UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For
the quarter ended September 30, 2008
 OR
 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 0 32605
 NEFFS BANCORP, INC.
  Pennsylvania
    
    23-2400383(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 5629 PA Route 873, P.O. Box 10, Neffs, PA l8065-0010
 (Issuers telephone number)
  þ o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company
þ(Do not check if a smaller reporting company)
  o þ




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##### 



PART 1. FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Statements of Financial Condition (Unaudited)
September 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Income (Unaudited)
Three months ended September 30, 2008 and September 30, 2007
Nine months ended September 30, 2008 and September 30, 2007
    
    
    4Consolidated Statements of Stockholders Equity (Unaudited)
Nine months ended September 30, 2008 and September 
30, 2007
    
    
    5Consolidated Statements of Cash Flows (Unaudited)
Nine  months ended September 30, 2008 and September 30, 2007
    
    
    6Notes to the Interim Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4T. Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22SIGNATURES
    
    
    24
  2




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##### 



September 30,
    
    December 31,Dollars in thousands, except share data
    
    2008
    
    2007ASSETSCash and due from banks
    
    $
    3,573
    
    
    $
    3,888Interest bearing deposits with banks
    
    
    109
    
    
    
    118Securities available for sale
    
    
    39,428
    
    
    
    36,394Securities held to maturity, fair value
$87,942 in 2008; $87,896 in 2007
    
    
    88,074
    
    
    
    86,811Loans
    
    
    99,721
    
    
    
    94,610Less allowance for loan losses
    
    
    (687
    )
    
    
    (620
    )Net loans
    
    
    99,034
    
    
    
    93,990Premises and equipment, net
    
    
    2,307
    
    
    
    2,347Other assets
    
    
    2,395
    
    
    
    2,249Total assets
    
    $
    234,920
    
    
    $
    225,797LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:DepositsNon-interest bearing
    
    $
    15,915
    
    
    $
    17,205Interest bearing
    
    
    173,633
    
    
    
    163,186Total deposits
    
    
    189,548
    
    
    
    180,391Federal funds purchased
    
    
    595
    
    
    
    2,249Other liabilities
    
    
    1,600
    
    
    
    1,327Total liabilities
    
    
    191,743
    
    
    
    183,967Stockholders Equity:Common stock, $1 par value, authorized 2,500,000 shares;
issued 200,000 shares
    
    
    200
    
    
    
    200Paid-in capital
    
    
    753
    
    
    
    753Retained earnings
    
    
    45,020
    
    
    
    43,558Accumulated other comprehensive loss
    
    
    (168
    )
    
    
    (373
    )Treasury stock, at cost 2008 10,464 shares; 2007 9,245 shares
    
    
    (2,628
    )
    
    
    (2,308
    )Total stockholders equity
    
    
    43,177
    
    
    
    41,830Total liabilities and stockholders equity
    
    $
    234,920
    
    
    $
    225,797
  3




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##### 



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Dollars in thousands, except per share data
    
    2008
    
    2007
    
    2008
    
    2007Interest income:Interest and fees on loans
    
    $
    1,655
    
    
    $
    1,536
    
    
    $
    4,826
    
    
    $
    4,441Interest and dividends on investments:Taxable
    
    
    1,222
    
    
    
    1,049
    
    
    
    3,595
    
    
    
    3,009Exempt from federal income taxes
    
    
    373
    
    
    
    437
    
    
    
    1,164
    
    
    
    1,366Interest on federal funds sold and other
    
    
    1
    
    
    
    17
    
    
    
    11
    
    
    
    52Total interest income
    
    
    3,251
    
    
    
    3,039
    
    
    
    9,596
    
    
    
    8,868Interest ExpenseDeposits
    
    
    1,492
    
    
    
    1,534
    
    
    
    4,616
    
    
    
    4,508Borrowings
    
    
    11
    
    
    
    
    
    
    
    21
    
    
    
    1Total interest expense
    
    
    1,503
    
    
    
    1,534
    
    
    
    4,637
    
    
    
    4,509Net interest income
    
    
    1,748
    
    
    
    1,505
    
    
    
    4,959
    
    
    
    4,359Provision for loan losses
    
    
    38
    
    
    
    
    
    
    
    68
    
    
    
    Net interest income after provision for loan losses
    
    
    1,710
    
    
    
    1,505
    
    
    
    4,891
    
    
    
    4,359Other income:Service charges on deposit accounts
    
    
    36
    
    
    
    36
    
    
    
    98
    
    
    
    100Other service charges and fees
    
    
    26
    
    
    
    24
    
    
    
    75
    
    
    
