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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 June 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 June 30, 1999
$0.01 par value common stock 609,770 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 - June 30, 1999
and December 31, 1998 4-5
Consolidated Statements of Income and
Comprehensive Income for Six Months
Ended and Three Months Ended June 30,
1999 and June 30, 1998 6-7
Consolidated Statements of Cash Flows
for Six Months Ended June 30, 1999
and June 30, 1998 8-9
Notes to Consolidated Financial
Statements 10
ITEM 2. Managements Discussion and Analysis
of Financial Condition and Results
of Operations 10-22
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 June 30,
1999 and the related consolidated statements of income and
comprehensive income for the three-month and six-month periods
ended June 30, 1999 and 1998 and the consolidated statement of
cash flows for the six-month period ended June 30, 1999 and
1998. These financial statements are the responsibility of the
Corporation'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 financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We previously audited and reported on the consolidated
statement of financial condition of CECIL BANCORP, INC. AND
SUBSIDIARIES as of December 31, 1998 and the related
consolidated statements of income and comprehensive
income, stockholders' equity, and cash flows for the year 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 balance sheet as of December
31, 1998 is fairly stated, in all material respects, in
relation to the consolidated balance sheet 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>
June 30, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
(Unaudited)
(As Restated)
Cash $ 4,428,868 $ 2,725,430
Cash - Interest bearing 1,783,585 6,211,760
Federal funds sold 1,075,000 1,125,000
Investment securities
Securities held-to-maturity, at cost 6,014,349 4,228,742
Securities available-for-sale at estimated
market value 1,289,976 4,091,843
Mortgage-backed securities
Securities held-to-maturity, at cost 1,349,113 2,046,983
Securities available-for-sale at estimated
market value 650,571 863,260
Loans held for sale, at lower of cost or market 2,338,905 2,515,151
Loans receivable, net 78,624,259 74,545,912
Real estate owned 254,994 187,742
Office properties, equipment and leasehold
improvements at cost, less accumulated
depreciation and amortization 1,131,129 1,112,507
Stock in Federal Home Loan Bank of
Atlanta - at cost 657,800 672,300
Accrued interest receivable 608,380 597,922
Mortgage servicing rights 103,789 123,541
Prepaid expenses 173,657 50,040
Deferred taxes 182,127 114,891
Other assets 18,034 11,391
------------ ------------
TOTAL ASSETS $100,684,536 $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>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
(As Restated)
<S> <C> <C>
LIABILITIES
Savings deposits $ 84,601,704 $ 87,674,802
Advance payments by borrowers for
property taxes and insurance 1,438,622 821,625
Employee stock ownership debt 231,048 231,048
Other liabilities 461,559 672,738
Advances from Federal Home Loan Bank
of Atlanta 3,500,000 1,750,000
------------ ------------
TOTAL LIABILITIES 90,232,933 91,150,213
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par value
Authorized: 4,000,000 shares
Issued and outstanding: 609,770 shares
at June 30, 1999 and 606,471 at
December 31, 1998 6,098 6,065
Additional paid in capital 4,924,715 4,735,470
Employee stock ownership debt (231,048) (231,048)
Deferred compensation - Management
Recognition Plan (45,383) (80,676)
Retained earnings, substantially
restricted 5,801,619 5,628,467
Accumulated other comprehensive income (4,398) 15,924
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,451,603 10,074,202
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $100,684,536 $101,224,415
============ ============
5
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(As Restated) (As Restated)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable $1,644,863 $1,654,058 $3,278,199 $3,223,681
Mortgage-backed securities 33,413 60,048 79,702 125,882
Investment securities 95,807 156,184 195,307 289,466
Other interest-earning assets 84,735 77,107 168,599 153,024
---------- ---------- ---------- ----------
Total interest income 1,858,818 1,947,397 3,721,807 3,792,053
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest expense on deposits 900,874 993,398 1,843,195 1,974,270
Borrowing 30,612 33,504 61,235 64,528
---------- ---------- ---------- ----------
Total interest expense 931,486 1,026,902 1,904,430 2,038,798
---------- ---------- ---------- ----------
Net interest income 927,332 920,495 1,817,377 1,753,255
Provision for loan losses 22,500 22,500 45,000 45,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 904,832 897,995 1,772,377 1,708,255
---------- ---------- ---------- ----------
NONINTEREST INCOME
Loan service charges 10,743 15,967 24,617 32,135
Dividends on FHLB stock 12,457 11,920 25,078 23,762
Gain on sale of loans 23,971 20,641 23,971 33,526
Unrealized loss on loans
held for sale (47,773) (47,773)
Commission income 37,069 16,929 51,011 39,513
Checking account fees 47,633 35,898 85,034 72,411
Other 2,077 26,578 1,106 43,878
---------- ---------- ---------- ----------
