<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________
FORM 10-QSB/A
(Amendment No. 1)
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from __________ to _____________.
Commission File Number: 0-24926
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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, including area code)
Indicate by check mark whether the registrant (1) has filed all
the 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 September 30, 1999
$0.01 par value common stock 612,422 shares
- ---------------------------- -------------------
Class Outstanding
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CECIL BANCORP INC., AND SUBSIDIARIES
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Auditor's Letter on Restatement 3
Consolidated Statements of Financial
Condition - September 30, 1999
and December 31, 1998 4-5
Consolidated Statements of Income and
Comprehensive Income for Nine Months
Ended and Three Months Ended
September 30, 1999 and September
30, 1998 6-7
Consolidated Statements of Cash Flows
for Nine Months Ended September 30,
1999 and September 30, 1998 8-9
Notes to Consolidated Condensed
Financial Statements 10
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11-22
PART II. OTHER INFORMATION 23
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
2
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[SIMON MASTER & SIDLOW LETTERHEAD]
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
CECIL BANCORP, INC.
We have reviewed the consolidated statement of financial
condition of CECIL BANCORP, INC. AND SUBSIDIARIES at September
30, 1999 and the related consolidated statements of operations
and comprehensive income for the three-month and nine-month
periods ended September 30, 1999 and 1998, and the consolidated
statements of cash flows for the nine-month period ended
September 30, 1999 and 1998. These financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements for them to be in conformity with generally accepted
accounting principles.
We previously audited and reported on the consolidated
statement of financial condition as of December 31, 1998, and
the related consolidated statement of operations and
comprehensive income, stockholders' equity, and cash flows for
the year then ended (not presented herein), and in our report
dated February 23, 2000, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated statement
of financial condition as of December 31, 1998 is fairly stated,
in all material respects, in relation to the consolidated
statement of condition from which it has been derived.
As discussed in Note 2, the accompanying consolidated
financial statements have been restated.
/s/ Simon, Master & Sidlow, P.A.
February 23, 2000
3
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
September December
30, 1999 31, 1998
------------- ------------
(Unaudited)
(As Restated)
<S> <C> <C>
Cash $ 3,112,314 $ 2,725,430
Cash - interest bearing 1,455,640 6,211,760
Federal funds sold 250,000 1,125,000
Investment securities
Securities held-to-maturity, at cost 5,509,880 4,228,742
Securities available-for-sale at
estimated market value 12,827,906 4,091,843
Mortgage-backed securities
Securities held-to-maturity, at cost 1,170,538 2,046,983
Securities available-for-sale at
estimated market value 621,763 863,260
Loans held for sale, at lower of cost
or market - 2,515,151
Loans receivable, net 87,452,950 74,545,912
Real estate owned 254,994 187,742
Office properties, equipment and leasehold
improvements at cost, less accumulated
depreciation and amortization 2,031,575 1,112,507
Stock in Federal Home Loan Bank of
Atlanta - at cost 657,800 672,300
Accrued interest receivable 657,051 597,922
Mortgage servicing rights 96,898 123,541
Prepaid expenses 154,793 50,040
Deferred taxes 184,852 114,891
Goodwill 2,815,669 -
Other assets 148,429 11,391
------------ ------------
TOTAL ASSETS $119,403,052 $101,224,415
============ ============
</TABLE>
4
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
September December
30, 1999 31, 1998
------------- ----------
(Unaudited)
(As Restated)
<S> <C> <C>
LIABILITIES
Savings deposits $105,766,990 $ 87,674,802
Advance payments by borrowers for
property taxes and insurance 479,877 821,625
Employee stock ownership debt 231,048 231,048
Other liabilities 528,849 672,738
Advances from Federal Home Loan
Bank of Atlanta 1,750,000 1,750,000
TOTAL LIABILITIES 108,756,764 91,150,213
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par value
Authorized: 4,000,000 shares
Issued and outstanding: 612,420 shares at
September 30, 1999 and 606,471 at
December 31, 1998 6,124 6,065
Additional paid in capital 4,953,839 4,735,470
Employee stock ownership debt (231,048) (231,048)
Deferred compensation - Management
Recognition Plan (45,383) (80,676)
Retained earnings, substantially restricted 5,969,414 5,628,467
Accumulated other comprehensive income (6,658) 15,924
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,646,288 10,074,202
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $119,403,052 $101,224,415
============ ============
</TABLE>
5
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
--------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(As Restated) (As Restated)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable $1,669,432 $1,639,886 $4,947,631 $4,863,567
Mortgage-backed securities 28,951 52,957 108,654 178,840
Investment securities 93,702 147,143 289,009 425,247
Other interest-earning assets 68,903 71,136 237,502 225,944
---------- ---------- ---------- ----------
Total interest income 1,860,988 1,911,122 5,582,796 5,693,598
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest expense on deposits 900,192 1,018,419 2,743,388 2,990,675
Borrowing 70,325 22,587 131,560 87,115
---------- ---------- ---------- ----------
Total interest expense 970,517 1,041,006 2,874,948 3,077,790
---------- ---------- ---------- ----------
Net interest income 890,471 870,116 2,707,848 2,615,808
Provision for loan losses 22,500 22,500 67,500 67,500
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 867,971 847,616 2,640,348 2,548,308
---------- ---------- ---------- ----------
