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 June 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
(Do not check if a smaller reporting company)
    
    Smaller reporting Company þ
 o þ




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##### 



PART 1. FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Statements of Financial Condition (Unaudited) June 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Income (Unaudited) Three months ended June 30, 2008 and June 30, 2007 Six months ended June 30, 2008 and June 30, 2007
    
    
    4Consolidated Statements of Stockholders Equity (Unaudited) Six months ended June 30, 2008 and June 30, 2007
    
    
    5Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30, 2008 and June 30, 2007
    
    
    6Notes to the Interim Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4T. Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22
  2




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##### 



June 30,
    
    December 31,Dollars in thousands, except share data
    
    2008
    
    2007ASSETSCash and due from banks
    
    $
    3,682
    
    
    $
    3,888Interest bearing deposits with banks
    
    
    112
    
    
    
    118Securities available for sale
    
    
    40,137
    
    
    
    36,394Securities held to maturity, fair value
$86,898 in 2008; $87,896 in 2007
    
    
    87,819
    
    
    
    86,811Loans
    
    
    98,070
    
    
    
    94,610Less allowance for loan losses
    
    
    (650
    )
    
    
    (620
    )Net loans
    
    
    97,420
    
    
    
    93,990Premises and equipment, net
    
    
    2,294
    
    
    
    2,347Other assets
    
    
    2,691
    
    
    
    2,249Total assets
    
    $
    234,155
    
    
    $
    225,797LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:DepositsNon-interest bearing
    
    $
    16,575
    
    
    $
    17,205Interest bearing
    
    
    171,034
    
    
    
    163,186Total deposits
    
    
    187,609
    
    
    
    180,391Federal funds purchased
    
    
    2,850
    
    
    
    2,249Other liabilities
    
    
    1,260
    
    
    
    1,327Total liabilities
    
    
    191,719
    
    
    
    183,967Stockholders Equity:Common stock, $1 par value, authorized 2,500,000 shares;
issued 200,000 shares
    
    
    200
    
    
    
    200Paid-in capital
    
    
    753
    
    
    
    753Retained earnings
    
    
    44,629
    
    
    
    43,558Accumulated other comprehensive loss
    
    
    (560
    )
    
    
    (373
    )Treasury stock, at cost 2008 10,303 shares; 2007 9,245 shares
    
    
    (2,586
    )
    
    
    (2,308
    )Total stockholders equity
    
    
    42,436
    
    
    
    41,830Total liabilities and stockholders equity
    
    $
    234,155
    
    
    $
    225,797
  3




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##### 



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Dollars in thousands, except per share data
    
    2008
    
    2007
    
    2008
    
    2007Interest income:Interest and fees on loans
    
    $
    1,615
    
    
    $
    1,484
    
    
    $
    3,171
    
    
    $
    2,905Interest and dividends on investments:Taxable
    
    
    1,179
    
    
    
    992
    
    
    
    2,361
    
    
    
    1,960Exempt from federal income taxes
    
    
    398
    
    
    
    456
    
    
    
    803
    
    
    
    929Interest on federal funds sold and other
    
    
    9
    
    
    
    19
    
    
    
    10
    
    
    
    35Total interest income
    
    
    3,201
    
    
    
    2,951
    
    
    
    6,345
    
    
    
    5,829Interest ExpenseDeposits
    
    
    1,536
    
    
    
    1,504
    
    
    
    3,124
    
    
    
    2,974Borrowings
    
    
    1
    
    
    
    1
    
    
    
    10
    
    
    
    1Total interest expense
    
    
    1,537
    
    
    
    1,505
    
    
    
    3,134
    
    
    
    2,975Net interest income
    
    
    1,664
    
    
    
    1,446
    
    
    
    3,211
    
    
    
    2,854Provision for loan losses
    
    
    15
    
    
    
    
    
    
    
    30
    
    
    
    Net interest income after Provision for loan losses
    
    
    1,649
    
    
    
    1,446
    
    
    
    3,181
    
    
    
    2,854Other income:Service charges on deposit accounts
    
    
    32
    
    
    
