##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007.
 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 Number 0-24926
 CECIL BANCORP, INC.
  Maryland
    
    52-1883546(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)127 North Street, Elkton, Maryland
    
    21921-5547(Address of principal executive office)
    
    (Zip Code)
   þ o
  o þ
  1,839,143




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##### 



PAGEPART I. FINANCIAL INFORMATIONITEM 1. Financial Statements (unaudited)Consolidated Balance Sheets -
March 31, 2007 and December 31, 2006
    
    
    3-4Consolidated Statements of Income and Comprehensive Income
for the Three Months Ended March 31, 2007 and 2006
    
    
    5-6Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2007 and 2006
    
    
    7Notes to Consolidated Financial Statements
    
    
    8-10ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11-17ITEM 3. Controls and Procedures
    
    
    17PART II. OTHER INFORMATION
    
    
    18SIGNATURES
    
    
    19CERTIFICATIONS
    
    
    20-23EX-31.A: CERTIFICATIONEX-31.B: CERTIFICATIONEX-32.A: CERTIFICATIONEX-32.B; CERTIFICATION
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CECIL BANCORP, INC. AND SUBSIDIARIES
 
  
    March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)Cash and due from banks
    
    $
    916
    
    
    $
    1,316Interest bearing deposits with banks
    
    
    3,494
    
    
    
    5,259Investment securities:Securities available-for-sale at fair value
    
    
    2,283
    
    
    
    2,257Securities held-to-maturity (fair value of $3,723
in 2007 and $3,738 in 2006)
    
    
    3,724
    
    
    
    3,737Restricted investment securities  at cost
    
    
    2,593
    
    
    
    2,382Loans receivable
    
    
    326,773
    
    
    
    312,300Less: Allowance for loan losses
    
    
    (2,414
    )
    
    
    (2,217
    )Net loans receivable
    
    
    324,359
    
    
    
    310,083Premises and equipment, net
    
    
    10,545
    
    
    
    9,208Accrued interest receivable
    
    
    1,823
    
    
    
    1,695Goodwill
    
    
    2,182
    
    
    
    2,182Other intangible assets
    
    
    193
    
    
    
    193Bank owned life insurance
    
    
    7,578
    
    
    
    5,914Other assets
    
    
    3,283
    
    
    
    3,225TOTAL ASSETS
    
    $
    362,973
    
    
    $
    347,451
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March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)LIABILITIES:Deposits
    
    $
    282,722
    
    
    $
    270,604Other liabilities
    
    
    5,011
    
    
    
    4,943Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    17,000
    
    
    
    17,000Advances from Federal Home Loan Bank of Atlanta
    
    
    33,302
    
    
    
    30,631Total liabilities
    
    
    338,035
    
    
    
    323,178STOCKHOLDERS EQUITY:Common stock, $.01 par value; authorized 4,000,000
shares, issued and outstanding 1,839,143 shares in
2007 and 2006
    
    
    18
    
    
    
    18Stock dividend distributable
    
    
    19
    
    
    
    Additional paid in capital
    
    
    11,441
    
    
    
    11,460Retained earnings
    
    
    13,487
    
    
    
    12,824Accumulated other comprehensive loss
    
    
    (27
    )
    
    
    (29
    )Total stockholders equity
    
    
    24,938
    
    
    
    24,273TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY
    
    $
    362,973
    
    
    $
    347,451
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CECIL BANCORP, INC. AND SUBSIDIARIES
 
   For the Three Months Ended March 31,2007
    
    
    2006INTEREST INCOME:Interest and fees on loans
    
    $
    6,564
    
    
    $
    4,522Interest on investment securities
    
    
    74
    
    
    
    61Dividends on FHLB and FRB stock
    
    
    35
    
    
    
    31Other interest-earning assets
    
    
    24
    
    
    
    13Total interest income
    
    
    6,697
    
    
    
    4,627INTEREST EXPENSE:Interest expense on deposits
    
    
    2,664
    
    
    
    1,603Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    278
    
    
    
    13Interest expense on advances from FHLB
    
    
    421
    
    
    
    418Total interest expense
    
    
    3,363
    
    
    
    2,034NET INTEREST INCOME
    
    
    3,334
    
    
    
    2,593PROVISION FOR LOAN LOSSES
    
    
    195
    
    
    
