Hunter Hollar - Chairman and Chief Executive Officer Phil Mantua - Chief Financial Officer Dan Schrider - Chief Credit Officer and President, Ron Kuykendall - General Counsel

Jennifer Demba - SunTrust Robinson Humphrey Dave West - Davenport & Company Mark Hughes - Lafayette Investments Bryce Rowe - Robert W Baird Greg Vennett - Smith Barney

In this economic environment, even having stuck to our traditional conservative loan origination standards, we still felt it imperative that we set aside a provision for loan and lease losses that totaled $6.2 million for the second quarter of 2008, compared to $600,000 for the second quarter of 2007 and $2.7 million for the linked first quarter of 2008. These increases were primarily due to a higher level of nonperforming loans, specifically in the residential real estate development portfolio.

More about that shortly. The allowance for loan and lease losses represented 1.38% of total outstanding loans and leases at June 30th, 2008, which we think will be in line with our peers and is a good level of reserve coverage for us in light of the current market conditions.

Nonperforming assets totaled $64.9 million at June 30th, 2008 compared to $46.9 million at March 31st, 2008, and $22.2 million at June 30th, 2007, a year ago. The increase over the linked first quarter of 2008 was due primarily to two commercial construction loans totaling $10.6 million, which we believe are adequately reserved or well secured.

In this economic environment, even having stuck to our traditional conservative loan origination standards, we still felt it imperative that we set aside a provision for loan and lease losses that totaled $6.2 million for the second quarter of 2008, compared to $600,000 for the second quarter of 2007 and $2.7 million for the linked first quarter of 2008. These increases were primarily due to a higher level of nonperforming loans, specifically in the residential real estate development portfolio.

More about that shortly. The allowance for loan and lease losses represented 1.38% of total outstanding loans and leases at June 30th, 2008, which we think will be in line with our peers and is a good level of reserve coverage for us in light of the current market conditions.

Nonperforming assets totaled $64.9 million at June 30th, 2008 compared to $46.9 million at March 31st, 2008, and $22.2 million at June 30th, 2007, a year ago. The increase over the linked first quarter of 2008 was due primarily to two commercial construction loans totaling $10.6 million, which we believe are adequately reserved or well secured.

In this economic environment, even having stuck to our traditional conservative loan origination standards, we still felt it imperative that we set aside a provision for loan and lease losses that totaled $6.2 million for the second quarter of 2008, compared to $600,000 for the second quarter of 2007 and $2.7 million for the linked first quarter of 2008. These increases were primarily due to a higher level of nonperforming loans, specifically in the residential real estate development portfolio.

More about that shortly. The allowance for loan and lease losses represented 1.38% of total outstanding loans and leases at June 30th, 2008, which we think will be in line with our peers and is a good level of reserve coverage for us in light of the current market conditions.

Nonperforming assets totaled $64.9 million at June 30th, 2008 compared to $46.9 million at March 31st, 2008, and $22.2 million at June 30th, 2007, a year ago. The increase over the linked first quarter of 2008 was due primarily to two commercial construction loans totaling $10.6 million, which we believe are adequately reserved or well secured.

In this economic environment, even having stuck to our traditional conservative loan origination standards, we still felt it imperative that we set aside a provision for loan and lease losses that totaled $6.2 million for the second quarter of 2008, compared to $600,000 for the second quarter of 2007 and $2.7 million for the linked first quarter of 2008. These increases were primarily due to a higher level of nonperforming loans, specifically in the residential real estate development portfolio.

More about that shortly. The allowance for loan and lease losses represented 1.38% of total outstanding loans and leases at June 30th, 2008, which we think will be in line with our peers and is a good level of reserve coverage for us in light of the current market conditions.

Nonperforming assets totaled $64.9 million at June 30th, 2008 compared to $46.9 million at March 31st, 2008, and $22.2 million at June 30th, 2007, a year ago. The increase over the linked first quarter of 2008 was due primarily to two commercial construction loans totaling $10.6 million, which we believe are adequately reserved or well secured.

In this economic environment, even having stuck to our traditional conservative loan origination standards, we still felt it imperative that we set aside a provision for loan and lease losses that totaled $6.2 million for the second quarter of 2008, compared to $600,000 for the second quarter of 2007 and $2.7 million for the linked first quarter of 2008. These increases were primarily due to a higher level of nonperforming loans, specifically in the residential real estate development portfolio.

More about that shortly. The allowance for loan and lease losses represented 1.38% of total outstanding loans and leases at June 30th, 2008, which we think will be in line with our peers and is a good level of reserve coverage for us in light of the current market conditions.

Nonperforming assets totaled $64.9 million at June 30th, 2008 compared to $46.9 million at March 31st, 2008, and $22.2 million at June 30th, 2007, a year ago. The increase over the linked first quarter of 2008 was due primarily to two commercial construction loans totaling $10.6 million, which we believe are adequately reserved or well secured.

That means recognizing any signs of weakness within our retail or commercial portfolios very early. We try to do this with a very disciplined approach, day in and day out.

The impact of the economic downturn on our credit quality, for the most part, has been in areas directly or indirectly related to the residential real estate markets. We operate in a footprint that is a very fluent demographics and it naturally follows that real estate is a big economic driver.