    33
    
    
    
    62
    
    
    
    64Other service charges and fees
    
    
    25
    
    
    
    22
    
    
    
    49
    
    
    
    44Other income
    
    
    13
    
    
    
    13
    
    
    
    25
    
    
    
    22Total other income
    
    
    70
    
    
    
    68
    
    
    
    136
    
    
    
    130Other expenses:Salaries and employee benefits
    
    
    351
    
    
    
    342
    
    
    
    704
    
    
    
    688Occupancy
    
    
    49
    
    
    
    37
    
    
    
    93
    
    
    
    70Furniture and equipment
    
    
    67
    
    
    
    65
    
    
    
    134
    
    
    
    132Pennsylvania shares tax
    
    
    106
    
    
    
    101
    
    
    
    212
    
    
    
    202Other expenses
    
    
    203
    
    
    
    187
    
    
    
    352
    
    
    
    357Total other expenses
    
    
    776
    
    
    
    732
    
    
    
    1,495
    
    
    
    1,449Income before income taxes
    
    
    943
    
    
    
    782
    
    
    
    1,822
    
    
    
    1,535Income tax expense
    
    
    196
    
    
    
    117
    
    
    
    370
    
    
    
    222Net income
    
    $
    747
    
    
    $
    665
    
    
    $
    1,452
    
    
    $
    1,313Per share data:Earnings per share, basic
    
    $
    3.93
    
    
    $
    3.36
    
    
    $
    7.63
    
    
    $
    6.63Weighted average common shares outstanding
    
    
    190,152
    
    
    
    197,941
    
    
    
    190,233
    
    
    
    197,941Cash dividends declared per share
    
    $
    
    
    
    $
    
    
    
    $
    2.00
    
    
    $
    2.00
  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
    
    
    
    
    
    
    
    
    
    
    1,313
    
    
    
    
    
    
    
    
    
    
    
    1,313Change in unrealized net losses
on securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    (163
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,150Cash dividends declared on common
stock, $2.00 per share
    
    
    
    
    
    
    
    
    
    
    (396
    )
    
    
    
    
    
    
    
    
    
    
    (396
    )Balance, June 30, 2007
    
    $
    200
    
    
    $
    753
    
    
    $
    42,551
    
    
    $
    (1,110
    )
    
    $
    (418
    )
    
    $
    41,976
 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
    
    
    
    
    
    
    
    
    
    
    1,452
    
    
    
    
    
    
    
    
    
    
    
    1,452Change in unrealized net losses
on securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (187
    )
    
    
    
    
    
    
    (187
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,265Cash dividends declared on common
stock, $2.00 per share
    
    
    
    
    
    
    
    
    
    
    (381
    )
    
    
    
    
    
    
    
    
    
    
    (381
    )Purchase of treasury stock
(1,058 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    (278
    )Balance, June 30, 2008
    
    $
    200
    
    
    $
    753
    
    
    $
    44,629
    
    
    $
    (560
    )
    
    $
    (2,586
    )
    
    $
    42,436
  5




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##### 



Dollars in thousandsSix Months Ended June 30,
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    1,452
    
    
    $
    1,313Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    110
    
    
    
    98Provision for loan losses
    
    
    30
    
    
    
    Net accretion of securities premiums/discounts
    
    
    (201
    )
    
    
    (15
    )Change in assets and liabilities:Increase in:Accrued interest receivable
    
    
    (105
    )
    
    
    (53
    )Other assets
    
    
    (241
    )
    
    
    (135
    )Decrease in:Other liabilities
    
    
    (67
    )
    
    
    (8
    )Net cash provided by operating activities
    
    
    978
    
    
    
    1,200CASH FLOWS FROM INVESTING ACTIVITIESDecrease (increase) in interest bearing deposits
with banks
    
    
    6
    
    
    
    (50
    )Increase in federal funds sold
    
    
    
    
    
    
    (616
    )Purchase of securities available for sale
    
    
    (7,577
    )
    