    68Other income
    
    
    9
    
    
    
    11
    
    
    
    34
    
    
    
    33Total other income
    
    
    71
    
    
    
    71
    
    
    
    207
    
    
    
    201Other expenses:Salaries and employee benefits
    
    
    358
    
    
    
    341
    
    
    
    1,062
    
    
    
    1,029Occupancy
    
    
    83
    
    
    
    64
    
    
    
    171
    
    
    
    134Furniture and equipment
    
    
    68
    
    
    
    69
    
    
    
    200
    
    
    
    201Pennsylvania shares tax
    
    
    106
    
    
    
    100
    
    
    
    318
    
    
    
    302Other expenses
    
    
    164
    
    
    
    150
    
    
    
    523
    
    
    
    507Total other expenses
    
    
    779
    
    
    
    724
    
    
    
    2,274
    
    
    
    2,173Income before income taxes
    
    
    1,002
    
    
    
    852
    
    
    
    2,824
    
    
    
    2,387Income tax expense
    
    
    232
    
    
    
    148
    
    
    
    602
    
    
    
    370Net income
    
    $
    770
    
    
    $
    704
    
    
    $
    2,222
    
    
    $
    2,017Per share data:Earnings per share, basic
    
    $
    4.06
    
    
    $
    3.57
    
    
    $
    11.69
    
    
    $
    10.21Weighted average common shares outstanding
    
    
    189,676
    
    
    
    197,004
    
    
    
    190,046
    
    
    
    197,625Cash dividends declared per share
    
    $
    2.00
    
    
    $
    2.00
    
    
    $
    4.00
    
    
    $
    4.00
  4




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##### 



AccumulatedOther
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersDollars in thousands, except per share data
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    EquityBalance, December 31, 2006
    
    $
    200
    
    
    $
    753
    
    
    $
    41,634
    
    
    $
    (947
    )
    
    $
    (418
    )
    
    $
    41,222Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    2,017
    
    
    
    
    
    
    
    
    
    
    
    2,017Change in unrealized net losses
on securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    200Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,217Cash dividends declared on common
stock, $4.00 per share
    
    
    
    
    
    
    
    
    
    
    (777
    )
    
    
    
    
    
    
    
    
    
    
    (777
    )Purchase of treasury stock
(7,186 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,890
    )
    
    
    (1,890
    )Balance, September 30, 2007
    
    $
    200
    
    
    $
    753
    
    
    $
    42,874
    
    
    $
    (747
    )
    
    $
    (2,308
    )
    
    $
    40,772
 AccumulatedOther
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersDollars in thousands, except per share data
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    EquityBalance, December 31, 2007
    
    $
    200
    
    
    $
    753
    
    
    $
    43,558
    
    
    $
    (373
    )
    
    $
    (2,308
    )
    
    $
    41,830Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    2,222
    
    
    
    
    
    
    
    
    
    
    
    2,222Change in unrealized net losses
on securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    205Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,427Cash dividends declared on common
stock, $4.00 per share
    
    
    
    
    
    
    
    
    
    
    (760
    )
    
    
    
    
    
    
    
    
    
    
    (760
    )Purchase of treasury stock

(1,219 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (320
    )
    
    
    (320
    )Balance, September 30, 2008
    
    $
    200
    
    
    $
    753
    
    
    $
    45,020
    
    
    $
    (168
    )
    
    $
    (2,628
    )
    
    $
    43,177
  5




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##### 



Dollars in thousandsNine Months Ended September 30,
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    2,222
    
    
    $
    2,017Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    165
    
    
    
    151Provision for loan losses
    
    
    68
    
    
    
    Net accretion of securities premiums/discounts
    
    
    (320
    )
    
    
    (47
    )Change in assets and liabilities:Increase in:Accrued interest receivable
    
    
    (121
    )
    
    
    (186
    )Other assets
    
    
    (131
    )
    
    
    (40
    )Decrease in:Other liabilities
    
    
    (106
    )
    
    
    62Net cash provided by operating activities
    
    
    1,777
    
    
    
    1,957CASH FLOWS FROM INVESTING ACTIVITIESDecrease (increase) in interest bearing deposits
with banks
    
    
    9
    
    
    
    (61
    )Increase in federal funds sold
    
    
    
    
    
    
    (3,700
    )Purchase of securities available for sale
    
    
    (8,050
    )
    
    
    (1,925
    )Proceeds from maturities/calls of securities available
for sale
    
    
    5,268
    
    
    
    5,019Purchase of securities held to maturity
    
    
    (30,617
    )
    
    
    (9,417
    )Proceeds from maturities/calls of securities held to
maturity
    
    
    29,733
    
    
    