NONINTEREST INCOME
Loan service charges 13,945 31,283 38,561 49,234
Dividends on FHLB stock 12,183 12,571 37,261 36,333
Gain on sale of loans 23,971 33,526
Unrealized gain on loans held
for sale 47,773 - - -
Commission income 26,222 19,486 77,234 58,999
Checking account fees 49,689 45,784 134,723 115,588
Other 18,249 21,585 19,355 78,041
---------- ---------- ---------- ----------
Total noninterest income 168,061 130,709 331,105 371,721
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 360,421 269,833 1,059,192 954,014
Occupancy 33,769 42,209 102,832 109,120
Equipment and data processing
expense 87,805 65,105 248,125 187,668
SAIF deposit insurance premium 21,274 21,045 63,992 62,719
Merger expense 201,038 252,174
Other 205,522 211,522 575,185 557,957
---------- ---------- ---------- ----------
Total noninterest expense 708,791 810,752 2,049,326 2,123,652
---------- ---------- ---------- ----------
Income before income taxes 327,241 167,573 922,127 796,377
---------- ---------- ---------- ----------
INCOME TAXES
Current 101,818 206,350 376,574 455,020
Deferred (1,302) (32,425) (55,752) (51,019)
---------- ---------- ---------- ----------
Total income taxes 100,516 173,925 320,822 404,001
---------- ---------- ---------- ----------
NET INCOME $ 226,725 $ (6,352) $ 601,305 $ 392,376
========== ========== ========== ==========
</TABLE>
6
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
--------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(As Restated) (As Restated)
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ 226,725 $ (6,352) $ 601,305 $ 392,376
OTHER COMPREHENSIVE INCOME
Unrealized gains (losses) on
investment securities, net
of deferred taxes (2,260) 2,639 (22,582) (8,384)
---------- --------- --------- ----------
TOTAL COMPREHENSIVE INCOME $ 224,465 $ (3,713) $ 578,723 $ 383,992
========== ========= ========= ==========
Earnings per common share and
common share equivalent $ 0.39 $ (0.01) $ 1.03 $ 0.69
========== ========= ========= ==========
Earnings per common share-
assuming full dilution $ 0.38 $ (0.01) $ 1.01 $ 0.68
========== ========= ========= ==========
</TABLE>
7
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1999 1998
---------- -----------
(Unaudited) (Unaudited)
(As Restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and fees received on loans
and investments $ 5,851,338 $ 5,978,965
Cash paid to suppliers and employees (2,106,873) (2,189,781)
Proceeds from sale of loans 1,149,335 1,249,567
Origination of loans held for sale (3,220,300) (2,959,600)
Interest paid (2,874,948) (3,077,790)
Income taxes paid (501,899) (541,567)
------------- ------------
NET CASH USED BY OPERATING ACTIVITIES (1,703,347) (1,540,206)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of investment
securities 4,500,000 6,645,000
Proceeds from maturities of mortgage-backed
securities 1,116,829 967,066
Purchase of investment securities (14,546,773) (6,685,802)
Loans originated (29,441,413) (24,888,679)
Principal collected on loans 21,148,652 22,436,020
Purchase of office properties, equipment
and leasehold improvements (146,988) (106,924)
Proceeds from sale of real estate owned 23,425 245,159
Purchase of real estate owned (90,677) (146,071)
Proceeds from sale of stock in Federal Home
Loan Bank of Atlanta 27,700 -
Purchase of stock in Federal Home Loan
Bank of Atlanta (13,200) (19,600)
------------- ------------
NET CASH USED BY INVESTING ACTIVITIES (17,422,445) (1,553,831)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
and savings accounts 22,605,738 40,361,688
Proceeds from sales of certificates 9,845,821 5,569,556
Payments of maturing certificates of deposits (36,535,463) (41,398,427)
Branch acquisition 18,417,620 -
Decrease in advance payments by borrowers for
property taxes and insurance (341,748) (314,341)
Proceeds from issuance of common stock 65,440 10,800
Dividends paid (175,852) (131,553)
------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,881,556 4,097,723
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,244,236) 1,003,686
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 10,062,190 4,529,151
------------- ------------
END OF PERIOD $ 4,817,954 $ 5,532,837
============= ============
</TABLE>
8
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1999 1998
---------- -----------
(Unaudited) (Unaudited)
(As Restated)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
USED BY OPERATING ACTIVITIES
Net Income $ 601,305 $ 392,376
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation 99,033 68,124
Provision for loan losses 67,500 67,500
Amortization of investment security
premiums (discounts) 16,506 (6,985)
Stock dividends (22,612) (26,824)
Increase in accrued interest receivable (59,129) (12,283)
Increase in deferred taxes (55,752) (52,840)
Increase (decrease) in mortgage servicing rights 26,643 (6,736)
Increase in prepaid expenses (104,753) (27,428)
(Increase) decrease in other assets (137,038) 42,729
Decrease in other liabilities (100,355) (293,938)
Increase in loans held for sale (2,094,936) (1,743,559)
Distribution from MRP Trust 60,241 61,076
Cash paid in lieu of fractional shares - (1,418)
----------- -----------
(2,304,652) (1,932,582)
----------- -----------
$(1,703,347) $(1,540,206)
=========== ===========
SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Cash received in branch acquisition
Assumption of savings deposits liabilities $22,176,092 $
Loans receivable obtained (71,690)
Office properties, equipment, and leasehold
improvements obtained (871,113)
Goodwill obtained (2,815,669)
----------- -----------
Net cash received in branch acquisition $18,417,620 $
=========== ===========
</TABLE>
9
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
SEPTEMBER 30, 1999
------------------
(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 consolidated statements of
financial condition, consolidated statements of
operations and comprehensive income and consolidated
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 operations for the nine months ended
September 30, 1999 are not necessarily indicative of
the results that may be expected for the entire year.
