<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
_________________________________________________________________
FORM 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
_________________________________________________________________
For Quarter Ended Commission File Number
March 31, 1997 0-24926
CECIL BANCORP, INC.
-------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1883546
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
127 North Street
Elkton, Maryland 21921
---------------- -----
(Address of principal (Zip Code)
executive office)
(410) 398-1650
--------------
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X NO
------- -------
Number of shares outstanding of common stock
as of March 31, 1997
$0.01 par value common stock 469,358 shares
- ---------------------------- --------------
class outstanding
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2
CECIL BANCORP, INC., AND SUBSIDIARIES
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
ITEM 1. Financial Statements (Unaudited)
Consolidated Condensed Statements of
Financial Condition - March 31, 1997
and December 31, 1996 3-4
Consolidated Condensed Statements of
Operations Three Months Ended
March 31, 1997 and 1996 5
Consolidated Condensed Statement of
Cash Flows Three Months Ended
March 31, 1997 and 1996 6-7
Notes to Consolidated Condensed
Financial Statements 8
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-15
PART II. OTHER INFORMATION 16
Item 4. Submission of Matters to a Vote of
Security Holders
Item 6. Exhibits and Reports on Form 8-K
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3
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash $ 2,025,169 $ 1,678,415
Cash - Interest bearing 772,920 502,207
Investment securities
Securities held-to-maturity 1,996,551 2,490,069
Securities available-for-sale at
estimated market value 500,981 496,358
Mortgage backed securities
Securities held to maturity 504,585 531,775
Securities available for sale
at estimated market value 1,583,392 1,633,338
Loans held for sale 1,603,671 1,707,883
Loans receivable, net 50,309,268 49,779,988
Office properties, equipment and leasehold
improvements at cost, less accumulated
depreciation and amortization 519,966 508,824
Stock in Federal Home Loan Bank of
Atlanta - at cost 438,100 422,900
Accrued interest receivable 406,214 432,828
Deferred taxes 5,578
Prepaid expenses 57,638 42,878
Other assets 43,474 36,160
----------- -----------
TOTAL ASSETS $60,767,507 $60,263,623
=========== ===========
</TABLE>
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<PAGE>
4
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Savings deposits $48,701,131 $47,365,022
Advance payments by borrowers for
property taxes and insurance 993,840 711,247
Employee stock ownership debt 308,064 308,064
Other liabilities 372,318 323,327
Deferred taxes 2,877
Advances from Federal Home Loan
Bank of Atlanta 3,250,000 4,500,000
----------- -----------
TOTAL LIABILITIES 53,625,353 53,210,537
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par value
Authorized: 4,000,000 shares
Issued and outstanding:469,358 shares 4,694 4,694
Additional paid in capital 3,940,728 3,940,728
Net unrealized gain (loss) on securities
available-for-sale, net of deferred
taxes (3,140) 13,139
Employee stock ownership debt (308,064) (308,064)
Retained earnings, substantially
restricted 3,663,983 3,558,636
Deferred compensation - Management
Recognition Plan (156,047) (156,047)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,142,154 7,053,086
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $60,767,507 $60,263,623
=========== ===========
</TABLE>
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<PAGE>
5
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------------
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME
Loans receivable $1,096,702 $ 994,917
Mortgage-backed securities 35,582 14,251
Investment securities 29,210 33,885
Other interest-earning assets 28,207 22,623
---------- ----------
Total interest income 1,189,701 1,065,676
---------- ----------
INTEREST EXPENSE
Deposits
NOW accounts 17,244 17,710
Passbook accounts and statement savings 71,476 73,714
Money market deposit accounts 17,760 21,499
Certificates 411,304 408,706
---------- ----------
Interest expense on deposits 517,784 521,629
Borrowings 59,917 12,735
---------- ----------
Total interest expense 577,701 534,364
---------- ----------
Net interest income 612,000 531,312
Provision for loan losses 10,500 9,000
Net interest income after
provision for loan losses 601,500 522,312
---------- ----------
NONINTEREST INCOME (LOSS)
Loan service charges 8,820 6,673
Dividends on FHLB stock 7,707 7,500
Gain on sale of loans 4,736 4,793
Other 49,205 43,894
---------- ----------
Total noninterest income 70,468 62,860
---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 238,149 264,405
Occupancy expense 29,548 26,490
Equipment and data processing expense 46,271 40,786
SAIF deposit insurance premium 6,744 29,511
Other 111,118 92,595
---------- ----------
Total noninterest expense 431,830 453,787