Total noninterest income 86,177 127,933 163,044 245,225
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 351,233 347,327 698,771 692,922
Occupancy 33,910 35,662 69,062 71,095
Equipment and data processing
expense 82,847 59,573 160,321 122,563
SAIF deposit insurance premium 21,365 20,891 42,718 41,676
Merger expense 51,136 51,136
Other 198,882 179,582 369,663 338,072
---------- ---------- ---------- ----------
Total noninterest expense 688,237 694,171 1,340,535 1,317,464
---------- ---------- ---------- ----------
Income before income taxes 302,772 331,757 594,886 636,016
---------- ---------- ---------- ----------
INCOME TAXES
Current 127,779 133,881 274,756 256,195
Deferred (21,188) 2,905 (54,450) (18,594)
---------- ---------- ---------- ----------
Total income taxes 106,591 136,786 220,306 237,601
---------- ---------- ---------- ----------
NET INCOME $ 196,181 $ 194,971 $ 374,580 $ 398,415
========== ========== ========== ==========
</TABLE>
6
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
----------------------------------------------------------
(Continued)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(As Restated) (As Restated)
<S> <C> <C> <C> <C>
NET INCOME $ 196,181 $ 194,971 $ 374,580 $ 398,415
OTHER COMPREHENSIVE INCOME
Unrealized losses on investment
securities, net of deferred
taxes (4,853) (5,588) (20,322) (11,023)
--------- ---------- ---------- ----------
TOTAL COMPREHENSIVE INCOME $ 191,328 $ 189,383 $ 354,258 $ 387,392
========= ========== ========== ==========
Earnings per common share and
common share equivalent $ 0.34 $ 0.34 $ 0.64 $ 0.70
========= ========== ========== ==========
Earnings per common share -
assuming full dilution $ 0.33 $ 0.34 $ 0.63 $ 0.68
========= ========== ========== ==========
</TABLE>
7
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
1999 1998
-------------- -----------
(Unaudited) (Unaudited)
(As Restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and fees received on loans and
investments $ 3,914,561 $ 3,980,140
Cash paid to suppliers and employees (1,377,575) (1,254,882)
Proceeds from sale of loans 1,149,335 1,249,567
Origination of loans held for sale (3,060,300) (2,125,200)
Interest paid (1,904,430) (2,038,798)
Income taxes paid (409,740) (456,464)
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES (1,688,149) (645,637)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of investment
securities 3,000,000 4,400,000
Proceeds from maturities of mortgage-backed
securities 909,239 582,698
Purchases of investment securities (4,796,726) (4,560,089)
Proceeds from sales of investment securities
available-for-sale 2,784,584
Loans originated (18,220,598) (16,498,592)
Principal collected on loans 16,160,660 13,385,961
Purchases of office properties, equipment and
leasehold improvements (84,265) (48,381)
Proceeds from sales of real estate owned 23,425 331,668
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 (299,858) (2,572,406)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW
accounts, and savings accounts 19,972,192 28,242,199
Proceeds from sales of certificates 5,728,887 4,018,708
Payments of maturing certificates of deposits (28,774,177) (29,134,370)
Increase in advance payments by borrowers for
property taxes and insurance 616,997 515,358
Proceeds from issuance of common stock 36,292 10,800
Advances from Federal Home Loan Bank of Atlanta 1,750,000 250,000
Dividends paid (116,921) (96,427)
------------ ------------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES (786,730) 3,806,268
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,774,737) 588,225
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 10,062,190 4,318,392
------------ ------------
END OF PERIOD $ 7,287,453 $ 4,906,617
============ ============
</TABLE>
8
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
1999 1998
-------------- -----------
(Unaudited) (Unaudited)
(As Restated)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
USED BY OPERATING ACTIVITIES
Net Income $ 374,580 $ 398,415
Adjustments to reconcile net income to
net cash used by operating
activities:
Gain on sale of investments (4,583)
Depreciation 65,640 44,129
Provision for loan losses 45,000 45,000
Amortization of investment security
premiums 11,639 740
Stock dividends (15,025) (15,508)
Increase in accrued interest receivable (10,458) (974)
Increase in deferred taxes (54,450)
(Increase) decrease in mortgage servicing rights 19,752 (7,870)
(Increase) decrease in prepaid expenses (123,617) 11,760
Increase in other assets (6,643) (486)
Decrease in other liabilities (167,645) (249,583)
Increase in loans held for sale (1,887,163) (909,159)
Decrease in deferred tax liability (18,594)
Distribution from MRP Trust 60,241 61,076
----------- -----------
(2,062,729) (1,044,052)
----------- -----------
$(1,688,149) $ (645,637)
=========== ===========
</TABLE>
9
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
JUNE 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
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 six months ended June 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 584,433 and 568,173 in 1999 and 1998,
respectively. The weighted average number of shares
of common stock for computation of diluted earnings per
common share was 595,852 and 582,150, respectively.