(2) Earnings per Share
------------------
Earnings per common share were computed by dividing
net income by the weighted average number of shares of
common stock outstanding during the quarter. The
weighted average number of shares of common stock
outstanding was 585,499 and 569,271 in 1999 and 1998,
respectively. The weighted average number of shares
of common stock for computation of diluted earnings
per common share was 596,439 and 581,115,
respectively.
(3) Other Financial Information
---------------------------
Simon, Master & Sidlow, P.A., Cecil Bancorp's
independent 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.
(2) RESTATEMENT
-----------
Subsequent to the issuance of the Corporation's third
quarter 1999 financial statements and the filing of its
third quarter 1999 Form 10-QSB with the Securities and
Exchange Commission (the "SEC"), an error in the
calculation of certain compensation and benefits expenses
related to stock options was discovered. The Corporation
concluded that it would restate its third quarter 1999
financial statements and related disclosures to reflect the
correction of the error. The restatement resulted in an
increase to previously reported net income of $21,590, net
of income tax expense of $11,123, for the three months
ended September 30, 1999, and an increase to previously
reported net income of $33,973, net of income tax expense
of $17,503, for the nine months ended September 30, 1999.
10
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CECIL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
(Continued)
(2) RESTATEMENT (Continued)
Previously reported earnings per share increased by $.04 a
share and $.06 a share, for the three months and nine months
ended September 30, 1999, respectively. The 1999
consolidated statements of financial condition, and related
consolidated statements of income and comprehensive income,
and cash flows have been restated to reflect this
adjustment, as follows:
<TABLE>
<CAPTION>
As Previously
As Restated Adjustment Reported
----------- ---------- --------------
<S> <C> <C> <C>
Prepaid expenses $ 154,793 $(17,503) $ 172,296
Other assets 148,429 (32,713) 181,142
Additional paid in capital 4,953,839 (84,189) 5,038,028
Retained earnings 5,969,414 33,973 5,935,441
Noninterest expense
Compensation and
benefits 1,059,192 (51,476) 1,110,668
Income taxes
Current 320,822 17,503 303,319
Net income 601,305 33,973 567,332
Total comprehensive income 578,723 33,973 544,750
Earnings per common share
and common share
equivalent 1.03 0.06 0.97
Earnings per common share -
assuming full dilution 1.01 0.06 0.95
</TABLE>
11
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CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BUSINESS OF THE COMPANY AND THE BANK
CECIL BANCORP, INC.
Cecil Bancorp, Inc. (the "Company") was incorporated under
the laws of the State of Maryland in July 1994 at the direction
of the Board of Directors of Cecil Federal Savings Bank ("Cecil
Federal") for the purpose of serving as a savings institution
holding company of Cecil Federal upon the acquisition of all of
the capital stock issued by Cecil Federal in its conversion from
mutual to stock form (the "Conversion"). Substantially all of
the Company's assets consists of the outstanding capital stock
of Cecil Federal. On September 30, 1998, the Company completed
its acquisition of Columbian Bank, a Federal Savings Bank
("Columbian") through the exchange of 1.7021 shares of Company
Common Stock for each outstanding shares of Columbian Common
Stock in a transaction valued at approximately $2.8 million.
The Company holds all of the stock of Cecil Federal and
Columbian and operates them as two separate savings
institutions. Together, Cecil Federal and Columbian are
referred to herein as the "Banks". The Company's principal
business is the business of Cecil Federal and its wholly owned
subsidiaries, and of Columbian. Therefore, most of the
discussion in this Annual Report relates to the business of the
Banks rather than the business of the Company.
CECIL FEDERAL SAVINGS BANK
Cecil Federal is a community-oriented financial
institution which commenced operations in 1959 as a Federal
mutual savings and loan association. It converted to a Federal
mutual savings bank in January 1993 and, effective November 10,
1994, Cecil Federal converted from mutual to stock form. Its
deposits have been federally insured up to applicable limits,
and it has been a member of the Federal Home Loan Bank ("FHLB")
system since 1959. Cecil Federal's deposits are currently
insured by the Savings Association Insurance Fund ("SAIF") of
the Federal Deposit Insurance Corporation ("FDIC") and it is a
member of the FHLB of Atlanta.
Cecil Federal's primary business is the origination of
mortgage loans secured by single-family residential real estate
located primarily in Cecil County, Maryland, with funds obtained
through the attraction of deposits, primarily certificate
accounts with terms of 60 months or less, savings accounts and
transaction accounts. To a lesser extent, Cecil Federal also
makes loans on commercial and multi-family real estate,
construction loans on one- to four-family residences, home
equity loans and land loans. Cecil Federal also makes consumer
loans including education loans, personal and commercial lines
of credit, automobile loans and loans secured by deposit
accounts. Cecil Federal purchases mortgage-backed securities
and invests in other liquid investment securities when warranted
by the level of excess funds.
