<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
June 30, 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 June 30, 1997
$0.01 par value common stock 469,358 shares
- ---------------------------- --------------
class outstanding
<PAGE>
<PAGE>
CECIL BANCORP, INC., AND SUBSIDIARIES
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
ITEM 1. Financial Statements (Unaudited)
Consolidated Condensed Statements of
Financial Condition - June 30, 1997
and December 31, 1996 3-4
Consolidated Condensed Statements of
Operations for Six Months Ended and
Three Months Ended June 30, 1997 and
June 30, 1996 5
Consolidated Condensed Statement of
Cash Flows for Six Months Ended
June 30, 1997 and June 30, 1996 6-7
Notes to Consolidated Condensed
Financial Statements 8
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-16
PART II. OTHER INFORMATION 17
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash $ 1,914,148 $ 1,678,415
Cash - Interest-bearing 3,002,685 502,207
Investment securities
Securities held-to-maturity 2,500,571 2,490,069
Securities available-for-sale at
estimated market value 510,932 496,358
Mortgage-backed securities
Securities held-to-maturity 475,464 531,775
Securities available-for-sale at
estimated market value 1,552,874 1,633,338
Loans receivable, net 50,805,141 49,779,988
Loans held for sale 1,434,212 1,707,883
Real estate owned 147,258
Office properties, equipment and leasehold
improvements at cost, less accumulated
depreciation and amortization 601,236 508,824
Stock in Federal Home Loan Bank of
Atlanta - at cost 438,100 422,900
Accrued interest receivable 428,360 432,828
Prepaid expenses 30,620 42,878
Other assets 49,989 36,160
----------- -----------
TOTAL ASSETS $63,891,590 $60,263,623
=========== ===========
</TABLE>
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Savings deposits $52,995,357 $47,365,022
Advance payments by borrowers for
property taxes and insurance 1,241,944 711,247
Employee stock ownership debt 308,064 308,064
Other liabilities 289,170 323,327
Deferred taxes 9,192 2,877
Advances from Federal Home
Loan Bank of Atlanta 1,750,000 4,500,000
----------- -----------
TOTAL LIABILITIES 56,593,727 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 3,947,226 3,940,728
Net unrealized gain on securities
available-for-sale, net of
deferred taxes 12,478 13,139
Employee stock ownership debt (308,064) (308,064)
Deferred compensation - Management
Recognition Plan (118,361) (156,047)
Retained earnings,
substantially restricted 3,759,890 3,558,636
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,297,863 7,053,086
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $63,891,590 $60,263,623
=========== ===========
</TABLE>
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
---------------- ------------------
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable $1,119,873 $1,055,699 $2,216,574 $2,050,616
Mortgage-backed securities 34,156 12,088 69,737 26,339
Investment securities 32,445 30,089 61,655 63,974
Other interest-earning assets 47,469 21,926 75,677 44,549
---------- ---------- ---------- ----------
Total interest income 1,233,943 1,119,802 2,423,643 2,185,478
INTEREST EXPENSE
Deposits
NOW accounts 20,020 16,744 37,264 34,454
Passbook accounts 73,311 74,620 144,787 148,334
Money market deposit accounts 17,189 19,427 34,949 40,926
Certificates 451,072 410,222 862,376 819,289
---------- ---------- ---------- ----------
Interest expense on deposits 561,592 521,013 1,079,376 1,043,003
Borrowings 39,836 18,772 99,752 31,147
---------- ---------- ---------- ----------
Total interest expense 601,428 539,785 1,179,128 1,074,150
---------- ---------- ---------- ----------
Net interest income 632,515 580,017 1,244,515 1,111,328
Provision for loan losses 25,500 9,000 36,000 18,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 607,015 571,017 1,208,515 1,093,328
NONINTEREST INCOME
Loan service charges 8,574 6,795 17,395 13,468
Dividends on FHLB stock 7,599 7,623 15,306 15,123
Gain on sale of loans 17,856 1,257 22,592 6,050
Other 56,215 50,076 105,420 93,970
---------- ---------- ---------- ----------
Total noninterest income 90,244 65,751 160,713 128,611
NONINTEREST EXPENSE
Compensation and benefits 243,765 216,461 481,913 480,865
Occupancy expense 24,183 23,751 53,731 50,241
Equipment and data processing
expense 41,013 39,095 87,285 79,881
SAIF deposit insurance premium 12,975 30,262 19,719 59,773
