##### 



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 quarterly period ended March 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 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
  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
  3,678,286




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##### 



PAGEPART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    Financial Statements (unaudited)Consolidated Balance Sheets  March 31, 2008 and December 31, 2007
    
    
    3-4Consolidated Statements of Income and Comprehensive Income
for the Three Months Ended March 31, 2008 and 2007
    
    
    5-6Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2008 and 2007
    
    
    7Notes to Consolidated Financial Statements
    
    
    8-10ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11-17ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17ITEM 4.
    
    Controls and Procedures
    
    
    17ITEM 4T.
    
    Controls and Procedures
    
    
    17PART II.
    
    OTHER INFORMATION
    
    
    18SIGNATURES
    
    
    19CERTIFICATIONS
    
    
    20-23
 Page 2




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##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
  March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)Cash and due from banks
    
    $
    12,171
    
    
    $
    1,205Interest bearing deposits with banks
    
    
    226
    
    
    
    4,306Investment securities:Securities available-for-sale at fair value
    
    
    4,578
    
    
    
    2,470Securities held-to-maturity (fair value of $249
in 2008 and $2,753 in 2007)
    
    
    248
    
    
    
    2,749Restricted investment securities  at cost
    
    
    4,866
    
    
    
    4,750Loans receivable
    
    
    371,759
    
    
    
    358,704Less: Allowance for loan losses
    
    
    (3,397
    )
    
    
    (3,109
    )Net loans receivable
    
    
    368,362
    
    
    
    355,595Other real estate owned
    
    
    655
    
    
    
    655Premises and equipment, net
    
    
    12,178
    
    
    
    11,997Accrued interest receivable
    
    
    2,034
    
    
    
    2,122Goodwill
    
    
    2,182
    
    
    
    2,182Other intangible assets
    
    
    263
    
    
    
    240Bank owned life insurance
    
    
    7,577
    
    
    
    7,532Other assets
    
    
    3,927
    
    
    
    5,629TOTAL ASSETS
    
    $
    419,267
    
    
    $
    401,432
  Page 3




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##### 



March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)LIABILITIES:Deposits
    
    $
    278,808
    
    
    $
    267,032Other liabilities
    
    
    10,649
    
    
    
    5,659Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    17,000
    
    
    
    17,000Advances from Federal Home Loan Bank of Atlanta
    
    
    84,929
    
    
    
    84,499Total liabilities
    
    
    391,386
    
    
    
    374,190STOCKHOLDERS EQUITY:Common stock, $.01 par value; authorized 10,000,000
shares, issued and outstanding 3,678,286 shares in
2008 and 2007
    
    
    37
    
    
    
    37Additional paid in capital
    
    
    11,441
    
    
    
    11,441Retained earnings
    
    
    16,528
    
    
    
    15,856Accumulated other comprehensive loss
    
    
    (125
    )
    
    
    (92
    )Total stockholders equity
    
    
    27,881
    
    
    
    27,242TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY
    
    $
    419,267
    
    
    $
    401,432
  Page 4




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##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
 For the Three Months Ended March 31,2008
    
    
    2007INTEREST INCOME:Interest and fees on loans
    
    $
    7,011
    
    
    $
    6,564Interest on investment securities
    
    
    71
    
    
    
    74Dividends on FHLB and FRB stock
    
    
    68
    
    
    
    35Other interest-earning assets
    
    
    15
    
    
    
    24Total interest income
    
    
    7,165
    
    
    
    6,697INTEREST EXPENSE:Interest expense on deposits
    
    
    2,588
    
    
    
    2,664Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    280
    
    
    
    278Interest expense on advances from FHLB
    
    
    696
    
    
    
    421Total interest expense
    
    
    3,564
    
    
    
    3,363NET INTEREST INCOME
    
    
    3,601
    
    
    
    3,334PROVISION FOR LOAN LOSSES
    
    
    325
    
    
    
    195NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    3,276
    
    
    
    3,139NONINTEREST INCOME:Checking account fees
    
    
    152
    
    
    
    138ATM fees
    
    
    83
    
    
    
