company pursuant to this authorization are expected to enable the Company to repurchase its shares at an attractive price, and to provide a source of liquidity for the Company’s shares. As of March 31, 2012, there have been 27,968 shares repurchased by the Company, for an aggregate expenditure totaling $342 thousand, at an average price of $12.22.

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Note 11. Fair Value Measurements:

The Company follows the guidance issued by the FASB under ASC Topic 825 Financial Instruments regarding fair value measurements and disclosures topic. This guidance permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a Company commitment. Subsequent changes must be recorded in earnings. The Company has yet to apply the fair value option to any assets or liabilities. This guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Under this guidance, fair value measurements are not adjusted for transaction costs. This guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this guidance are described below.

Level 1		Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2		Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, liquid mortgage products, active listed equities and most money market securities. Such instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy. As required by fair value measurement and disclosures guidance, the Company does not adjust the quoted price for such instruments.

The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, less liquid mortgage products, less liquid equities, state, municipal and provincial obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy.

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used.

Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or market value. Market value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable. The value of real estate collateral is determined based on appraisal by qualified licensed appraisers hired by the Company. The value of business equipment, inventory and accounts receivable collateral is based on the net book value on the business’ financial statements and, if necessary, discounted based on management’s review and analysis. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

There were no transfers of any assets or liabilities between levels 1, 2 and 3 in the current period.

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The following tables set forth the Company’s financial assets and liabilities that were accounted for or disclosed at fair value on a recurring basis as of March 31, 2012 and December 31, 2011.

March 31, 2012

					Significant
	Carrying				Other		Significant
	Value		Quoted		Observable		Unobservable
	(Fair		Prices		Inputs		Inputs
(dollars in thousands)	Value)		(Level 1)		(Level 2)		(Level 3)
Securities available for sale:
State and political subdivisions	$	12,833	$	—	$	12,833	$	—
Small business administration	871		—		871		—
Residential mortgage-backed debt	27,615		—		27,615		—
Equity securities	300		—		300		—
Total	$	41,619	$	—	$	41,619	$	—

December 31, 2011

					Significant
	Carrying				Other		Significant
	Value		Quoted		Observable		Unobservable
	(Fair		Prices		Inputs		Inputs
(dollars in thousands)	Value)		(Level 1)		(Level 2)		(Level 3)
Securities available for sale:
State and political subdivisions	$	13,666	$	—	$	13,666	$	—
Small business administration	924		—		924		—
Residential mortgage-backed debt	21,533		—		21,533		—
Equity securities	300		—		300		—
Total	$	36,423	$	—	$	36,423	$	—

The following tables set forth the Company’s financial assets and liabilities that were accounted for or disclosed at fair value on a nonrecurring basis as of March 31, 2012 and December 31, 2011.

March 31, 2012

					Significant
	Carrying				Other		Significant
	Value		Quoted		Observable		Unobservable
	(Fair		Prices		Inputs		Inputs
(dollars in thousands)	Value)		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Construction and land development	$	3,848	$	—	$	—	$	3,848
Commercial real estate	9,945		—		—		9,945
Residential real estate	2,602		—		—		2,602
Commercial and industrial	4,024		—		—		4,024
Consumer	16		—		—		16
Total impaired loans	$	20,435	$	—	$	—	$	20,435
Foreclosed properties:
Commercial real estate	$	2,995	$	—	$	—	$	2,995
Residential real estate	396		$	—	$	—	396
Total foreclosed properties	$	3,391	$	—	$	—	$	3,391

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December 31, 2011

					Significant
	Carrying				Other		Significant
	Value		Quoted		Observable		Unobservable
	(Fair		Prices		Inputs		Inputs
(dollars in thousands)	Value)		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Construction and land development	$	4,181	$	—	$	—	$	4,181
Commercial real estate	9,825		—		—		9,825
Residential real estate	2,095		—		—		2,095
Commercial and industrial	5,194		—		—		5,194
Consumer	17		—		—		17
Total impaired loans	$	21,312	$	—	$	—	$	21,312
Foreclosed properties:
Commercial real estate	$	3,095	$	—	$	—	$	3,095
Residential real estate	396		$	—	$	—	396
Total foreclosed properties	$	3,491	$	—	$	—	3,491

Note 12. Fair Value of Financial Instruments:

The estimated fair values of the Company’s financial instruments are as follows:

					Fair Value Measurements
(dollars in thousands)	Carrying Amount		Fair Value		Quoted Prices (Level1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2012
FINANCIAL ASSETS
Cash and cash equivalents	$	33,271	$	33,271	$	33,271	$	—	$	—
Investment securities available for sale	41,619		41,619		—		41,619		—
Restricted stock	1,510		1,510		—		1,510		—
Net loans	210,009		205,299		—		—		205,299
Accrued interest receivable	840		840		—		—		840

FINANCIAL LIABILITIES
Deposits	$	258,969	$	270,674	—		—		$	270,674
Short-term borrowings	2,700		2,700		—		—		2,700
Long-term borrowings	10,000		10,764		—		—		10,764
Junior subordinated debentures	6,186		6,186		—		—		6,186
Accrued interest payable	111		111		—		—		111

December 31, 2011
FINANCIAL ASSETS
Cash and cash equivalents	$	26,848	$	26,848	$	26,848	$	—	$	—
Investment securities available for sale	36,423		36,423		—		36,423		—
Restricted stock	1,510		1,510		—		1,510		—
Net loans	209,099		206,182		—		—		206,182
Accrued interest receivable	858		858		—		—		858

FINANCIAL LIABILITIES
Deposits	$	246,487	$	258,232	—		—		258,232
Short-term borrowings	2,700		2,700		—		—		2,700
Long-term borrowings	10,000		10,788		—		—		10,788
Junior subordinated debentures	6,186		6,186		—		—		6,186
Accrued interest payable	116		116		—		—		116

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The following methods and assumptions were used to estimate the fair value disclosures for financial instruments as of March 31, 2012 and December 31, 2011:

Cash and cash equivalents:

The fair value of cash and cash equivalents is estimated to approximate the carrying amounts.

Investment securities and restricted stock:

Fair values are based on quoted market prices for Level 1 and 2, except for certain restricted stocks where fair value equals par value because of certain redemption restrictions.