    
    (1,925
    )Proceeds from maturities/calls of securities available
for sale
    
    
    3,509
    
    
    
    3,471Purchase of securities held to maturity
    
    
    (28,858
    )
    
    
    (5,487
    )Proceeds from maturities/calls of securities held to
maturity
    
    
    28,093
    
    
    
    3,756Net increase in loans
    
    
    (3,460
    )
    
    
    (4,139
    )Purchases of premises and equipment
    
    
    (57
    )
    
    
    (31
    )Net cash used in investing activities
    
    
    (8,344
    )
    
    
    (5,021
    )CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    7,218
    
    
    
    5,010Net decrease in federal funds purchased
    
    
    601
    
    
    
    (357
    )Purchase of treasury stock
    
    
    (278
    )
    
    
    Dividends paid
    
    
    (381
    )
    
    
    (396
    )Net cash provided (used) by financing activities
    
    
    7,160
    
    
    
    4,257Increase (decrease) in cash and cash equivalents
    
    
    (206
    )
    
    
    436Cash and cash equivalents:Beginning
    
    
    3,888
    
    
    
    2,201Ending
    
    $
    3,682
    
    
    $
    2,637Supplementary Cash Flows InformationInterest Paid
    
    $
    3,129
    
    
    $
    2,890Income Taxes Paid
    
    $
    426
    
    
    $
    267
  6




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##### 



NEFFS BANCORP, INC.
 
 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30, 2008
 (Unaudited)
 Note 1. BASIS OF PRESENTATION
     Note 2. COMMITMENTS AND CONTINGENCIES
  7




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##### 



Note 3. COMPREHENSIVE INCOME
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,Dollars in thousands
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Unrealized holding gains (losses)
on available for sale securities
    
    $
    (844
    )
    
    $
    (492
    )
    
    $
    (283
    )
    
    $
    (247
    )Tax effect
    
    
    287
    
    
    
    167
    
    
    
    96
    
    
    
    84Other comprehensive income (loss), net of tax
    
    $
    (557
    )
    
    $
    (325
    )
    
    $
    (187
    )
    
    $
    (163
    )
 Note 4. EARNINGS PER SHARE
  Note 5. GUARANTEES
  Note 6. ADOPTION OF NEW ACCOUNTING STANDARDS
   8




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##### 



(Level 1)Quoted Prices in
    
    (Level 2)
    
    (Level 3)Active Markets for
    
    Significant Other
    
    SignificantDescription
    
    June 30, 2008
    
    Identical Assets
    
    Observable Inputs
    
    Unobservable Inputs(In Thousands)Securities Available for sale
    
    $
    40,137
    
    
    $
    40,137
   Note 7. NEW ACCOUNTING STANDARDS
  9




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##### 



Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  10




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##### 



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
   11




---



##### 



RESULTS OF OPERATIONS
 Average Balances and Average Interest Rates
   Net Interest Income and Net Interest Margin
      12




---



##### 



Provision for Loan Losses
    Non-interest Income
  Non-interest Expense
      13




---



##### 



Provision for Federal Income Taxes
  Return on Average Assets
  14




---



##### 



Return on Average Equity
  FINANCIAL CONDITION
 Securities
     Net Loans Receivable
  Loan and Asset Quality and Allowance for Loan Losses
  15




---



##### 



Nonperforming Loans and Assets
 June
    
    
    December30, 2008
    
    
    31, 2007Nonaccrual loans:
    
    $
    
    
    
    $
    Commercial
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    Real Estate:Construction
    
    
    
    
    
    
    Mortgage
    
    
    
    
    
    
    Total nonaccrual
    
    
    
    
    
    
    Loans past due 90 days or more
    
    
    47
    
    
    
    36Restructured loans
    
    
    
    
    
    
    Total nonperforming loans
    
    
    47
    
    
    
    36Repossessed assets
    
    
    13
    
    
    