---------- ----------
Income before income taxes 240,138 131,385
---------- ----------
INCOME TAXES
Current 98,976 57,808
Deferred (11,121) (5,089)
---------- ----------
Total income taxes 87,855 52,719
---------- ----------
NET INCOME $ 152,283 $ 78,666
========== ==========
Earnings per common share and common
share equivalent $ .35 $ .18
========== ==========
Earnings per common share - assuming
full dilution $ .35 $ .18
========== ==========
Cash dividends paid per common share $ .10 $ .10
========== ==========
</TABLE>
<PAGE>
<PAGE>
6
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------------
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and fees received on
loans and investments $1,269,659 $ 1,107,384
Cash paid to suppliers and employees (414,793) (493,805)
Proceeds from sale of loans 624,719 128,422
Origination of loans held for sale (608,500) (671,500)
Interest paid (577,701) (534,364)
Income taxes paid (75,000) (2,700)
---------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 218,384 (466,563)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of
investment securities 2,000,000 500,000
Proceeds from maturities of
mortgage-backed securities 63,624 59,813
Purchases of investment securities (,501,484) (1,744,922)
Loans originated (3,772,745) (4,554,868)
Principal collected on loans 3,325,694 3,787,129
Purchases of office properties, equipment
and leasehold improvements (22,572) (48,064)
Purchase of stock in Federal Home Loan Bank
of Atlanta (15,200)
---------- -----------
NET CASH USED BY INVESTING ACTIVITIES 77,317 (2,000,912)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits,
NOW accounts, and savings accounts 7,105,950 6,953,697
Proceeds from sales of certificates 2,430,776 2,598,129
Payments of maturing certificates of deposits (8,200,617) (7,975,716)
Increase in advance payments by
borrowers for property taxes and insurance 282,593 358,222
Dividends paid (46,936) (47,175)
Advances (repayments) to Federal Home
Loan Bank of Atlanta (1,250,000) 500,000
Proceeds from issuance of common stock 177,501
Purchase of common stock (316,993)
---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 321,766 2,247,665
---------- ----------
NET INCREASE (DECREASE) IN CASH 617,467 (219,810)
CASH
Beginning of period 2,180,622 2,252,544
---------- ----------
End of period $2,798,089 $2,032,734
========== ==========
</TABLE>
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7
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Continued)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------------
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
Net Income $ 152,283 $ 78,666
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation 11,430 10,844
Provision for loan losses 10,500 9,000
Amortization of investment security
premiums and discounts (5,008) (4,632)
Stock dividends (7,380) (3,380)
(Increase) decrease in accrued interest
receivable 26,614 (8,347)
Increase in deferred taxes (8,455) (5,089)
Increase in prepaid expenses (14,760) (16,049)
(Increase) decrease in other assets (7,314) 2,564
Increase in other liabilities 48,991 17,731
(Increase) decrease in loans held for sale 11,483 547,871)
---------- ---------
66,101 (545,229)
---------- ---------
$ 218,384 $(466,563)
========== =========
</TABLE>
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8
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
MARCH 31, 1997
--------------
(1) BASIS OF PRESENTATION
---------------------
(1) Summary of Significant Accounting Policies
------------------------------------------
The accompanying unaudited consolidated financial statements have
been prepared in accordance with instructions for Form 10-QSB and
therefore, do not include all disclosures necessary for a
complete presentation of the statements of condition, statements
of operations and statements of cash flows in conformity with
GAAP. However, all adjustments which are in the opinion of
management, necessary for the fair presentation of the interim
financial statements have been included.
The results of operation of the three month periods ended March
31, 1997 and 1996, are not necessarily indicative of the results
to be expected for the full year.
(2) Earnings per Share
------------------
Earnings per common share for 1997 is computed by dividing net
income by the weighted average number of shares of common stock
outstanding. The weighted average number of shares of common
stock was 440,582.
(3) Other Financial Information
---------------------------
Simon, Master & Sidlow, P.A., Cecil Bancorp's independent
certified public accountants, performed a limited review of the
financial data presented on pages 1 through 5 inclusive. The
review was performed in accordance with standards for such
reviews established by the American Institute of Certified Public
Accountants. The review did not constitute an audit;
accordingly, Simon, Master & Sidlow, P.A. did not express an
opinion on the aforementioned data. The financial data include
any material adjustments or disclosures proposed by Simon, Master
& Sidlow, P.A. as a result of their review.