Loans:

Fair values are estimated for portfolios of loans with similar financial characteristics. Each portfolio is further segmented into fixed and adjustable rate interest terms by performing and non-performing categories.

The fair value of performing loans is calculated by discounting estimated cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The estimated cash flows do not anticipate prepayments.

Management has made estimates of fair value discount rates that it believes to be reasonable. However, because there is no market for many of these financial instruments, management has no basis to determine whether the fair value presented for loans would be indicative of the value negotiated in an actual sale.

Deposits:

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, NOW accounts and money market accounts, is equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.

Short-term borrowings:

The fair value of short-term borrowings is determined using rates currently available to the Company for debt with similar terms and remaining maturities.

Long-term borrowings:

The fair value of the long-term borrowings is determined using rates currently available to the Company for debt with similar terms and remaining maturities.

Junior subordinated debentures:

The junior subordinated debentures are unsecured obligations of the Company and are subordinate and junior in right of payment to all present and future senior indebtedness of the Company. The Company has entered into a guarantee, which together with its obligations under the junior subordinated debentures and the declaration of trust governing the Trust provides a full and unconditional guarantee of the Trust’s preferred securities. The fair value of junior subordinated debentures is determined using rates currently available to the Company for debt with similar terms and remaining maturities. See Note 7 for additional disclosures.

Accrued Interest:

The carrying amounts of accrued interest approximate fair value.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This management’s discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to Frederick County Bancorp, Inc.’s (“Bancorp”) and Frederick County Bank’s (the “Bank” and together with Bancorp, the “Company”) beliefs, expectations, anticipations and plans regarding, among other things, general economic trends, interest rates, product expansions and other matters. Such forward-looking statements are identified by terminology such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “likely”, “unlikely”, “continue”, or similar terms and are subject to numerous uncertainties, such as federal monetary policy, inflation, employment, profitability and consumer confidence levels, both nationally and in the Company’s market area, the health of the real estate and construction market in the Company’s market area, the Company’s ability to develop and market new products and to enter new markets, competitive challenges in the Company’s market, legislative and regulatory changes, changes in accounting principles or the application thereof and other factors, and as such, there can be no assurance that future events will develop in accordance with the forward-looking statements contained herein. Readers are cautioned against placing undue reliance on any such forward-looking statement. In addition, the Company’s past results of operations do not necessarily indicate its future results.

General

The following paragraphs provide an overview of the financial condition and results of operations of the Company. This discussion is intended to assist the readers in their analysis of the accompanying financial statements and notes thereto.

Bancorp, the parent company for the Bank, its wholly-owned subsidiary, was organized in September 2003. The Bank was incorporated under the laws of the state of Maryland in August 2000 and commenced banking operations in October 2001. The Bank provides its customers with various banking services, from four banking offices in the City of Frederick and one in Walkersville, Maryland. The Bank offers various loan and deposit products to its customers. The Bank’s customers include individuals and commercial enterprises within its principal market area consisting of Frederick County, Maryland. Additionally, the Bank maintains correspondent banking relationships and transacts daily federal funds sales on an unsecured basis with regional correspondent banks. Note 4 discusses the types of securities the Bank purchases. Note 5 discusses the types of lending in which the Bank engages. The Bank does not have any significant concentrations to any one industry or customer. Bancorp also has a subsidiary trust, established to issue trust preferred securities, and two subsidiaries established to hold foreclosed properties. The two subsidiaries established to hold foreclosed properties are known as FCB Holdings, Inc. (a direct subsidiary of Bancorp) and FCB Hagerstown, LLC (an indirect subsidiary of Bancorp). See Note 7 for additional disclosures related to the subsidiary trust, which issued trust preferred securities.

Critical Accounting Policies

The Company’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 industry in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance 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 reserve to be established, or when an asset or liability needs to 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 estimates used in management’s assessment of the adequacy of the allowance for loan losses require that management make assumptions about matters that are uncertain at the time of estimation. Differences in these assumptions and differences between the estimated and actual losses could have a material effect. For discussions related to the critical accounting policies of the Company, refer to the sections in this Management’s Discussion and Analysis entitled “Income Taxes,” “Allowance for Loan Losses” and “Investment Portfolio.”

Loans

Loans increased by $980 thousand, or 0.46%, from December 31, 2011, to a balance of $213.30 million as of March 31, 2012, and by $5.53 million, or 2.66% from March 31, 2011. Management continues to be cautious about the economy, but has adopted a strategy to increase loans and the overall balance sheet at a modestly higher pace than has been taken over the past several years.

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Deposits

Deposits increased by $12.48 million, or 5.06%, from December 31, 2011 to a balance of $258.97 million as of March 31, 2012, and by $8.20 million, or 3.27% from March 31, 2011. The balance of certificates of deposit decreased to $108.68 million as of March 31, 2012 from $109.18 million as of December 31, 2011, while noninterest-bearing demand deposits increased by $2.96 million from $43.03 million, NOW and savings accounts also increased to $23.75 million from $22.21 million, and money market accounts increased to $80.55 million from $72.07 million, between the same periods. As a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), since July 21, 2011 banks are no longer prohibited from paying interest on demand deposit accounts, including those from businesses. At this time, there has been little impact from the elimination of this prohibition on the Bank’s interest expense, allocation of deposits, deposit pricing, loan pricing, net interest margin, ability to compete, ability to establish and maintain customer relationships, or profitability.

Three Months Ended March 31, 2012 and 2011

Net income was $370 thousand for the three months ended March 31, 2012, as compared to $336 thousand of net income for the same period in 2011. The increase in earnings for this quarter in 2012 is primarily related to a decrease in the provision for income taxes due to higher levels of tax-exempt income in the current year. Net interest income for the quarter ended March 31, 2012 increased (on a tax-equivalent basis) to $2.80 million from $2.68 million for the same period in 2011. Basic earnings per share for the three months ended March 31, 2012 and 2011 were $0.24 and $0.23, respectively, and were based on weighted-average number of shares outstanding of 1,516,455 and 1,473,508, respectively. Diluted earnings per share for the three months ended March 31, 2012 and 2011 were $0.24 and $0.22, respectively, and were based on weighted-average number of shares outstanding of 1,516,562 and 1,499,219, respectively.

