##### 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 September 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
    
    52-1883546(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    IdentificationNumber)127 North Street, Elkton, Maryland
    
    21921-5547(Address of principal executive office)
    
    (Zip Code)
   þ o
  o þ
  3,678,286
   1




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##### 



PAGEPART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial Statements (unaudited)Consolidated Balance Sheets - September 30, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2007 and 2006
    
    
    4-5Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-9ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10-18ITEM 3.
    
    Controls and Procedures
    
    
    18PART II.
    
    OTHER INFORMATION
    
    
    19SIGNATURES
    
    
    
    
    
    
    20CERTIFICATIONS
    
    
    
    
    
    
    21-24EX-31.A: CERTIFICATIONEX-31.B: CERTIFICATIONEX-32.A: CERTIFICATIONEX-32.B: CERTIFICATION
  2




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CECIL BANCORP, INC. AND SUBSIDIARIES
 
  
 
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETS:Cash and due from banks
    
    $
    1,186
    
    
    $
    1,316Interest bearing deposits with banks
    
    
    3,848
    
    
    
    5,259Investment securities:Securities available-for-sale at fair value
    
    
    2,494
    
    
    
    2,534Securities held-to-maturity (fair value of $2,753
in 2007 and $3,738 in 2006)
    
    
    2,745
    
    
    
    3,737Restricted investment securities  at cost
    
    
    2,701
    
    
    
    2,382Loans receivable
    
    
    343,764
    
    
    
    312,300Less: allowance for loan losses
    
    
    (2,779
    )
    
    
    (2,217
    )Net loans receivable
    
    
    340,985
    
    
    
    310,083Other real estate owned
    
    
    648
    
    
    
    Premises and equipment, net
    
    
    11,210
    
    
    
    9,208Accrued interest receivable
    
    
    1,972
    
    
    
    1,695Goodwill
    
    
    2,182
    
    
    
    2,182Other intangible assets
    
    
    236
    
    
    
    193Bank owned life insurance
    
    
    7,436
    
    
    
    5,914Other assets
    
    
    3,491
    
    
    
    2,948TOTAL ASSETS
    
    $
    381,134
    
    
    $
    347,451LIABILITIES:Deposits
    
    $
    291,789
    
    
    $
    270,604Other liabilities
    
    
    7,860
    
    
    
    4,943Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    17,000
    
    
    
    17,000Advances from Federal Home Loan Bank of Atlanta
    
    
    38,050
    
    
    
    30,631Total liabilities
    
    
    354,699
    
    
    
    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
    
    
    15,016
    
    
    
    12,824Accumulated other comprehensive loss
    
    
    (59
    )
    
    
    (29
    )Total stockholders equity
    
    
    26,435
    
    
    
    24,273TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    381,134
    
    
    $
    347,451
 .
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CECIL BANCORP, INC. AND SUBSIDIARIES
 
 
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST INCOME:Interest and fees on loans
    
    $
    6,979
    
    
    $
    5,661
    
    
    $
    20,388
    
    
    $
    15,137Interest on investment securities
    
    
    67
    
    
    
    72
    
    
    
    217
    
    
    
    200Dividends on FHLB and FRB stock
    
    
    36
    
    
    
    43
    
    
    
    105
    
    
    
    101Other interest-earning assets
    
    
    26
    
    
    
    10
    
    
    
    81
    
    
    
    34Total interest income
    
    
    7,108
    
    
    
    5,786
    
    
    
    20,791
    
    
    
    15,472INTEREST EXPENSE:Interest expense on deposits
    
    
    2,992
    
    
    
    1,910
    
    
    
    8,572
    
    
    
    5,362Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    282
    
    
    
    166
    
    
    
    840
    
    
    
    345Interest expense on advances from FHLB
    
    
    413
    
    
    
    647
    
    
    
    1,195
    
    
    
    1,402Total interest expense
    
    
    3,687
    
    
    
    2,723
    
    
    
    10,607
    
    
    
    7,109NET INTEREST INCOME
    
    
    3,421
    
    
    
    3,063
    
    
    
    10,184
    
    
    
    8,363PROVISION FOR LOAN LOSSES
    
    
    195
    
    
    
    130
    
    
    
    585
    
    
    
    345NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
    
    
    3,226
    
    
    
    2,933
    
    
    
    9,599
    
    
    
    8,018NONINTEREST INCOME:Checking account fees
    
    
    128
    
    
    
    139
    
    
    
    397
    
    
    
    394ATM fees
    
    
    83
    
    
    
    22
    
    
    
    219
    
    
    
    69Commission income
    
    
    5
    
    
    
    33
    
    
    
    24
    
    
    