    6,546Net increase in loans
    
    
    (5,112
    )
    
    
    (5,731
    )Purchases of premises and equipment
    
    
    (125
    )
    
    
    (39
    )Net cash used in investing activities
    
    
    (8,894
    )
    
    
    (9,308
    )CASH FLOWS FROM FINANCING ACTIVITIESNet increase in deposits
    
    
    9,157
    
    
    
    10,625Net decrease in federal funds purchased
    
    
    (1,654
    )
    
    
    (357
    )Dividends paid
    
    
    (381
    )
    
    
    (396
    )Purchase of treasury stock
    
    
    (320
    )
    
    
    (1,890
    )Net cash provided by financing activities
    
    
    6,802
    
    
    
    7,982Increase (decrease) in cash and cash equivalents
    
    
    (315
    )
    
    
    631Cash and cash equivalents:Beginning
    
    
    3,888
    
    
    
    2,201Ending
    
    $
    3,573
    
    
    $
    2,832Supplementary Cash Flows InformationInterest Paid
    
    $
    4,710
    
    
    $
    4,390Income Taxes Paid
    
    $
    676
    
    
    $
    410
  6




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##### 



NEFFS BANCORP, INC.
 
 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2008
 (Unaudited)
 Note 1. BASIS OF PRESENTATION
    Note 2. COMMITMENTS AND CONTINGENCIES
  Note 3. COMPREHENSIVE INCOME
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,Dollars in thousands
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Unrealized holding gains on
available for sale securities
    
    $
    594
    
    
    $
    550
    
    
    $
    311
    
    
    $
    303Tax effect
    
    
    (202
    )
    
    
    (187
    )
    
    
    (106
    )
    
    
    (103
    )Other comprehensive income, net of tax
    
    $
    392
    
    
    $
    363
    
    
    $
    205
    
    
    $
    200
 7




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##### 



Note 4. EARNINGS PER SHARE
  Note 5. GUARANTEES
  Note 6. ADOPTION OF NEW ACCOUNTING STANDARDS
       8




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##### 



(Level 1)
    
    (Level 2)Quoted Prices
    
    Significant
    
    (Level 3)in Active
    
    Other
    
    SignificantSeptember 30,
    
    Markets for
    
    Observable
    
    UnobservableDescription
    
    2008
    
    Identical Assets
    
    Inputs
    
    Inputs(In Thousands)Securities Available for sale
    
    $
    39,428
    
    
    $
    39,428
      9




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##### 



Note 7. NEW ACCOUNTING STANDARDS
  10




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##### 



11




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##### 



Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS
    v
    
    operating, legal and regulatory risks;v
    
    economic, political, and competitive forces affecting banking, securities, asset
management and credit services businesses; andv
    
    the risk that managements analyses of these risks and forces could be incorrect and/or
that the strategies developed to address them could be unsuccessful.
  CRITICAL ACCOUNTING POLICIES
  OVERVIEW
  12




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##### 



RESULTS OF OPERATIONS
 Average Balances and Average Interest Rates
   Net Interest Income and Net Interest Margin
     13




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##### 



Provision for Loan Losses
    Non-interest Income
  Non-interest Expense
      14




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##### 



Provision for Federal Income Taxes
  Return on Average Assets
  15




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##### 



Return on Average Equity
  FINANCIAL CONDITION
 Securities
     Net Loans Receivable
  Loan and Asset Quality and Allowance for Loan Losses
  16




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##### 



Nonperforming Loans and Assets
 September
    
    
    December30, 2008
    
    
    31, 2007Nonaccrual loans:
    
    $
    
    
    
    $
    Commercial
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    Real Estate:Construction
    
    
    
    
    
    
    Mortgage
    
    
    
    
    
    
    Total nonaccrual
    
    
    
    
    
    
    Loans past due 90 days or more
    
    
    194
    
    
    
    36Restructured loans
    
    
    
    
    
    
    Total nonperforming loans
    
    
    194
    
    
    
    36Repossessed assets
    
    
    
    
    
    
    Total nonperforming assets
    
    $
    194
    
    
    $
    36Nonperforming loans to total loans
    
    
    0.19
    %
    
    
    0.04
    %Nonperforming assets to total assets
    
    
    0.08
    %
    
    
    0.02
    %
  Allowance for Loan Losses
 Nine Months
    
    
    Nine MonthsEnding 9/30/08
    
    
    Ending 9/30/07Balance at beginning of period
    
    $
    620
    
    
    $
    653Provisions charged to operating expenses
    
    
    68
    
    
    