The Company experienced an annualized return on average assets of 0.50% and 0.47% for the three-months ended March 31, 2012 and 2011, respectively. Additionally, the Company experienced an annualized return on average shareholders’ equity of 5.71% and 5.70% for the three-month periods ended March 31, 2012 and 2011, respectively.

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Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential

The following tables show average balances of asset and liability categories, interest income and interest expense, and average yields and rates for the periods indicated.

Three Months Ended March 31,

	2012						2011
(dollars in thousands)	Average daily balance		Interest Income/ Expense		Average Yield/ rate		Average daily balance		Interest Income/ Expense		Average Yield/ rate
Assets
Interest-earning assets:
Federal funds sold	$	573	$	—	—	%	$	1,125	$	—	—	%
Interest bearing deposits in other banks	25,419		15		0.24		36,002		22		0.25
Investment securities (1):
Taxable	28,948		168		2.33		25,295		172		2.76
Tax-exempt (2)	10,762		144		5.37		8,745		130		6.03
Loans (3)	212,753		3,009		5.67		207,149		3,160		6.19
Total interest-earning assets	278,455		3,336		4.81		278,316		3,484		5.08
Noninterest-earning assets	17,294						7,802
Total assets	$	295,749					$	286,118

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
NOW accounts	$	16,131	$	8	0.20	%	$	14,114	$	10	0.29	%
Savings accounts	5,366		1		0.07		4,836		1		0.08
Money market accounts	76,314		89		0.47		72,436		144		0.81
Certificates of deposit $100,000 or more	39,882		127		1.28		46,977		196		1.69
Certificates of deposit less than $100,000	68,257		176		1.03		67,835		272		1.63
Short-term borrowings	2,700		20		2.97		300		4		5.41
Long-term borrowings	10,000		80		3.21		10,000		79		3.20
Junior subordinated debentures	6,186		34		2.20		6,186		101		6.62
Total interest-bearing liabilities	224,836		535		0.95		222,684		807		1.47
Noninterest-bearing deposits	43,999						39,181
Noninterest-bearing liabilities	983						685
Total liabilities	269,818						262,550
Total shareholders’ equity	25,931						23,568
Total liabilities and shareholders’ equity	$	295,749					$	286,118
Net interest income			$	2,801					$	2,677
Net interest spread					3.86	%					3.61	%
Net interest margin					4.03	%					3.90	%

(1) Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which is reflected as a component of shareholders’ equity.

(2) Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $49 thousand in 2012 and $44 thousand in 2011 are included in the calculation of the tax-exempt investment interest income.

(3) Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $31 thousand in 2012 and $32 thousand in 2011 are included in the calculation of the loan interest income. Net loan origination income in interest income totaled $9 thousand in 2012 and expense of $13 thousand in 2011.

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Rate/Volume Analysis

The following table indicates the changes in interest income and interest expense that are attributable to changes in average volume and average rates, in comparison with the same period in the preceding year on a fully taxable equivalent basis. The change in interest due to the combined rate-volume variance has been allocated entirely to the change in rate.

	Three Months Ended March 31, 2012 compared to 2011
(dollars in thousands)	Increase (decrease) Due to						Net increase
	Volume			Rate			(decrease)
Interest income
Interest-earning assets:
Interest on federal funds sold	$	—		$	—		$	—
Interest-bearing deposits in other banks	(7		)	—			(7		)
Investment securities:
Taxable	25			(29		)	(4		)
Tax-exempt	30			(16		)	14
Loans	87			(238		)	(151		)
Total interest income	135			(283		)	(148		)

Interest expense
Interest-bearing liabilities:
NOW accounts	—			(2		)	(2		)
Money market accounts	8			(63		)	(55		)
Certificates of deposit $100,000 or more	(30		)	(39		)	(69		)
Certificates of deposit less than $100,000	2			(98		)	(96		)
Short-term borrowings	32			(16		)	16
Long-term borrowings	—			1			1
Junior subordinated debentures	—			(67		)	(67		)
Total interest expense	12			(284		)	(272		)
Net interest income	$	123		$	1		$	124

Net Interest Income

Net interest income is generated from the Company’s lending and investment activities, and is the most significant component of the Company’s earnings. Net interest income is the difference between interest and rate-related fee income on earning assets (primarily loans and investment securities) and the interest paid on the funds (primarily deposits) supporting them. The Company primarily utilizes deposits to fund loans and investments, with a small amount of additional funding from junior subordinated debentures and minimal short-term and long-term borrowings. In future periods, the Company may utilize a higher level of short-term and long-term borrowings, including borrowings from the Federal Home Loan Bank, federal funds lines with correspondent banks and repurchase agreements, to fund operations, depending on economic conditions, deposit availability and pricing, interest rates and other factors.

Three Months Ended March 31, 2012 and 2011

Net interest income (on a taxable-equivalent basis) was $2.80 million in 2012 and $2.68 million in 2011. The change in net interest income was primarily driven by lower rates paid on certificates of deposit, money market accounts and junior subordinated debentures, which was partially offset by the lower yields earned on loans. Average earning assets increased by $139 thousand, or 0.05%, since March 31, 2011. The yield on earning assets in 2012 decreased by 27 basis points to 4.81% from 5.08% in 2011. The decrease of 52 basis points in the rate paid on interest-bearing liabilities primarily is the result of the lower rates paid on certificates of deposit and money market accounts, along with lower rates paid on the junior subordinated debentures. The Company’s net interest margin was 4.03% and 3.90%, and the net interest spread was 3.86% and 3.61%, for the three-month periods ended March 31, 2012 and 2011, respectively.

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Interest expense decreased 33.71% from $807 thousand in 2011 to $535 thousand in 2012 due to the reduced rates paid on interest-bearing liabilities, which decreased to 0.95% in 2012 from 1.47% in 2011 primarily as a result in declines in rates on certificates of deposit and money market accounts. The net interest margin is not expected to improve substantially through the re-pricing of the certificates of deposit portfolio since the majority are priced at current market interest rates.