Other 132,415 94,602 243,533 187,198
---------- ---------- ---------- ----------
Total noninterest expense 454,351 404,171 886,181 857,958
---------- ---------- ---------- ----------
Income before income taxes 242,908 232,597 483,047 363,981
INCOME TAXES
Current 85,296 67,259 184,272 125,067
Deferred 14,770 7,609 3,649 2,520
Total income taxes 100,066 74,868 187,921 127,587
---------- ---------- ---------- ----------
NET INCOME $ 142,842 $ 157,729 $ 295,126 $ 236,394
========== ========== ========== ==========
Earnings per common share and
common share equivalent $ .32 $ .36 $ .67 $ .54
========== ========== ========== ==========
Earnings per common share -
assuming full dilution $ .32 $ .36 $ .67 $ .54
========== ========== ========== ==========
Cash dividends paid per common share $ .10 $ .08 $ .20 $ .18
========== ========== ========== ==========
</TABLE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and fees received on
loans and investments $ 2,542,273 $ 2,242,447
Cash paid to suppliers and employees ( 848,550) ( 818,507)
Proceeds from sale of loans 1,703,325 196,992
Origination of loans held for sale ( 1,506,800) ( 1,809,700)
Interest paid ( 1,179,128) ( 1,074,150)
Income taxes paid ( 187,334) ( 112,756)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 523,786 ( 1,375,674)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of
investment securities 2,500,000 1,000,000
Proceeds from maturities of
mortgage-backed securities 136,638 274,932
Purchases of investment securities ( 2,501,641) ( 1,720,625)
Purchases of mortgage-backed securities ( 1,722,837)
Loans originated ( 8,410,502) ( 11,047,228)
Principal collected on loans 7,449,087 9,004,958
Purchases of office properties, equipment
and leasehold improvements ( 115,859) ( 92,736)
Purchase of real estate owned ( 147,258)
Purchase of stock in Federal Home Loan
Bank of Atlanta ( 15,200)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES ( 1,104,735) ( 4,303,536)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits,
NOW accounts, and savings accounts 16,198,249 16,364,266
Proceeds from sales of certificates 5,894,684 5,936,502
Payments of maturing certificates of deposits ( 16,462,598) ( 18,869,787)
Increase in advance payments by borrowers
for property taxes and insurance 530,697 675,120
Dividends paid ( 93,872) ( 84,723)
Advances (repayments) from Federal Home
Loan Bank of Atlanta ( 2,750,000) 1,500,000
Proceeds from issuance of common stock 178,799
Purchase of common stock ( 352,843)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,317,160 5,347,334
----------- -----------
NET INCREASE (DECREASE) IN CASH 2,736,211 ( 331,876)
CASH
BEGINNING OF PERIOD 2,180,622 2,252,544
----------- -----------
END OF PERIOD $ 4,916,833 $ 1,920,668
=========== ===========
</TABLE>
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
(Continued)
Six Months Ended
June 30,
-----------------------------
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES
Net Income $ 295,126 $ 236,394
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 23,447 23,310
Provision for loan losses 36,000 18,000
Amortization of investment
security premiums (discounts) ( 8,873) ( 7,077)
Stock dividends ( 15,086) ( 8,951)
Increase (decrease) in accrued
interest receivable 4,468 ( 49,564)
Decrease in deferred tax asset 2,520
(Increase) decrease in prepaid expenses 12,258 ( 4,342)
(Increase) decrease in other assets ( 13,829) 4,701
Decrease in other liabilities ( 34,157) ( 9,594)
(Increase) decrease in loans held for sale 173,933 ( 1,618,758)
Release of vested MRP shares 44,184 37,687
Increase in deferred tax liability 6,315
----------- -----------
228,660 ( 1,612,068)
----------- -----------
$ 523,786 ($ 1,375,674)
=========== ===========
</TABLE>
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
JUNE 30, 1997
--------------
(1) BASIS OF PRESENTATION
- --------------------------
(1) Summary of Significant Accounting Policies
------------------------------------------
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the accounting policies in
effect at December 31, 1996, as set forth in the annual
consolidated financial statements of Cecil Bancorp, Inc. and
Subsidiaries (the "Bank"). In the opinion of Management, all
adjustments necessary for a fair presentation of the consolidated
financial statements are of a normal recurring nature and have
been included.