    60NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    3,139
    
    
    
    2,533NONINTEREST INCOME:Checking account fees
    
    
    138
    
    
    
    118ATM fees
    
    
    50
    
    
    
    19Commission income
    
    
    5
    
    
    
    2Gain on sale of loans
    
    
    8
    
    
    
    35Income from bank owned life insurance
    
    
    52
    
    
    
    42Other
    
    
    41
    
    
    
    62Total noninterest income
    
    
    294
    
    
    
    278NONINTEREST EXPENSE:Salaries and employee benefits
    
    
    1,290
    
    
    
    1,167Occupancy expense
    
    
    161
    
    
    
    165Equipment and data processing expense
    
    
    249
    
    
    
    212Other
    
    
    310
    
    
    
    387Total noninterest expense
    
    
    2,010
    
    
    
    1,931INCOME BEFORE INCOME TAXES
    
    
    1,423
    
    
    
    880INCOME TAX EXPENSE
    
    
    668
    
    
    
    328NET INCOME
    
    $
    755
    
    
    $
    552
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CECIL BANCORP, INC. AND SUBSIDIARIES
  For the Three Months Ended March 31,2007
    
    
    2006NET INCOME
    
    $
    755
    
    
    $
    552OTHER COMPREHENSIVE INCOMEUnrealized gains (losses) on
investment securities,
net of deferred taxes
    
    
    2
    
    
    
    (7
    )TOTAL COMPREHENSIVE INCOME
    
    $
    757
    
    
    $
    545Earnings per common share  basic
    
    $
    0.21
    
    
    $
    0.15Earnings per common share  diluted
    
    $
    0.21
    
    
    $
    0.15Dividends declared per common share
    
    $
    0.05
    
    
    $
    0.05
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CECIL BANCORP, INC. AND SUBSIDIARIES
 
   Three Months Ended March 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    755
    
    
    $
    552Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    108
    
    
    
    85Provision for loan losses
    
    
    195
    
    
    
    60Gain on sale of loans
    
    
    (8
    )
    
    
    (35
    )Loss on disposal of premises and equipment
    
    
    
    
    
    
    1Increase in cash surrender value of bank owned life insurance
    
    
    (52
    )
    
    
    (42
    )Excess servicing rights
    
    
    (7
    )
    
    
    (22
    )Reinvested dividends on investments
    
    
    (26
    )
    
    
    (22
    )Origination of loans held for sale
    
    
    (493
    )
    
    
    (1,643
    )Proceeds from sales of loans held for sale
    
    
    495
    
    
    
    1,660Net change in:Accrued interest receivable and other assets
    
    
    (187
    )
    
    
    (193
    )Other liabilities
    
    
    68
    
    
    
    121Net cash provided by operating activities
    
    
    848
    
    
    
    522CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of investment securities held-to-maturity
    
    
    (3,719
    )
    
    
    (3,670
    )Net (purchase) redemption of stock in Federal Home Loan Bank of Atlanta
    
    
    (210
    )
    
    
    570Proceeds from sales, maturities, calls and principal payments of
investment securities available-for-sale
    
    
    5
    
    
    
    6Proceeds from maturities, calls and principal payments of
investment securities held-to-maturity
    
    
    3,750
    
    
    
    3,750Net increase in loans
    
    
    (14,465
    )
    
    
    (13,996
    )Surrender of bank owned life insurance
    
    
    1,550
    
    
    
    Purchase of bank owned life insurance
    
    
    (3,163
    )
    
    
    Purchases of premises and equipment  net
    
    
    (1,457
    )
    
    
    (172
    )Net cash used in investing activities
    
    
    (17,709
    )
    
    
    (13,512
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    12,118
    
    
    
    20,320Net increase in guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    
    
    
    
    10,000Net increase (decrease) in advances from Federal Home Loan Bank
    
    
    2,670
    
    
    
    (17,975
    )Payments of cash dividends
    
    
    (92
    )
    
    
    (93
    )Net cash provided by financing activities
    
    
    14,696
    
    
    
    12,252DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (2,165
    )
    
    
    (738
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    6,575
    
    
    
    5,695CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    4,410
    
    
    $
    4,957SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:Cash paid for income taxes
    