Cecil Federal has two wholly owned subsidiaries, Cecil
Service Corporation and Cecil Financial Services Corporation.
Cecil Service Corporation's primary business is acting as
leasing agent for the North East Plaza Branch and Cecil
Financial Services Corporation's primary business is the
operation, through a partnership with UVEST Investment Services,
of a full range of brokerage and investment services.
Cecil Federal's main office is located at 127 North
Street, Elkton, Maryland and its phone number is (410) 398-1650.
12
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CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RECENTLY CLOSED TRANSACTIONS:
On September 27, 1999, Cecil Federal Savings Bank, a
wholly owned subsidiary of Cecil Bancorp, Inc. closed an
agreement with Susquehanna Bank, a subsidiary of Susquehanna
Bancshares, Inc., and acquired Susquehanna's two branch offices
located in Elkton, Maryland. This acquisition represents a
continuation of the growth of Cecil Federal's existing branch
network, and is currently expected to benefit Cecil Federal's
net income in future periods.
Under the terms of the agreement Cecil Federal assumed
deposits of Susquehanna's two branch offices and certain other
assets. The deposits of these branch offices totaled $22.2
million at September 27, 1999. The transaction resulted in the
acquisition of the 200 North Street office, which was
subsequently combined with Cecil Federal's main office, and the
assumption of the lease of the Big Elk Mall office, which is
currently operating as the third office of Cecil Federal.
COLUMBIAN BANK, A FEDERAL SAVINGS BANK
Columbian was originally chartered by the State of
Maryland in 1893. In October 1985, Columbian became a member of
the FHLB System and obtained federal insurance of its deposits.
In January 1989, Columbian converted to a federally insured,
state chartered capital stock institution through the sale and
issuance of 69,140 shares of common stock. On September 26,
1990, Columbian changed its name to Columbian Bank, A Federal
Savings Bank and became a federally chartered stock savings
bank. Columbian's deposits are also insured by the SAIF of the
FDIC, and it is a member of the FHLB of Atlanta.
Columbian's primary business is the origination of
mortgage loans secured by single-family residential real estate
located primarily in Harford County, Maryland, with funds
obtained through the attraction of deposits, primarily
certificate accounts with terms of 60 months or less and savings
accounts. To a lesser extent, Columbian also makes loans on
commercial and multi-family real estate, construction loans on
one- to four-family residences, home equity loans and land
loans. Columbian purchases mortgage-backed securities and
invests in other liquid investment securities when warranted by
the level of excess funds.
Columbian's office is located at 303-307 St. John Street,
Havre de Grace, Maryland, and its phone number is (410) 939-
2313.
GENERAL
Cecil Federal's primary business is the origination of
mortgage loans secured by single-family residential real estate
located primarily in Cecil County, Maryland, with funds obtained
through the attraction of deposits, primarily certificate
accounts with terms of 60 months or less, savings accounts and
transaction accounts. To a lesser extent, Cecil Federal also
makes loans on commercial and multi-family real estate,
construction loans on one- to four-family residences, home
equity loans and land loans. Cecil Federal also makes consumer
loans including education loans, personal and commercial lines
of credit, automobile loans and loans secured by deposit
accounts. Although consumer loans provide Cecil Federal with
additional interest income, they also involve greater risk.
Cecil Federal purchases mortgage-backed securities and invests
in other liquid investment securities when warranted by the
level of excess funds. Cecil Federal's revenues are derived
principally from interest earned on loans and, to a lesser
extent, from interest earned on investments and mortgage-backed
securities.
13
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CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The principal business of Columbian is the acceptance
of savings deposits from the general public and the origination
of conventional mortgage loans for the purpose of financing or
refinancing one to four family dwellings. Its income is derived
largely from interest and fees in connection with its lending
activities. Its principal expenses are interest paid on savings
deposits and non-interest expenses. Columbian's operations are
conducted through its office located at 303-307 St. John Street,
Havre de Grace, Maryland.
The Banks' operations are influenced by general economic
conditions and by policies of financial institution regulatory
agencies, including the OTS and the FDIC.
The Banks' cost of funds are influenced by interest rates
on competing investments and general market interest rates.
Lending activities are affected by the demand for financing of
real estate and other types of loans, which in turn is affected
by the interest rates at which such financing may be offered.
The Banks' net interest income is dependent primarily upon
the difference or spread between the average yield earned on
loans, investments and mortgage-backed securities and the
average rate paid on deposits and borrowings (if any), as well
as the relative amounts of such assets and liabilities. The
Banks, like other thrift institutions, are subject to interest
rate risk to the degree that its interest-bearing liabilities
mature or reprice at different times, or on a different basis,
than its interest-earning assets.
SUBSEQUENT FINANCIAL AND ACCOUNTING DEVELOPMENTS
- ------------------------------------------------
Subsequent to the issuance of the consolidated financial
statements for the year ended December 31, 1998, and the filing
of its 1998 Form 10-KSB, an error in the calculation of certain
compensation and benefits expenses related to stock options was
discovered. The Company and its subsidiaries, in consultation
with their independent auditors, collectively concluded that the
Company would restate its consolidated financial statements and
related disclosures for the year ended December 31, 1998 and for
the first three quarters of fiscal 1999, and amend its 1998 Form
10-KSB and first, second, and third quarter 1999 Forms 10-QSB to
reflect the correction of the error. The purpose of the
restatements and amended filings was to reflect the changes
necessary to correct the error.
