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 endedMarch 31, 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)
March 31, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Income (Unaudited)
Three months ended March 31, 2008 and March 31, 2007
    
    
    4Consolidated Statements of Stockholders Equity (Unaudited)
Three months ended March 31, 2008 and March 31, 2007
    
    
    5Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 2008 and March 31, 2007
    
    
    6Notes to the Interim Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4.
    
    Controls and Procedures
    
    
    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
    
    
    20Item 6.
    
    Exhibits
    
    
    20SIGNATURES
    
    
    22




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##### 



March 31,
    
    December 31,Dollars in thousands, except share data
    
    2008
    
    2007ASSETSCash and due from banks
    
    $
    3,705
    
    
    $
    3,888Interest bearing deposits with banks
    
    
    172
    
    
    
    118Federal funds sold
    
    
    2,080
    
    
    
    Securities available for sale
    
    
    39,229
    
    
    
    36,394Securities held to maturity, fair value
$85,647 in 2008;$87,896 in 2007
    
    
    84,388
    
    
    
    86,811Loans
    
    
    95,084
    
    
    
    94,610Less allowance for loan losses
    
    
    (636
    )
    
    
    (620
    )Net loans
    
    
    94,448
    
    
    
    93,990Premises and equipment, net
    
    
    2,305
    
    
    
    2,347Other assets
    
    
    2,803
    
    
    
    2,249Total assets
    
    $
    229,130
    
    
    $
    225,797LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:DepositsNon-interest bearing
    
    $
    16,224
    
    
    $
    17,205Interest bearing
    
    
    168,445
    
    
    
    163,186Total deposits
    
    
    184,669
    
    
    
    180,391Federal funds purchased
    
    
    
    
    
    
    2,249Other liabilities
    
    
    2,065
    
    
    
    1,327Total liabilities
    
    
    186,734
    
    
    
    183,967Stockholders Equity:Common stock, $1 par value, authorized 2,500,000 shares;
issued 200,000 shares; outstanding 2008 190,267
shares;
2007 190,755 shares
    
    
    200
    
    
    
    200Paid-in capital
    
    
    753
    
    
    
    753Retained earnings
    
    
    43,882
    
    
    
    43,558Accumulated other comprehensive loss
    
    
    (3
    )
    
    
    (373
    )Treasury stock, at cost 2008 9,733 shares; 2007 9,245 shares
    
    
    (2,436
    )
    
    
    (2,308
    )Total stockholders equity
    
    
    42,396
    
    
    
    41,830Total liabilities and stockholders equity
    
    $
    229,130
    
    
    $
    225,797
  3




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##### 



Three Months EndedMarch 31,Dollars in thousands, except per share data
    
    2008
    
    2007Interest income:Interest and fees on loans
    
    $
    1,556
    
    
    $
    1,421Interest and dividends on investments:Taxable
    
    
    1,182
    
    
    
    968Exempt from federal income taxes
    
    
    405
    
    
    
    473Interest on federal funds sold and other
    
    
    1
    
    
    
    16Total interest income
    
    
    3,144
    
    
    
    2,878Interest ExpenseDeposits
    
    
    1,588
    
    
    
    1,470Borrowings
    
    
    9
    
    
    
    Total interest expense
    
    
    1,597
    
    
    
    1,470Net interest income
    
    
    1,547
    
    
    
    1,408Provision for loan losses
    
    
    15
    
    
    
    Net interest income after Provision for loan losses
    
    
    1,532
    
    
    
    1,408Other income:Service charges on deposit accounts
    
    
    30
    
    
    
    31Other service charges and fees
    
    
    24
    
    
    
    22Other income
    
    
    12
    
    
    
    9Total other income
    
    
    66
    
    
    
    62Other expenses:Salaries and employee benefits
    
    
    353
    
    
    
    346Occupancy
    
    
    44
    
    
    
    33Furniture and equipment
    
    
    67
    
    
    
    67Pennsylvania shares tax
    
    
    106
    
    
    
    101Other expenses
    
    
    149
    
    
    
    170Total other expenses
    
    
    719
    
    
    
    717Income before income taxes
    
    
    879
    
    
    
    753Income tax expense
    
    
    174
    
    
    
    105Net income
    
    $
    705
    
    
    $
    648Per share data:Earnings per share, basic
    
    $
    3.70
    
    
    $
    3.27Weighted average common shares outstanding
    
    
    190,316
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    648
    
    
    