    $
    260
    
    
    $
    330Cash paid for interest
    
    $
    3,279
    
    
    $
    2,097
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CECIL BANCORP, INC. AND SUBSIDIARIES
 
            Page 8




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Three Months Ended March 31,2007
    
    2006Basic:Net income available to common stockholders
    
    $
    755,000
    
    
    $
    552,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286Basic earnings per common share
    
    $
    0.21
    
    
    $
    0.15Diluted:Net income available to common stockholders
    
    $
    755,000
    
    
    $
    552,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286Stock option adjustment
    
    
    5,732
    
    
    
    5,995Average common shares outstanding  diluted
    
    
    3,684,018
    
    
    
    3,684,281Diluted earnings per common share
    
    $
    0.21
    
    
    $
    0.15
   Three months ended
    
    
    Year endedMarch 31, 2007
    
    
    December 31, 2006Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding at beginning of period
    
    
    16,032
    
    
    $
    6.00
    
    
    
    20,426
    
    
    $
    5.33Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled/expired
    
    
    
    
    
    
    
    
    
    
    (4,394
    )
    
    
    2.81Outstanding at end of period
    
    
    16,032
    
    
    $
    6.00
    
    
    
    16,032
    
    
    $
    6.00Options exercisable at end of period
    
    
    16,032
    
    
    $
    6.00
    
    
    
    16,032
    
    
    $
    6.00
  Options Outstanding and Exercisable RemainingExercise
    
    Number
    
    LifePrice
    
    Outstanding
    
    (Years)6.00
    
    16,032
    
    2.1
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Page 10




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CECIL BANCORP, INC. AND SUBSIDIARIES
 
  Forward-Looking Statements
  General
    Asset/Liability Management
  Comparison of Financial Condition at March 31, 2007 and December 31, 2006
  Page 11




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Comparison of Results of Operations for the Three Months Ended March 31, 2007 and 2006
    Page 12




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Page 13




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Loans Receivable
  March 31,
    
    
    December 31,2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Type of LoanReal estate loans:Construction loans
    
    $
    35,467
    
    
    
    10.85
    %
    
    $
    29,018
    
    
    
    9.29
    %One- to four-family residential and home equity
    
    
    93,085
    
    
    
    28.49
    
    
    
    90,302
    
    
    
    28.92Multi-family residential
    
    
    7,012
    
    
    
    2.15
    
    
    
    6,625
    
    
    
    2.12Land
    
    
    3,123
    
    
    
    0.96
    
    
    
    2,805
    
    
    
    0.90Commercial
    
    
    84,764
    
    
    
    25.94
    
    
    
    87,316
    
    
    
    27.96Commercial business loans*
    
    
    88,768
    
    
    
    27.16
    
    
    
    82,961
    
    
    
    26.56Consumer loans:Automobile loans
    
    
    1,413
    
    
    
    0.43
    
    
    
    1,287
    
    
    
    0.41Deposit account loans
    
    
    1,569
    
    
    
    0.48
    
    
    
    1,447
    
    
    
    0.46Personal loans
    
    
    11,572
    
    
    
    3.54
    
    
    
    10,539
    
    
    
    3.38Gross loans
    
    
    326,773
    
    
    
    100.00
    %
    
    
    312,300
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    (2,414
    )
    
    
    
    
    
    
    (2,217
    )Total loans
    
    $
    324,359
    
    
    
    
    
    
    $
    310,083
 
 *
    
    Commercial business loans above include loans primarily for business purposes that are
secured by real estate. Nonperforming Assets
  March 31,
    
    
    December 31,(Dollars in thousands)
    
    2007
    
    
    2006Non-accrual loans and leases
    
    $
    1,522
    
    
    $
    1,382Loans and leases 90 days or more past due
    
    
    157
    
    
    
    211Restructured loans and leases
    
    
    0
    
    
    
    0Total nonperforming loans and leases
    
    
    1,679
    
    
    
    1,593Other real estate owned, net
    
    
    0
    
    
    
    0Total nonperforming assets
    
    $
    1,679
    
    
    $
    1,593Nonperforming loans and leases to total loans
    
    
    0.51
    %
    
    
    0.51
    %Nonperforming assets to total assets
    
    
    0.46
    
    
    
    0.46Allowance for loan losses to non-performing loans and leases
    
    
    143.78
    
    
    