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9
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
Cecil Bancorp, Inc. ("the Company") was incorporated under the laws
of the State of Maryland in July 1994. On November 10, 1994,
Cecil Federal Savings Bank ("Cecil Federal" or the "Bank" converted
from mutual to stock form and reorganized into the holding company
form of ownership as a wholly owned subsidiary of the Company. As
a result of the conversion and reorganization, the Company issued
and sold 481,361 shares of its common stock at a price of $10.00
per share to its depositors, borrowers, stock benefit plans and the
public, thereby recognizing net proceeds of $4,315,057. The
Company's common stock is registered with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Company is classified
as a unitary savings institution holding company subject to
regulation by the Office of Thrift Supervision ("OTS") of the
Department of the Treasury.
The Company is primarily engaged in the business of directing,
planning and coordinating the business activities of Cecil
Federal. Accordingly, the information set forth in this report,
including financial statements and related data, relates
primarily to the Bank and its subsidiaries. In the future, the
Company may become an operating company or acquire or organize
other operating subsidiaries, including other financial
institutions. Currently, the Company does not maintain offices
separate from those of Cecil Federal or employ any persons other
than its officers who are not separately compensated for such
service.
Cecil Federal is principally engaged in the business of
attracting savings deposits from the general public and investing
those funds in loans for the purchase and construction of one-to-
four family residential real estate, primarily located in Cecil
County, Maryland, and in originating to a lessor extent, land
loans, commercial real estate loans, equity loans, consumer loans
and student loans. Also, during periods of reduced loan demand,
the Bank invests excess funds in mortgage-backed securities and
other investment securities, such as U.S. Treasury obligations
and overnight funds in the Federal Home Loan Bank of Atlanta.
Cecil Federal's profitability is primarily dependent upon its net
interest income, which is the difference between interest earned
on its loan and investment portfolios and the cost of funds or
interest paid on deposits. Net interest income is directly
affected by the relative amounts of interest-earning assets and
interest-bearing liabilities and the interest rates earned or
paid on these balances.
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10
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
To a lesser extent, the Bank's profitability is also affected by
the level of noninterest income and expense. Noninterest income
consists primarily of service fees and gains on sales of
investments. Noninterest expenses include salaries and benefits,
occupancy expenses, equipment and data processing expenses,
deposit insurance expenses and other operating expenses.
The most significant outside factors influencing the operations
of Cecil Federal and other banks include general economic
conditions, competition in the local marketplace and related
monetary and fiscal policies of agencies that regulate financial
institutions. More specifically, lending activities are
influenced by the demand for real estate financing and other
types of loans, which in turn are affected by the interest rates
at which such loans may be offered and other factors affecting
loan demand and funds availability, while the cost of funds
(deposits) are influenced by interest rates on competing deposits
and general market rates of interest.
ASSET/LIABILITY MANAGEMENT
The ability to maximize net interest income is largely dependent
upon the achievement of a positive interest rate spread (the
difference between the weighted average interest yields earned on
interest-earning assets and the weighted average interest rates
paid on interest-bearing liabilities) that can be sustained
during fluctuations in prevailing interest rates. Cecil
Federal's asset/liability management policies are designed to
reduce the impact of changes in interest rates on its net
interest income by achieving a more favorable match between the
maturities or repricing dates of its interest-earning assets and
interest-bearing liabilities. The Bank has implemented these
policies by generally emphasizing the origination of one-year,
three-year and five-year adjustable rate mortgage loans and
short-term consumer lending. The bank now offers an adjustable
rate product which remains fixed for the first ten years and then
converts to a one-year adjustable. Prior to June 1994, most
fixed-rate mortgage loans offered by the Bank were originated for
sale in the secondary market. From July 1, 1994 through June 30,
1995 the bank elected to not sell fixed rate mortgages that were
originated, but chose to maintain them in its portfolio.
Management has been monitoring the retention of fixed rate loans
through its asset/liability management policy. Beginning July 1,
1995, the bank began originating fixed rate mortgages for sale in
the secondary market.
Management intends to continue to concentrate on maintaining its
interest rate spread in a manner consistent with its lending
policies, which are principally the origination of adjustable-
rate mortgages, with an appropriate blend of fixed-rate mortgage
loans in its primary market area.