    
    
    
    
    
    
    
    
    648Change in unrealized net losses
on securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    162
    
    
    
    
    
    
    
    162Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    810Cash dividends declared on common
stock, $2.00 per share
    
    
    
    
    
    
    
    
    
    
    (396
    )
    
    
    
    
    
    
    
    
    
    
    (396
    )Balance, March 31, 2007
    
    $
    200
    
    
    $
    753
    
    
    $
    41,886
    
    
    $
    (785
    )
    
    $
    (418
    )
    
    $
    41,636
 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
    
    
    
    
    
    
    
    
    
    
    705
    
    
    
    
    
    
    
    
    
    
    
    705Change in unrealized net losses
on securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    370
    
    
    
    
    
    
    
    370Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,075Cash dividends declared on common
stock, $2.00 per share
    
    
    
    
    
    
    
    
    
    
    (381
    )
    
    
    
    
    
    
    
    
    
    
    (381
    )Purchase of treasury stock
(488 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128
    )
    
    
    (128
    )Balance, March 31, 2008
    
    $
    200
    
    
    $
    753
    
    
    $
    43,882
    
    
    $
    (3
    )
    
    $
    (2,436
    )
    
    $
    42,396
  5




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##### 



Dollars in thousandsThree Months Ended March 31,
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    705
    
    
    $
    648Adjustments to reconcile net income to net cash
provided by operating activities:Provision for loan losses
    
    
    15
    
    
    
    Depreciation
    
    
    55
    
    
    
    50Net accretion of securities premiums/discounts
    
    
    (100
    )
    
    
    (25
    )Change in assets and liabilities:Increase in:Accrued interest receivable
    
    
    (99
    )
    
    
    (111
    )Other assets
    
    
    (646
    )
    
    
    (287
    )Increase in:Other liabilities
    
    
    357
    
    
    
    80Net cash provided by operating activities
    
    
    287
    
    
    
    355CASH FLOWS FROM INVESTING ACTIVITIESDecrease (increase) in interest bearing deposits
with banks
    
    
    (54
    )
    
    
    (24
    )Decrease (increase) in federal funds sold
    
    
    (2,080
    )
    
    
    (1,988
    )Purchase of securities available for sale
    
    
    (3,897
    )
    
    
    (927
    )Proceeds from maturities/calls of securities available
for sale
    
    
    1,602
    
    
    
    1,738Purchase of securities held to maturity
    
    
    (16,946
    )
    
    
    (2,993
    )Proceeds from maturities/calls of securities held to
maturity
    
    
    19,490
    
    
    
    911Net increase in loans
    
    
    (473
    )
    
    
    (1,908
    )Purchases of premises and equipment
    
    
    (13
    )
    
    
    (24
    )Net cash used in investing activities
    
    
    (2,371
    )
    
    
    (5,215
    )CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    4,278
    
    
    
    5,868Net decrease in federal funds purchased
    
    
    (2,249
    )
    
    
    (357
    )Purchase of treasury stock
    
    
    (128
    )
    
    
    Net cash provided (used) by financing activities
    
    
    1,901
    
    
    
    5,511Increase (decrease) in cash and cash equivalents
    
    
    (183
    )
    
    
    651Cash and cash equivalents:Beginning
    
    
    3,888
    
    
    
    2,201Ending
    
    $
    3,705
    
    
    $
    2,852Supplementary Cash Flows InformationInterest Paid
    
    $
    1,551
    
    
    $
    1,421Income Taxes Paid
    
    $
    141
    
    
    $
    
  6




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##### 



NEFFS BANCORP, INC.
 
 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
(Unaudited)
 Note 1. BASIS OF PRESENTATION
     Note 2. COMMITMENTS AND CONTINGENCIES
  7




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##### 



Note 3. COMPREHENSIVE INCOME
  Three Months EndedMarch 31,2008
    
    
    2007(In Thousands)Unrealized holding gains on
available for sale securities
    
    $
    561
    
    
    $
    245Tax effect
    
    
    (191
    )
    
    
    (83
    )Other comprehensive income (loss), net of tax
    
    $
    370
    
    
    $
    162
 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
    
    SignificantMarkets for
    
    Observable
    
    UnobservableDescription
    
    March 31, 2008
    
    Identical Assets
    
    Inputs
    
    Inputs(In Thousands)Securities Available for sale
    
    $
    39,229
    
    
    $
    39,229
    9




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##### 



Note 7. NEW ACCOUNTING STANDARDS
    10




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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.
  11




