##### 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 June 30, 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
(State or other jurisdiction of 
incorporation or organization)
    
    52-1883546
(I.R.S. Employer
Identification Number)
 127 North Street, Elkton, Maryland
(Address of principal executive office)
    
    21921-5547
(Zip Code)
   þ o
  o þ
  3,678,286




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##### 



PAGEPART I. FINANCIAL INFORMATIONITEM 1.
    
    Financial Statements (unaudited)Consolidated Balance Sheets  June 30, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2007 and 2006
    
    
    4-5Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-9ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10-17ITEM 3.
    
    Controls and Procedures
    
    
    17PART II. OTHER INFORMATION
    
    
    18SIGNATURES
    
    
    
    
    19CERTIFICATIONS
    
    
    
    
    20-23EX-31.A: CERTIFICATIONEX-31.B: CERTIFICATIONEX-32.A: CERTIFICATIONEX-32.B: CERTIFICATION
  Page 2




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CECIL BANCORP, INC. AND SUBSIDIARIES
 
 
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETS:Cash and due from banks
    
    $
    1,405
    
    
    $
    1,316Interest bearing deposits with banks
    
    
    8,360
    
    
    
    5,259Investment securities:Securities available-for-sale at fair value
    
    
    2,506
    
    
    
    2,534Securities held-to-maturity (fair value of $3,740
in 2007 and $3,738 in 2006)
    
    
    3,740
    
    
    
    3,737Restricted investment securities  at cost
    
    
    2,180
    
    
    
    2,382Loans receivable
    
    
    331,611
    
    
    
    312,300Less: allowance for loan losses
    
    
    (2,599
    )
    
    
    (2,217
    )Net loans receivable
    
    
    329,012
    
    
    
    310,083Other real estate owned
    
    
    455
    
    
    
    Premises and equipment, net
    
    
    10,842
    
    
    
    9,208Accrued interest receivable
    
    
    1,814
    
    
    
    1,695Goodwill
    
    
    2,182
    
    
    
    2,182Other intangible assets
    
    
    221
    
    
    
    193Bank owned life insurance
    
    
    7,340
    
    
    
    5,914Other assets
    
    
    2,910
    
    
    
    2,948TOTAL ASSETS
    
    $
    372,967
    
    
    $
    347,451LIABILITIES:Deposits
    
    $
    295,415
    
    
    $
    270,604Other liabilities
    
    
    7,555
    
    
    
    4,943Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    17,000
    
    
    
    17,000Advances from Federal Home Loan Bank of Atlanta
    
    
    27,385
    
    
    
    30,631Total liabilities
    
    
    347,355
    
    
    
    323,178STOCKHOLDERS EQUITY:Common stock, $.01 par value; authorized 10,000,000
shares in 2007 and 4,000,000 shares in 2006,
issued and outstanding 3,678,286 shares in
2007 and 1,839,143 shares in 2006
    
    
    37
    
    
    
    18Additional paid in capital
    
    
    11,441
    
    
    
    11,460Retained earnings
    
    
    14,190
    
    
    
    12,824Accumulated other comprehensive loss
    
    
    (56
    )
    
    
    (29
    )Total stockholders equity
    
    
    25,612
    
    
    
    24,273TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    372,967
    
    
    $
    347,451
 .
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CECIL BANCORP, INC. AND SUBSIDIARIES
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST INCOME:Interest and fees on loans
    
    $
    6,845
    
    
    $
    4,954
    
    
    $
    13,409
    
    
    $
    9,476Interest on investment securities
    
    
    76
    
    
    
    67
    
    
    
    150
    
    
    
    128Dividends on FHLB and FRB stock
    
    
    34
    
    
    
    27
    
    
    
    69
    
    
    
    58Other interest-earning assets
    
    
    31
    
    
    
    11
    
    
    
    55
    
    
    
    24Total interest income
    
    
    6,986
    
    
    
    5,059
    
    
    
    13,683
    
    
    
    9,686INTEREST EXPENSE:Interest expense on deposits
    
    
    2,916
    
    
    
    1,849
    
    
    
    5,580
    
    
    
    3,452Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    280
    
    
    
    166
    
    
    
    558
    
    
    
    179Interest expense on advances from FHLB
    
    
    361
    
    
    
    337
    
    
    
    782
    
    
    
    755Total interest expense
    
    
    3,557
    
    
    
    2,352
    
    
    
    6,920
    
    
    
    4,386NET INTEREST INCOME
    
    
    3,429
    
    
    
    2,707
    
    
    
    6,763
    
    
    
    5,300PROVISION FOR LOAN LOSSES
    
    
    195
    
    
    
    155
    
    
    
    390
    
    
    
    215NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    3,234
    
    
    