    Total nonperforming assets
    
    $
    60
    
    
    $
    36Nonperforming loans to total loans
    
    
    0.05
    %
    
    
    0.04
    %Nonperforming assets to total assets
    
    
    0.03
    %
    
    
    0.02
    %
  Allowance for Loan Losses
 Six Months
    
    
    Six MonthsEnding 6/30/08
    
    
    Ending 6/30/07Balance at beginning of period
    
    $
    620
    
    
    $
    653Provisions charged to operating expenses
    
    
    30
    
    
    
    Recoveries of loans previously charged-offCommercial
    
    
    
    
    
    
    Consumer
    
    
    1
    
    
    
    1Real Estate
    
    
    
    
    
    
    Total recoveries
    
    
    1
    
    
    
    1Loans charged-off:Commercial
    
    
    
    
    
    
    Consumer
    
    
    (1
    )
    
    
    (9
    )Real Estate
    
    
    
    
    
    
    Total charged-off
    
    
    (1
    )
    
    
    (9
    )Net charge-offs
    
    
    
    
    
    
    (8
    )Balance at end of period
    
    $
    650
    
    
    $
    645Net charge-offs as a percentage of average
loans outstanding
    
    
    0.00
    %
    
    
    0.01
    %Allowance for loan losses as a percentage
of period-end loans
    
    
    0.66
    %
    
    
    0.70
    %
 16




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##### 



Deposits
  At June 30,(Dollars in thousands)2008
    
    
    2007Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    RateDemand Deposits:Noninterest-bearing
    
    $
    16,575
    
    
    
    
    
    
    $
    17,346Interest-bearing
    
    
    6,128
    
    
    
    1.01
    
    
    
    6,764
    
    
    
    1.53Savings
    
    
    48,027
    
    
    
    1.81
    
    
    
    47,037
    
    
    
    1.95Time deposits:<$100,000
    
    
    77,767
    
    
    
    4.50
    
    
    
    73,264
    
    
    
    4.58>$100,000
    
    
    39,112
    
    
    
    4.85
    
    
    
    33,700
    
    
    
    4.92Total Deposits
    
    $
    187,609
    
    
    
    
    
    
    $
    178,111
 Interest Rate Sensitivity
     17




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##### 



Liquidity
   Off-Balance Sheet Arrangements
   Capital Adequacy
  18




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##### 



To be WellCapitalizedFor Capital
    
    Under PromptJune 30,
    
    December 31,
    
    Adequacy
    
    Corrective Action2008
    
    2007
    
    Purposes
    
    ProvisionRisk-based capital
ratios:Tier 1 Capital
    
    
    37.2
    %
    
    
    37.9
    %
    
    
    4.0
    %
    
    
    6.0
    %Total Capital
    
    
    37.8
    %
    
    
    38.5
    %
    
    
    8.0
    %
    
    
    10.0
    %Leveraged Capital
    
    
    18.5
    %
    
    
    18.7
    %
    
    
    4.0
    %
    
    
    5.0
    %
  
 Item 3.
 Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4T.
 Controls and Procedures
   19




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##### 



Part II.
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
 a)
    
    An annual meeting of shareholders was held on May 14, 2008 at The
NOVA Building, Coplay, PA.b)
    
    One matter was voted on at the May 14, 2008, meeting as follows:
 Votes against orElection of Directors
    
    Term Expires
    
    Votes Cast For
    
    WithheldJohn J. Remaley
    
    May, 2011
    
    
    156,473
    
    
    
    1,367John F. Sharkey, Jr.
    
    May, 2011
    
    
    156,740
    
    
    
    1,100Herman P. Snyder
    
    May, 2011
    
    
    155,819
    
    
    
    2,021
 Directors whose term continued after the meeting
    
    Term ExpiresDuane A. Schleicher
    
    May, 2009John F. Simock
    
    May, 2009Mary Ann Wagner
    
    May, 2009Robert B. Heintzelman
    
    May, 2010Kevin A. Schmidt
    
    May, 2010
 20




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##### 



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 2002.32.1
    
    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.
 21




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##### 



SIGNATURES
  NEFFS BANCORP, INC.Date: August 13, 2008
    
    /s/ John J. RemaleyJohn J. Remaley, President
 22