Noninterest Income

Noninterest income was $202 thousand and $130 thousand for the three months ended March 31, 2012 and 2011, respectively. There were no gains on sale of securities for the three months ended March 31, 2012, while there were only $3 thousand for the same period in 2011. The bank owned life insurance purchased in May 2011 generated $40 thousand of income for the three months ended March 31, 2012.

Noninterest Expense

Noninterest expense amounted to $2.35 million and $2.11 million for the three-month periods ended March 31, 2012 and 2011, respectively. The primary increase in noninterest expense for the three-month periods in 2012 compared to 2011 relates to an increase in foreclosure expenses of $100 thousand, $81 thousand in salaries expense and $40 thousand for advertising.

Income Taxes

During the three months ended March 31, 2012, the Company incurred an income tax expense of $138 thousand compared to $175 thousand during the same period in 2011. The effective tax rates for the three-month periods in 2012 and 2011 were 27.17% and 34.25%, respectively. The decrease in income tax expense in 2012 is due to the larger proportion of tax-exempt income, which includes income from municipal securities and bank owned life insurance, to taxable income.

Market Risk, Liquidity and Interest Rate Sensitivity

Asset/liability management involves the funding and investment strategies necessary to maintain an appropriate balance between interest sensitive assets and liabilities. It also involves providing adequate liquidity while sustaining stable growth in net interest income. Regular review and analysis of deposit and loan trends, cash flows in various categories of loans, and monitoring of interest spread relationships are vital to this process.

The conduct of our banking business requires that we maintain adequate liquidity to meet changes in the composition and volume of assets and liabilities due to seasonal, cyclical or other reasons. Liquidity describes the ability of the Company to meet financial obligations that arise during the normal course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of the customers of the Company, as well as for meeting current and future planned expenditures. This liquidity is typically provided by the funds received through customer deposits, investment maturities, loan repayments, borrowings, and income. Management considers the current liquidity position to be adequate to meet the needs of the Company and its customers.

The Company seeks to limit the risks associated with interest rate fluctuations by managing the balance between interest sensitive assets and liabilities. Managing to mitigate interest rate risk is, however, not an exact science. Not only does the interval until repricing of interest rates on assets and liabilities change from day to day as the assets and liabilities change, but for some assets and liabilities, contractual maturity and the actual maturity experienced are not the same. Similarly, NOW and money market accounts, by contract, may be withdrawn in their entirety upon demand and savings deposits may be withdrawn on seven days notice. While these contracts are extremely short, it is the Company’s belief that these accounts turn over at the rate of five percent (5%) per year. The Company therefore treats them as having maturities staggered over all periods. If all of the Company’s NOW, money market, and savings accounts were treated as repricing in one year or less, the cumulative gap at one year or less would be $(107.90) million.

Interest rate sensitivity is an important factor in the management of the composition and maturity configurations of the Company’s earning assets and funding sources. An Asset/Liability Committee manages the interest rate sensitivity position in order to maintain an appropriate balance between the maturity and repricing characteristics of assets and liabilities that is consistent with the Company’s liquidity analysis, growth, and capital adequacy goals. It is the objective of the Asset/Liability Committee to maximize net interest margins during periods of both volatile and stable interest rates, to attain earnings growth, and to maintain sufficient liquidity to satisfy depositors’ requirements and meet credit needs of customers.

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The table below, “Interest Rate Sensitivity Gap Analysis,” summarizes, as of March 31, 2012, the anticipated maturities or repricing of the Company’s interest-earning assets and interest-bearing liabilities, the Company’s interest rate sensitivity gap (interest-earning assets less interest-bearing liabilities), the Company’s cumulative interest rate sensitivity gap, and the Company’s cumulative interest sensitivity gap ratio (cumulative interest rate sensitivity gap divided by total assets). A negative gap for any time period means that more interest-bearing liabilities will reprice or mature during that time period than interest-earning assets. During periods of rising interest rates, a negative gap position would generally decrease earnings, and during periods of declining interest rates, a negative gap position would generally increase earnings. The converse would be true for a positive gap position. Therefore, a positive gap for any time period means that more interest-earning assets will reprice or mature during that time period than interest-bearing liabilities. During periods of rising interest rates, a positive gap position would generally increase earnings, and during periods of declining interest rates, a positive gap position would generally decrease earnings.

It is important to note that the following table represents the static gap position for interest sensitive assets and liabilities at March 31, 2012. The table does not give effect to prepayments or extensions of loans as a result of changes in general market interest rates. Moreover, while the table does indicate the opportunities to reprice assets and liabilities within certain time frames, it does not account for timing differences that occur during periods of repricing. For example, changes to deposit rates tend to lag in a rising rate environment and lead in a falling rate environment, although this will not always be the case. Nor does it account for the effects of competition on pricing of deposits and loans. For example, under current market conditions, market rates paid on deposits may not be able to adjust by the full amount of downward adjustments in the federal funds target rate, while rates on loans will tend to adjust by the full amount, subject to certain limitations. In response to the weak economic climate, the Company has maintained a higher level of liquidity over the past year, mostly in interest-bearing deposits in other banks with the majority being held at the Federal Reserve.

Interest Rate Sensitivity Gap Analysis
March 31, 2012

	Expected Repricing or Maturity Date
(dollars in thousands)	Within One Year		One to Three Years		Three to Five Years		After Five Years		Total
Assets
Interest-bearing deposits in other banks	$30,744		$—		$—		$—		$30,744
Investment securities(1)	951		7,572		13,908		18,888		41,319
Loans	82,272		55,318		55,747		19,958		213,295
Total interest-earning assets	113,967		62,890		69,655		38,846		285,358

Liabilities
Savings and NOW accounts	1,188		2,375		2,375		17,816		23,754
Money Market accounts	4,036		8,072		8,072		60,369		80,549
Certificates of deposit	57,900		32,388		18,393		—		108,681
Short-term borrowings	2,700		—		—		—		2,700
Long-term borrowings	—		—		10,000		—		10,000
Junior subordinated debentures	6,186		—		—		—		6,186
Total interest-bearing liabilities	72,010		42,835		38,840		78,185		231,870
Interest rate sensitivity gap	$41,957		$20,055		$30,815		$(39,339	)	$53,488
Cumulative interest rate sensitivity gap	$41,957		$62,012		$92,827		$53,488
Cumulative gap ratio as a percentage of total assets	13.77	%	20.35	%	30.47	%	17.56	%

(1) Excludes equity securities.