    2,552
    
    
    
    6,373
    
    
    
    5,085NONINTEREST INCOME:Checking account fees
    
    
    131
    
    
    
    137
    
    
    
    269
    
    
    
    255ATM fees
    
    
    86
    
    
    
    28
    
    
    
    136
    
    
    
    47Commission income
    
    
    14
    
    
    
    18
    
    
    
    19
    
    
    
    20Gain on sale of loans
    
    
    39
    
    
    
    20
    
    
    
    47
    
    
    
    55Income from bank owned life insurance
    
    
    74
    
    
    
    47
    
    
    
    126
    
    
    
    89Other
    
    
    30
    
    
    
    36
    
    
    
    71
    
    
    
    98Total noninterest income
    
    
    374
    
    
    
    286
    
    
    
    668
    
    
    
    564NONINTEREST EXPENSE:Salaries and employee benefits
    
    
    1,497
    
    
    
    1,203
    
    
    
    2,787
    
    
    
    2,370Occupancy expense
    
    
    150
    
    
    
    135
    
    
    
    311
    
    
    
    300Equipment and data processing expense
    
    
    312
    
    
    
    200
    
    
    
    561
    
    
    
    412Other
    
    
    377
    
    
    
    299
    
    
    
    687
    
    
    
    686Total noninterest expense
    
    
    2,336
    
    
    
    1,837
    
    
    
    4,346
    
    
    
    3,768INCOME BEFORE INCOME TAXES
    
    
    1,272
    
    
    
    1,001
    
    
    
    2,695
    
    
    
    1,881INCOME TAX EXPENSE
    
    
    476
    
    
    
    374
    
    
    
    1,144
    
    
    
    702NET INCOME
    
    $
    796
    
    
    $
    627
    
    
    $
    1,551
    
    
    $
    1,179
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CECIL BANCORP, INC. AND SUBSIDIARIES
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006NET INCOME
    
    $
    796
    
    
    $
    627
    
    
    $
    1,551
    
    
    $
    1,179OTHER COMPREHENSIVE INCOMEUnrealized losses on
investment securities,
net of deferred taxes
    
    
    (29
    )
    
    
    (5
    )
    
    
    (27
    )
    
    
    (12
    )TOTAL COMPREHENSIVE INCOME
    
    $
    767
    
    
    $
    622
    
    
    $
    1,524
    
    
    $
    1,167Earnings per common share  basic
    
    $
    0.22
    
    
    $
    0.17
    
    
    $
    0.42
    
    
    $
    0.32Earnings per common share  diluted
    
    $
    0.22
    
    
    $
    0.17
    
    
    $
    0.42
    
    
    $
    0.32Dividends declared per common share
    
    $
    0.025
    
    
    $
    0.025
    
    
    $
    0.05
    
    
    $
    0.05
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CECIL BANCORP, INC. AND SUBSIDIARIES
 For the Six Months Ended June 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    1,551
    
    
    $
    1,179Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    223
    
    
    
    167Provision for loan losses
    
    
    390
    
    
    
    215Gain of sale of loans
    
    
    (47
    )
    
    
    (55
    )Loss on disposal of premises and equipment
    
    
    
    
    
    
    1Increase in cash surrender value of bank owned life insurance
    
    
    (126
    )
    
    
    (89
    )Excess servicing rights
    
    
    (40
    )
    
    
    (46
    )Reinvested dividends on investments
    
    
    (26
    )
    
    
    (45
    )Origination of loans held for sale
    
    
    (2,926
    )
    
    
    (3,408
    )Proceeds from sales of loans held for sale
    
    
    2,938
    
    
    
    3,426Net change in:Accrued interest receivable and other assets
    
    
    (65
    )
    
    
    (538
    )Other liabilities
    
    
    2,612
    
    
    
    221Net cash provided by operating activities
    
    
    4,484
    
    
    
    1,028CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of investment securities held-to-maturity
    
    
    (3,719
    )
    
    
    (3,670
    )Net redemption of restricted investment securities
    
    
    202
    
    
    
    156Proceeds from sales, maturities, calls and principal
payments of investment securities available-for-sale
    
    
    9
    
    
    
    10Proceeds from maturities, calls and principal
payments of investment securities held-to-maturity
    
    
    3,750
    
    
    
    3,750Net increase in loans
    
    
    (19,738
    )
    
    
    (29,557
    )Surrender of bank owned life insurance
    
    
    1,863
    
    
    
    Purchases of bank owned life insurance
    
    
    (3,163
    )
    
    
    (650
    )Purchases of premises and equipment  net
    
    
    (1,879
    )
    
    
    (222
    )Net cash used in investing activities
    
    
    (22,675
    )
    