(3) Other Financial Information
---------------------------
Simon, Master & Sidlow, P.A., Cecil Bancorp's
independent certified public accountants, performed a
limited review of the financial data presented on
pages 1 through 5 inclusive. The review was performed
in accordance with standards for such reviews
established by the American Institute of Certified
Public Accountants. The review did not constitute an
audit; accordingly, Simon, Master & Sidlow, P.A. did not
express an opinion on the aforementioned data. The
financial data include any material adjustments or
disclosures proposed by Simon, Master & Sidlow, P.A. as
a result of their review.
(2) RESTATEMENT
-----------
Subsequent to the issuance of the Corporation's second
quarter 1999 financial statements and the filing of its
second 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 second 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 $9,424, net
of income tax expense of $4,855, for the three months ended
June 30, 1999, and an increase to previously reported net
income of $12,383, net of income tax expense of $6,380 for
the six months ended June 30, 1999.
10
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CECIL BANCORP, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
JUNE 30, 1999
-------------
(Continued)
(2) RESTATEMENT (Continued)
Previously reported earnings per share increased by $.02 a
share for the three months and six months ended June 30,
1999. 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 $ 173,657 $ 81,046 $ 92,611
Other assets 18,034 ( 115,983) 134,017
Other liabilities 4,924,715 ( 47,320) 4,972,035
Retained earnings 5,801,619 12,383 5,789,236
Noninterest expense
Compensation and benefits 698,771 ( 18,763) 717,534
Income taxes
Current 274,756 6,380 268,376
Net income 374,580 12,383 362,197
Total comprehensive income 354,258 12,383 341,875
Earnings per common share and
common share equivalent 0.64 0.02 0.62
Earnings per common share -
assuming full dilution 0.63 0.02 0.61
</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, con-
struction 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
PROPOSED TRANSACTIONS:
On June 7, 1999, Cecil Federal Savings Bank, a wholly owned
subsidiary of Cecil Bancorp, Inc. reached an agreement with
Susquehanna Bank ("Susquehanna"), a subsidiary of Susquehanna
Bancshares, Inc., to acquire Susquehanna's two branch offices
located in Elkton, Maryland.
Under the terms of the agreement with Susquehanna, Cecil
Federal will assume deposits of Susquehanna's two branch offices
and certain other assets, subject to regulatory approval and
certain other conditions. The deposits of these branch offices
totaled approximately $23.5 million at May 31, 1999. The
transaction is expected to be completed in the Fall of 1999.
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.
The principal business of Columbian is the acceptance of
savings deposits from
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 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 READINESS DISCLOSURE
As the Year 2000 approaches, there is growing concern that
many computers and computer systems could malfunction. Finan-
cial institutions, 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 programming concept works well while we are still
in the 1900's. This concept does not work well for the Year
2000, as that year could be read by a computer to mean 1900.
Bank regulators and computer system experts are emphasizing
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 are preparing 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.
Validation Phase: The Banks will validate any decision making
- ---------------- by thoroughly assessing the systems compati-
bility 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 March 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.
15
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Customer Awareness: The Banks feel 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. 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. Since
July 1, 1995, the Bank has originated fixed rate mortgages for
sale in the secondary market.
Management intends to continue to concentrate on main-
taining 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, 1999 and December
31, 1998.
The Company's total assets at June 30, 1999 decreased
$539,879 or 0.5% to $100,684,536 from $101,224,415 at December
31, 1998. The decrease was primarily the result of a decrease
in interest-bearing cash, investments held for sale, and loans-
held-for-sale. Total liabilities decreased $917,280 or 1.0% to
$90,232,933 at June 30, 1999 from $91,150,213 at December 31,
1998. This decrease was primarily the result of a decrease in
savings deposits. Stockholder's equity increased $377,401 or
3.7%.
16
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cash increased $1,703,438 or 62.5% to $4,428,868 at June
30, 1999 from $2,725,430 at December 31, 1998. Interest-bearing
cash decreased $4,428,175 or 71.3% to $1,783,585 at June 30,
1999 from $6,211,760 at December 31, 1998. The decreases in
cash were primarily due to a decrease in deposits and increase
in loans receivable.