The results of operation for the six month periods ended June 30,
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 are 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 and common stock equivalents was 440,749. The weighted
average number of shares of common stock and common stock
equivalents for computation of earnings per common share - fully
diluted was 440,845.
(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 includes
any material adjustments or disclosures proposed by Simon, Master
& Sidlow, P.A. as a result of their review.
<PAGE>
<PAGE>
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
and 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.
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,
deposits 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
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
loan demand and funds availability, while the costs 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 and 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 mortgages 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 is principally the origination of adjustable-rate
mortgages, with an appropriate blend of fixed rate mortgage loans
in its primary market area.
FINANCIAL CONDITION
- -------------------
Comparison of Financial Condition at June 30, 1997 and December
31, 1996.
The Company's total assets at June 30, 1997 increased $3,627,967
or 6.0% to $63,891,590 from $60,263,623 at December 31, 1996.
The increase was primarily the result of an increase in cash and
loans receivable. Total liabilities increased $3,383,190 or 6.4%
to $56,593,727 at June 30, 1997 from $53,210,537 at December 31,
1996. This increase was a result of an increase in savings
deposits and escrows. Stockholders' equity increased $244,777,
which included a dividend payments of $0.10 per share during the
first and second quarter of 1997.
Cash increased $235,733 or 14.0% to $1,914,148 at June 30, 1997
from $1,678,415 at December 31, 1996. Interest-bearing cash
increased $2,500,478, up 497.9% to $3,002,685 at June 30, 1997
from $502,207 at December 31, 1996.
Loans receivable increased $1,025,153 or 2.1% to $50,805,141 at
June 30, 1997 from $49,779,988 at December 31, 1996. The
increase in loans receivable was a result of increased loan
volumes. The loans held-for-sale portfolio decreased $273,671 or
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
16.0% to $1,434,212 at June 30, 1997 from $1,707,883 at December
31, 1996. The decrease was the result of loans sold in the
amount of $1,060,938 offsetting originations of $992,000 in fixed
rate loans held for sale. Loans held-for-sale will continually
be sold to fund portfolio needs. Real Estate Owned increased
$147,258 or 100% at June 30, 1997. On June 30, 1997, the Bank
acquired a single-family dwelling through foreclosure. This
property will be marketed for sale.
Total savings deposits increased $5,630,335 or 11.9% to
$52,995,357 at June 30, 1997 from $47,365,022 at December 31,
1996. Increases are attributable to cross selling and marketing
plans. Decreases in the Bank's outstanding advances from the
Federal Home Loan Bank of Atlanta were the result of excess cash
reserves through strong deposit growth. The outstanding balance
decreased by $2,750,000 or 61.1% to $1,750,000 at June 30, 1997
from $4,500,000 at December 31, 1996.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended June 30, 1997 Net income for the three-month
period ended June 30, 1997 decreased 9.4% to $142,842 as compared
to net income for the same period in 1996 of $157,729. The
annualized return on average assets and annualized return on
average equity were 0.91% and 7.90% respectively, for the three-
month period ended June 30, 1997. This compares to an annualized
return on average assets and annualized return on average equity
of 1.10% and 9.04% respectively, for the same period in 1996.