    
    (30,183
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    24,811
    
    
    
    23,006Net increase in guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    
    
    
    
    10,000Net decrease in advances from Federal Home Loan Bank
    
    
    (3,246
    )
    
    
    (7,496
    )Payments of cash dividends
    
    
    (184
    )
    
    
    (184
    )Net cash provided by financing activities
    
    
    21,381
    
    
    
    25,326INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    3,190
    
    
    
    (3,829
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    6,575
    
    
    
    5,695CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    9,765
    
    
    $
    1,866Supplemental disclosure of cash flows information:Cash paid for income taxes
    
    $
    1,815
    
    
    $
    1,300Cash paid for interest
    
    $
    6,701
    
    
    $
    4,445
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CECIL BANCORP, INC. AND SUBSIDIARIES
       Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic:Net income available to common stockholders
    
    $
    796,000
    
    
    $
    627,000
    
    
    $
    1,551,000
    
    
    $
    1,179,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286Basic earnings per common share
    
    $
    0.22
    
    
    $
    0.17
    
    
    $
    0.42
    
    
    $
    0.32Diluted:Net income available to common stockholders
    
    $
    796,000
    
    
    $
    627,000
    
    
    $
    1,551,000
    
    
    $
    1,179,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286Stock option adjustment
    
    
    6,138
    
    
    
    4,217
    
    
    
    5,943
    
    
    
    4,397Average common shares outstanding  diluted
    
    
    3,684,424
    
    
    
    3,682,503
    
    
    
    3,684,229
    
    
    
    3,682,683Diluted earnings per common share
    
    $
    0.22
    
    
    $
    0.17
    
    
    $
    0.42
    
    
    $
    0.32
 Page 7




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Six months ended
    
    
    Year endedJune 30, 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 ExercisableRemainingExercise
    
    Number
    
    LifePrice
    
    Outstanding
    
    (Years)$6.00
    
    
    16,032
    
    
    
    1.8
    Page 8




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CECIL BANCORP, INC. AND SUBSIDIARIES
 Forward-Looking Statements
  General
    Asset/Liability Management
  Comparison of Financial Condition at June 30, 2007 and December 31, 2006
  Page 10




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Comparison of Results of Operations for the Three Months Ended June 30, 2007 and 2006
    Page 11




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Comparison of Results of Operations for the Six Months Ended June 30, 2007 and 2006
  Page 12




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Page 13




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Loans Receivable
  June 30,
    
    
    December 31,2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Type of LoanReal estate loans:Construction loans
    
    $
    38,851
    
    
    
    11.72
    %
    
    $
    29,018
    
    
    
    9.29
    %One- to four-family residential and home equity
    
    
    88,475
    
    
    
    26.68
    
    
    
    90,302
    
    
    
    28.92Multi-family residential
    
    
    6,951
    
    
    
    2.10
    
    
    
    6,625
    
    
    
    2.12Land
    
    
    2,962
    
    
    
    0.89
    
    
    
    2,805
    
    
    
    0.90Commercial
    
    
    89,863
    
    
    
    27.10
    
    
    
    87,316
    
    
    
    27.96Commercial business loans*
    
    
    89,342
    
    
    
    26.94
    
    
    
    82,961
    
    
    
    26.56Consumer loans:Automobile loans
    
    
    1,442
    
    
    
    0.43
    
    
    
    1,287
    
    
    
    0.41Deposit account loans
    
    
    1,648
    
    
    
    0.50
    
    
    
    1,447
    
    
    
    0.46Personal loans
    
    
    12,077
    
    
    
    3.64
    
    
    
    10,539
    
    
    
    3.38Gross loans
    
    
    331,611
    
    
    
    100.00
    %
    
    
    312,300
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    (2,599
    )
    
    
    
    
    
    
    (2,217
    )Net loans
    
    $
    329,012
    
    
    
    
    
    
    $
    310,083
 
 *
    
    Commercial business loans above include loans primarily for business purposes that are secured by
real estate. Nonperforming Assets
  Page 14




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June 30,
    
    
    December 31,(Dollars in thousands)
    
    2007
    
    
    2006Non-accrual loans and leases
    
    $
    3,297
    
    
    $
    1,382Loans and leases 90 days or more past due
    
    
    613
    
    
    
    211Restructured loans and leases
    
    
    0
    
    
    
    0Total nonperforming loans and leases
    
    
    3,910
    
    
    
    1,593Other real estate owned, net
    
    
    455
    
    
    
    0Total nonperforming assets
    
    $
    4,365
    
    
    $
    1,593Nonperforming loans and leases to total loans and leases
    
    
    1.18
    %
    
    
    0.51
    %Nonperforming assets to total assets
    
    
    1.17
    
    
    