The principal effects of the changes on the accompanying
financial statements are presented in "Note 2 -- Restatement" of
the Notes to the Consolidated Financial Statements, which is
included in "Part I -- Item 1 -- Financial Statements" and is
incorporated herein by reference for more information.
FINANCIAL SERVICES
- ------------------
On September 1, 1997, Cecil Financial Services, a service
corporation of Cecil Federal Savings Bank, began offering a full
range of brokerage and investment services in all our branches,
through a partnership with UVEST Investment Services.
With this expansion, Cecil Federal will now offer maximum
convenience in servicing customer needs. Mr. Roger L. Owens,
CLU, has been hired as investment representative. He will seek
to provide comprehensive investment products tailored to meet
current and future individual financial needs.
14
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cecil Financial, Inc. has partnered in this venture with
UVEST Investment Services, a registered broker-dealer and member
of both the National Association of Securities Dealers (NASD)
and the Securities Investment Protection Corporation (SIPC).
Headquartered in Charlotte, NC, UVEST has been providing bank-
based investment services throughout the Southeast since 1982.
YEAR 2000 ISSUES
- ----------------
As the Year 2000 approaches, there is growing concern that
many computers and computer systems could malfunction. Banks,
as with many other industries, could be faced with errors in
their account processing, payment systems, ATM systems, security
systems, or virtually any system controlled by a computer.
The cause is rooted in the programming of the date field
within computer systems and software. For many years, computer
systems were designed to record only the last two digits of the
year in the date field in order to save costly data storage
space. This does not work well for the Year
2000, as that year could be read by a computer to mean 1900.
Bank regulators are requiring that systems and software
products be implemented and tested for Year 2000 readiness.
This task is a monumental undertaking for all parties involved
from vendor service providers, computer systems manufacturers,
software providers, and finally the Banks. Cecil Federal and
Columbian have prepared for the millennium.
The Banks have prepared an action plan to begin evaluating
our systems and software products. The Banks plan consists of
the following:
Problem Awareness: The Banks are aware of the problems that
- -----------------
could potentially arise with the year 2000 problem. The Banks
have analyzed what systems and software need to be reviewed.
Assessment Phase: The Banks have made contacts with all its
- ----------------
third party vendors to assess exposure to problems. These
include those that provide Account & Item Processing; System
Hardware Setup and ATM Software; General Ledger Software; ATM
Transaction Processing; the ATM Service Provider; ATM Software;
Financial Reporting Software; Fed-Line Software; On-Line Bank
Service Software; Loan Sales Software; Loan Documentation
Software; HMDA/Geocoding Software; Payroll Processing; Computer
Hardware; Spreadsheet Software; and Word Processing Software.
Vendors have been proactive in their response to the Year
2000 problem. The Banks' vendors have in place or will have in
place procedures to minimize risks associated with the of the
Year 2000 problem by December 31, 1998.
Renovation Phase: Initial steps have been completed to assure
- ----------------
compliance with the Year 2000 problem. A new front-end
processing system has been installed in the third quarter of
1998 at Cecil Federal, and was installed at Columbian prior to
January 31, 1999. This system is already Year 2000 compliant.
This system replaces the Banks' previous teller systems which
were not compliant.
15
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Validation Phase: The Banks will validate any decision making by
- ----------------
thoroughly assessing the systems compatibility with the Year
2000 issues. Validations will be recorded and presented to the
Board of Directors. The target date for the validation phase is
March 31, 1999. The Banks will share testing information with
each other to minimize the amount of testing on the same
systems. Software and system testing will be done on an ongoing
basis through the end of June 1999.
Implementation Phase: The Banks will monitor the implementation
- --------------------
of the Year 2000 assessment and report results to the Board of
Directors. The Banks will continue to stress with their vendors
the importance of this project. The Banks will keep in
continual contact with its vendors until a final solution and
implementation has been completed. All plans are to be
completed as outlined above. The implementation phase has been
completed. All major systems and software have been tested,
upgraded, and implemented.
Contingency Plan: The Banks have prepared a contingency plan
- ----------------
that allows for the manual processing of transactions and
reporting. The plan designates the training and implementation
of the manual operation in a worst case scenario. The
Contingency Plan is being updated in conjunction with our
Disaster Recovery Plan. The Contingency Plan has been updated
and testing of the plan will take place in the during the third
and fourth quarters of 1999. The employees will be trained in
the handling of manual processes during the fourth quarter of
1999.
Customer Awareness: The Banks believe that customer awareness is
- ------------------
key to the Year 2000 efforts. The Banks have been following the
program set down by the association, Americas Community Bankers.
This program is a comprehensive plan on informing the banks
customers about Year 2000 issues, plans, and programs. The
Banks have implemented an ongoing program of information that is
being sent to customers on a regular basis. In addition, the
Banks have a developed an employee training program that makes
the employees aware of many Year 2000 issues and how to respond
to customer inquiries as to the Banks' plans for Year 2000
compliance.
The Banks have also undertaken an effort to reach all
business customers via mail to explain how the Year 2000 issue
affects their business. All businesses need to be aware of the
Year 2000 issue and make attempts to correct any possible
problems.