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<PAGE>
11
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Comparison of Financial Condition at March 31, 1997 and December
31, 1996.
The Company's assets increased by $503,884, or 0.8% to
$60,767,507 at March 31, 1997 from $60,263,623 at December 31,
1996. The Company's emphasis on expanding the loans receivable
portfolio continued. The loans receivable portfolio increased by
$529,280, or 1.1% to $50,309,268 at March 31, 1997 from
$49,779,988 at December 31, 1996. The remainder of the Company's
interest earning assets, primarily invested for liquidity,
remained constant. Cash and interest-earning cash increased as a
result of the sale of mortgage loans, prepayments of the loan
portfolio, and increased savings deposits. The Company's stock
investment in Federal Home Loan Bank of Atlanta increased by
$15,200, or 3.6% to $438,100 at March 31, 1997 from $422,900 at
December 31, 1996, as a result of requirements imposed by the
Federal Home Loan Bank of Atlanta. Federal Home Loan Bank of
Atlanta stock is currently paying an annualized dividend rate of
7.25%.
The Company's liabilities increased $414,816, or 0.8% to
$53,625,353 from $53,210,537 at December 31, 1996. During the
three months ended March 31, 1997, the Company was able to
increase savings deposits as a result of additional marketing
campaigns, and also reduce advances due to the Federal Home Loan
Bank of Atlanta. Savings Deposits increased $1,336,109, or 2.8%
to $48,701,131 at March 31, 1997 from $47,365,022 at December 31,
1996. Advances from the Federal Home Loan Bank of Atlanta
decreased $1,250,000, or 27.8% to $3,250,000 at March 31, 1997
from $4,500,000 at December 31, 1996. Escrow payments received
in advance for the payment of taxes and insurance on loans
receivable increased $282,593, or 39.7% to $933,840 at March 31,
1997 to $711,247 at December 31, 1996.
The Company's stockholder's equity increased by $89,068 or 1.3%
to $7,142,154 at March 31, 1997 from $7,053,086 at December 31,
1996. The increase was primarily due to an increase in retained
earnings of $105,347, or 3.0% and a decrease in the unrealized
net holding losses on available for sale investment securities.
The Company paid its regular dividend of $.10 per share for the
quarter ended March 31, 1997.
Results of Operations
Three Months Ended March 31, 1997
- ---------------------------------
Net income increased $73,617, or 93.6% to $152,283 for the three
months ended March 31, 1997, from $78,666 for the same period in
1996. The annualized return on average assets and annualized
return on average equity were 1.01% and 8.53% respectively, for
the three months ended March 31, 1997. This compares to an
annualized return on average assets of .56% and 4.48%
respectively for the same period in 1996.
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12
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Net interest income, the Company's primary source of income,
increased $79,188, or 15.2% to $601,500 for the three months
ended March 31, 1997, from $522,312 for the three months ended
March 31, 1996. The weighted average yield on all interest
earning assets increased from 8.07% for the three months ended
March 31, 1996, to 8.31% for the three months ended March 31,
1997. The weighted average rate paid on interest bearing
liabilities increased from 3.91% for the three months ended March
31, 1996 to 4.40% for the three months ended March 31, 1997. The
increase was a result of an increase in the average rate paid on
deposits along with an increase in the average balance
outstanding.
Interest on loans receivable increased by $101,785, or 10.2% to
$1,096,702 for the three months ended March 31, 1997 from
$994,917 for the three months ended March 31, 1996. The increase
is attributable to both an increase in the weighted average yield
and an increase in the average balance outstanding. The weighted
average yield increased from 8.27% for the three months ended
March 31, 1996 to 8.45% for the three months ended March 31,
1997.
Interest on mortgage backed securities increased $21,331, or
149.7% to $35,582 for the three months ended March 31, 1997 from
$14,251 for the three months ended March 31, 1996. The increase
is a result of an increase in the average balance outstanding.
Although the bank purchased additional mortgage backed securities
during the quarter ended September 1996, there have been no new
purchases of mortgage backed securities during the current
quarter.
Interest on investment securities (primarily earnings on monies
held in federal funds and daily time accounts) decreased $4,675,
or 13.8% to $29,210 for the three months ended March 31, 1997
from $33,885 for the three months ended March 31, 1996. The
decrease is a result of a decline in both the weighted average
yield and the average balance outstanding. Interest on other
investment securities increased as a result of an increase in the
average balance outstanding for the quarter. Other investments
primarily are short term liquidity accounts with variable rates.