    Recoveries of loans previously charged-offCommercial
    
    
    
    
    
    
    Consumer
    
    
    1
    
    
    
    4Real Estate
    
    
    
    
    
    
    Total recoveries
    
    
    1
    
    
    
    4Loans charged-off:Commercial
    
    
    
    
    
    
    Consumer
    
    
    (2
    )
    
    
    (14
    )Real Estate
    
    
    
    
    
    
    Total charged-off
    
    
    (2
    )
    
    
    (14
    )Net charge-offs
    
    
    (1
    )
    
    
    (10
    )Balance at end of period
    
    $
    687
    
    
    $
    643Net charge-offs as a percentage of average
loans outstanding
    
    
    0.00
    %
    
    
    0.01
    %Allowance for loan losses as a percentage
of
period-end loans
    
    
    0.69
    %
    
    
    0.69
    %
 17




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##### 



Deposits
  At September 30,(Dollars in thousands)2008
    
    
    2007Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateDemand Deposits:Noninterest-bearing
    
    $
    15,915
    
    
    
    
    
    
    $
    18,052Interest-bearing
    
    
    6,246
    
    
    
    0.73
    
    
    
    6,302
    
    
    
    1.70Savings
    
    
    47,921
    
    
    
    1.69
    
    
    
    49,368
    
    
    
    1.92Time deposits:<$100,000
    
    
    78,426
    
    
    
    4.25
    
    
    
    73,470
    
    
    
    4.62>$100,000
    
    
    41,040
    
    
    
    4.64
    
    
    
    36,533
    
    
    
    4.99Total Deposits
    
    $
    189,548
    
    
    
    
    
    
    $
    183,726
 Interest Rate Sensitivity
     18




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##### 



Liquidity
   Off-Balance Sheet Arrangements
   Capital Adequacy
  19




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##### 



To be WellCapitalizedFor Capital
    
    Under PromptSeptember 30,
    
    December 31,
    
    Adequacy
    
    Corrective Action2008
    
    2007
    
    Purposes
    
    ProvisionRisk-based capital
ratios:Tier 1 Capital
    
    
    37.4
    %
    
    
    37.9
    %
    
    
    4.0
    %
    
    
    6.0
    %Total Capital
    
    
    38.0
    %
    
    
    38.5
    %
    
    
    8.0
    %
    
    
    10.0
    %Leveraged Capital
    
    
    18.4
    %
    
    
    18.7
    %
    
    
    4.0
    %
    
    
    5.0
    %
  
 Item 3.
 Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4T.
 Controls and Procedures
  20




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##### 



Part II.
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
     21




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##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total
    
    
    MaximumNumber
    
    
    Number ofof Shares
    
    
    Shares thatTotal
    
    
    
    
    
    
    Purchased as
    
    
    may yet beNumber
    
    
    Average
    
    
    Part of
    
    
    Purchasedof
    
    
    Price
    
    
    Publicly
    
    
    Under theShares
    
    
    Paid per
    
    
    Announced Plans
    
    
    Plans orPurchased
    
    
    Share
    
    
    or Programs
    
    
    ProgramsJuly 1 through July 31, 2008
    
    
    
    
    
    $
    
    
    
    NA
    
    NAAugust 1 through August 31, 2008
    
    
    41
    
    
    
    263
    
    
    NA
    
    NASeptember 1 through September 31, 2008
    
    
    120
    
    
    
    263
    
    
    NA
    
    NATotal
    
    
    161
    
    
    $
    263
    
    
    NA
    
    NA
 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 3(i)
    
    Amended and Restated Articles of Incorporation for Neffs Bancorp, Inc.
(Incorporated by reference to Exhibit 3(i) to the Form 10 filed with the
Commission on April 27, 2001, as amended on June 29, 2001 and
July 20, 2001.)3(ii)
    
    Amended and Restated By-laws of Neffs Bancorp, Inc. (Incorporated by
reference to Exhibit 99.1 to the Form 8K filed with the Commission
on February 27, 2002.)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes Oxley Act of 2002.31.2
    
    Certification of Principal Financial Officer pursuant to Section 302 of the
Sarbanes Oxley Act of 2002.
 22




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##### 



32.1
    
    Certification of Chief Executive Officer pursuant to Section 1350 of the
Sarbanes Oxley Act of 2002.32.2
    
    Certification of Principal Financial Officer pursuant to Section 1350 of
the Sarbanes Oxley Act of 2002.
 23




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SIGNATURES
  NEFFS BANCORP, INC.Date: November 14, 2008
    
    /s/ John J. RemaleyJohn J. Remaley, President
 24