##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Year Ended December 31, 2006
 Commission File Number 0-24926
 CECIL BANCORP, INC.
  Maryland
(State or other jurisdiction of 
incorporation or organization)
    
    52-1883546
(I.R.S. Employer Identification No.)
 127 North Street, Elkton, Maryland
(Address of principal executive office)
    
    21921-5547
(Zip Code)
    Common Stock, par value $0.01 per share
 o
 þ o
 o
 o þ
    o þ
 
 *
    
    The issuer is required to file such reports.




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2




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CAUTION ABOUT FORWARD-LOOKING STATEMENTS
  
    
    Statements of goals, intentions, and expectations;
    
    Estimates of risks and of future costs and benefits;
    
    Assessments of loan quality, probable loan losses, liquidity, off-balance sheet
arrangements, and interest rate risks; and
    
    Statements of Cecil Bancorps ability to achieve financial and other goals.
  
    
    Managements estimates and projections of future interest rates and other economic conditions;
    
    Future laws and regulations; and
    
    A variety of other matters.
              3




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4




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5




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6




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Bank Secrecy Act and USA Patriot Act
        7




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8




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9




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10




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Popular Name
    
    LocationMain Office
    
    127 North Street, Elkton, MD  21921*Cecil Financial Center
    
    135 North Street, Elkton, MD  21921Loan Center
    
    200 North Street, Elkton, MD  21921Corporate Center
    
    114 North Street, Elkton, MD  21921*North East
    
    108 North East Plaza, North East, MD 21901*Rising Sun
    
    56 Rising Sun Towne Centre, Rising Sun, MD  21911Turkey Point
    
    1223 Turkey Point Road, North East, MD 21901Cecilton
    
    122 West Main Street, Cecilton, MD 21913*Crossroads
    
    114 E. Pulaski Hwy, Elkton, MD  21921Aberdeen
    
    3 W. Bel Air Avenue, Aberdeen, MD  21001Conowingo
    
    390 Conowingo Road, Conowingo, MD  21918Downtown Havre de Grace
    
    303-307 St John Street, Havre de Grace, MD 21078Route 40 Havre de Grace
    
    1609 Pulaski Highway, Havre de Grace, MD 21078
 
 *
    
    Leased. 11




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ITEM 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES
OF EQUITY SECURITIES
    2006
    
    
    2005Stock Price Range
    
    
    Per Share
    
    
    Stock Price Range
    
    
    Per ShareQuarter
    
    Low
    
    
    High
    
    
    Dividend
    
    
    Low
    
    
    High
    
    
    Dividend1st
    
    $
    15.35
    
    
    $
    18.32
    
    
    $
    .05
    
    
    $
    18.70
    
    
    $
    20.00
    
    
    $
    .052nd
    
    
    15.75
    
    
    
    16.75
    
    
    
    .05
    
    
    
    17.10
    
    
    
    19.90
    
    
    
    .053rd
    
    
    15.84
    
    
    
    18.32
    
    
    
    .05
    
    
    
    16.75
    
    
    
    18.50
    
    
    
    .054th
    
    
    17.97
    
    
    
    20.50
    
    
    
    .05
    
    
    
    15.55
    
    
    
    16.65
    
    
    
    .05Total
    
    
    
    
    
    
    
    
    
    $
    .20
    
    
    
    
    
    
    
    
    
    
    $
    .20
 
 (1)
    
    Quotations reflect inter-dealer price, without retail mark-up, mark-down or
commissions, and may not represent actual transactions. 12




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Number ofsecuritiesNumber of
    
    
    
    remaining availablesecurities to be
    
    
    
    for future issuanceissued upon
    
    Weighted average
    
    under equityexercise of
    
    exercise price of
    
    compensation plansoutstanding
    
    outstanding
    
    excludingoptions, warrants
    
    options, warrants
    
    securitiesand rights
    
    and rights
    
    reflected in column (a)Plan category
    
    (a)
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders
    
    8,016
    
    $12.01
    
    0Equity compensation
plans not approved
by security holders
    
    0
    
    0
    
    0Total
    
    8,016
    
    $12.01
    
    0
      13




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##### 



(Dollars in thousands, except per share data)
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002RESULTS OF OPERATIONS:Interest Income
    
    $
    21,646
    
    
    $
    14,987
    
    
    $
    10,427
    
    
    $
    8,369
    
    
    $
    8,385Interest Expense
    
    
    10,167
    
    
    
    5,679
    
    
    
    3,116
    
    
    
    2,649
    
    
    
    3,191Net Interest Income
    
    
    11,479
    
    
    
    9,308
    
    
    
    7,311
    
    
    
    5,720
    
    
    
    5,194Provision for Loan Losses
    
    
    665
    
    
    
    625
    
    
    
    370
    
    
    
    220
    
    
    
    569Net Interest Income after Provision
for Loan Losses
    
    
    10,814
    
    
    
    8,683
    
    
    
    6,941
    
    
    
    5,500
    
    
    
    4,626Noninterest Income
    
    
    1,261
    
    
    
    1,115
    
    
    
    1,005
    
    
    
    805
    
    
    
    691Noninterest Expenses
    
    
    7,847
    
    
    
    6,543
    
    
    
    5,466
    
    
    
    4,321
    
    
    
    3,709Income before Income Taxes
    
    
    4,228
    
    
    
    3,255
    
    
    
    2,480
    
    
    
    1,984
    
    
    
    1,608Income Tax Expense
    
    
    1,520
    
    
    
    1,193
    
    
    
    948
    
    
    
    749
    
    
    
    613Net Income
    
    
    2,708
    
    
    
    2,062
    
    
    
    1,532
    
    
    
    1,235
    
    
    
    995PER SHARE DATA: (1)Basic Net Income Per Share
    
    $
    1.47
    
    
    $
    1.21
    
    
    $
    .91
    
    
    $
    .78
    
    
    $
    .76Diluted Net Income Per Share
    
    
    1.47
    
    
    
    1.20
    
    
    
    .91
    
    
    
    .77
    
    
    
    .75Dividends Declared
    
    
    .20
    
    
    
    .20
    
    
    
    .20
    
    
    
    .20
    
    
    
    .20Book Value (at year end)
    
    
    13.20
    
    
    
    12.41
    
    
    
    11.21
    
    
    
    10.41
    
    
    
    10.30Tangible Book Value (at year end) (2)
    
    
    11.91
    
    
    
    11.09
    
    
    
    9.79
    
    
    
    8.98
    
    
    
    8.54FINANCIAL CONDITION (at year end):Assets
    
    $
    347,451
    
    
    $
    267,125
    
    
    $
    200,380
    
    
    $
    149,600
    
    
    $
    123,120Loans, net
    
    
    310,083
    
    
    
    233,307
    
    
    
    173,790
    
    
    
    126,887
    
    
    
    101,571Investment Securities
    
    
    5,994
    
    
    
    5,922
    
    
    
    5,674
    
    
    
    5,770
    
    
    
    10,488Deposits
    
    
    270,604
    
    
    
    198,207
    
    
    
    140,841
    
    
    
    118,164
    
    
    
    99,831Stockholders Equity
    
    
    24,273
    
    
    
    21,942
    
    
    
    18,316
    
    
    
    16,714
    
    
    
    13,186PERFORMANCE RATIOS (for the year):Return on Average Assets
    
    
    .91
    %
    
    
    .89
    %
    
    
    .89
    %
    
    
    .91
    %
    
    
    .81
    %Return on Average Equity
    
    
    11.70
    
    
    
    10.54
    
    
    
    8.70
    
    
    
    7.79
    
    
    
    7.86Net Interest Margin
    
    
    4.18
    
    
    
    4.36
    
    
    
    4.61
    
    
    
    4.51
    
    
    
    4.43Efficiency Ratio (3)
    
    
    61.59
    
    
    
    62.77
    
    
    
    65.73
    
    
    
    66.22
    
    
    
    63.02Dividends Declared Per Share
to Diluted Net Income Per Share
    
    
    13.61
    
    
    
    16.67
    
    
    
    21.98
    
    
    
    25.97
    
    
    
    26.32CAPITAL AND CREDIT QUALITY RATIOS:Average Equity to Average Assets
    
    
    7.81
    %
    
    
    8.45
    %
    
    
    10.23
    %
    
    
    11.72
    %
    
    
    10.25
    %Allowance for Loan Losses to Loans
    
    
    .71
    
    
    