Loans receivable increased $4,078,347 or 5.5% to
$78,624,259 at June 30, 1999 from $74,545,912 at December 31,
1998. The increase in loans receivable was a result of
increased loan originations. The loans-held-for sale portfolio
decreased $176,246 or 7.0% to $2,338,905 at June 30, 1999 from
$2,515,151 at December 31, 1998. The decrease was a result of a
large loan sale during the quarter. Loans held-for-sale will
continue to be sold to fund portfolio needs. Real estate owned
increased $67,252 or 35.89% to $254,994 at June 30, 1999 from
$187,742 at December 31, 1998.
Total savings deposits decreased $3,073,098 or 3.5% to
$84,601,704 at June 30, 1999 from $87,674,802 at December 31,
1998. Decreases are attributable to conservative pricing of
deposit rates. Escrows held for the payments of taxes and
insurance increased $616,997 or 75.1% to $1,438,622 at June 30,
1999 from $821,625 at December 31, 1998. Increases are
attributable to changes in the calculation of reserves on
mortgage escrow accounts. Advances from the Federal Home Loan
Bank of Atlanta increased $1,750,000 or 100.0% to $3,500,000 at
June 30, 1999 from $1,750,000 at December 31, 1998. Increases
were due to general funding needs.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended June 30, 1999 Net income for the three
- --------------------------------
month period ended June 30, 1999 increased $1,210 or 0.6% to
$196,181 as compared to net income for the same period in 1998
of $194,971. The annualized return on average assets and
annualized return on average equity were 0.79% and 7.67%
respectively, for the three-month period ended June 30, 1999.
This compares to an annualized return on average assets and
annualized return on average equity of 0.80% and 7.95%
respectively, for the same period in 1998.
Net interest income, the Bank's primary source of income,
increased 0.7%, or $6,837 for the three months ended June 30,
1999, over the same period in 1998. The weighted average yield
on interest earning assets decreased from 8.37% for the three
months ended June 30, 1998 to 7.88% for the three months ended
June 30, 1999. The weighted average rate paid on interest
bearing liabilities decreased from 4.71% for the three months
ended June 30, 1998 to 4.18% for the three months ended June 30,
1999.
Interest on loans receivable decreased by $9,195 or 0.6%, from
$1,654,058 for the three months ended June 30, 1998 to
$1,644,863 for the three months ended June 30, 1999. The
decrease is attributable to a decrease in the average weighted
yield which was offset by an increase in the average balance
outstanding. The weighted average yield decreased from 8.64%
for the three months ended June 30, 1998 to 8.14% for the three
months ended June 30, 1999.
Interest on mortgage backed securities decreased $26,635 or
44.4%, from $60,048 for the three months ended June 30, 1998 to
$33,413 for the three months ended June 30, 1999. The decrease
was the result of a decrease in the average outstanding balance.
Interest on investment securities decreased $60,377 or 38.7%
from $156,184 for the three months ended June 30, 1998 to
17
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
$95,807 for the three months ended June 30, 1999. The average
outstanding balance decreased $1,669,008 for the three months
ended June 30, 1999 over the three months ended June 30, 1998.
The weighted average yield decreased from 6.75% for the three
months ended June 30, 1998 to 5.05% for the three months ended
June 30, 1999.
Interest on other interest earning assets increased $7,628, or
9.9% from $77,107 for the three months ended June 30, 1998 to
$84,735 for the three months ended June 30, 1999. The average
outstanding balance increased slightly, which was offset by a
slight decrease in the average yield.
Interest on savings deposits decreased $92,524 or 9.3% from
$993,398 for the three months ended June 30, 1998 to $900,874
for the three months ended June 30, 1999. The average balance
outstanding increased $1,618,582 for the period noted above.
The weighted average rate paid on deposits decreased from 4.73%
for the three months ended June 30, 1998 to 4.21% for the three
months ended June 30, 1999. Interest expense paid on borrowings
decreased $2,892, or 8.6% from $33,504 for the three months
ended June 30, 1998 to $30,612 for the three months ended June
30, 1999.
Noninterest income decreased 32.6%, down $41,756 for the three
months ended June 30,1999, over the same period in 1998. Loan
servicing fees decreased 32.7%, down $5,224 for the three months
ended June 30, 1999 over the same period in 1998. There was an
increase in gains on the sale of loans for the three months
ended June 30, 1999 of $3,330 over the same period in 1998.
This increase was attributable to the Bank's decision to
continually sell loans on the secondary market during 1999 to
fund portfolio needs. Checking account fees increased $11,735,
or 32.7% Increases in this area can be primarily attributable
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.