In addition to the Interest Rate Sensitivity Gap Analysis, the Company also uses an earnings simulation model on a quarterly basis to closely monitor interest sensitivity and to expose its balance sheet and income statement to different scenarios. The model is based on current Company data and adjusted by assumptions as to growth patterns, noninterest income and noninterest expense and interest rate sensitivity, based on historical data, for both assets and liabilities projected for a one-year period. The model is then subjected to a “shock test” assuming a sudden prime interest rate increase of 100, 200, 300 and 400 basis points or a decrease for the same amounts, but not below zero. The results show that with a rise in the prime interest rate the Company’s net interest income would increase by 0.33% for 100 basis points, but decrease by 1.25%, 2.83% and 3.96% for 200, 300 and 400 basis points, respectively. A decrease in the prime interest rate of 100 basis points or more was not considered to be feasible since this would infer that the federal funds interest rate would fall below zero.

Certain shortcomings are inherent in this method of analysis. For example, although certain assets and liabilities may have similar maturities or repricing periods, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the loan. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed. Finally, the ability of many borrowers to service their debt may decrease in the event of a significant interest rate increase.

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Critical Accounting Policy:

Allowance for Loan Losses

The Company makes provisions for loan losses in amounts deemed necessary to maintain the allowance for loan losses at an appropriate level. The Company’s provision for loan losses for the three-month periods ended March 31, 2012 and 2011 was $65 thousand and $115 thousand, respectively. The provision for loan losses is determined based upon Management’s estimate of the amount required to maintain an adequate allowance for loan losses reflective of the risks in the Company’s loan portfolio. At March 31, 2012 and December 31, 2011, the allowance for loan losses was $3.29 million and $3.22 million, respectively. The change in the allowance from December 31, 2011 reflects the provision of $65 thousand plus recoveries of $5 thousand, which included no charge-offs, as compared to a provision of $115 thousand plus net recoveries of $9 thousand, consisting of $1 thousand in charge-offs and $10 thousand in recoveries in the same period of 2011. The $10 thousand of recoveries in 2011 is as a result of one (1) commercial and industrial loan relationship.

The Company prepares a quarterly analysis of the allowance for loan losses, with the objective of quantifying portfolio risk into a dollar amount of inherent losses. The determination of the allowance for loan losses is based on eight qualitative factors and one quantitative factor for each category and type of loan along with any specific allowance for adversely classified loans within each category. Each factor is assigned a percentage weight and that total weight is applied to each loan category. Factors are different for each category. Qualitative factors include: levels and trends in delinquencies and nonaccrual loans; trends in volumes and terms of loans; effects of any changes in lending policies, the experience, ability and depth of management; national and local economic trends and conditions; concentrations of credit; quality of the Company’s loan review system; and regulatory requirements. The total allowance required thus changes as the percentage weight assigned to each factor increased or decreased due to the particular circumstances, as the various types and categories of loans change as a percentage of total loans and as specific allowances are required due to increases in adversely classified loans.

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. The allowance is based on two basic principles of accounting: (i) Accounting Standards Codification (“ASC”) Contingencies Topic, which requires that losses be accrued when they are probable of occurring and estimable; and (ii) ASC Receivables Topic, which requires that losses be accrued based on the differences between the loan balance and either the value of collateral, or the present value of future cash flows, or the loan’s value as observable in the secondary market. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impaired loans are any loans that have been classified by internal measurements as substandard or worse. Factors considered by Management in determining impairment include payment status, collateral value, and the projected potential cash flow of the borrower. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and borrower, including the length of the delay, the reason for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The provision for loan losses included in the statements of operations serves to maintain the allowance at a level Management considers adequate.

The Company’s allowance for loan losses has three basic components: the specific allowance, the formula allowance and the pooled allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur. As a result of the uncertainties inherent in the estimation process, Management’s estimate of loan losses and the related allowance could change in the near term.

The specific allowance component is used to individually establish an allowance for loans identified as impaired. When impairment is identified, a specific reserve may be established based on the Company’s calculation of the estimated loss embedded in the individual loan. Impaired loans are any loans that have been classified by internal measurements as substandard or worse. Impairment testing includes consideration of the borrower’s overall financial condition, resources and payment record, support available from financial guarantors and the fair market value of collateral. These factors are combined to estimate the probability and severity of inherent losses. Large groups of smaller balance, homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment.

The formula allowance component is used for estimating the loss on internally risk rated loans meeting the Company’s internal criteria for classification as special mention are segregated from performing loans within the portfolio. These internally classified loans are then grouped by loan type (commercial, commercial real estate, commercial construction, residential real estate, residential construction or installment). Each loan type is assigned an allowance factor based on Management’s estimate of the associated risk, complexity and size of the individual loans within the particular loan category. Classified loans are assigned a higher allowance factor than non-classified loans due to Management’s concerns regarding collectability or Management’s knowledge of particular elements surrounding the borrower. Allowance factors increase with the worsening of the internal risk rating.

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The pooled formula component is used to estimate the losses inherent in the pools of non-classified loans. These loans are then also segregated by loan type and allowance factors are assigned by Management based on delinquencies, loss history, trends in volume and terms of loans, effects of changes in lending policy, the experience and depth of Management, national and local economic trends, concentrations of credit, quality of loan review system and the effect of external factors (i.e. competition and regulatory requirements). The allowance factors assigned differ by loan type.

Allowance factors and overall size of the allowance may change from period to period based on Management’s assessment of the above-described factors and the relative weights given to each factor. In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require the Bank to make additions to the allowance for loan losses based on their judgments of collectibility based on information available to them at the time of their examination.

Management believes that the allowance for loan losses is adequate at March 31, 2012. There can be no assurance, however, that additional provisions for loan losses will not be required in the future, including as a result of changes in the economic assumptions underlying Management’s estimates and judgments, adverse developments in the economy, on a national basis or in the Company’s market area, or changes in the circumstances of particular borrowers.