    .74
    
    
    
    .68
    
    
    
    .61
    
    
    
    .60Nonperforming Assets to Total Assets
    
    
    .46
    
    
    
    1.21
    
    
    
    1.06
    
    
    
    .84
    
    
    
    .50Net Recoveries (Charge-offs) to Average Loans
    
    
    (.07
    )
    
    
    (.04
    )
    
    
    .02
    
    
    
    (.04
    )
    
    
    (.28
    )
 
 (1)
    
    All EPS amounts have been adjusted to give retroactive effect for the two-for-one stock
split approved by the Board of Directors on February 24, 2004 and the 1% stock dividends approved
by the Board of Directors in December 2005, March 2006, May 2006, and August 2006.(2)
    
    Total stockholders equity, net of goodwill and other intangible assets, divided by the number
of shares of common stock outstanding at year end.(3)
    
    The Efficiency Ratio equals noninterest expenses as a percentage of net interest income plus
noninterest income. 14




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(1)
  2006
    
    
    2005
    
    
    2004Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssetsLoans
    
    $
    263,185
    
    
    $
    21,174
    
    
    
    8.05
    %
    
    $
    202,318
    
    
    $
    14,663
    
    
    
    7.25
    %
    
    $
    148,588
    
    
    $
    10,246
    
    
    
    6.90
    %Investment securities
    
    
    5,914
    
    
    
    276
    
    
    
    4.67
    
    
    
    5,768
    
    
    
    187
    
    
    
    3.25
    
    
    
    5,768
    
    
    
    106
    
    
    
    1.85Other earning assets
    
    
    5,551
    
    
    
    196
    
    
    
    3.53
    
    
    
    5,599
    
    
    
    137
    
    
    
    2.44
    
    
    
    4,269
    
    
    
    75
    
    
    
    1.77Total earning assets
    
    
    274,650
    
    
    
    21,646
    
    
    
    7.88
    
    
    
    213,682
    
    
    
    14,987
    
    
    
    7.01
    
    
    
    158,265
    
    
    
    10,427
    
    
    
    6.57Other assets
    
    
    21,795
    
    
    
    
    
    
    
    
    
    
    
    17,821
    
    
    
    
    
    
    
    
    
    
    
    13,653Total assets
    
    $
    296,445
    
    
    
    
    
    
    
    
    
    
    $
    231,503
    
    
    
    
    
    
    
    
    
    
    $
    172,278Liabilities and
Stockholders
Equity:Deposits
    
    
    224,156
    
    
    
    7,546
    
    
    
    3.37
    
    
    
    169,801
    
    
    
    4,132
    
    
    
    2.43
    
    
    
    129,623
    
    
    
    2,405
    
    
    
    1.86FHLB advances
    
    
    39,740
    
    
    
    2,071
    
    
    
    5.21
    
    
    
    40,664
    
    
    
    1,547
    
    
    
    3.80
    
    
    
    23,019
    
    
    
    710
    
    
    
    3.09Guaranteed preferred
beneficial interest
in junior
subordinated
debentures
    
    
    8,789
    
    
    
    550
    
    
    
    6.25
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Advances from
borrowers for taxes
and insurance
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    221
    
    
    
    1
    
    
    
    .50Total
interest-bearing
liabilities
    
    
    272,685
    
    
    
    10,167
    
    
    
    3.73
    
    
    
    210,465
    
    
    
    5,679
    
    
    
    2.70
    
    
    
    152,863
    
    
    
    3,116
    
    
    
    2.04Net interest
income and spread
    
    
    
    
    
    $
    11,479
    
    
    
    4.15
    %
    
    
    
    
    
    $
    9,308
    
    
    
    4.31
    %
    
    
    
    
    
    $
    7,311
    
    
    
    4.53
    %Noninterest-bearing
liabilities
    
    
    616
    
    
    
    
    
    
    
    
    
    
    
    1,465
    
    
    
    
    
    
    
    
    
    
    
    1,795Total liabilities
    
    
    273,301
    
    
    
    
    
    
    
    
    
    
    
    211,930
    
    
    
    
    
    
    
    
    
    
    
    154,628Stockholders equity
    
    
    23,144
    
    
    
    
    
    
    
    
    
    
    
    19,573
    
    
    
    
    
    
    
    
    
    
    
    17,620Total
liabilities
and
stockholders
equity
    
    $
    296,445
    
    
    
    
    
    
    
    
    
    
    $
    231,503
    
    
    
    
    
    
    
    
    
    
    $
    172,278Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    4.18
    %
    
    
    
    
    
    
    
    
    
    
    4.36
    %
    
    
    
    
    
    
    
    
    
    
    4.61
    %Average interest
earning assets to
interest bearing
liabilities
    
    
    
    
    
    
    
    
    
    
    100.72
    
    
    
    
    
    
    
    
    
    
    
    101.53
    
    
    
    
    
    
    
    
    
    
    
    103.53
 
 (1)
    
    Average balances are based upon month-end balances, which are not believed to be
materially different from daily averages.(2)
    
    Non-accrual loans are included in the average balances. 15




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16




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2006 vs. 2005
    
    
    2005 vs. 2004Increase
    
    
    Due to Change
    
    
    Increase
    
    
    Due to ChangeOr
    
    
    in Average:*
    
    
    or
    
    
    in Average:*(Dollars in thousands)
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    (Decrease)
    
    
    Volume
    
    
    RateInterest income from earning assets:Loans
    
    $
    6,511
    
    
    $
    4,767
    
    
    $
    1,744
    
    
    $
    4,417
    
    
    $
    3,871
    
    
    $
    546Investment securities
    
    
    89
    
    
    
    5
    
    
    
    84
    
    
    
    81
    
    
    
    0
    
    
    
    81Other interest-earning assets
    
    
    59
    
    
    
    (1
    )
    
    
    60
    
    
    
    62
    
    
    
    27
    
    
    
    35Total Interest Income
    
    
    6,659
    
    
    
    4,645
    
    
    
    2,014
    
    
    
    4,560
    
    
    
    3,822
    
    
    
    738Interest expense:Interest-bearing deposits
    
    
    3,414
    
    
    
    1,553
    
    
    
    1,861
    
    
    
    1,727
    
    
    
    861
    
    
    
    866FHLB advances
    
    
    524
    
    
    
    (36
    )
    
    
    560
    
    
    
    837
    
    
    
    642
    
    
    
    195Guaranteed preferred beneficial interest
in junior subordinated debentures
    
    
    550
    
    
    
    550
    
    
    
    0
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    0Total Interest Expense
    
    
    4,488
    
    
    
    1,959
    
    
    
    2,529
    
    
    
    2,563
    
    
    
    1,379
    
    
    
    1,184Net Interest Income
    
    $
    2,171
    
    
    $
    2,686
    
    
    $
    (515
    )
    
    $
    1,997
    
    
    $
    2,444
    
    
    $
    (447
    )
 
 *
    
    Variances are computed line-by-line and do not add to the totals shown. Changes in
rate-volume (changes in rate multiplied by the changes in volume) are allocated between changes in
rate and changes in volume in proportion to the relative contribution of each.    17




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18




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19




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20




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21




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2006
    
    
    2005Percentage
    
    
    
    
    
    
    Percentage(Dollars in thousands)
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of TotalReal estate loans:Construction loans
    
    $
    29,018
    
    
    
    9.29
    %
    
    $
    16,414
    
    
    
    6.98
    %One- to four-family residential and home equity
    
    
    90,302
    
    
    
    28.92
    
    
    
    86,334
    
    
    
    36.73Multi-family residential
    
    
    6,625
    
    
    
    2.12
    
    
    
    4,523
    
    
    
    1.93Land
    
    
    2,805
    
    
    
    0.90
    
    
    
    3,477
    
    
    
    1.48Commercial
    
    
    87,316
    
    
    
    27.96
    
    
    
    45,338
    
    
    
    19.29Total real estate loans
    
    
    216,066
    
    
    
    69.19
    
    
    
    156,086
    
    
    
    66.41Commercial business loans
    
    
    82,961
    
    
    
    26.56
    
    
    
    67,277
    
    
    
    28.62Consumer loans:Automobile loans
    
    
    1,287
    
    
    
    0.41
    
    
    
    1,265
    
    
    
    0.54Education loans
    
    
    15
    
    
    
    0.01
    
    
    
    16
    
    
    