    50Commission income
    
    
    3
    
    
    
    5Gain on sale of loans
    
    
    44
    
    
    
    8Income from bank owned life insurance
    
    
    45
    
    
    
    52Other
    
    
    55
    
    
    
    41Total noninterest income
    
    
    382
    
    
    
    294NONINTEREST EXPENSE:Salaries and employee benefits
    
    
    1,520
    
    
    
    1,290Occupancy expense
    
    
    188
    
    
    
    161Equipment and data processing expense
    
    
    318
    
    
    
    249Other
    
    
    382
    
    
    
    310Total noninterest expense
    
    
    2,408
    
    
    
    2,010INCOME BEFORE INCOME TAXES
    
    
    1,250
    
    
    
    1,423INCOME TAX EXPENSE
    
    
    486
    
    
    
    668NET INCOME
    
    $
    764
    
    
    $
    755
  Page 5




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##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
  For the Three Months Ended March 31,2008
    
    
    2007NET INCOME
    
    $
    764
    
    
    $
    755OTHER COMPREHENSIVE INCOMEUnrealized (losses) gains on
investment securities,
net of deferred taxes
    
    
    (33
    )
    
    
    2TOTAL COMPREHENSIVE INCOME
    
    $
    731
    
    
    $
    757Earnings per common share  basic
    
    $
    0.21
    
    
    $
    0.21Earnings per common share  diluted
    
    $
    0.21
    
    
    $
    0.21Dividends declared per common share
    
    $
    0.025
    
    
    $
    0.025
  Page 6




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CECIL BANCORP, INC. AND SUBSIDIARIES
 For the Three Months Ended March 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    764
    
    
    $
    755Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    145
    
    
    
    108Provision for loan losses
    
    
    325
    
    
    
    195Gain on sale of loans
    
    
    (44
    )
    
    
    (8
    )Increase in cash surrender value of bank owned life insurance
    
    
    (45
    )
    
    
    (52
    )Excess servicing rights
    
    
    (35
    )
    
    
    (7
    )Reinvested dividends on investments
    
    
    (10
    )
    
    
    (26
    )Origination of loans held for sale
    
    
    (2,600
    )
    
    
    (493
    )Proceeds from sales of loans held for sale
    
    
    2,616
    
    
    
    495Net change in:Accrued interest receivable and other assets
    
    
    1,815
    
    
    
    (187
    )Other liabilities
    
    
    4,989
    
    
    
    68Net cash provided by operating activities
    
    
    7,920
    
    
    
    848CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of investment securities available-for-sale
    
    
    (2,161
    )
    
    
    Purchases of investment securities held-to-maturity
    
    
    (247
    )
    
    
    (3,719
    )Net purchase of restricted investment securities
    
    
    (116
    )
    
    
    (210
    )Proceeds from sales, maturities, calls and principal payments of
investment securities available-for-sale
    
    
    3
    
    
    
    5Proceeds from maturities, calls and principal payments of
investment securities held-to-maturity
    
    
    2,750
    
    
    
    3,750Net increase in loans
    
    
    (13,064
    )
    
    
    (14,465
    )Surrender of bank owned life insurance
    
    
    
    
    
    
    1,550Purchase of bank owned life insurance
    
    
    
    
    
    
    (3,163
    )Purchases of premises and equipment
    
    
    (313
    )
    
    
    (1,457
    )Net cash used in investing activities
    
    
    (13,148
    )
    
    
    (17,709
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    11,776
    
    
    
    12,118Net increase in advances from Federal Home Loan Bank of Atlanta
    
    
    430
    
    
    
    2,670Payments of cash dividends
    
    
    (92
    )
    
    
    (92
    )Net cash provided by financing activities
    
    
    12,114
    
    
    
    14,696INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    6,886
    
    
    
    (2,165
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    5,511
    
    
    
    6,575CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    12,397
    
    
    $
    4,410SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:Cash paid for income taxes
    
    $
    83
    
    
    $
    260Cash paid for interest
    
    $
    3,602
    
    
    $
    3,279Interest capitalized during the period
    
    $
    69
    
    
    $
    
  Page 7




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CECIL BANCORP, INC. AND SUBSIDIARIES
          Page 8