Net interest income, the Bank's primary source of income,
increased 9.1% up $52,498 for the three months ended June 30,
1997, over the same period in 1996. The weighted average yield
on interest earning assets increased from 8.16% for the three
months ended June 30, 1996 to 8.32% for the three months ended
June 30, 1997. The weighted average rate paid on interest
bearing liabilities increased from 3.93% for the three months
ended June 30, 1996 to 4.56% for the three months ended June 30,
1997.
Interest on loans receivable increased by $64,174 or 6.1%, from
$1,055,699 for the three months ended June 30, 1996 to $1,119,873
for the three months ended June 30, 1997. The increase is
attributable to an increase in the average balance outstanding of
$2,080,046. The weighted average yield increased from 8.50% for
the three months ended June 30, 1996 to 8.65% for the three
months ended June 30, 1997.
Interest on mortgage backed securities increased $22,068 or
182.6%, from $12,088 for the three months ended June 30, 1996 to
$34,156 for the three months ended June 30, 1997. The increase
was the result of an increase in the average outstanding balance
and weighted average yield.
Interest on investment securities increased $2,356 or 7.8% from
$30,089 for the three months ended June 30, 1996 to $32,445 for
the three months ended June 30, 1997. The average outstanding
balance increased $175,399 from $2,333,318 for the three months
ended June 30, 1996 to $2,508,717 for the three months ended June
30, 1997. The weighted average yield increased from 4.80% for
the three months ended June 30, 1996 to 5.56% for the three
months ended June 30, 1997. The average outstanding balance and
weighted average yield increased slightly.
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Interest on other investments increased $25,543, or 116.5% from
$21,926 for the three months ended June 30, 1996 to $47,469 for
the three months ended June 30, 1997. The average outstanding
balance increased $1,758,782 from $1,376,940 for the three months
ended June 30, 1996 to $3,135,722 for the three months ended June
30, 1997. The weighted average yield decreased from 6.37% for
the three months ended June 30, 1996 to 6.06% for the three
months ended June 30, 1997. The average balance outstanding
increased due to the investment of excess cash in an FHLB time
deposit.
Interest on savings deposits increased $40,579, or 7.8% from
$521,013 for the three months ended June 30, 1996 to $561,592 for
the three months ended June 30, 1997. The average balance
outstanding increased $3,964,405 for the period noted above. The
weighted average rate paid on deposits increased from 3.88% for
the three months ended June 30, 1996 to 4.34% for the three
months ended June 30, 1997. Interest expense paid on borrowings
increased $21,064, or 112.2% from $18,772 for the three months
ended June 30, 1996 to $39,836 for the three months ended June
30, 1997. Increases are attributable to an increase in the
average balance outstanding and an increase in the weighted
average cost of funds.
Noninterest income increased 37.3%, up $24,493 for the three
months ended June 30, 1997, over the same period in 1996. Loan
servicing fees increased 26.2%, up $1,779 for the three months
ended June 30, 1997 over the same period in 1996. There was an
increase in gains on the sale of loans for the three months ended
June 30, 1997 of $16,599 over the same period in 1996. This
increase was attributable to the Bank's decision to continually
sell loans on the secondary market during 1996 to fund portfolio
needs. Other noninterest income increased 12.3%, up $6,139 for
the three months ended June 30, 1997 over the same period in
1996. Increases in this area can be primarily attributable to
increased service charges, as a result of steady growth of demand
deposits, and the usage of two ATM machines, which are primarily
used by non-customers.
Noninterest expense increased 12.4%, up $50,180 for the three
months ended June 30, 1997, over the same period in 1996.
Compensation and benefits increased 12.6% for the three months
ended June 30, 1997 over the same period in 1996, which is a
result of general merit increases and costs of benefits and the
hiring of an additional full-time employee. The SAIF deposit
premium decreased 57.1% for the three months ended June 30, 1997
over the same period in 1996, as a result of reduced SAIF
insurance rates. Other expenses increased by 40.0% for the three
months ended June 30, 1997 over the same period in 1996, as a
result of increased legal expenses, accounting and audit
expenses, meeting expenses, and charitable contributions.