    53Gain on sale of loans
    
    
    25
    
    
    
    19
    
    
    
    72
    
    
    
    74Loss on sale of other real estate owned
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    (43
    )Income from bank owned life insurance
    
    
    96
    
    
    
    98
    
    
    
    222
    
    
    
    187Other
    
    
    35
    
    
    
    68
    
    
    
    106
    
    
    
    166Total noninterest income
    
    
    372
    
    
    
    336
    
    
    
    1,040
    
    
    
    900NONINTEREST EXPENSE:Salaries and employee benefits
    
    
    1,374
    
    
    
    1,267
    
    
    
    4,161
    
    
    
    3,637Occupancy expense
    
    
    151
    
    
    
    147
    
    
    
    462
    
    
    
    447Equipment and data processing expense
    
    
    311
    
    
    
    227
    
    
    
    872
    
    
    
    639Other
    
    
    312
    
    
    
    287
    
    
    
    999
    
    
    
    973Total noninterest expense
    
    
    2,148
    
    
    
    1,928
    
    
    
    6,494
    
    
    
    5,696INCOME BEFORE INCOME TAXES
    
    
    1,450
    
    
    
    1,341
    
    
    
    4,145
    
    
    
    3,222INCOME TAX EXPENSE
    
    
    533
    
    
    
    487
    
    
    
    1,677
    
    
    
    1,189NET INCOME
    
    $
    917
    
    
    $
    854
    
    
    $
    2,468
    
    
    $
    2,033
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CECIL BANCORP, INC. AND SUBSIDIARIES
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006NET INCOME
    
    $
    917
    
    
    $
    854
    
    
    $
    2,468
    
    
    $
    2,033OTHER COMPREHENSIVE INCOMEUnrealized gains (losses) on
investment securities,
net of deferred taxes
    
    
    (3
    )
    
    
    12
    
    
    
    (30
    )
    
    
    TOTAL COMPREHENSIVE INCOME
    
    $
    914
    
    
    $
    866
    
    
    $
    2,438
    
    
    $
    2,033Earnings per common share  basic
    
    $
    0.25
    
    
    $
    0.23
    
    
    $
    0.67
    
    
    $
    0.55Earnings per common share  diluted
    
    $
    0.25
    
    
    $
    0.23
    
    
    $
    0.67
    
    
    $
    0.55Dividends declared per common share
    
    $
    0.025
    
    
    $
    0.025
    
    
    $
    0.075
    
    
    $
    0.075
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CECIL BANCORP, INC. AND SUBSIDIARIES
 
 
 For the Nine Months Ended September 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,468
    
    
    $
    2,033Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    351
    
    
    
    249Provision for loan losses
    
    
    585
    
    
    
    345Gain on sale of loans
    
    
    (72
    )
    
    
    (74
    )Loss on disposal of premises and equipment
    
    
    
    
    
    
    1Loss on sale of other real estate owned
    
    
    
    
    
    
    43Increase in cash surrender value of bank owned life insurance
    
    
    (222
    )
    
    
    (187
    )Excess servicing rights
    
    
    (62
    )
    
    
    (55
    )Reinvested dividends on investments
    
    
    (28
    )
    
    
    (70
    )Origination of loans held for sale
    
    
    (4,478
    )
    
    
    (4,110
    )Proceeds from sales of loans held for sale
    
    
    4,497
    
    
    
    4,141Net change in:Accrued interest receivable and other assets
    
    
    (802
    )
    
    
    (836
    )Other liabilities
    
    
    2,917
    
    
    
    537Net cash provided by operating activities
    
    
    5,154
    
    
    
    2,017CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of investment securities held-to-maturity
    
    
    (3,719
    )
    
    
    (7,328
    )Net purchases of restricted investment securities
    
    
    (318
    )
    
    
    (232
    )Proceeds from sales, maturities, calls and principal payments of
investment securities available-for-sale
    
    
    19
    
    
    
    17Proceeds from maturities, calls and principal payments of
investment securities held-to-maturity
    
    
    4,750
    
    
    
    7,500Net increase in loans
    
    
    (32,082
    )
    
    
    (46,209
    )Proceeds from sales of other real estate owned
    
    
    
    
    
    
    341Surrender of bank owned life insurance
    
    
    1,863
    
    
    
    Purchases of bank owned life insurance
    
    
    (3,163
    )
    
    
    (650
    )Purchases of premises and equipment  net
    
    
    (2,373
    )
    
    
    (283
    )Net cash used in investing activities
    
    
    (35,023
    )
    
    
    (46,844
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    21,185
    
    
    
    31,124Net increase in guaranteed preferred beneficial
interest in junior subordinated debentures
    