As of March 31, 2012 and December 31, 2011, the real estate loan portfolio constituted 87% of the total loan portfolio. While this exceeds the 10% threshold for determining a concentration of credit risk within an industry, we do not consider this to be a concentration with adverse risk characteristics given the diversity of borrowers within the real estate portfolio and other sources of repayment. An industry for this purpose is defined as a group of counterparties that are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Additionally, the loan portfolio does not include concentrations of credit risk in residential loan products that permit the deferral of principal payments that are smaller than normal interest accruals (negative amortization); loans with high loan-to-value ratios; or loans, such as option adjustable-rate mortgages, that may expose the borrower to future increases in repayments that are in excess of increases that would result solely from increases in market interest rates. However, the Company does have interest only home equity lines of credit with outstanding balances of $11.04 million of at March 31, 2012.

	Three Months Ended
(dollars in thousands)	March 31, 2012			March 31, 2011
Average total loans outstanding during period	$	212,753		$	207,149
Balance at beginning of period	$	3,216		$	3,718
Recoveries — commercial and industrial	5			10
Total recoveries	5			10
Charge-offs — construction and land development	—			(1		)
Total charge-offs	—			(1		)
Net recoveries (charge-offs)	5			9
Provision charged to operating expenses	65			115
Balance at end of period	$	3,286		$	3,842
Ratios of net charge-offs to average loans	0.00		%	0.00		%

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The allocation of the allowance, presented in the following table, is based primarily on the factors discussed above in evaluating the adequacy of the allowance as a whole. Since all of those factors are subject to change, the allocation is not necessarily indicative of the category of recognized loan losses, and does not restrict the use of the allowance to absorb losses in any category.

	March 31,				December 31,
Allocation of Allowance for Loan Losses (dollars in thousands)	2012		% of Loans		2011		% of Loans
Construction and land development	$	395	8	%	$	326	9	%
Real estate - mortgage loans:
Commercial real estate	2,042		62	%	2,064		62	%
Residential real estate	507		17	%	460		17	%
Total mortgage loans	2,549		79	%	2,524		79	%
Commercial and industrial	328		12	%	351		11	%
Consumer	14		1	%	15		1	%
	$	3,286	100	%	$	3,216	100	%

	March 31,			December 31,
(dollars in thousands)	2012			2011
Nonperforming loans:
Construction and land development	$	1,049		$	1,049
Commercial real estate	786			795
Residential real estate	192			148
Commercial and industrial	—			32
Total nonperforming loans	2,027			2,024
Loans 90 days past due and still accruing	—			—
Total nonperforming loans	2,027			2,024
Foreclosed properties:
Foreclosed properties — commercial real estate	2,995			3,095
Foreclosed properties — residential real estate	396			396
Total foreclosed properties	3,391			3,491
Total nonperforming assets	$	5,418		$	5,515
Nonperforming assets to total assets	1.78		%	1.89		%

There were no other interest-bearing assets at March 31, 2012 or December 31, 2011 classified as past due 90 days or more and still accruing, problem assets, and no non-impaired loans which were currently performing in accordance with their terms, but as to which information known to Management caused it to have serious doubts about the ability of the borrower to comply with the loan as currently written.

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Information concerning the Company’s recorded investment in impaired loans is as follows:

	March 31,		December 31,
(dollars in thousands)	2012		2011
Impaired loans with no allowance:
Construction and land development	$	3,012	$	2,510
Commercial real estate	9,337		9,217
Residential real estate	1,960		1,950
Commercial and industrial	4,024		5,163
Consumer	16		17
Total impaired loans with no allowance	$	18,349	$	18,857
Impaired loans with allowance:
Construction and land development	$	1,005	$	1,771
Commercial real estate	689		689
Residential real estate	751		191
Commercial and industrial	—		32
Total impaired loans with allowance	$	2,445	$	2,683
Specific allocation of allowance	$	359	$	228

	March 31,		December 31,
(dollars in thousands)	2012		2011
Impaired performing loans:
Construction and land development	$	2,968	$	3,232
Commercial real estate	7,153		7,022
Residential real estate	1,402		873
Commercial and industrial	3,756		4,875
Consumer	—		—
Troubled debt restructurings:
Construction and land development	—		—
Commercial real estate	2,087		2,089
Residential real estate	1,117		1,120
Commercial and industrial	268		288
Consumer	16		17
Total impaired performing loans	$	18,767	$	19,516

Impaired nonperforming loans (nonaccrual):
Construction and land development	$	989	$	988
Commercial real estate	232		236
Residential real estate	192		148
Commercial and industrial	—		32
Troubled debt restructurings:
Construction and land development	60		61
Commercial real estate	554		559
Residential real estate	—		—
Commercial and industrial	—		—
Consumer	—		—
Total impaired nonperforming loans	$	2,027	$	2,024
Total impaired loans	$	20,794	$	21,540

At March 31, 2012, there were $18.35 million of impaired loans with no specific reserves that consisted of four (4) construction and land development loans in the aggregate amount to $3.01 million, eighteen (18) commercial real estate loans in the aggregate amount of $9.34 million, ten (10) residential real estate loans in the amount of $1.96 million, twelve (12) commercial and industrial loans totaling $4.02 million and one (1) consumer loan in the amount of $16 thousand. By comparison, at December 31, 2011 there were $18.86 million of impaired loans which required no specific reserves consisting of four (4) construction and land development loans in the aggregate amount to $2.51 million, fifteen (15) commercial real estate loans in the aggregate amount of $9.22 million, eight (8) residential real estate loans for $1.95 million, ten (10) commercial and industrial loans totaling $5.16 million and one (1) consumer loan for $17 thousand. In addition at March 31, 2012, there were $2.45 million of impaired loans, which required specific reserves totaling $359 thousand, that consisted of three (3) construction and land development loans for $1.01 million thousand, four (4) commercial real estate loans in the aggregate amount of $689 million and three (3) residential real estate loan for $751 thousand, compared to $2.68 million of impaired loans, which required specific reserves totaling $228 thousand, that consisted of four (4) construction and land development loans for $1.77 million, four (4) commercial real estate loans in the aggregate amount of $689 thousand, one (1) residential real estate loan for $191 thousand and one (1) commercial and industrial loan totaling $32 thousand at December 31, 2011. All of the impaired loan relationships discussed are in different types of businesses.