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##### 



Three Months Ended March 31,2008
    
    2007Basic:Net income available to common stockholders
    
    $
    764,000
    
    
    $
    755,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286Basic earnings per common share
    
    $
    0.21
    
    
    $
    0.21Diluted:Net income available to common stockholders
    
    $
    764,000
    
    
    $
    755,000Average common shares outstanding
    
    
    3,678,286
    
    
    
    3,678,286Stock option adjustment
    
    
    5,443
    
    
    
    5,732Average common shares outstanding  diluted
    
    
    3,683,729
    
    
    
    3,684,018Diluted earnings per common share
    
    $
    0.21
    
    
    $
    0.21
   Three months ended
    
    Year endedMarch 31, 2008
    
    December 31, 2007Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageShares
    
    Exercise Price
    
    Shares
    
    Exercise PriceOutstanding at beginning of period
    
    
    16,032
    
    
    $
    6.00
    
    
    
    16,032
    
    
    $
    6.00Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled/expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding 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)
    
    Intrinsic Value6.00
    
    16,032
    
    1.1
    
    $48,096
 Page 9




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##### 



Fair Value Measurements at Reporting Date UsingQuoted PricesIn Active
    
    SignificantMarkets For
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsDescription
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Investment securities
available-for-sale
    
    $
    4,578
    
    
    $
    2,302
    
    
    $
    2,276
    
    
    $
    0
 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, 2008 and December 31, 2007
  Page 11




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##### 



Comparison of Results of Operations for the Three Months Ended March 31, 2008 and 2007
    Page 12




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Page 13




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Loans Receivable
  March 31,
    
    
    December 31,2008
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Type of LoanReal estate loans:Construction loans
    
    $
    82,699
    
    
    
    22.24
    %
    
    $
    79,150
    
    
    
    22.07
    %One- to four-family residential and home equity
    
    
    128,618
    
    
    
    34.59
    
    
    
    125,723
    
    
    
    35.05Multi-family residential
    
    
    6,901
    
    
    
    1.86
    
    
    
    7,149
    
    
    
    1.99Land
    
    
    3,299
    
    
    
    0.89
    
    
    
    3,262
    
    
    
    0.91Commercial
    
    
    133,302
    
    
    
    35.86
    
    
    
    126,850
    
    
    
    35.36Commercial business loans
    
    
    11,641
    
    
    
    3.13
    
    
    
    10,206
    
    
    
    2.85Consumer loans
    
    
    5,299
    
    
    
    1.43
    
    
    
    6,364
    
    
    
    1.77Gross loans
    
    
    371,759
    
    
    
    100.00
    %
    
    
    358,704
    
    
    
    100.00
    %Less: allowance for loan losses
    
    
    (3,397
    )
    
    
    
    
    
    
    (3,109
    )Net loans receivable
    
    $
    368,362
    
    
    
    
    
    
    $
    355,595
 Nonperforming Assets
  March 31,
    
    
    December 31,(Dollars in thousands)
    
    2008
    
    
    2007Nonaccrual loans and leases
    
    $
    4,858
    
    
    $
    5,065Loans and leases 90 days or more past due
    
    
    0
    
    
    
    0Restructured loans and leases
    
    
    0
    
    
    
    0Total nonperforming loans and leases
    
    
    4,858
    
    
    
    5,065Other real estate owned, net
    
    
    655
    
    
    
    655Total nonperforming assets
    
    $
    5,513
    
    
    $
    5,720Nonperforming loans and leases to total loans
    
    
    1.31
    %
    
    
    1.41
    %Nonperforming assets to total assets
    
    
    1.31
    
    
    
    1.42Allowance for loan losses to non-performing loans and leases
    
    
    69.93
    
    
    
    61.38
 Analysis of Allowance for Loan Losses
 Page 14




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Page 15




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3 Months Ended
    
    
    12 Months EndedMarch 31, 2008
    
    
    December 31, 2007(In thousands)Balance at beginning of period
    
    $
    3,109
    
    
    $
    2,217Charge-offs:Residential real estate
    
    
    (35
    )
    