    
    
    
    
    
    10,000Net increase in advances from Federal Home Loan Bank
    
    
    7,419
    
    
    
    1,128Payments of cash dividends
    
    
    (276
    )
    
    
    (279
    )Net cash provided by financing activities
    
    
    28,328
    
    
    
    41,973DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,541
    )
    
    
    (2,854
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    6,575
    
    
    
    5,695CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    5,034
    
    
    $
    2,841Supplemental disclosures of cash flows information:Cash paid for income taxes
    
    $
    2,438
    
    
    $
    1,885Cash paid for interest
    
    $
    10,250
    
    
    $
    7,137
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CECIL BANCORP, INC. AND SUBSIDIARIES
 
 
       Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Basic:Net income available to common stockholders
    
    $
    917,000
    
    
    $
    854,000
    
    
    $
    2,468,000
    
    
    $
    2,033,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286Basic earnings per common share
    
    $
    0.25
    
    
    $
    0.23
    
    
    $
    0.67
    
    
    $
    0.55Diluted:Net income available to common stockholders
    
    $
    917,000
    
    
    $
    854,000
    
    
    $
    2,468,000
    
    
    $
    2,033,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286
    
    
    
    3,678,286Stock option adjustment
    
    
    5,675
    
    
    
    4,474
    
    
    
    5,855
    
    
    
    4,418Average common shares outstanding  diluted
    
    
    3,683,961
    
    
    
    3,682,760
    
    
    
    3,684,141
    
    
    
    3,682,704Diluted earnings per common share
    
    $
    0.25
    
    
    $
    0.23
    
    
    $
    0.67
    
    
    $
    0.55
 7




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Nine months ended
    
    
    Year endedSeptember 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 ExercisableExercise
    
    Number
    
    LifePrice
    
    Outstanding
    
    (Years)$6.00
    
    
    16,032
    
    
    
    1.5
    8




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CECIL BANCORP, INC. AND SUBSIDIARIES
 
 
 Forward-Looking Statements
   General
  
  Asset/Liability Management
  10




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Comparison of Financial Condition at September 30, 2007 and December 31, 2006
      Comparison of Results of Operations for the Three Months Ended September 30, 2007 and 2006
  11




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12




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Comparison of Results of Operations for the Nine Months Ended September 30, 2007 and 2006
    13




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14




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##### Table of Contents



Loans Receivable
  September 30, 2007
    
    
    December 31, 2006Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Type of LoanReal estate loans:Construction loans
    
    $
    45,455
    
    
    
    13.22
    %
    
    $
    29,018
    
    
    
    9.29
    %One- to four-family residential and home equity
    
    
    87,034
    
    
    
    25.32
    
    
    
    90,302
    
    
    
    28.92Multi-family residential
    
    
    6,857
    
    
    
    1.99
    
    
    
    6,625
    
    
    
    2.12Land
    
    
    3,020
    
    
    
    0.88
    
    
    
    2,805
    
    
    
    0.90Commercial
    
    
    89,960
    
    
    
    26.17
    
    
    
    87,316
    
    
    
    27.96Commercial business loans*
    
    
    95,382
    
    
    
    27.75
    
    
    
    82,961
    
    
    
    26.56Consumer loans:Automobile loans
    
    
    1,198
    
    
    
    0.35
    
    
    
    1,287
    
    
    
    0.41Deposit account loans
    
    
    1,531
    
    
    
    0.44
    
    
    
    1,447
    
    
    
    0.46Personal loans
    
    
    13,327
    
    
    
    3.88
    
    
    
    10,539
    
    
    
    3.38Gross loans
    
    
    343,764
    
    
    
    100.00
    %
    
    
    312,300
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    (2,779
    )
    
    
    
    
    
    
    (2,217
    )Net loans
    
    $
    340,985
    
    
    
    
    
    
    $
    310,083
 
 *
    
    Commercial business loans above include loans primarily for business purposes that are
secured by real estate. Nonperforming Assets
  September 30,
    
    December 31,(Dollars in thousands)
    
    2007
    
    2006Non-accrual loans and leases
    
    $
    4,878
    
    
    $
    1,382Loans and leases 90 days or more past due
    
    
    0
    
    
    
    211Restructured loans and leases
    
    
    0
    
    
    
    0Total nonperforming loans and leases
    
    
    4,878
    
    
    
    1,593Other real estate owned, net
    
    
    648
    
    
    
    0Total nonperforming assets
    
    $
    5,526
    
    
    $
    1,593Nonperforming loans and leases to total loans and leases
    
    
    1.42
    %
    
    
    0.51
    %Nonperforming assets to total assets
    
    
    1.45
    
    
    