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There are no loans that had a specific allowance as of December 31, 2011 that are still in the Company’s loan portfolio as of March 31, 2012 where the specific allowance has been reduced or eliminated.

Loans are placed into a nonaccruing status and classified as nonperforming when the principal or interest has been in default for a period of 90 days or more unless the obligation is well secured and in the process of collection. A debt is “well secured” if it is secured by (i) pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt, (including accrued interest), in full, or (ii) the guarantee of a financially responsible party. A debt is “in the process of collection” if collection on the debt is proceeding in due course either through legal action, including judgment enforcement procedure, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status.

Loans classified as substandard or worse are considered for impairment testing. A substandard loan shows signs of continuing negative financial trends and unprofitability and therefore, is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. The borrower on such loans typically exhibit one or more of the following characteristics: financial ratios and profitability margins are well below industry average; a negative cash flow position exists; debt service capacity is insufficient to the service debt and an improvement in the cash flow position is unlikely within the next twelve months; secondary and tertiary means of debt repayment are weak. Loans classified as substandard are characterized by the probability that the Bank will not collect amounts due according to the contractual terms or sustain some loss if the deficiencies are not corrected.

Loss potential, while existing with respect to the aggregate amount of substandard (or worse) loans, does not have to exist in any individual assets classified as substandard. Such credits are also evaluated for nonaccrual status.

Impaired loans include loans that have been classified as substandard or worse. However, certain of such loans have been paying as agreed and have remained current, with some financial issues related to cash flow that has caused some concern as to the ability of the borrower to perform in accordance with the current loan terms, but it has not been extreme enough to require the loan be put into a nonaccruing status.

The Company does not have a formal modification program such as the Making Home Affordable Program, but instead uses a system whereby loans are modified on a case-by-case basis, based upon an analysis of the individual borrower’s situation and the causes of the weakness in the individual loan. To date, loan modifications have primarily involved commercial real estate mortgages and commercial and industrial loans and have included reducing the interest rate on the loan to a level that is in line with current market rates for similar type loans, converting to an interest only period, usually six to twelve months, or re-amortizing the loan. During the first three months of 2012, the Company has not made any concessions on any residential mortgage loans.

Troubled debt restructured loans, which are included in the total of impaired loans, amounted to $4.10 million as of March 31, 2012. These included loans converted to interest only periods for six to twelve months in the amount of $1.80 million, reduced interest rates on loans in the amount of $954 thousand, and loans that have been re-amortized in the amount of $1.35 million. These loans have specific reserves of $63 thousand based on the collateral value.

As noted above the Company does not have a formal modification program and it does not have any loans as of March 31, 2012 that had been modified and then subsequently re-defaulted.

Loans classified as non-performing are nonaccrual loans and loans 90 days or more past due. The Company does not have any loans 90 days or more past due that are still in an accruing status. If a loan has been modified and it is current as to principal and interest for a period of at least six months then it is classified as a performing loan, otherwise it is considered to be a non-performing loan.

The Company’s charge-off policy states after all collection efforts have been exhausted and the loan is deemed to be a loss, it will be charged to the Company’s established allowance for loan losses. Consumer loans subject to the Uniform Retail Credit Classification are charged-off as follows (a) closed end loans are charged-off no later than 120 days after becoming delinquent, (b) consumer loans to borrowers who subsequently declare bankruptcy, where the Company is an unsecured creditor, are charged-off within 60 days of receipt of the notification from the bankruptcy court, (c) fraudulent loans are charged-off within 90 days of discovery and (d) death of a borrower will cause a charge-off to be incurred at such time an actual loss is determined. All other types of loans are generally evaluated for loss potential at the 90th day past due threshold, and any loss is recognized no later than the 120th day past due threshold; each loss is evaluated on its specific facts regarding the appropriate timing to recognize the loss.

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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 commitments to extend credit, including unused portions of lines of credit, and standby letters of credit. The Company has also entered into long-term lease obligations for some of its premises and equipment, the terms of which generally include options to renew. The above instruments and obligations involve, to varying degrees, elements of off-balance sheet risk in excess of the amount recognized in the consolidated statements of financial condition. With the exception of these instruments and the Company’s obligations relating to its trust preferred securities, the Company does not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Commitments to extend credit and standby letters of credit were as follows:

	March 31,
	2012
(dollars in thousands)	Contractual Amount
Financial instruments whose notional or contract amounts represent credit risk:
Commitments to extend credit	$	28,509
Standby letters of credit		2,045
Total	$	30,554

See Note 9 to the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for additional information regarding the Company’s long-term lease obligations.

Capital Resources

The ability of the Company to grow is dependent on the availability of capital with which to meet regulatory capital requirements, discussed below. To the extent the Company is successful it may need to acquire additional capital through the sale of additional common stock, other qualifying equity instruments, subordinated debt or other qualifying capital instruments. There can be no assurance that additional capital will be available to the Company on a timely basis or on attractive terms. On December 15, 2006, the Company completed the issuance of $6.00 million of trust preferred securities that can be recognized as capital for regulatory purposes. The interest rate on the trust preferred securities and underlying subordinated debentures was a fixed rate of 6.5375% through December 15, 2011, and is adjusted quarterly to 163 basis points over three-month LIBOR. On March 15, 2011, the most recent interest reset date, the interest rate was adjusted to 2.10365% for the period ending June 15, 2012. The Company has an unsecured revolving line of credit borrowing arrangement with an unaffiliated financial institution in the amount of $4.00 million with no outstanding balance as of March 31, 2012 or December 31, 2011. This facility matures on July 22, 2012, has a floating interest rate equal to the Wall Street Journal prime rate, subject to a minimum rate of 3.75%, and requires monthly interest payments only. The purpose of this facility is to provide capital to the Bank, as needed. The Company also has an unsecured borrowing arrangement with an unaffiliated third party in the amount of $2.7 million as of March 31, 2012. This facility was initiated on July 12, 2011 and matures on July 12, 2012, at a fixed rate of 3.00%, and requires quarterly interest payments only. The Bank expects to have these credit facilities renewed, but there can be no assurance.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. The Company will be subject to such requirements when its assets exceed $500 million, it has publicly issued debt or it engages in certain highly leveraged activities. 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 consolidated 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.