    0.01Deposit account loans
    
    
    1,447
    
    
    
    0.46
    
    
    
    1,447
    
    
    
    0.61Personal loans
    
    
    10,524
    
    
    
    3.37
    
    
    
    8,954
    
    
    
    3.81Total consumer loans
    
    
    13,273
    
    
    
    4.25
    
    
    
    11,682
    
    
    
    4.97Gross loans
    
    
    312,300
    
    
    
    100.00
    %
    
    
    235,045
    
    
    
    100.00
    %Less: Allowance for Loan Losses
    
    
    (2,217
    )
    
    
    
    
    
    
    (1,738
    )Net loans
    
    $
    310,083
    
    
    
    
    
    
    $
    233,307
  (In thousands)
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Real estate loans:Construction
    
    $
    29,018
    
    
    $
    16,414
    
    
    $
    14,556
    
    
    $
    10,177
    
    
    $
    5,8711-4 family residential and home equity
    
    
    90,302
    
    
    
    86,334
    
    
    
    69,012
    
    
    
    59,272
    
    
    
    61,026Multi-family residential
    
    
    6,625
    
    
    
    4,523
    
    
    
    4,422
    
    
    
    1,481
    
    
    
    2,559Land
    
    
    2,805
    
    
    
    3,477
    
    
    
    2,182
    
    
    
    4,021
    
    
    
    1,781Commercial
    
    
    87,316
    
    
    
    45,338
    
    
    
    26,174
    
    
    
    21,760
    
    
    
    14,803Total real estate loans
    
    
    216,066
    
    
    
    156,086
    
    
    
    116,346
    
    
    
    96,711
    
    
    
    86,040Commercial business loans
    
    
    82,961
    
    
    
    67,277
    
    
    
    49,474
    
    
    
    23,858
    
    
    
    9,783Consumer loans:Automobile loans
    
    
    1,287
    
    
    
    1,265
    
    
    
    745
    
    
    
    893
    
    
    
    1,528Education loans
    
    
    15
    
    
    
    16
    
    
    
    18
    
    
    
    19
    
    
    
    18Deposit account loans
    
    
    1,447
    
    
    
    1,447
    
    
    
    730
    
    
    
    1,059
    
    
    
    928Personal loans
    
    
    10,524
    
    
    
    8,954
    
    
    
    7,666
    
    
    
    5,132
    
    
    
    3,887Total consumer loans
    
    
    13,273
    
    
    
    11,682
    
    
    
    9,159
    
    
    
    7,103
    
    
    
    6,361Gross loans
    
    
    312,300
    
    
    
    235,045
    
    
    
    174,979
    
    
    
    127,672
    
    
    
    102,184Less allowance for loan losses
    
    
    (2,217
    )
    
    
    (1,738
    )
    
    
    (1,189
    )
    
    
    (786
    )
    
    
    (613
    )Net loans
    
    $
    310,083
    
    
    $
    233,307
    
    
    $
    173,790
    
    
    $
    126,886
    
    
    $
    101,571
  At December 31, 2006Remaining Maturities of Selected Credits in Years(Dollars in thousands)
    
    1 or Less
    
    
    Over 1-5
    
    
    Over 5
    
    
    TotalReal estate:Mortgage
    
    $
    172,763
    
    
    $
    55,779
    
    
    $
    8,809
    
    
    $
    237,351Home equity and second
mortgages
    
    
    1,918
    
    
    
    743
    
    
    
    4,741
    
    
    
    7,402Commercial
    
    
    77,403
    
    
    
    3,299
    
    
    
    2,259
    
    
    
    82,961Consumer
    
    
    8,644
    
    
    
    2,724
    
    
    
    1,836
    
    
    
    13,204Total
    
    $
    260,728
    
    
    $
    62,545
    
    
    $
    17,645
    
    
    $
    340,918Rate Terms:Fixed
    
    $
    2,817
    
    
    $
    7,462
    
    
    $
    17,645
    
    
    $
    27,924Variable or adjustable
    
    
    257,911
    
    
    
    55,083
    
    
    
    0
    
    
    
    312,994Total
    
    $
    260,728
    
    
    $
    62,545
    
    
    $
    17,645
    
    
    $
    340,918
 22




---



##### 



23




---



##### 



Years Ended December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Balance of allowance, January 1
    
    $
    1,738
    
    
    $
    1,189
    
    
    $
    786
    
    
    $
    613
    
    
    $
    326Loan and lease charge-offs:Residential real estate
    
    
    (35
    )
    
    
    (5
    )
    
    
    0
    
    
    
    0
    
    
    
    0Commercial loans
    
    
    (121
    )
    
    
    (29
    )
    
    
    (9
    )
    
    
    0
    
    
    
    (49
    )Consumer
    
    
    (92
    )
    
    
    (86
    )
    
    
    (63
    )
    
    
    (147
    )
    
    
    (271
    )Total charge-offs
    
    
    (248
    )
    
    
    (120
    )
    
    
    (72
    )
    
    
    (147
    )
    
    
    (320
    )Loan and lease recoveries:Residential real estate
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Commercial loans
    
    
    14
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Consumer
    
    
    48
    
    
    
    44
    
    
    
    105
    
    
    
    100
    
    
    
    38Total recoveries
    
    
    62
    
    
    
    44
    
    
    
    105
    
    
    
    100
    
    
    
    38Net recoveries (charge-offs)
    
    
    (186
    )
    
    
    (76
    )
    
    
    33
    
    
    
    (47
    )
    
    
    (282
    )Provision for loan losses
    
    
    665
    
    
    
    625
    
    
    
    370
    
    
    
    220
    
    
    
    569Balance of allowance, December 31
    
    $
    2,217
    
    
    $
    1,738
    
    
    $
    1,189
    
    
    $
    786
    
    
    $
    613Net recoveries (charge-offs) to average loans and leases
    
    
    (0.07
    )%
    
    
    (0.04
    )%
    
    
    0.02
    %
    
    
    (0.04
    )%
    
    
    (0.28
    )%Allowance to total loans and leases
    
    
    0.71
    %
    
    
    0.74
    %
    
    
    0.68
    %
    
    
    0.61
    %
    
    
    0.60
    %
  December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Credit
    
    
    
    
    
    Credit
    
    
    
    
    
    Credit
    
    
    
    
    
    Credit
    
    
    
    
    
    Credit(Dollars in thousands)
    
    Amount
    
    Mix
    
    Amount
    
    Mix
    
    Amount
    
    Mix
    
    Amount
    
    Mix
    
    Amount
    
    MixAmount applicable to:Real estate loans:Construction
    
    $
    661
    
    
    
    9
    %
    
    $
    469
    
    
    
    7
    %
    
    $
    216
    
    
    
    8
    %
    
    $
    0
    
    
    
    8
    %
    
    $
    0
    
    
    
    6
    %1-4 family residential
and home equity
    
    
    123
    
    
    
    29
    
    
    
    118
    
    
    
    37
    
    
    
    170
    
    
    
    39
    
    
    
    39
    
    
    
    46
    
    
    
    41
    
    
    
    59Multi-family residential
    
    
    0
    
    
    
    2
    
    
    
    0
    
    
    
    2
    
    
    
    0
    
    
    
    3
    
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    3Land
    
    
    33
    
    
    
    1
    
    
    
    98
    
    
    
    1
    
    
    
    78
    
    
    
    1
    
    
    
    0
    
    
    
    3
    
    
    
    0
    
    
    
    2Commercial
    
    
    589
    
    
    
    28
    
    
    
    410
    
    
    
    19
    
    
    
    94
    
    
    
    15
    
    
    
    34
    
    
    
    17
    
    
    
    20
    
    
    
    14Total Real Estate Loans
    
    
    1,406
    
    
    
    69
    
    
    
    1,095
    
    
    
    66
    
    
    
    558
    
    
    
    66
    
    
    
    73
    
    
    
    75
    
    
    
    61
    
    
    
    84Commercial business loans
    
    
    659
    
    
    
    26
    
    
    
    446
    
    
    
    29
    
    
    
    424
    
    
    
    28
    
    
    
    162
    
    
    
    19
    
    
    
    123
    
    
    
    10Consumer loans:Automobile loans
    
    
    13
    
    
    
    1
    
    
    
    17
    
    
    
    0
    
    
    
    16
    
    
    
    1
    
    
    
    255
    
    
    
    1
    
    
    
    278
    
    
    