Income tax expense for the three-month period ended June 30, 1997
and 1996 was $100,066 and $74,868, which equates to effective
rates of 41.2% and 32.1% respectively.
Six Months Ended June 30, 1997 Net income for the six-month
period ended June 30, 1997 increased $58,732 or 24.8% to
$295,126, compared to net income of $236,394 for the same period
in 1996. The annualized return on average assets and annualized
return on average equity were 0.96% and 8.21% respectively, for
the six-month period ended June 30, 1997. This compares to an
annualized return on average assets and annualized return on
average equity of 0.84% and 6.76% respectively, for the same
period in 1996.
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net interest income, the Bank's primary source of income,
increased 10.9% up $238,165 for the six months ended June 30,
1997, over the same period in 1996. The weighted average yield
on interest earning assets increased from 8.12% for the six
months ended June 30, 1996 to 8.31% for the six months ended June
30, 1997. The weighted average rate paid on interest bearing
liabilities increased from 4.04% for the six months ended June
30, 1996 to 4.65% for the six months ended June 30, 1997.
Interest on loans receivable increased by $165,958 or 8.1%, from
$2,050,616 for the six months ended June 30, 1996 to $2,216,574
for the six months ended June 30, 1997. The increase is
attributable to an increase in the average balance outstanding of
$2,929,840. The weighted average yield increased from 8.50% for
the six months ended June 30, 1996 to 8.55% for the six months
ended June 30, 1997.
Interest on mortgage backed securities increased $43,398 or
164.8%, from $26,339 for the six months ended June 30, 1996 to
$69,737 for the six months ended June 30, 1997. The average
outstanding balance increased $1,078,256 from $1,006,786 for the
six months ended June 30, 1996 to $2,085,042 for the six months
ended June 30, 1997. The weighted average yield increased from
5.23% for the six months ended June 30, 1996 to 6.69% for the six
months ended June 30, 1997. No new purchases of mortgage backed
securities were made in 1997.
Interest on investment securities decreased $2,319 or 3.6% from
$63,974 for the six months ended June 30, 1996 to $61,655 for the
six months ended June 30, 1997. The average outstanding balance
decreased $435,065 from $2,599,320 for the six months ended June
30, 1996 to $2,164,255 for the six months ended June 30, 1997.
The weighted average yield increased from 4.92% for the six
months ended June 30, 1996 to 5.70% for the six months ended June
30, 1997.
Interest on other investments increased $31,128, or 69.9% from
$44,549 for the six months ended June 30, 1996 to $75,677 for the
six months ended June 30, 1997. The average balance outstanding
increased $930,778, up from $1,277,959 for the six months ended
June 30, 1996 to $2,208,737 for the six months ended June 30,
1997. The weighted average yield decreased slightly from 6.97%
for the six months ended June 30, 1996 to 6.85% for the six
months ended June 30, 1997. The average balance outstanding
increased due to the investment of excess cash in an FHLB time
deposit.
Interest on savings deposits increased $36,373, or 3.5% from
$1,043,003 for the six months ended June 30, 1996 to $1,079,376
for the six months ended June 30, 1997. The average balance
outstanding increased $2,861,724 for the period noted above. The
weighted average rate paid on deposits increased from 4.09% for
the six months ended June 30, 1996 to 4.33% for the six months
ended June 30, 1997. Interest expense paid on borrowings
increased $68,605, or 220.3% from $31,147 for the six months
ended June 30, 1996 to $99,752 for the six months ended June 30,
1997. Increases are attributable to increases in the average
balance outstanding and the weighted average cost of funds.