To a lesser extent the economic downturn has also hit our small business customers. Specifically ones who lack longevity in the market place.

In other words, the less established segment of the overall small business base.

That means recognizing any signs of weakness within our retail or commercial portfolios very early. We try to do this with a very disciplined approach, day in and day out.

The impact of the economic downturn on our credit quality, for the most part, has been in areas directly or indirectly related to the residential real estate markets. We operate in a footprint that is a very fluent demographics and it naturally follows that real estate is a big economic driver.

To a lesser extent the economic downturn has also hit our small business customers. Specifically ones who lack longevity in the market place.

In other words, the less established segment of the overall small business base.

That means recognizing any signs of weakness within our retail or commercial portfolios very early. We try to do this with a very disciplined approach, day in and day out.

The impact of the economic downturn on our credit quality, for the most part, has been in areas directly or indirectly related to the residential real estate markets. We operate in a footprint that is a very fluent demographics and it naturally follows that real estate is a big economic driver.

To a lesser extent the economic downturn has also hit our small business customers. Specifically ones who lack longevity in the market place.

In other words, the less established segment of the overall small business base.

That means recognizing any signs of weakness within our retail or commercial portfolios very early. We try to do this with a very disciplined approach, day in and day out.

The impact of the economic downturn on our credit quality, for the most part, has been in areas directly or indirectly related to the residential real estate markets. We operate in a footprint that is a very fluent demographics and it naturally follows that real estate is a big economic driver.

To a lesser extent the economic downturn has also hit our small business customers. Specifically ones who lack longevity in the market place.

In other words, the less established segment of the overall small business base.

That means recognizing any signs of weakness within our retail or commercial portfolios very early. We try to do this with a very disciplined approach, day in and day out.

The impact of the economic downturn on our credit quality, for the most part, has been in areas directly or indirectly related to the residential real estate markets. We operate in a footprint that is a very fluent demographics and it naturally follows that real estate is a big economic driver.

To a lesser extent the economic downturn has also hit our small business customers. Specifically ones who lack longevity in the market place.

In other words, the less established segment of the overall small business base.

Good afternoon.

Hello.

Couple of questions. One, your loan growth 12% annualized.

Do you anticipate keeping the double-digit type rate of loan growth and do you feel comfortable with that in this environment? You seemed to indicate earlier in your opening remarks that you felt like that was pretty conservative.

If we look at your non-performers geographically would they be weighted towards Virginia or Maryland?

Non-performers would be weighted toward Maryland.

How much of your residential construction and development book and your retail lots or outer markets versus not?

Retail lots is tends to all be within our footprint. The residential building market, I mean, the building business is, is on the outskirts of our market and I would say the majority of that is, as opposed to our core market of Montgomery and Howard and Arundel County.

Jennifer just to add, the people that we have added that Dan mentioned the three, are people with significant experience in workouts.

Yes.

And where did they come from?

They came from other local banking institutions.

Thank you.

David, this is Phil. That exposure would be basically zero.

The only thing that we do hold is as you just mentioned the traditional mortgage-backed type assets that are in our investment portfolio.

Okay, but the goodwill that came out of Potomac and Athenian were probably predominantly in the banking segment, is that correct?

Absolutely. It was all in the banking segment, 100%.

Very good. Thanks very much.

Thank you.

Good afternoon. Can you hear me?

Hey, Mark, yes, sure I can.

Great. One final question, where are you on the Sussex county property and working that out?

Good. Okay.

Thank you for the information.

Thank you, Mark.

Thanks. Good afternoon.

Hey, Bryce.

Bryce.

Okay. And Dan as far as the updated appraisals go, what kind of I guess decline value have you seen, relative to origination value or perceived origination value?

Exactly. And Dan, is that values on finished homes or, or homes being sold or is that, is that values on the raw land or developed land?

Okay. One more question on the margin.

So what was the impact in the non-accruals to the margin this quarter?

Okay. And then from a deposit competition perspective, you guys mentioned it in the release, as it being very competitive.

Do you see any further ability to cut the average cost of CDC? Or is it going to stay where it was in the second quarter?

Average cost of CDs, Bryce is that what you said?

Okay. Thanks, Phil.

Good afternoon.

Good afternoon.

Hi, Greg.

Hi, how are you? Do you anticipate that you all may have to raise capital?

I was off the call maybe you had said something about that, but a number of banks are talking about coming out with like trust prefers or something like that in order to raise capital. Do you feel that you might have to do that?

Okay. Second question is, on the four pieces of the nonperforming loan portfolio, the outlying properties, I guess the Sussex County properties, is that considered a site development or an entitlement processor or vertical construction or raw land?

Which category do they fall into?

The non-performers as a whole fall into really all of those categories, depending upon the specific project.

Is there still --

Do you know how many lots or you do know how many lots are there?

It is very customary in this lending, our underwriting standards would obviously have the underlying property as the primary collateral as well as the principals that are part of that, that business to also offer their and lend their support. But every project is structured slightly different based upon the risks of that particular transaction.

But very safe to say that the principals as well as the underlying collateral support the loan.

Yes.

All right. So the, the borrower has a lot to lose in other words?

Yes.

Okay. Thank you.