    2Education loans
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Savings account loans
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    1
    
    
    
    0
    
    
    
    0Personal
    
    
    139
    
    
    
    3
    
    
    
    180
    
    
    
    4
    
    
    
    191
    
    
    
    4
    
    
    
    296
    
    
    
    4
    
    
    
    151
    
    
    
    4Total Consumer Loans
    
    
    152
    
    
    
    5
    
    
    
    197
    
    
    
    5
    
    
    
    207
    
    
    
    6
    
    
    
    551
    
    
    
    6
    
    
    
    429
    
    
    
    6Total allowance
    
    $
    2,217
    
    
    
    100
    %
    
    
    $1,738
    
    
    
    100
    %
    
    $
    1,189
    
    
    
    100
    %
    
    $
    786
    
    
    
    100
    %
    
    $
    613
    
    
    
    100
    %
 24




---



##### 



December 31,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Non-accrual loans and leases (1)
    
    $
    1,382
    
    
    $
    2,818
    
    
    $
    2,092
    
    
    $
    806
    
    
    $
    578Loans and leases 90 days past due
    
    
    211
    
    
    
    18
    
    
    
    28
    
    
    
    446
    
    
    
    35Restructured loans and leases
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total non-performing loans and leases (2)
    
    
    1,593
    
    
    
    2,836
    
    
    
    2,120
    
    
    
    1,252
    
    
    
    613Other real estate owned, net
    
    
    0
    
    
    
    385
    
    
    
    0
    
    
    
    0
    
    
    
    0Total non-performing assets
    
    $
    1,593
    
    
    $
    3,221
    
    
    $
    2,120
    
    
    $
    1,252
    
    
    $
    613Non-performing loans and leases to total loans
    
    
    0.51
    %
    
    
    1.21
    %
    
    
    1.22
    %
    
    
    0.99
    %
    
    
    0.60
    %Non-performing assets to total assets
    
    
    0.46
    %
    
    
    1.21
    %
    
    
    1.06
    %
    
    
    0.84
    %
    
    
    0.50
    %Allowance for loan and lease losses to non-performing
loans and leases
    
    
    139.17
    %
    
    
    61.28
    %
    
    
    56.08
    %
    
    
    62.78
    %
    
    
    99.82
    %
 
 (1)
    
    Gross interest income that would have been recorded in 2006 if non-accrual loans and
leases had been current and in accordance with their original terms was $116,000, while interest
actually recorded on such loans was $53,000.(2)
    
    Performing loans considered potential problem loans, as defined and identified by
management, amounted to $4,206,000 at December 31, 2006. Although these are loans where known
information about the borrowers possible credit problems causes management to have doubts as to
the borrowers ability to comply with the present loan repayment terms, most are well
collateralized and are not believed to present significant risk of loss. Loans classified for
regulatory purposes not included in nonperforming loans consist only of other loans especially
mentioned and do not, in managements opinion, represent or result from trends or uncertainties
reasonably expected to materially affect future operating results, liquidity or capital resources
or represent material credits where known information about the borrowers possible credit problems
causes management to have doubts as to the borrowers ability to comply with the loan repayment
terms.   (Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2004Available-for-Sale:(1)Mutual Funds-Mortgage Securities
    
    $
    1,375
    
    
    $
    1,315
    
    
    $
    1,287Mutual Funds-U.S. Government Securities
    
    
    741
    
    
    
    710
    
    
    
    695Mortgage-backed Securities
    
    
    141
    
    
    
    162
    
    
    
    201Total
    
    
    2,257
    
    
    
    2,187
    
    
    
    2,183Held-to-Maturity:U.S. Government and Agency (2)
    
    
    3,737
    
    
    
    3,735
    
    
    
    3,491Total Investment Securities (3)
    
    $
    5,994
    
    
    $
    5,922
    
    
    $
    5,674
 
 (1)
    
    At estimated fair value.(2)
    
    Issued by a U. S. Government Agency or secured by U.S. Government Agency collateral.(3)
    
    The outstanding balance of no single issuer, except for U.S. Government and U.S. Government
Agency securities, exceeded ten percent of stockholders equity at December 31, 2006, 2005 or 2004.  WeightedAverage(Dollars in thousands)
    
    Amount
    
    
    YieldAvailable-for-Sale:Mortgage Backed Securities
    
    $
    141
    
    
    
    4.40
    %Held-to-Maturity:U.S. Government and Agency
    
    
    3,737
    
    
    
    4.62
    %Total Debt Securities
    
    $
    3,878
    
    
    
    4.61
    %
 25




---



##### 



2006
    
    
    2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    % of
    
    
    
    
    
    
    Average
    
    
    % of(Dollars in thousands)
    
    Balance
    
    
    Rate
    
    
    Total
    
    
    Balance
    
    
    Rate
    
    
    TotalNOW and Money Market Accounts
    
    $
    22,331
    
    
    
    1.77
    %
    
    
    8.25
    %
    
    $
    27,065
    
    
    
    0.89
    %
    
    
    13.66
    %Savings accounts
    
    
    20,742
    
    
    
    0.75
    
    
    
    7.67
    
    
    
    19,184
    
    
    
    0.76
    
    
    
    9.68Term Certificates
    
    
    209,716
    
    
    
    4.65
    
    
    
    77.50
    
    
    
    134,825
    
    
    
    4.04
    
    
    
    68.02Checking Accounts
    
    
    17,815
    
    
    
    0.00
    
    
    
    6.58
    
    
    
    17,133
    
    
    
    0.00
    
    
    
    8.64Total Deposits
    
    $
    270,604
    
    
    
    
    
    
    
    100.00
    %
    
    $
    198,207
    
    
    
    
    
    
    
    100.00
    %
 2004WeightedAverage
    
    
    % of(Dollars in thousands)
    
    Balance
    
    
    Rate
    
    
    TotalNOW and Money Market Accounts
    
    $
    29,384
    
    
    
    0.85
    %
    
    
    20.86
    %Savings accounts
    
    
    18,722
    
    
    
    0.76
    
    
    
    13.29Term Certificates
    
    
    79,661
    
    
    
    2.78
    
    
    
    56.56Checking Accounts
    
    
    13,074
    
    
    
    0.00
    
    
    
    9.29Total Deposits
    
    $
    140,841
    
    
    
    
    
    
    
    100.00
    %
   2006
    
    2005Maturity
    
    
    
    
    
    
    
    
    
    
    
    
    
    MaturityAmount
    
    
    Date
    
    Rate
    
    Type
    
    Amount
    
    Date
    
    Rate
    
    Type$
    6,060
    
    
    Demand
    
    
    Variable
    
    
    Overnight
    
    
    $
    18,200
    
    
    Demand
    
    
    Variable
    
    Overnight14,000
    
    
    
    2007
    
    
    
    5.32
    
    
    30 Day
    
    
    20,000
    
    
    
    2006
    
    
    Variable
    
    Adjustable10,000
    
    
    
    2007
    
    
    
    5.36
    
    
    30 Day
    
    
    6,000
    
    
    
    2006
    
    
    
    4.97
    
    
    Fixed571
    
    
    
    2010
    
    
    
    3.93
    
    
    Fixed
    
    
    714
    
    
    
    2010
    
    
    
    3.93
    
    
    Fixed$
    30,631
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    44,914
 2004MaturityAmount
    
    
    Date
    
    
    Rate
    
    
    Type$
    30,000
    
    
    Demand
    
    
    Variable
    
    
    Overnight6,000
    
    
    
    2006
    
    
    
    4.97
    
    
    Fixed3,000
    
    
    
    2006
    
    
    
    4.13
    
    
    Fixed857
    
    
    
    2010
    
    
    
    3.93
    
    
    Fixed$
    39,857
 26




---



##### 



27




---



##### 



Months to Maturity3 or
    
    Over 3
    
    Over 6
    
    Over(Dollars in thousands)
    
    less
    
    to 6
    
    to 12
    
    12
    
    TOTALTime deposits$100 thousand or more
    
    $
    15,743
    
    
    $
    14,417
    
    
    $
    16,288
    
    
    $
    8,406
    
    
    $
    54,854
       28




---



##### 



29




---



##### 



30




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    32CONSOLIDATED FINANCIAL STATEMENTSBalance Sheets
    