Significant further growth of the Company may be limited because the current level of capital will not support rapid short term growth while meeting regulatory capital expectations. Loan portfolio growth will need to be funded primarily by increases in deposits as the Company has limited amounts of on-balance sheets assets deployable into loans. Growth will depend upon Company earnings and/or the raising of additional capital.

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Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes that the Bank met all capital adequacy requirements to which it is subject as of March 31, 2012 and that the Company would meet such requirements if applicable. See Note 10 to the consolidated financial statements for a table depicting compliance with regulatory capital requirements.

As of March 31, 2012, the most recent notification from the regulatory agency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table in Note 10. There are no conditions or events since that notification which management believes have changed the Bank’s category.

On June 26, 2007, the Company authorized the repurchase of up to 146,000 shares of its common stock, for an aggregate expenditure of not more than $4.5 million, through March 31, 2012, or earlier termination of the program by the Board of Directors. Repurchases, if any, by the Company pursuant to this authorization are expected to enable the Company to repurchase its shares at an attractive price, and to provide a source of liquidity for the Company’s shares. As of March 31, 2012, there have been 27,968 shares repurchased by the Company, for an aggregate expenditure totaling $342 thousand, at an average price of $12.22 per share.

Inflation

The effect of changing prices on financial institutions is typically different than on non-banking companies since virtually all of a Company’s assets and liabilities are monetary in nature. In particular, interest rates are significantly affected by inflation, but neither the timing nor magnitude of the changes are directly related to price level indices; therefore, the Company can best counter inflation over the long term by managing net interest income and controlling net increases in noninterest income and expenses.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See “Market Risk, Liquidity and Interest Rate Sensitivity” at Page 27.

Item 4. Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer 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 the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15 under the Securities Act of 1934) during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — Other Information

Item 1. Legal Proceedings. From time to time the Company is a participant in various legal proceedings incidental to its business. In the opinion of management, the liabilities (if any) resulting from such legal proceedings will not have a material effect on the financial position of the Company.

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Item 1A. Risk Factors. Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities. None

(b) Use of Proceeds. Not Applicable.

The following table provides information on the Company’s purchases of its common stock during the quarter ended March 31, 2012.

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
January 1-31, 2012	0	N/A	0	0
February 1-29, 2012	0	N/A	0	0
March 1-31, 2012	0	N/A	0	118,032	(2)

(1) On June 26, 2007, the Company’s Board of Directors approved a share repurchase program that authorizes the repurchase of up to 146,000 shares of the Company’s outstanding common stock, subject to a maximum expenditure of $4.5 million. Repurchases under the program may be made on the open market and in privately negotiated transactions from time to time until June 30, 2012, or earlier termination of the program by the Board.

(2) Subject to a maximum expenditure of $4.5 million. Number of shares indicated is the remaining number of shares authorized for repurchase as of the end of the indicated period.

Item 3. Defaults upon Senior Securities. None

Item 4. Mine Safety Disclosures. None

Item 5. Other Information None

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Item 6. Exhibits

Exhibit No.		Description of Exhibits

3(a)		Articles of Incorporation of the Company, as amended(1)
3(b)		Bylaws of the Company(2)
4(a)		Indenture, dated as of December 15, 2006 between Frederick County Bancorp, Inc. and U.S. Bank National Association, as trustee(3)
4(b)		Amended and Restated Declaration of Trust, dated as December 15, 2006 between Frederick County Bancorp, Inc. and U.S. Bank National Association, as trustee, and Martin S. Lapera and William R. Talley, Jr. as Administrators(3)
4(c)		Guarantee Agreement dated as of December 15, 2006 between Frederick County Bancorp, Inc. and U.S. Bank National Association, as Guarantee Trustee(3)
10(a)		2001 Stock Option Plan(4)
10(b)		Employment Agreement between the Bank and Martin S. Lapera(5)
10(c)		Employment Agreement between the Bank and William R. Talley, Jr. (6)
10(f)		2002 Executive and Director Deferred Compensation Plan, as amended(7)
10(g)		Amendment No. 1 to the 2002 Executive and Director Deferred Compensation Plan(7)
10(h)		Promissory Note with Atlantic Central Bankers Bank (8)
10(i)		Amendment to Loan Documents, filed herein
10(j)		2011 Stock Incentive Plan(10)
11		Statement Regarding Computation of Per Share Income — Please refer to Note 2 to the unaudited consolidated financial statements included herein
21		Subsidiaries of the Registrant
31(a)		Certification of Martin S. Lapera, President and Chief Executive Officer
31(b)		Certification of William R. Talley, Jr., Executive Vice President and Chief Financial Officer
32(a)		Certification of Martin S. Lapera, President and Chief Executive Officer
32(b)		Certification of William R. Talley, Jr., Executive Vice President and Chief Financial Officer
101		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at March 31, 2012 and December 31, 2011, (ii) the Consolidated Statements of Income for the three months ended March 31, 2012 and 2011, (iii) the Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and 2011, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2012 and 2011, (v) the Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011and (iv) the Notes to the Consolidated Financial Statements

(1) Incorporated by reference to Exhibit of the same number to the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004, as filed with the Securities and Exchange Commission.

(2) Incorporated by reference to Exhibit of the same number to the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2003, as filed with the Securities and Exchange Commission.

(3) Not filed in accordance with the provision of Item 601(b)(4)(v) of Regulation SK. The Company agrees to provide a copy of these documents to the Commission upon request.

(4) Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 (No. 333-111761).

(5) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 29, 2009.

(6) Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 29, 2009.

(7) Incorporated by reference to Exhibit of the same number to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2004, as filed with the Securities and Exchange Commission.

(8) Incorporated by reference to Exhibit of the same number to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission.

(9) Incorporated by reference to Exhibit of the same number to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, as filed with the Securities and Exchange Commission.

(10) Incorporated by reference to Exhibit of the same number to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, as filed with the Securities and Exchange Commission.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FREDERICK COUNTY BANCORP, INC.


Date: May 10, 2012	By:	/s/ Martin S. Lapera
		Martin S. Lapera
		President and Chief Executive Officer


Date: May 10, 2012	By:	/s/ William R. Talley, Jr.
		William R. Talley, Jr.
		Executive Vice President, Chief Financial Officer
		and Chief Operating Officer