Interest paid on savings deposits decreased $3,845, or 0.7% to
$517,784 for the three months ended March 31, 1997 from $521,629
for the three months ended March 31, 1996. The decrease was the
result of an increase in the average balance outstanding along
with an increase in the weighted average yield on deposits.
Interest expense paid on borrowings increased $47,182, or 370.5%
to $59,917 for the three months ending March 31, 1997 from
$12,735 for the three months ended March 31, 1996. The increase
was a result of an increase in the average balance outstanding
which was offset by a slight decrease in the average cost of
funds.
Provisions for loan losses increased $1,500, or 16.7% to $10,500
for the three months ended March 31, 1997 from $9,000 for the
three month period ending March 31, 1996. The Bank reported a
voluntary increase in general reserves as a result of the
reassessment of reserve balances needed to provide for increased
exposure in outstanding loan categories other than one-to-four
residential loans.
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13
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Noninterest income. Noninterest income increased $7,608, or
12.1% to $70,468 for the three months ended March 31, 1997 from
$62,860 for the three months ended March 31, 1996. Loan
servicing fees increased 32.2%, up $2,147 for the three months
ended March 31, 1997 over the same period in 1996. This was a
result of the increase in balances of the servicing portfolio.
Gains on sale of loans decreased $57 for 1.2% to $4,736 for the
three month period ending Marc 31, 1997 from $4,793 for the three
months ended March 31, 1996. The decrease was attributable to a
decline the number of fixed-rate loan originations and sales
during the quarter, affected primarily by an increase in
secondary market rate increases on long-term fixed rate loans.
Other fees increased $5,311 or 12.1% to $49,205 for the three
months ended March 31, 1997 from $43,894 for the three months
ended March 31, 1996. Increases were primarily attributable to
increases in fee income, from service charges and ATM fees.
Noninterest Expense. Noninterest expense decreased $21,957, or
4.8% to $431,830 for the three months ended March 31, 1997 from
$453,787 for the three months ended March 31, 1996. The Company
experienced a decrease in compensation and benefits of $26,256,
or 9.9% to $238,149 for the three months ended March 31, 1997
from $264,405 for the three months ended March 31, 1996. The
decrease can be attributable to the one-time benefit payouts for
former President and CEO Gary A. Brown during the three months
ended March 31, 1996. The Company also experienced a decline in
the amount paid to the Savings Association Insurance Fund during
the three months ended March 31, 1997. Lower premium rates
became effective January 1, 1997. The Company's SAIF premium
declined $22,767, or 77.2% to $6,744 for the three months ended
March 31, 1997 as compared to $29,511 for the three months ended
March 31, 1996. The Company anticipates paying the lowest
premium for SAIF deposit premiums.
Income Taxes. Income tax expense for the three months ended
March 13, 1997 and March 31, 1996 was $87,855 and $52,719
respectively, which equates to effective rates of 36.6% and
40.1%, respectively.
<PAGE>
<PAGE>
14
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
NONPERFORMING ASSETS AND PROBLEM LOANS
Management reviews and identifies all loans and investments that
require designation as nonperforming assets. These assets
include: (I) loans accounted for on a nonaccrual basis,
consisting of all loans 90 or more days past due; (ii) troubled
debt restructuring; and (iii) assets acquired in settlement of
loans. The following table sets forth certain information with
respect to nonperforming assets at March 31, 1997:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Nonperforming loans:
Residential mortgage $381,101 $510,842
Consumer and other 6,400 0
Assets required in settlement of loans:
Real estate held for development
and sale
Real estate held for investments
and sale $ 73,000
Repossessed assets
-------- --------
Total nonperforming assets $387,501 $583,842
======== ========
</TABLE>
Residential mortgages classified consisted of 7 loans with
balances ranging from $2,000 to $144,000. Classified consumer
loans consisted of 4 loans with balances ranging from $500 to
$5,000 as of March 31, 1997.
The provision for losses on loans is determined based on
management's review of the loan portfolio and analysis of
borrowers' ability to repay, past collection experience and risk
characteristics.
<PAGE>
<PAGE>
15
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
CAPITAL ADEQUACY
- ----------------
The Company. Capital adequacy refers to the level of capital
required to sustain asset growth and to absorb losses. There are
currently no regulatory capital guidelines or requirements for
the Company.