    33Statements of Income
    
    35Statements of Changes in Stockholders Equity
    
    36Statements of Cash Flows
    
    37NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    39
 31




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 32




---



##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
  2006
    
    
    2005Cash and due from banks
    
    $
    1,316
    
    
    $
    1,317Interest bearing deposits with banks
    
    
    5,259
    
    
    
    4,378Investment securities:Securities available-for-sale at fair value
    
    
    2,257
    
    
    
    2,187Securities held-to-maturity (fair value of $3,738
in 2006 and $3,735 in 2005)
    
    
    3,737
    
    
    
    3,735Restricted investment securities  at cost
    
    
    2,382
    
    
    
    2,607Loans receivable
    
    
    312,300
    
    
    
    235,045Less: Allowance for loan losses
    
    
    (2,217
    )
    
    
    (1,738
    )Net loans receivable
    
    
    310,083
    
    
    
    233,307Other real estate owned
    
    
    
    
    
    
    385Premises and equipment, net
    
    
    9,208
    
    
    
    9,253Accrued interest receivable
    
    
    1,695
    
    
    
    1,146Goodwill
    
    
    2,182
    
    
    
    2,182Other intangible assets
    
    
    193
    
    
    
    154Bank owned life insurance
    
    
    5,914
    
    
    
    5,030Other assets
    
    
    3,225
    
    
    
    1,444TOTAL ASSETS
    
    $
    347,451
    
    
    $
    267,125
  33




---



##### 



2006
    
    
    2005LIABILITIES:Deposits
    
    $
    270,604
    
    
    $
    198,207Other liabilities
    
    
    4,943
    
    
    
    2,062Guaranteed preferred beneficial interest in
junior subordinated debentures
    
    
    17,000
    
    
    
    Advances from Federal Home Loan Bank of Atlanta
    
    
    30,631
    
    
    
    44,914Total liabilities
    
    
    323,178
    
    
    
    245,183STOCKHOLDERS EQUITY:Common stock, $.01 par value; authorized 4,000,000
shares, issued and outstanding 1,839,143 shares in
2006 and 1,768,082 shares in 2005
    
    
    18
    
    
    
    18Additional paid in capital
    
    
    11,460
    
    
    
    10,578Retained earnings
    
    
    12,824
    
    
    
    11,372Accumulated other comprehensive loss
    
    
    (29
    )
    
    
    (26
    )Total stockholders equity
    
    
    24,273
    
    
    
    21,942TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY
    
    $
    347,451
    
    
    $
    267,125
  34




---



##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
 2006
    
    
    2005INTEREST INCOME:Interest and fees on loans
    
    $
    21,174
    
    
    $
    14,663Interest on investment securities
    
    
    276
    
    
    
    187Dividends on FHLB and FRB stock
    
    
    147
    
    
    
    103Other interest-earning assets
    
    
    49
    
    
    
    34Total interest income
    
    
    21,646
    
    
    
    14,987INTEREST EXPENSE:Interest expense on deposits
    
    
    7,546
    
    
    
    4,132Guaranteed preferred beneficial interest in junior subordinated debentures
    
    
    550
    
    
    
    Interest expense on advances from FHLB
    
    
    2,071
    
    
    
    1,547Total interest expense
    
    
    10,167
    
    
    
    5,679NET INTEREST INCOME
    
    
    11,479
    
    
    
    9,308PROVISION FOR LOAN LOSSES
    
    
    665
    
    
    
    625NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    10,814
    
    
    
    8,683NONINTEREST INCOME:Checking account fees
    
    
    540
    
    
    
    453ATM fees
    
    
    108
    
    
    
    87Commission income
    
    
    75
    
    
    
    82Loss on sale of other real estate owned
    
    
    (43
    )
    
    
    Gain on sale of loans
    
    
    101
    
    
    
    110Income from bank owned life insurance
    
    
    234
    
    
    
    243Other
    
    
    246
    
    
    
    140Total noninterest income
    
    
    1,261
    
    
    
    1,115NONINTEREST EXPENSE:Salaries and employee benefits
    
    
    5,051
    
    
    
    4,169Occupancy expense
    
    
    589
    
    
    
    484Equipment and data processing expense
    
    
    896
    
    
    
    740Checking account expense
    
    
    92
    
    
    
    124Professional fees
    
    
    202
    
    
    
    109Stationery, printing and supplies
    
    
    51
    
    
    
    52Advertising
    
    
    97
    
    
    
    113Other
    
    
    869
    
    
    
    752Total noninterest expense
    
    
    7,847
    
    
    
    6,543INCOME BEFORE INCOME TAXES
    
    
    4,228
    
    
    
    3,255INCOME TAX EXPENSE
    
    
    1,520
    
    
    
    1,193NET INCOME
    
    $
    2,708
    
    
    $
    2,062Earnings per common share  basic
    
    $
    1.47
    
    
    $
    1.21Earnings per common share  diluted
    
    $
    1.47
    
    
    $
    1.20Dividends declared per common share
    
    $
    0.20
    
    
    $
    0.20
  35




---



##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBALANCES AT JANUARY 1, 2005
    
    $
    16
    
    
    $
    8,377
    
    
    $
    9,929
    
    
    $
    (6
    )
    
    $
    18,316Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    2,062
    
    
    
    
    
    
    
    2,062Other comprehensive loss, net of
related income tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,042Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    (336
    )
    
    
    
    
    
    
    (336
    )Sale of common stock
    
    
    2
    
    
    
    1,840
    
    
    
    
    
    
    
    
    
    
    
    1,842Stock purchased by dividend
reinvestment plan
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    78Stock dividend
    
    
    
    
    
    
    283
    
    
    
    (283
    )
    
    
    
    
    
    
    BALANCES AT DECEMBER 31, 2005
    
    
    18
    
    
    
    10,578
    
    
    
    11,372
    
    
    
    (26
    )
    
    
    21,942Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    2,708
    
    
    
    
    
    
    
    2,708Other comprehensive loss, net of
related income tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,705Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    (374
    )
    
    
    
    
    
    
    (374
    )Stock dividends
    
    
    
    
    
    
    
    
    
    
    882
    
    
    
    (882
    )
    
    
    BALANCES AT DECEMBER 31, 2006
    
    $
    18
    
    
    $
    11,460
    
    
    $
    12,824
    
    
    $
    (29
    )
    
    $
    24,273
  36




---



##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
 2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,708
    
    
    $
    2,062Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    333
    
    
    
    313Provision for loan losses
    
    
    665
    
    
    
    625Gain on sale of loans
    
    
    (101
    )
    
    
    (110
    )Loss on sale of real estate owned
    
    
    43
    
    
    
    Loss on disposal of premises and equipment
    
    
    1
    
    
    
    11Increase in cash surrender value of bank owned life insurance
    
    
    (234
    )
    
    
    (243
    )Deferred income taxes
    
    
    (507
    )
    
    
    (430
    )Excess servicing rights
    
    
    (73
    )
    
    
    (49
    )Reinvested dividends on investments
    
    
    (96
    )
    
    
    (76
    )Originations of loans held for sale
    
    
    (5,441
    )
    
    
    (4,051
    )Proceeds from sales of loans held for sale
    
    
    5,485
    
    
    
    4,123Net change in:Accrued interest receivable and other assets
    
    
    (1,820
    )
    
    
    (345
    )Other liabilities
    
    
    2,881
    
    
    
    696Net cash provided by operating activities
    
    
    3,844
    
    
    
    2,526CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of investment securities held-to-maturity
    
    
    (7,328
    )
    
    
    (7,139
    )Proceeds from sales, maturities, calls and principal payments
of investment securities available-for-sale
    
    
    21
    
    
    
    38Proceeds from maturities, calls and principal payments
of investment securities held-to-maturity
    
    
    7,500
    
    
    
    7,000Net redemption (purchase) of stock in Federal Home Loan Bank
    
    
    224
    
    
    
    (328
    )Net increase in loans
    
    
    (77,384
    )
    
    
    (60,489
    )Proceeds from sale of real estate owned
    
    
    342
    
    
    
    Purchase of bank owned life insurance
    
    
    (650
    )
    
    
    (650
    )Purchases of premises and equipment  net
    
    
    (428
    )
    
    
    (3,504
    )Net cash used by investing activities
    
    
    (77,703
    )
    
    
    (65,072
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    72,397
    
    
    
    57,366Proceeds from issuance of common stock
    
    
    
    
    
    
    1,920Net (decrease) increase in advances from Federal Home Loan Bank:Short-term
    
    
    (8,140
    )
    