    0.46Allowance for loan losses to non-performing loans and leases
    
    
    66.47
    
    
    
    139.17
 Analysis of Allowance for Loan Losses
       Page 15




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Six Months Ended
    
    
    Twelve Months EndedJune 30, 2007
    
    
    December 31, 2006(In thousands)Balance at beginning of period
    
    $
    2,217
    
    
    $
    1,738Loans charged-off:Residential real estate
    
    
    0
    
    
    
    (35
    )Commercial
    
    
    (25
    )
    
    
    (121
    )Consumer
    
    
    (3
    )
    
    
    (92
    )Total charge-offs
    
    
    (28
    )
    
    
    (248
    )Recoveries:Residential real estate
    
    
    0
    
    
    
    0Commercial
    
    
    0
    
    
    
    14Consumer
    
    
    20
    
    
    
    48Total recoveries
    
    
    20
    
    
    
    62Net charge-offs
    
    
    (8
    )
    
    
    (186
    )Provision for loan losses
    
    
    390
    
    
    
    665Balance at end of period
    
    $
    2,599
    
    
    $
    2,217Net charge-offs to average loans
outstanding during the period (annualized)
    
    
    0.01
    %
    
    
    0.07
    %Allowance for loan losses to loans
    
    
    0.78
    %
    
    
    0.71
    %Allowance for loan losses to nonperforming loans
    
    
    66.47
    %
    
    
    139.17
    %
 Analysis of Deposits
  Balance at
    
    
    
    
    
    
    Balance atJune 30,
    
    
    %
    
    
    December 31,
    
    
    %2007
    
    
    Deposits
    
    
    2006
    
    
    Deposits(Dollars in thousands)Regular checking
    
    $
    18,994
    
    
    
    6.43
    %
    
    $
    17,815
    
    
    
    6.58
    %NOW accounts
    
    
    13,943
    
    
    
    4.72
    
    
    
    10,269
    
    
    
    3.79Passbook
    
    
    11,998
    
    
    
    4.06
    
    
    
    12,447
    
    
    
    4.60Statement savings
    
    
    8,220
    
    
    
    2.78
    
    
    
    8,224
    
    
    
    3.04Money market
    
    
    5,391
    
    
    
    1.82
    
    
    
    5,430
    
    
    
    2.01Holiday club
    
    
    225
    
    
    
    0.08
    
    
    
    71
    
    
    
    0.03Certificates of Deposit
    
    
    215,845
    
    
    
    73.07
    
    
    
    197,620
    
    
    
    73.03IRA Certificates of Deposit
    
    
    13,476
    
    
    
    4.56
    
    
    
    12,096
    
    
    
    4.47Money Market Certificates
    
    
    7,323
    
    
    
    2.48
    
    
    
    6,632
    
    
    
    2.45$
    295,415
    
    
    
    100.00
    %
    
    $
    270,604
    
    
    
    100.00
    %
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Capital Adequacy
  Regulatory Minimums2007
    
    2006
    
    Well
    
    AdequatelyActual
    
    Actual
    
    Capitalized
    
    CapitalizedTotal risk-based capital ratio
    
    
    13.41
    %
    
    
    12.75
    %
    
    
    10.00
    %
    
    
    8.00
    %Tier 1 risk-based capital ratio
    
    
    8.54
    %
    
    
    8.46
    %
    
    
    6.00
    %
    
    
    4.00
    %Tangible capital ratio
    
    
    7.35
    %
    
    
    7.32
    %
    
    
    5.00
    %
    
    
    4.00
    %
  
   Page 17




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SharesVoted
    
    SharesFor
    
    WithheldTo serve for a three-year term:Matthew G. Bathon
    
    
    1,356,223
    
    
    
    11,354Charles F. Sposato
    
    
    1,353,610
    
    
    
    13,967
   SharesVoted
    
    Shares
    
    SharesFor
    
    Against
    
    AbstainIncrease authorized common stock
    
    
    1,257,183
    
    
    
    100,585
    
    
    
    9,809Adjourn the meeting
    
    
    1,255,832
    
    
    
    106,398
    
    
    
    5,347
    Exhibit 31(a),(b)
    
    Rule 13a-14(a)/15d-14(a) CertificationExhibit 32(a),(b)
    
    18 U.S.C. Section 1350 Certification
 Page 18




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##### Table of Contents



CECIL BANCORP, INC.Date:      August 10, 2007
    By:
    /s/  Mary B. HalseyMary B. HalseyPresident and Chief Executive OfficerDate:      August 10, 2007
    By:
    /s/  Robert Lee WhiteheadRobert Lee WhiteheadVice President and Chief Financial Officer Page 19