    139.17
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Analysis of Allowance for Loan Losses
       Page 15




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3 Months Ended
    
    
    12 Months EndedMarch 31, 2007
    
    
    December 31, 2006(In thousands)Balance at beginning of period
    
    $
    2,217
    
    
    $
    1,738Charge-offs:Residential real estate
    
    
    0
    
    
    
    (35
    )Commercial
    
    
    0
    
    
    
    (121
    )Consumer
    
    
    (2
    )
    
    
    (92
    )Total charge-offs
    
    
    (2
    )
    
    
    (248
    )Recoveries:Residential real estate
    
    
    0
    
    
    
    0Commercial
    
    
    0
    
    
    
    14Consumer
    
    
    4
    
    
    
    48Total recoveries
    
    
    4
    
    
    
    62Net recoveries (charge-offs)
    
    
    2
    
    
    
    (186
    )Provision for loan losses
    
    
    195
    
    
    
    665Balance at end of period
    
    $
    2,414
    
    
    $
    2,217Net recoveries (charge-offs) to average loans
outstanding during the period (annualized)
    
    
    0.01
    %
    
    
    (0.07
    )%Allowance for loan losses to loans
    
    
    0.74
    
    
    
    0.71Allowance for loan losses to nonperforming loans
    
    
    143.78
    
    
    
    139.17
 Analysis of Deposits
  Balance at
    
    
    
    
    
    
    Balance atMarch 31,
    
    
    %
    
    
    December 31,%2007
    
    
    Deposits
    
    
    2006
    
    
    Deposits(Dollars in thousands)Regular checking
    
    $
    18,041
    
    
    
    6.38
    %
    
    $
    17,815
    
    
    
    6.58
    %NOW accounts
    
    
    9,595
    
    
    
    3.39
    
    
    
    10,269
    
    
    
    3.79Passbook
    
    
    12,227
    
    
    
    4.32
    
    
    
    12,447
    
    
    
    4.60Statement savings
    
    
    9,332
    
    
    
    3.30
    
    
    
    8,224
    
    
    
    3.04Money market
    
    
    5,955
    
    
    
    2.11
    
    
    
    5,430
    
    
    
    2.01Holiday club
    
    
    152
    
    
    
    0.05
    
    
    
    71
    
    
    
    0.03Certificates of Deposit
    
    
    208,373
    
    
    
    73.71
    
    
    
    197,620
    
    
    
    73.03IRA Certificates of Deposit
    
    
    13,176
    
    
    
    4.66
    
    
    
    12,096
    
    
    
    4.47Money Market Certificates
    
    
    5,871
    
    
    
    2.08
    
    
    
    6,632
    
    
    
    2.45Total Deposits
    
    $
    282,722
    
    
    
    100.00
    %
    
    $
    270,604
    
    
    
    100.00
    %
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Capital Adequacy
  Regulatory Minimums2007
    
    2006
    
    Well
    
    AdequatelyActual
    
    Actual
    
    Capitalized
    
    CapitalizedTotal risk-based capital ratio
    
    
    13.50
    %
    
    
    13.74
    %
    
    
    10.00
    %
    
    
    8.00
    %Tier 1 risk-based capital ratio
    
    
    8.54
    %
    
    
    9.02
    %
    
    
    6.00
    %
    
    
    4.00
    %Tangible capital ratio
    
    
    7.41
    %
    
    
    7.35
    %
    
    
    5.00
    %
    
    
    4.00
    %
  
  Cecil Bancorps management, under the supervision and with the participation of its Chief
Executive Officer and its 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 under the Securities Exchange Act
of 1934. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective. There were no
significant changes in the Companys internal controls over financial reporting (as defined in
Rule 13a-15 under the Securities Act of 1934) during the quarter ended March 31, 2007, that have
materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.
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Exhibit 31(a),(b)
    
    Rule 13a-14(a)/15d-14(a) CertificationExhibit 32(a),(b)
    
    18 U.S.C. Section 1350 Certification
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CECIL BANCORP, INC.Date: May 14, 2007
    
    by:
    
    /s/ Mary B. HalseyMary B. HalseyPresident and Chief Executive OfficerDate: May 14, 2007
    
    by:
    
    /s/ Robert Lee WhiteheadRobert Lee Whitehead
Vice President and Chief Financial Officer
 Page 19