    
    8,200Long-term
    
    
    (6,144
    )
    
    
    (3,143
    )Net increase in guaranteed preferred beneficial
interest in junior subordinated debentures
    
    
    17,000
    
    
    
    Payments of cash dividends
    
    
    (374
    )
    
    
    (336
    )Net cash provided by financing activities
    
    
    74,739
    
    
    
    64,007
 37




---



##### 



Cecil Bancorp, Inc. and Subsidiaries
 2006
    
    
    2005Increase in cash and cash equivalents
    
    $
    880
    
    
    $
    1,461Cash and cash equivalents at beginning of year
    
    
    5,695
    
    
    
    4,234Cash and cash equivalents at end of year
    
    $
    6,575
    
    
    $
    5,695Supplemental disclosure of cash flows information:Cash paid for income taxes
    
    $
    2,120
    
    
    $
    1,463Cash paid for interest
    
    $
    10,081
    
    
    $
    5,606Interest capitalized during the period
    
    $
    
    
    
    $
    29Supplemental disclosure of noncash investing
and financing activities:Transfer of loans receivable to real estate owned
    
    $
    
    
    
    $
    385Sale of real estate owned:Carrying value
    
    $
    385
    
    
    $
    Loss on sale
    
    
    (43
    )
    
    
    Cash received from sale
    
    $
    342
    
    
    $
    
  38




---



##### 



CECIL BANCORP, INC. AND SUBSIDIARIES
 
    Nature of Operations
  Policy for Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  39




---



##### 



Investment Securities
   Restricted Investment Securities
  Loans Receivable
   40




---



##### 







Loans Held for Sale




Allowance for Loan Losses








Premises and Equipment


41




---



##### 







Other Real Estate Owned




Goodwill




Mortgage Servicing Rights








Bank Owned Life Insurance




Income Taxes


42




---



##### 



Advertising
  Earnings Per Share
  Stock-Based Compensation
 Share-Based Payment
 Accounting for Stock Issued to
Employees
  Comprehensive Income
    43




---



##### 



44




---



##### 



2006Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-Sale:Mutual funds  mortgage securities
    
    $
    1,411
    
    
    $
    
    
    
    $
    36
    
    
    $
    1,375Mutual funds  U.S. Government securities
    
    
    747
    
    
    
    
    
    
    
    6
    
    
    
    741Mortgage-backed securities
    
    
    146
    
    
    
    
    
    
    
    5
    
    
    
    141$
    2,304
    
    
    $
    
    
    
    $
    47
    
    
    $
    2,257Held-to-Maturity:U. S. Treasury securities and obligations
of U. S. Government and Federal agencies
    
    $
    3,737
    
    
    $
    1
    
    
    $
    
    
    
    $
    3,738
 2005Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-Sale:Mutual funds  mortgage securities
    
    $
    1,348
    
    
    $
    
    
    
    $
    33
    
    
    $
    1,315Mutual funds  U.S. Government securities
    
    
    714
    
    
    
    
    
    
    
    4
    
    
    
    710Mortgage-backed securities
    
    
    167
    
    
    
    
    
    
    
    5
    
    
    
    162$
    2,229
    
    
    $
    
    
    
    $
    42
    
    
    $
    2,187Held-to-Maturity:U. S. Treasury securities and obligations
of U. S. Government and Federal agencies
    
    $
    3,735
    
    
    $
    
    
    
    $
    
    
    
    $
    3,735
   45




---



##### 



Less than
    
    
    More than12 months
    
    
    12 months
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossAvailable-for-Sale:Mutual funds 
mortgage securities
    
    $
    
    
    
    $
    
    
    
    $
    1,375
    
    
    $
    36
    
    
    $
    1,375
    
    
    $
    36Mutual funds 
US Government securities
    
    
    
    
    
    
    
    
    
    
    741
    
    
    
    6
    
    
    
    741
    
    
    
    6Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    5
    
    
    
    141
    
    
    
    5$
    
    
    
    $
    
    
    
    $
    2,257
    
    
    $
    47
    
    
    $
    2,257
    
    
    $
    47
   46




---



##### 



2006
    
    
    2005First mortgage loans:1  4 dwelling units
    
    $
    83,905
    
    
    $
    79,5745 or more
    
    
    6,625
    
    
    
    4,523Nonresidential
    
    
    87,316
    
    
    
    45,338Land
    
    
    2,805
    
    
    
    3,477Construction
    
    
    56,701
    
    
    
    29,777237,352
    
    
    
    162,689Other loans:Home equity loans
    
    
    7,402
    
    
    
    7,335Commercial loans
    
    
    82,961
    
    
    
    67,407Consumer loans
    
    
    11,741
    
    
    
    10,072Loans on deposit accounts
    
    
    1,447
    
    
    
    1,447Education loans
    
    
    15
    
    
    
    15103,566
    
    
    
    86,276Gross loans
    
    
    340,918
    
    
    
    248,965Less:Undisbursed proceeds on loans in process
    
    
    (27,683
    )
    
    
    (13,086
    )Deferred loan fees and costs
    
    
    (935
    )
    
    
    (834
    )Net loans receivable
    
    $
    312,300
    
    
    $
    235,045
  2006
    
    
    2005Balance at beginning of year
    
    $
    3,637
    
    
    $
    1,332Change in related party classification
    
    
    4,148
    
    
    
    299New loans and additional borrowings
    
    
    5,217
    
    
    
    3,859Participations purchased
    
    
    1,035
    
    
    
    Participations sold
    
    
    (575
    )
    
    
    (538
    )Repayments
    
    
    (2,775
    )
    
    
    (1,315
    )Balance at end of year
    
    $
    10,687
    
    
    $
    3,637
  47




---



##### 



2006
    
    
    2005Balance at beginning of period
    
    $
    1,738
    
    
    $
    1,189Provision charged to operations
    
    
    665
    
    
    
    625Charge-offs
    
    
    (248
    )
    
    
    (120
    )Recoveries
    
    
    62
    
    
    
    44Balance at end of period
    
    $
    2,217
    
    
    $
    1,738
  2006
    
    
    2005Non-accrual loans
    
    $
    1,382
    
    
    $
    2,818Loans 90 days or more past due and still accruing
    
    
    211
    
    
    
    18Total nonperforming loans
    
    
    1,593
    
    
    
    2,836Other real estate owned, net
    
    
    
    
    
    
    385Total nonperforming assets
    
    $
    1,593
    
    
    $
    3,221
   2006
    
    
    2005Impaired loans with a valuation allowance
    
    $
    237
    
    
    $
    1,350Impaired loans without a valuation allowance
    
    
    1,356
    
    
    
    1,686Total impaired loans
    
    $
    1,593
    
    
    $
    3,036Allowance for loan losses related to impaired loans
    
    $
    236
    
    
    $
    167Allowance for loan losses related to other than
impaired loans
    
    
    1,981
    
    
    
    1,571Total allowance for loan losses
    
    $
    2,217
    
    
    $
    1,738Average impaired loans for the year
    
    $
    2,044
    
    
    $
    2,444Interest income on impaired loans
recognized on the cash basis
    
    $
    53
    
    
    $
    99
   48




---



##### 



2006
    
    
    2005Balance at beginning of period
    
    $
    154
    
    
    $
    143Mortgage servicing rights capitalized
    
    
    73
    
    
    
    49Mortgage servicing rights amortized
    
    
    (34
    )
    
    
    (38
    )Balance at end of period
    
    $
    193
    
    
    $
    154
   2006
    
    
    2005Land
    
    $
    1,728
    
    
    $
    1,700Buildings and improvements
    
    
    7,155
    
    
    
    6,986Furniture, fixtures and equipment
    
    
    2,067
    
    
    
    2,097Leasehold improvements
    
    
    440
    
    
    
    42511,390
    
    
    
    11,208Less: accumulated depreciation
    
    
    2,182
    
    
    
    1,955$
    9,208
    
    
    $
    9,253
   Year ending December 31:2007
    
    $
    1282008
    
    
    1302009
    
    
    1342010
    
    
    1062011
    
    
    93Thereafter
    
    
    189
    49




---



##### 



2006 and 2005Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Amount$2,816
    
    $
    634
    
    
    $
    2,182
   2006
    
    
    2005Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    RateNOW and Money Market accounts
    
    $
    22,331
    
    
    
    1.77
    %
    
    $
    27,065
    
    
    