Noninterest income increased to $32,102 or 25.0% to $160,713 for
the six months ended June 30, 1997 from $128,611 for the same
period in 1996. Loan servicing fees increased 29.2%, up $3,927
for the six months ended June 30, 1997 over the same period in
1996. This was a result of the increased balances in the loan
servicing portfolio. Gain on sale of loans was up $16,542 or
273.4% for the six months ended June 30, 1997 over the same
period in 1996, as a result of the sale of fixed rate
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
loans in the secondary market. Other fees increased 12.2% up
$11,450 for the six months ended June 30, 1997 over the same
period in 1996. Increases were primarily attributable to
increases in fee income, from service charges and additional fees
associated with the Bank's two ATM machines.
Noninterest expense increased $28,223 or 3.2% to $886,181 for the
six-month period ended June 30, 1997 from $857,958 for the six
months ended June 30, 1996. The SAIF deposit premium decreased
67.0%, down $40,054 for the six months ended June 30, 1997, over
the same period in 1996. Decreases were a result of reduced SAIF
insurance rates. Other expenses increased 30.1%, up $56,335 for
the six-month period ended June 30, 1997, over the same period in
1996. The increase was attributable to an increase in legal
fees, audit and accounting fees, meeting expenses, and charitable
contributions.
Income tax expense for the six-month period ended June 30, 1997
and 1996 was $187,921 and $127,587 which equates to effective
rates of 38.9% and 35.1% respectively.
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 June 30, 1997:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Nonperforming loans:
Residential mortgage $504,756 $381,565
Consumer and other 12,127 133,585
Assets acquired in settlement of loans:
Real estate held for development and sale
Real estate held for investment and sale
Repossessed assets $147,258 $ 73,000
-------- --------
Total nonperforming assets $664,141 $588,150
======== ========
</TABLE>
Residential mortgages classified consisted of nine loans with
balances ranging from $7,000 to $154,000. Classified consumer
loans consisted of three loans with balances ranging from $700 to
$6,000 as of June 30, 1997. The Bank acquired a single-family
dwelling on June 30, 1997, as a result of a foreclosure. The
Bank will market the property for sale.
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>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 primary 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
June 30, 1997:
<TABLE>
<CAPTION>
Tangible Core Risk Based
- -----------------------------------------------------------------
<S> <C> <C> <C>
Available capital $7,376 $7,376 $7,524
Required capital 959 1,918 3,063
------ ------ ------
Excess $6,417 $5,458 $4,461
====== ====== ======
Available capital 11.54% 11.54% 19.65%
Required capital 1.50% 3.00% 8.00%
----- ----- -----
Excess 10.04% 8.54% 11.65%
===== ===== =====
</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 June 30, 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>
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
Not Applicable
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 June 30, 1997
<PAGE>
<PAGE>
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: July 31, 1997 By: /s/ Mary Beyer Halsey
----------------------
Mary Beyer Halsey
President
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,914,148
<INT-BEARING-DEPOSITS> 3,002,685
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,063,806
<INVESTMENTS-CARRYING> 2,976,035
<INVESTMENTS-MARKET> 2,976,035
<LOANS> 50,805,141
<ALLOWANCE> 148,000
<TOTAL-ASSETS> 63,891,590
<DEPOSITS> 52,995,357
<SHORT-TERM> 1,750,000
<LIABILITIES-OTHER> 1,848,370
<LONG-TERM> 0
<COMMON> 4,694
0
0
<OTHER-SE> 7,293,169
<TOTAL-LIABILITIES-AND-EQUITY> 63,891,590
<INTEREST-LOAN> 1,119,873
<INTEREST-INVEST> 66,601
<INTEREST-OTHER> 47,469
<INTEREST-TOTAL> 1,233,943
<INTEREST-DEPOSIT> 561,592
<INTEREST-EXPENSE> 601,428
<INTEREST-INCOME-NET> 632,515
<LOAN-LOSSES> 25,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 132,415
<INCOME-PRETAX> 242,908
<INCOME-PRE-EXTRAORDINARY> 242,908
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,842
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 4.27
<LOANS-NON> 487,000
<LOANS-PAST> 406,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 124,000
<CHARGE-OFFS> 4,000
<RECOVERIES> 2,000
<ALLOWANCE-CLOSE> 148,000
<ALLOWANCE-DOMESTIC> 148,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