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. The Company'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's
16
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
have 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's
now offer an adjustable rate product which remains fixed for the
first ten years and then converts to a one-year adjustable. The
Bank's determine on a monthly basis the availability of loans
held for sale based on a portfolio liquidity assessment.
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 September 30, 1999 and
December 31, 1998.
The Company's total assets at September 30, 1999 increased
$18,178,637 or 18.0% to $119,403,052 from $101,224,415 at
December 31, 1998. The increase was primarily the result of two
branches purchased from Susquehanna Bancshares, Inc.,on
September 27, 1999, of which proceeds were used to prepay
Federal Home Loan Bank of Atlanta Advances, fund loan portfolio
growth and increase investments held for sale. Total
liabilities increased $17,606,551 or 19.3% to $108,756,764 at
September 30, 1999 from $91,150,213 at December 31, 1998. This
increase was primarily the result of an increase in savings
deposits resulting from the said branch purchases.
Stockholders' equity increased $572,086 or 5.7%.
Cash increased $386,884 or 14.2% to $3,112,314 at
September 30, 1999 from $2,725,430 at December 31, 1998.
Interest-bearing cash decreased $4,756,120 or 76.6% to
$1,455,640 at September 30, 1999 from $6,211,760 at December 31,
1998. The decreases in cash were primarily due to a decrease in
Federal Home Loan Bank Advances and the purchase of other
investments. Investments held for sale increased $8,736,063 or
213.5% to $12,827,906 at
September 30, 1999 from $4,091,843 at December 31, 1998. The
increase was the result of the investment of the proceeds of the
branch purchase transaction.
Loans held-for-sale decreased $2,515,151 or 100% to $0 at
September 30, 1999 from $2,515,151 at December 31, 1998. The
decrease was a result of the Company's determination to hold
loans in the portfolio due to increased liquidity directly
resulting from the branch purchase transaction. Loans
receivable increased $12,907,038 or 17.3% to $87,452,950 at
September 30, 1999 from $74,545,912 at December 31, 1998. The
increase in loans receivable was a result of increased loan
originations. Real estate owned increased $67,252 or 35.89% to
$254,994 at September 30, 1999 from $187,742 at December 31,
1998.
Total savings deposits increased $18,092,188 or 20.6% to
$105,766,990 at September 30, 1999 from $87,674,802 at December
31, 1998. Increases are a direct result of the branch purchase.
Escrows held for the payments of taxes and insurances decreased
$341,748 or 41.6% to $479,877 at September 30, 1999 from
$821,625 at December 31, 1998. Decreases are attributable to
the payment of county tax bills on mortgage holder's accounts.
Advances from the Federal Home Loan Bank of Atlanta remained
constant at $1,750,000 both at September 30, 1999 and December
31, 1998.
17
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended September 30, 1999 Net income for the three
- -------------------------------------
month period ended September 30, 1999 increased $233,077 or
3,669.3% to $226,725 as compared to net loss for the same period
in 1998 of $6,352. The annualized return on average assets and
annualized return on average equity were 0.89% and 9.04%
respectively, for the three-month period ended September 30,
1999. This compares to an annualized return on average assets
and annualized return on average equity of (0.03%) and (0.26%)
respectively, for the same period in 1998.
Net interest income, the Bank's primary source of income,
increased 2.4%, or $20,355 for the three months ended September
30, 1999, over the same period in 1998. The weighted average
yield on interest earning assets decreased from 8.23% for the
three months ended September 30, 1998 to 7.88% for the three
months ended September 30, 1999. The weighted average rate paid
on interest bearing liabilities decreased from 4.72% for the
three months ended September 30, 1998 to 4.33% for the three
months ended September 30, 1999.
Interest on loans receivable increased by $29,546 or 1.8%, from
$1,639,886 for the three months ended September 30, 1998 to
$1,669,432 for the three months ended September 30, 1999. The
increase is attributable to an increase in the average weighted
yield along with an increase in the average balance outstanding.
The weighted average yield decreased from 8.50% for the three
months ended September 30, 1998 to 7.83% for the three months
ended September 30, 1999.
Interest on mortgage backed securities decreased $24,006 or
45.3%, from $52,957 for the three months ended September 30,
1998 to $28,951 for the three months ended September 30, 1999.
The decrease was the result of an decrease in the average
outstanding balance. Interest on investment securities
decreased $53,441 or 36.3% from $147,143 for the three months
ended September 30, 1998 to $93,702 for the three months ended
September 30, 1999. The average outstanding balance decreased
$1,633,615 for the three months ended September 30, 1999 over
the three months ended September 30, 1998. The weighted average
yield decreased from 6.75% for the three months ended September
30, 1998 to 5.12% for the three months ended September 30, 1999.
Interest on other interest earning assets decreased $2,233, or
3.1% from $71,136 for the three months ended September 30, 1998
to $68,903 for the three months ended September 30, 1999. The
average outstanding balance decreased 64.9% for the period,
which was offset by an increase in the weighted average yield.
Interest on savings deposits decreased $118,227 or 11.6% from
$1,018,419 for the three months ended September 30, 1998 to
$900,192 for the three months ended September 30, 1999. The
average balance outstanding increased $212,563 for the period
noted above. The weighted average rate paid on deposits
decreased from 4.77% for the three months ended September 30,
1998 to 4.21% for the three months ended September 30, 1999.