    0.89
    %Savings accounts
    
    
    20,742
    
    
    
    0.75
    
    
    
    19,184
    
    
    
    0.76Term certificates
    
    
    209,716
    
    
    
    4.65
    
    
    
    134,825
    
    
    
    4.04Checking accounts
    
    
    17,815
    
    
    
    0.00
    
    
    
    17,133
    
    
    
    0.00$
    270,604
    
    
    
    
    
    
    $
    198,207
  Three months or less
    
    $
    77,894Three months to twelve months
    
    
    95,902Twelve months to twenty-four months
    
    
    27,313Twenty-four months to thirty-six months
    
    
    4,660Thirty-six months to forty-eight months
    
    
    3,478Forty-eight months to sixty months
    
    
    469Over sixty months
    
    
    $
    209,716
       50




---



##### 



2006
    
    
    2005Maturity
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    Maturity
    
    
    InterestAmount
    
    
    Date
    
    
    Rate
    
    
    Type
    
    
    Amount
    
    
    Date
    
    
    Rate
    
    
    Type$
    
    6,060
    
    
    On Demand
    
    Variable
    
    Overnight
    
    $
    18,200
    
    
    On Demand
    
    Variable
    
    Overnight14,000
    
    
    
    2007
    
    
    
    5.32
    %
    
    30 Day
    
    
    20,000
    
    
    
    2006
    
    
    Variable
    
    Adjustable10,000
    
    
    
    2007
    
    
    
    5.36
    %
    
    30 Day
    
    
    6,000
    
    
    
    2006
    
    
    
    4.97
    %
    
    Fixed571
    
    
    
    2010
    
    
    
    3.93
    %
    
    Fixed
    
    
    714
    
    
    
    2010
    
    
    
    3.93
    %
    
    Fixed$
    
    30,631
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    44,914
       51




---



##### 



2006
    
    
    2005Current income taxes:Federal
    
    $
    1,660
    
    
    $
    1,335State
    
    
    367
    
    
    
    2882,027
    
    
    
    1,623Deferred income taxes:Federal
    
    
    (420
    )
    
    
    (351
    )State
    
    
    (87
    )
    
    
    (79
    )(507
    )
    
    
    (430
    )Total income tax expense
    
    $
    1,520
    
    
    $
    1,193
  2006
    
    
    2005Deferred tax assets:Deferred loan origination fees
    
    $
    361
    
    
    $
    322Loan loss allowance
    
    
    856
    
    
    
    671Deferred compensation
    
    
    879
    
    
    
    492Net unrealized loss on available-for-sale securities
    
    
    18
    
    
    
    17State net operating loss carry-forwards
    
    
    61
    
    
    
    53Other
    
    
    34
    
    
    
    64Total gross deferred tax assets
    
    
    2,209
    
    
    
    1,619Deferred tax liabilities:FHLB stock dividends
    
    
    28
    
    
    
    28Mortgage servicing rights
    
    
    74
    
    
    
    59Carrying value in excess of tax basis of goodwill
    
    
    291
    
    
    
    217Tax accumulated depreciation in excess of book
    
    
    206
    
    
    
    221Total gross deferred tax liabilities
    
    
    599
    
    
    
    525Net deferred tax assets before valuation allowance
    
    
    1,610
    
    
    
    1,094Valuation allowance
    
    
    (61
    )
    
    
    (53
    )Net deferred tax assets
    
    $
    1,549
    
    
    $
    1,041
   52




---



##### 



2006
    
    2005Federal income tax rate
    
    
    34.0
    %
    
    
    34.0
    %Increase (decrease) resulting from:State income taxes, net of federal
income tax benefit
    
    
    4.5
    
    
    
    4.5Other
    
    
    (2.5
    )
    
    
    (1.8
    )Effective tax rate
    
    
    36.0
    %
    
    
    36.7
    %
        53




---



##### 



To Be WellCapitalized UnderPrompt Corrective
    
    For CapitalActual
    
    Action Provisions
    
    Adequacy PurposesAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(in thousands)
    
    (in thousands)
    
    (in thousands)As of December 31, 2006:Total risk-based capital(to risk-weighted assets)The Bank
    
    $
    39,867
    
    
    
    13.80
    %
    
    $
    28,893
    
    
    
    10.00
    %
    
    $
    23,114
    
    
    
    8.00
    %Tier I capital(to risk-weighted assets)The Bank
    
    
    25,050
    
    
    
    8.67
    
    
    
    17,336
    
    
    
    6.00
    
    
    
    11,557
    
    
    
    4.00Tier I capital(to adjusted total assets)The Bank
    
    
    25,050
    
    
    
    7.72
    
    
    
    16,214
    
    
    
    5.00
    
    
    
    12,971
    
    
    
    4.00As of December 31, 2005:Total risk-based capital(to risk-weighted assets)Consolidated
    
    $
    21,295
    
    
    
    10.31
    %
    
    
    N/A
    
    
    
    N/A
    
    
    $
    16,530
    
    
    
    8.00
    %The Bank
    
    
    20,995
    
    
    
    10.05
    
    
    
    20,896
    
    
    
    10.00
    
    
    
    16,716
    
    
    
    8.00Tier I capital(to risk-weighted assets)Consolidated
    
    
    19,557
    
    
    
    9.46
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    8,265
    
    
    
    4.00The Bank
    
    
    19,257
    
    
    
    9.22
    
    
    
    12,537
    
    
    
    6.00
    
    
    
    8,358
    
    
    
    4.00Tier I capital(to adjusted total assets)Consolidated
    
    
    19,557
    
    
    
    7.63
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    10,251
    
    
    
    4.00The Bank
    
    
    19,257
    
    
    
    7.51
    
    
    
    12,814
    
    
    
    5.00
    
    
    
    10,251
    
    
    
    4.00
 54




---



##### 



Employee Stock Ownership Plan
   Stock-Based Compensation Plans
      55




---



##### 



2006
    
    
    2005Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    10,213
    
    
    $
    10.65
    
    
    
    10,213
    
    
    $
    10.65Forfeited
    
    
    (2,197
    )
    
    
    5.62
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    8,016
    
    
    $
    12.01
    
    
    
    10,213
    
    
    $
    10.65Options exercisable at year end
    
    
    8,016
    
    
    $
    12.01
    
    
    
    10,213
    
    
    $
    10.65
  Options Outstanding and ExercisableRemainingExercise
    
    Number
    
    LifePrice
    
    Outstanding
    
    (Years)12.01
    
    
    8,016
    
    
    
    2.3
   Deferred Compensation
  56




---



##### 



57




---



##### 



2006
    
    
    2005BASIC:Net income available to common stockholders
    
    $
    2,708,000
    
    
    $
    2,062,000Average common shares outstanding
    
    
    1,839,143
    
    
    
    1,708,484Basic net income per share
    
    $
    1.47
    
    
    $
    1.21DILUTED:Net income available to common stockholders
    
    $
    2,708,000
    
    
    $
    2,062,000Average common shares outstanding
    
    
    1,839,143
    
    
    
    1,708,484Stock option adjustment
    
    
    2,403
    
    
    
    3,983Average common shares outstanding  diluted
    
    
    1,841,546
    
    
    
    1,712,467Diluted net income per share
    
    $
    1.47
    
    
    $
    1.20
  Disclosure About Fair Value of Financial Instruments
 Cash and Cash Equivalents
 Investment Securities
 Loans
  58




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##### 



Accrued Interest Receivable
 Restricted Investment Securities
 Deposits
 Advances from the FHLB
 Commitments to Extend Credit
  EstimatedCarrying
    
    FairValue
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    6,575
    
    
    $
    6,575Investment securities:Available-for-sale
    
    
    2,257
    
    
    
    2,257Held-to-maturity
    
    
    3,737
    
    
    
    3,738Loans receivable
    
    
    312,300
    
    
    
    322,557Restricted investment securities
    
    
    2,382
    
    
    
    2,382Accrued interest receivable
    
    
    1,695
    
    
    
    1,695Financial liabilities:Deposits
    
    
    270,604
    
    
    
    266,635Guaranteed preferred beneficial interest
in junior subordinated debentures
    
    
    17,000
    
    
    
    16,835Advances from FHLB
    
    
    30,631
    
    
    
    30,619
 59




---



##### 



EstimatedCarrying
    
    FairValue
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    5,695
    
    
    $
    5,695Investment securities:Available-for-sale
    
    
    2,187
    
    
    