    0.46Allowance for loan losses to nonperforming loans and leases
    
    
    56.97
    
    
    
    139.17
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Analysis of Allowance for Loan Losses
       16




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Nine Months Ended
    
    
    Twelve Months EndedSeptember 30, 2007
    
    
    December 31, 2006(In thousands)Balance at beginning of period
    
    $
    2,217
    
    
    $
    1,738Charge-offs:Residential real estate
    
    
    0
    
    
    
    (35
    )Commercial
    
    
    (25
    )
    
    
    (121
    )Consumer
    
    
    (24
    )
    
    
    (92
    )Total charge-offs
    
    
    (49
    )
    
    
    (248
    )Recoveries:Residential real estate
    
    
    0
    
    
    
    0Commercial
    
    
    0
    
    
    
    14Consumer
    
    
    26
    
    
    
    48Total recoveries
    
    
    26
    
    
    
    62Net charge-offs
    
    
    (23
    )
    
    
    (186
    )Provision for loan losses
    
    
    585
    
    
    
    665Balance at end of period
    
    $
    2,779
    
    
    $
    2,217Net charge-offs to average loans
outstanding during the period (annualized)
    
    
    0.01
    %
    
    
    0.07
    %Allowance for loan losses to loans
    
    
    0.81
    %
    
    
    0.71
    %Allowance for loan losses to nonperforming loans
    
    
    56.97
    %
    
    
    139.17
    %
 Analysis of Deposits
  Balance at
    
    
    
    
    
    
    Balance atSeptember 30,
    
    
    %
    
    
    December 31,
    
    
    %2007
    
    
    Deposits
    
    
    2006
    
    
    Deposits(Dollars in thousands)Regular checking
    
    $
    19,112
    
    
    
    6.55
    %
    
    $
    17,815
    
    
    
    6.58
    %NOW accounts
    
    
    14,999
    
    
    
    5.14
    
    
    
    10,269
    
    
    
    3.79Passbook
    
    
    12,735
    
    
    
    4.36
    
    
    
    12,447
    
    
    
    4.60Statement savings
    
    
    7,856
    
    
    
    2.69
    
    
    
    8,224
    
    
    
    3.04Money market
    
    
    5,979
    
    
    
    2.05
    
    
    
    5,430
    
    
    
    2.01Holiday club
    
    
    295
    
    
    
    0.10
    
    
    
    71
    
    
    
    0.03Certificates of Deposit
    
    
    211,664
    
    
    
    72.55
    
    
    
    197,620
    
    
    
    73.03IRA Certificates of Deposit
    
    
    13,697
    
    
    
    4.69
    
    
    
    12,096
    
    
    
    4.47Money Market Certificates
    
    
    5,452
    
    
    
    1.87
    
    
    
    6,632
    
    
    
    2.45$
    291,789
    
    
    
    100.00
    %
    
    $
    270,604
    
    
    
    100.00
    %
 17




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Capital Adequacy
  Regulatory Minimums2007
    
    
    2006
    
    
    Well
    
    
    AdequatelyActual
    
    
    Actual
    
    
    Capitalized
    
    
    CapitalizedTotal risk-based capital ratio
    
    
    13.36
    %
    
    
    12.29
    %
    
    
    10.00
    %
    
    
    8.00
    %Tier 1 risk-based capital ratio
    
    
    8.58
    %
    
    
    8.24
    %
    
    
    6.00
    %
    
    
    4.00
    %Tier 1 leverage ratio
    
    
    7.42
    %
    
    
    7.05
    %
    
    
    5.00
    %
    
    
    4.00
    %
  
   18




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##### Table of Contents



Item 1.
    
    Legal Proceedings 
Not Applicable
 Item 2.
    
    Unregistered Sale of Equity Securities and Use of Proceeds 
Not Applicable
 Item 3.
    
    Defaults Upon Senior Securities 
Not Applicable
 Item 4.
    
    Submission of Matters to a Vote of Security Holders 
Not Applicable
 Item 5.
    
    Other Information 
Not Applicable
 Item 6.
    
    Exhibits 
Exhibit 31(a),(b)          Rule 13a-14(a)/15d-14(a) Certification
Exhibit 32(a),(b)          18 U.S.C. Section 1350 Certification
 19




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##### Table of Contents



CECIL BANCORP, INC.Date:     November 9, 2007
    By:/s/ Mary B. HalseyMary B. HalseyPresident and Chief Executive OfficerDate:     November 9, 2007
    By:/s/ Robert Lee WhiteheadRobert Lee WhiteheadVice President and Chief Financial Officer 20