    
    0Commercial
    
    
    0
    
    
    
    (30
    )Consumer
    
    
    (5
    )
    
    
    (40
    )Total charge-offs
    
    
    (40
    )
    
    
    (70
    )Recoveries:Residential real estate
    
    
    0
    
    
    
    0Commercial
    
    
    0
    
    
    
    0Consumer
    
    
    3
    
    
    
    27Total recoveries
    
    
    3
    
    
    
    27Net charge-offs
    
    
    (37
    )
    
    
    (43
    )Provision for loan losses
    
    
    325
    
    
    
    935Balance at end of period
    
    $
    3,397
    
    
    $
    3,109Net charge-offs to average loans
outstanding during the period (annualized)
    
    
    (0.04
    )%
    
    
    (0.01
    )%Allowance for loan losses to loans
    
    
    0.91
    
    
    
    0.87Allowance for loan losses to nonperforming loans
    
    
    69.93
    
    
    
    61.38
 Analysis of Deposits
  Balance at
    
    
    
    
    
    
    Balance atMarch 31,
    
    
    %
    
    
    December 31,
    
    
    %2008
    
    
    Deposits
    
    
    2007
    
    
    Deposits(Dollars in thousands)Regular checking
    
    $
    21,692
    
    
    
    7.78
    %
    
    $
    17,764
    
    
    
    6.65
    %NOW accounts
    
    
    23,450
    
    
    
    8.41
    
    
    
    15,927
    
    
    
    5.96Passbook
    
    
    10,818
    
    
    
    3.88
    
    
    
    11,830
    
    
    
    4.43Statement savings
    
    
    8,152
    
    
    
    2.92
    
    
    
    8,193
    
    
    
    3.07Money market
    
    
    6,914
    
    
    
    2.48
    
    
    
    7,127
    
    
    
    2.67Holiday club
    
    
    146
    
    
    
    0.05
    
    
    
    72
    
    
    
    0.03Certificates of Deposit
    
    
    186,697
    
    
    
    66.97
    
    
    
    186,488
    
    
    
    69.84IRA Certificates of Deposit
    
    
    14,811
    
    
    
    5.31
    
    
    
    14,010
    
    
    
    5.25Money Market Certificates
    
    
    6,128
    
    
    
    2.20
    
    
    
    5,621
    
    
    
    2.10Total Deposits
    
    $
    278,808
    
    
    
    100.00
    %
    
    $
    267,032
    
    
    
    100.00
    %
 Capital Adequacy
 Page 16




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##### 



Regulatory Minimums2008
    
    2007
    
    Well
    
    AdequatelyActual
    
    Actual
    
    Capitalized
    
    CapitalizedTotal risk-based capital ratio
    
    
    13.11
    %
    
    
    13.05
    %
    
    
    10.00
    %
    
    
    8.00
    %Tier 1 risk-based capital ratio
    
    
    8.47
    %
    
    
    8.41
    %
    
    
    6.00
    %
    
    
    4.00
    %Tangible capital ratio
    
    
    7.36
    %
    
    
    7.34
    %
    
    
    5.00
    %
    
    
    4.00
    %
        Page 17




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##### 



PART II.
    
    
    
    Other Information:Item 1.
    
    Legal Proceedings Not ApplicableItem 2.
    
    Unregistered Sale of Equity Securities and Use of Proceeds Not ApplicableItem 3.
    
    Defaults Upon Senior Securities Not ApplicableItem 4.
    
    Submission of Matters to a Vote of Security Holders Not ApplicableItem 5.
    
    Other Information Not ApplicableItem 6.
    
    Exhibits 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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##### 



CECIL BANCORP, INC.Date: May 9, 2008
    By:
    /s/ Mary B. HalseyMary B. HalseyPresident and Chief Executive OfficerDate: May 9, 2008
    By:
    /s/ Robert Lee WhiteheadRobert Lee WhiteheadVice President and Chief Financial Officer Page 19