Interest expense paid on borrowings increased $47,738, or 211.4%
from $22,587 for the three months ended September 30, 1998 to
$70,325 for the three months ended September 30, 1999. The
weighted average balance outstanding increased $1,300,000, or
53.8%, with a slight increase in the weighted average rate paid.
Noninterest income increased 28.6%, up $37,352 for the three
months ended September 30, 1999, over the same period in 1998.
Loan servicing fees decreased 55.4%, down $17,338 for the three
months ended September 30, 1999 over the same period in 1998.
18
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Checking account fees increased $3,905 or 8.5% Increases in
this area can be primarily attributed to increased service
charges, as a result of increased charges on demand deposits,
and the activity of three ATM machines, which are primarily used
by non-customers. Commission income increased 34.5%, up $6,736
for the three months ended September 30, 1999, as a result of
increased sales of alternative investment products.
Noninterest expense decreased 12.6%, down $101,961 for the three
months ended September 30, 1999, over the same period in 1998.
One time merger related costs of $201,038 were incurred in the
quarter ended September 30, 1998, and not in the quarter ended
September 30, 1999. Compensation and benefits increased 33.6%
for the three months ended September 30, 1999 over the same
period in 1998, which is a result of general merit increases
plus additional employees and costs of benefits. Equipment and
data processing expenses increased 34.9% for the three months
ended September 30, 1999 over the same period in 1998 as a
result of the Company's year 2000 compliance plan. The SAIF
deposit premium remained stable for the three months ended
September 30, 1999 over the same period in 1998. Other expenses
decreased by 15.5% for the three months ended September 30, 1999
over the same period in 1998, as a result of decreased legal
expenses, and general administration costs.
Income tax expense for the three-month period ended September
30, 1999 and 1998 was $100,516 and $173,925 respectively, which
equates to effective rates of 30.7% and 47.2%, respectively,
before non-deductible merger expenses.
Nine Months Ended September 30, 1999 Net income for the nine-
- ------------------------------------
month period ended September 30, 1999 increased $208,929 or
53.2% to $601,305, compared to net income of $392,376 for the
same period in 1998. The annualized return on average assets
and annualized return on average equity were 0.78% and 7.72%
respectively, for the nine-month period ended September 30,
1999. This compares to an annualized return on average assets
and annualized return on average equity of 0.54% and 5.36%
respectively, for the same period in 1998.
Net interest income, the Bank's primary source of income,
increased 3.6% up $92,040 for the nine months ended September
30, 1999, over the same period in 1998. The weighted average
yield on interest earning assets decreased from 8.21% for the
nine months ended September 30, 1998 to 7.85% for the nine
months ended September 30, 1999. The weighted average rate paid
on interest bearing liabilities decreased from 4.71% for the
nine months ended September 30, 1998 to 4.28% for the nine
months ended September 30, 1999.
Interest on loans receivable increased by $84,064 or 1.7%, from
$4,863,567 for the nine months ended September 30, 1998 to
$4,947,631 for the nine months ended September 30, 1999. The
average balance outstanding increased $6,378,169. The weighted
average yield decreased from 8.56 for the nine months ended
September 30, 1998 to 7.92% for the nine months ended September
30, 1999.
Interest on mortgage backed securities decreased $70,186, or
39.2%, from $178,840 for the nine months ended September 30,
1998 to $108,654 for the nine months ended September 30, 1999.
The average outstanding balance decreased $1,509,631 for the
nine months ended September 30, 1999 from the same period ended
1998, with the weighted average yield increasing from 6.54% for
the nine months ended September 30, 1998 to 6.78% for the nine
months ended September 30, 1999.
Interest on investment securities decreased $136,238, or 32.0%,
from $425,247 for the nine months ended September 30, 1998 to
$289,009 for the nine months ended September 30, 1999.
19
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The average balance outstanding decreased $1,687,555, and the
weighted average yield decreased slightly.
Interest on other interest earning assets increased $11,558 or
5.1%, from $225,944 for the nine months ended September 30, 1998
to $237,502 for the same period in 1999. The weighted average
yield increased from 7.92% for the nine months ended June 30,
1998 to 7.96% for the nine months ended September 30, 1999. The
average outstanding balance increased $374,701 from $3,863,135
for the nine months ended September 30, 1998 to $4,237,836 for
the nine months ended September 30, 1999.
Interest on savings deposits decreased $247,287, or 8.3% from
$2,990,675 for the nine months ended September 30, 1998 to
$2,743,388 for the nine months ended September 30, 1999. The
average balance outstanding increased $1,996,112 for the period
noted above. The weighted average rate paid on deposits
decreased from 4.74% for the nine months ended September 30,
1998 to 4.25% for the nine months ended September 30, 1999.
Interest expense paid on borrowings increased $44,445, or 51.0%
from $87,115 for the nine months ended September 30, 1998 to
$131,560 for the nine months ended September 30, 1999.
Increases are attributable to an increase in the weighted
average balance outstanding and the weighted average cost of
funds.