    2,187Held-to-maturity
    
    
    3,735
    
    
    
    3,735Loans
    
    
    235,045
    
    
    
    241,442Restricted investment securities
    
    
    2,607
    
    
    
    2,607Accrued interest receivable
    
    
    1,146
    
    
    
    1,146Financial liabilities:Deposits
    
    
    198,207
    
    
    
    193,304Advances from FHLB
    
    
    44,914
    
    
    
    44,916
    2006
    
    
    2005ASSETSCash
    
    $
    1,321
    
    
    $
    304Investment in subsidiaries
    
    
    27,949
    
    
    
    21,642Notes receivable from bank subsidiary
    
    
    12,600
    
    
    
    Other assets
    
    
    24
    
    
    
    11Total assets
    
    $
    41,894
    
    
    $
    21,957LIABILITIES AND STOCKHOLDERS EQUITYJunior subordinated debentures
    
    $
    17,000
    
    
    $
    Other liabilities
    
    
    621
    
    
    
    15Total liabilities
    
    
    17,621
    
    
    
    15Stockholders equity:Common stock, $.01 par value, authorized
4,000,000 shares, issued and outstanding
1,839,143 shares in 2006 and
1,768,082 shares in 2005
    
    
    18
    
    
    
    18Additional paid-in capital
    
    
    11,460
    
    
    
    10,578
 60




---



##### 



2006
    
    
    2005Retained earnings
    
    
    12,824
    
    
    
    11,372Accumulated other comprehensive loss
    
    
    (29
    )
    
    
    (26
    )Total stockholders equity
    
    
    24,273
    
    
    
    21,942Total liabilities and stockholders equity
    
    $
    41,894
    
    
    $
    21,957
 61




---



##### 



Years Ended December 312006
    
    
    2005Income:Dividend from subsidiary bank
    
    $
    
    
    
    $
    100Interest income on notes receivable
    
    
    460
    
    
    
    Equity in undistributed earnings of subsidiary bank
    
    
    2,783
    
    
    
    1,969Total income
    
    
    3,243
    
    
    
    2,069Operating expenses:Compensation and benefits
    
    
    11
    
    
    
    12Interest expense on junior subordinated debentures
    
    
    550
    
    
    
    Other
    
    
    12
    
    
    
    6Total operating expenses
    
    
    573
    
    
    
    18Net income before income taxes
    
    
    2,670
    
    
    
    2,051Income tax benefit
    
    
    38
    
    
    
    11Net income
    
    $
    2,708
    
    
    $
    2,062
  Years Ended December 312006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,708
    
    
    $
    2,062Adjustments to reconcile net income to net cash
provided by operating activities:Equity in undistributed earnings of subsidiary
    
    
    (2,783
    )
    
    
    (1,969
    )Net change in other assets and other liabilities
    
    
    593
    
    
    
    62Net cash flows provided by operating activities
    
    
    518
    
    
    
    155CASH FLOWS FROM INVESTING ACTIVITIES:Notes receivable from bank subsidiary
    
    
    (12,600
    )
    
    
    CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid
    
    
    (374
    )
    
    
    (336
    )Proceeds from sale of common stock
    
    
    
    
    
    
    1,920Proceeds from sale of junior subordinated debentures
    
    
    17,000
    
    
    
    Investment in subsidiary
    
    
    (3,527
    )
    
    
    (1,500
    )Net cash provided by financing activities
    
    
    13,099
    
    
    
    84NET INCREASE IN CASH
    
    
    1,017
    
    
    
    239CASH AT BEGINNING OF PERIOD
    
    
    304
    
    
    
    65CASH AT END OF PERIOD
    
    $
    1,321
    
    
    $
    304
 62




---



##### 



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
          Name
    
    Age
    
    TitleBrian J. Hale
    
    47
    
    Executive Vice President/Chief Operating OfficerSandra D. Feltman
    
    57
    
    Sr. Vice President/Director of LendingBrian L. Lockhart
    
    42
    
    Vice President/Business Development OfficerR. Lee Whitehead
    
    29
    
    Vice President/Chief Financial Officer
    63




---



##### 



rd
          Documents Filed as Part of this Report
 Financial Statements
        Financial Statement Schedules
 64




---



##### 



Exhibits
 Exhibit No.
    
    Description
    
    Incorporated by Reference to:3.1
    
    Articles of Incorporation of Cecil Bancorp, Inc.
    
    Exhibit 3.1 to RegistrationStatement on Form  S-1 (FileNo. 33-81374)3.2
    
    Bylaws of Cecil  Bancorp, Inc.
    
    Exhibit 3.2 to Form 10-KSBfor the year ended December31, 2003, SEC File No.0-24926.3.3
    
    Articles of Incorporation of Cecil Federal Bank
    
    Exhibit 3.3 to Form 10-KSBfor the year ended December31, 2004, SEC File No.0-24926.3.4
    
    Bylaws of Cecil Federal Bank
    
    Exhibit 3.4 to Form 10-KSBfor the year ended December31, 2004, SEC File No.0-24926.4
    
    Form of Common Stock Certificate
    
    Exhibit 4 to RegistrationStatement on Form  S-1 (FileNo. 33-81374)10.1*
    
    Employment Agreement between Cecil Bancorp,
    
    Exhibit 10.1 to RegistrationInc., Cecil Federal Savings Bank and Mary
    
    Statement on Form  S-1 (FileHalsey
    
    No. 33-81374)10.2*
    
    Cecil Bancorp, Inc. Stock Option and Incentive
    
    Exhibit to Companys ProxyPlan
    
    Statement for its AnnualMeeting of May 25, 1995(File No. 0-24926).10.3*
    
    Cecil Bancorp, Inc. Management Recognition Plan
    
    Exhibit to Companys ProxyStatement for its AnnualMeeting of May 25, 1995(File No. 0-24926).10.4*
    
    Cecil Federal Savings Bank Retirement Plan for
    
    Exhibit 10.4 to Form 10-KSBNon-Employee Directors
    
    for the year ended December31, 1994, SEC File No.0-24926.10.5*
    
    Columbian Bank, a Federal Savings Bank 1994
    
    Columbian Bank, a FederalStock Option and  Incentive Plan
    
    Savings Bank, RegistrationStatement on Form S-B.10.6*
    
    Cecil Federal Bank Supplemental Executive
    
    Exhibit 10.1 to theRetirement Plan covering Charles F. Sposato,
    
    Companys Quarterly ReportChairman; Mary B. Halsey, President and Chief
    
    on Form 10-QSB for theExecutive Officer; and Brian J. Hale, Executive
    
    quarterly period ending JuneVice President and Chief Operating Officer and
    
    30, 2004related agreements with such officers21
    
    Subsidiaries
 65




---



##### 



Exhibit No.
    
    Description
    
    Incorporated by Reference to:23
    
    Consent of Stegman & Company31
    
    Rule 13a-14(a)/15d-14(a) Certification32
    
    18 U.S.C. Section 1350 Certification
 
 *
    
    Management Contract or Compensatory Plan or Arrangement. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  66




---



##### 



March 26, 2007
    By:
    /s/ Mary B. HalseyMary B. HalseyPresident and Chief Executive Officer March 26, 2007
    By:
    /s/ Robert Lee WhiteheadRobert Lee WhiteheadVice President and Chief Financial Officer  By:
    
    /s/ Mary B. Halsey
    
    
    
    Date:  March 26, 2007Mary B. HalseyPresident and Chief Executive Officer(Principal Executive Officer)By:
    
    /s/ Robert Lee Whitehead
    
    
    
    Date:  March 26, 2007Robert Lee WhiteheadVice President and Chief Financial Officer(Principal Financial and Accounting Officer)By:
    
    /s/ Charles F. Sposato
    
    
    
    Date:  March 26, 2007Charles F. SposatoChairman of the BoardBy:
    
    /s/ Donald F. Angert
    
    
    
    Date:  March 26, 2007Donald F. AngertDirectorBy:
    
    /s/ Matthew G. Bathon
    
    
    
    Date:  March 26, 2007Matthew G. BathonDirectorBy:
    
    /s/ Mark W. Saunders
    
    
    
    Date:  March 26, 2007Mark W. SaundersDirectorBy:
    
    /s/ Thomas L. Vaughan, Sr.
    
    
    
    Date: March 26, 2007Thomas L. Vaughan, Sr.Director
 67