The Bank. The Office of Thrift Supervision ("OTS"), which is the
bank's principal regulator, has established requirements for
tangible, core and risk-based measures of capital. As a result,
the three capital measures mentioned above were as follows at
March 31, 1997:
<TABLE>
<CAPTION>
Tangible Core Risk-Based
-------- ---- ----------
<S> <C> <C> <C>
Available capital $7,207 $7,207 $7,331
Required capital 912 1,824 2,999
------ ------ ------
Excess $6,295 $5,383 $4,332
Available capital 11.85% 11.85% 19.55%
Required capital 1.50% 3.00% 8.00%
------ ------ ------
Excess 10.35% 8.85% 11.55%
</TABLE>
The Federal Deposit Improvement Act of 1991 ("FDICIA")
established five capital categories which are used to determine
the rate of deposit insurance premiums paid by insured
institutions, thus introducing the concept of risk adjusted
premiums. This act has the effect of requiring weaker banks to
pay higher insurance premiums while allowing healthier, well-
capitalized banks to pay lower premiums. The following table
summarizes the five capital categories and the minimum capital
requirements for each of the three capital requirements:
<TABLE>
<CAPTION>
Tangible Core Risk-Based
-------- ---- ----------
<S> <C> <C> <C>
Well capitalized 5+% 6+% 10+%
Adequately capitalized 4%-4.99% 4%-5.99% 8%-9.99%
Undercapitalized 3%-3.99% 3%-3.99% 6%-7.99%
Significantly undercapitalized 2%-2.99% 2%-2.99% 0%-5.99%
Critically undercapitalized 0%-1.99% - -
- -----------------------------------------------------------------
</TABLE>
On March 31, 1997, the Bank's capital levels were sufficient to
qualify it as a well-capitalized institution, the most favorable
category, allowing the Bank to pay lower deposit insurance
premiums.
<PAGE>
PAGE>
16
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
PART II. Other Information:
Item 1. Legal Proceedings -
Not Applicable
Item 2. Changes in Securities -
Not Applicable
Item 3. Defaults Upon Senior Securities -
Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders
The Annual Meeting of Stockholders of Cecil Bancorp, Inc. was
held on April 16, 1997, at 10:00 a.m. at the Swiss Inn, Elkton,
Maryland, for the purpose of electing a board of directors.
Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934 and there was no
solicitation in opposition to management's solicitations.
All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
To serve for a three-year term:
<TABLE>
<CAPTION>
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
<S> <C> <C> <C>
Bernard L. Siegel 391,175 3800 0
Howard J. Neff 398,950 25 0
Mary B. Halsey 398,750 225 0
</TABLE>
Item 5. Other Information -
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 -- Financial Data Schedule
No reports on Form 8-K were filed during the
three months ended March 31, 1997
<PAGE>
PAGE>
17
CECIL BANCORP, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CECIL BANCORP, INC.
Date: May 6, 1997 BY:/S/ Mary Beyer Halsey
----------------------
Mary Beyer Halsey
President
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,025,169
<INT-BEARING-DEPOSITS> 772,920
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,084,373
<INVESTMENTS-CARRYING> 2,501,136
<INVESTMENTS-MARKET> 2,501,307
<LOANS> 50,309,268
<ALLOWANCE> 124,000
<TOTAL-ASSETS> 60,767,507
<DEPOSITS> 48,701,131
<SHORT-TERM> 3,250,000
<LIABILITIES-OTHER> 1,674,222
<LONG-TERM> 0
<COMMON> 4,694
0
0
<OTHER-SE> 7,137,460
<TOTAL-LIABILITIES-AND-EQUITY> 60,767,507
<INTEREST-LOAN> 1,096,702
<INTEREST-INVEST> 29,210
<INTEREST-OTHER> 63,789
<INTEREST-TOTAL> 1,189,701
<INTEREST-DEPOSIT> 517,784
<INTEREST-EXPENSE> 577,701
<INTEREST-INCOME-NET> 612,000
<LOAN-LOSSES> 10,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 111,118
<INCOME-PRETAX> 240,138
<INCOME-PRE-EXTRAORDINARY> 240,138
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152,283
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
<YIELD-ACTUAL> 4.40
<LOANS-NON> 376,000
<LOANS-PAST> 112,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 121,000
<CHARGE-OFFS> 15,000
<RECOVERIES> 7,000
<ALLOWANCE-CLOSE> 124,000
<ALLOWANCE-DOMESTIC> 124,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