Noninterest income decreased $40,616 or 10.9% to $331,105 for
the nine months ended September 30, 1999 from $371,721 for the
same period in 1998. Gain on sale of loans was down $9,555 or
28.5% for the nine months ended September 30, 1999 over the same
period in 1998, as a result of fewer sales of fixed rate loans
in the secondary market. Commission income increased $18,235,
or 30.9% for the nine months ended September 30, 1999 over the
same period in 1998. The increase was the result of increased
sales of insurance and investments products. Other fees
decreased 75.2% down $58,686 for the nine months ended September
30, 1999 over the same period in 1998. Decreases were primarily
attributable to the increase in expenses to other real estate
owned properties and the amortization of mortgage servicing
rights.
Noninterest expense decreased $74,326 or 3.5% to $2,049,326 for
the nine-month period ended September 30, 1999 from $2,123,652
for the nine months ended September 30, 1998. The SAIF deposit
premium remained stable for the nine months ended September 30,
1999, compared to the same period in 1998. Equipment and data
processing expenses increased $60,457 or 32.2% , from $187,668
for the nine month ended September 30, 1998 to $248,125 for the
nine months ended September 30, 1999. This is a direct result
of the company's year 2000 awareness plan and other equipment
related upgrades. Other expenses increased 3.1%, up $17,228 for
the nine-month period ended September 30, 1999, over the same
period in 1998. The increase was attributable to an increase in
audit and accounting fees, loan expenses, postage, and mortgage
servicing rights valuation allowance.
Income tax expense for the nine-month period ended September 30,
1999 and 1998 was $320,822 and $404,001 which equates to
effective rates of 34.8% and 49.3% respectively.
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 September 30, 1999:
20
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Nonperforming loans:
Residential mortgage $ 796,492 $ 573,913
Consumer and other 198,884 6,871
Assets acquired in settlement of loans:
Real estate held for development and sale
Real estate held for investment and sale
Repossessed assets 254,994 356,399
---------- ----------
Total Nonperforming Assets $1,250,370 $ 937,183
========== ==========
</TABLE>
Residential mortgages classified consisted of 16 loans with
balances ranging from $5,000 to $165,000. Classified consumer
loans consisted of 24 loans with balances ranging from $1,000 to
$31,000 as of September 30, 1999.
The provision for losses on loans is determined based on
management's review of the loan portfolio and analysis of
borrower's ability to repay, past collection experience, and
risk characteristics.
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 Banks' The Office of Thrift Supervision ("OTS"), which is
- ----------
the Banks' 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
September 30, 1999:
21
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
<TABLE>
<CAPTION>
CECIL FEDERAL SAVINGS BANK
Tangible Core Risk Based
- ----------------------------------------------------------------
<S> <C> <C> <C>
Available capital $5,610 $5,610 $5,835
Required capital 1,328 3,541 4,584
------ ------ ------
Excess $4,282 $2,069 $1,251
====== ====== ======
Available capital 6.34% 6.34% 10.18%
Required capital 1.50% 4.00% 8.00%
------ ------ ------
Excess 4.84% 2.34% 2.18%
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
COLUMBIAN BANK, F.S.B.
Tangible Core Risk Based
- ----------------------------------------------------------------
<S> <C> <C> <C>
Available capital $2,087 $2,087 $2,190
Required capital 421 1,122 1,165
------ ------ ------
Excess $1,666 $ 965 $1,025
====== ====== ======
Available capital 7.44% 7.44% 15.04%
Required capital 1.50% 4.00% 8.00%
------ ------ ------
Excess 5.94% 3.44% 7.04%
====== ====== ======
</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 September 30, 1999, the Banks' capital levels were sufficient
to qualify it as a well capitalized institution, the most
favorable category, allowing the Banks' to pay lower deposit
insurance premiums.
22
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K -
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during
the three months ended September 30, 1999
23
<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 hereunto duly authorized.
CECIL BANCORP, INC.
Date: March 29, 2000 By: /s/ Mary Beyer Halsey
-------------- -------------------------
Mary Beyer Halsey
President
Chief Executive Officer
24
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,112,314
<INT-BEARING-DEPOSITS> 1,455,640
<FED-FUNDS-SOLD> 250,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,449,669
<INVESTMENTS-CARRYING> 7,338,218
<INVESTMENTS-MARKET> 7,154,856
<LOANS> 87,857,992
<ALLOWANCE> 405,042
<TOTAL-ASSETS> 119,403,052
<DEPOSITS> 105,766,990
<SHORT-TERM> 1,750,000
<LIABILITIES-OTHER> 1,239,774
<LONG-TERM> 0
<COMMON> 6,124
0
0
<OTHER-SE> 10,640,164
<TOTAL-LIABILITIES-AND-EQUITY> 119,403,052
<INTEREST-LOAN> 4,947,631
<INTEREST-INVEST> 397,663
<INTEREST-OTHER> 237,502
<INTEREST-TOTAL> 5,582,796
<INTEREST-DEPOSIT> 2,743,388
<INTEREST-EXPENSE> 2,874,948
<INTEREST-INCOME-NET> 2,707,848
<LOAN-LOSSES> 67,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,049,326
<INCOME-PRETAX> 922,127
<INCOME-PRE-EXTRAORDINARY> 922,127
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 601,305
<EPS-BASIC> 1.03
<EPS-DILUTED> 1.01
<YIELD-ACTUAL> 3.77
<LOANS-NON> 824,421
<LOANS-PAST> 287,072
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 233,513
<CHARGE-OFFS> 34,349
<RECOVERIES> 3,378
<ALLOWANCE-CLOSE> 405,042
<ALLOWANCE-DOMESTIC> 405,042
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