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CRITICAL ACCOUNTING POLICIES
  OVERVIEW
  RESULTS OF OPERATIONS
 Average Balances and Average Interest Rates
   Net Interest Income and Net Interest Margin
   12




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




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##### 



Provision for Federal Income Taxes
  Return on Average Assets
  Return on Average Equity
  FINANCIAL CONDITION
 Securities
     Net Loans Receivable
  Loan and Asset Quality and Allowance for Loan Losses
  14




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##### 



Nonperforming Loans and Assets
 March 31,
    
    
    March 31,2008
    
    
    2007Nonaccrual loans:
    
    $
    
    
    
    $
    Commercial
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    Real Estate:Construction
    
    
    
    
    
    
    Mortgage
    
    
    
    
    
    
    Total nonaccrual
    
    
    
    
    
    
    Loans past due 90 days or more
    
    
    32
    
    
    
    6Restructured loans
    
    
    
    
    
    
    Total nonperforming loans
    
    
    32
    
    
    
    6Foreclosed real estate
    
    
    
    
    
    
    Total nonperforming assets
    
    $
    32
    
    
    $
    6Nonperforming loans to total loans
    
    
    0.03
    %
    
    
    0.01
    %Nonperforming assets to total assets
    
    
    0.01
    %
    
    
    0.00
    %
 15




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##### 



Allowance for Loan Losses
 Three Months
    
    
    Three MonthsEnding 3/31/08
    
    
    Ending 3/31/07Balance at beginning of period
    
    $
    620
    
    
    $
    653Provisions charged to operating expenses
    
    
    15
    
    
    
    Recoveries of loans previously charged-offCommercial
    
    
    
    
    
    
    Consumer
    
    
    1
    
    
    
    1Real Estate
    
    
    
    
    
    
    Total recoveries
    
    
    1
    
    
    
    1Loans charged-off:Commercial
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    (5
    )Real Estate
    
    
    
    
    
    
    Total charged-off
    
    
    
    
    
    
    (5
    )Net charge-offs
    
    
    1
    
    
    
    (4
    )Balance at end of period
    
    $
    636
    
    
    $
    649Net charge-offs as a percentage of average
loans outstanding
    
    
    0.00
    %
    
    
    0.00
    %Allowance for loan losses as a percentage of
period-end loans
    
    
    0.67
    %
    
    
    0.72
    %
 Deposits
  At March 31,(Dollars in thousands)2008
    
    
    2007Average
    
    
    
    
    
    AverageBalance
    
    
    Yield
    
    
    Balance
    
    
    YieldDemand deposits:Noninterest-bearing
    
    $
    16,224
    
    
    
    
    
    
    $
    16,838Interest-bearing
    
    
    5,316
    
    
    
    1.34
    %
    
    
    6,462
    
    
    
    1.44
    %Savings
    
    
    46,309
    
    
    
    1.88
    %
    
    
    51,096
    
    
    
    1.95
    %Time deposits:<$100,000
    
    
    77,149
    
    
    
    4.61
    %
    
    
    71,696
    
    
    
    4.54
    %>$100,000
    
    
    39,671
    
    
    
    4.96
    %
    
    
    32,877
    
    
    
    4.94
    %Total deposits
    
    $
    184,669
    
    
    
    
    
    
    $
    178,969
 16




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Interest Rate Sensitivity
       Liquidity
  17




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##### 



Off-Balance Sheet Arrangements
   Capital Adequacy
   18




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##### 



To be WellCapitalizedFor Capital
    
    
    Under PromptMarch 31,
    
    
    December 31,
    
    
    Adequacy
    
    
    Corrective Action2008
    
    
    2007
    
    
    Purposes
    
    
    ProvisionRisk-based capital ratios:Tier 1 Capital
    
    
    37.5
    %
    
    
    37.9
    %
    
    
    4.0
    %
    
    
    6.0
    %Total Capital
    
    
    38.1
    %
    
    
    38.5
    %
    
    
    8.0
    %
    
    
    10.0
    %Leveraged Capital
    
    
    18.6
    %
    
    
    18.7
    %
    
    
    4.0
    %
    
    
    5.0
    %
  
 Item 3.
 Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.
 Controls and Procedures
   
 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
  
 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.)
 20




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##### 



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:  May 9, 2008
    /s/ John J. RemaleyJohn J. Remaley, President 22