Noninterest expense decreased 1.5%, down $10,418 for the three
months ended June 30, 1999, over the same period in 1998.
Compensation and benefits remained stable for the three months
ended June 30, 1999 over the same period in 1998. Equipment and
data processing expenses increased 39.1% for the three months
ended June 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 June 30, 1999
over the same period in 1998. Other expenses increased by 10.7%
for the three months ended June 30, 1999 over the same period in
1998, 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,
1999 and 1998 was $106,591 and $136,786, respectively, which
equates to effective rates of 35.2% and 41.2% respectively.
Six Months Ended June 30, 1999 Net income for the six-month
- ------------------------------
period ended June 30, 1999 decreased $23,835 or 6.0% to
$374,580, compared to net income of $398,415 for the same period
in 1998. The annualized return on average assets and annualized
return on average equity were 0.74% and 7.28% respectively, for
the six-month period ended June 30, 1999. This compares to an
annualized return on average assets and annualized return on
average equity of 0.82% and 8.19% respectively, for 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
Net interest income, the Bank's primary source of income,
increased 3.8% up $64,122 for the six months ended June 30,
1999, over the same period in 1998. The weighted average yield
on interest earning assets increased from 8.26% for the six
months ended June 30, 1998 to 7.89% for the six months ended
June 30, 1999. The weighted average rate paid on interest
bearing liabilities decreased from 4.72% for the six months
ended June 30, 1998 to 4.26% for the six months ended June 30,
1999.
Interest on loans receivable increased by $54,518 or 1.7%, from
$3,223,681 for the six months ended June 30, 1998 to $3,278,199
for the six months ended June 30, 1999. The average balance
outstanding increased $5,134,822. The weighted average yield
decreased from 8.59% for the six months ended June 30, 1998 to
8.18% for the six months ended June 30, 1999.
Interest on mortgage backed securities decreased $46,180 or
36.7%, from $125,882 for the six months ended June 30, 1998 to
$79,702 for the six months ended June 30, 1999. The average
outstanding balance decreased $1,544,926 for the six months
ended June 30, 1999 from the same period ended 1998, with the
weighted average yield increasing from 6.61% for the six months
ended June 30, 1998 to 7.04% for the six months ended June 30,
1999.
Interest on other interest earning assets increased $15,575, or
10.2%, from $153,024 for the six months ended June 30, 1998 to
$168,599 for the same period in 1998. The weighted average yield
increased from 7.92% for the six months ended June 30, 1996 to
7.96% for the six months ended June 30, 1999. The average
outstanding balance increased $374,701 from $3,863,135 for the
six months ended June 30, 1998 to $4,237,836 for the six months
ended June 30, 1999.
Interest on savings deposits decreased $131,075, or 6.6% from
$1,974,270 for the six months ended June 30, 1998 to $1,834,195
for the six months ended June 30, 1999. The average balance
outstanding increased $2,887,886 for the period noted above.
The weighted average rate paid on deposits decreased from 4.74%
for the six months ended June 30, 1998 to 4.27% for the six
months ended June 30, 1999. Interest expense paid on borrowings
decreased $3,293, or 5.1% from $64,528 for the six months ended
June 30, 1998 to $61,235 for the six months ended June 30, 1999.
Decreases are attributable to decreases in the weighted average
cost of funds, which were offset by a slight increase in the
average balance outstanding.
Noninterest income decreased $82,181 or 33.5% to $163,044 for
the six months ended June 30, 1999 from $245,225 for the same
period in 1998. Gain on sale of loans was down $9,555 or 28.5%
for the six months ended June 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 $11,498, or 29.1%
for the six months ended June 30, 1999 over the same period in
1998. The increase was the result of increased sales of
insurance and investments products. Other fees decreased 97.5%
down $42,772 for the six months ended June 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 increased $23,071 or 1.8% to $1,340,535 for
the six-month period ended June 30, 1999 from $1,317,464 for the
six months ended June 30, 1998. The SAIF deposit premium
remained stable for the six months ended June 30, 1999, compared
to the same period in 1998. Other expenses increased 9.3%, up
$31,591 for the six-month period ended June 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.
19
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Income tax expense for the six-month period ended June 30, 1999
and 1998 was $220,306 and $237,601 which equates to effective
rates of 37.0% and 37.4% 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, con-
sisting 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,
1999:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Nonperforming loans:
Residential mortgage $ 821,136 $ 933,380
Consumer and other 128,147 26,850
Assets acquired in settlement of loans:
Real estate held for development and sale
Real estate held for investment and sale
Repossessed assets 254,994 359,970
---------- ----------
Total Nonperforming Assets $1,204,277 $1,320,200
========== ==========
</TABLE>
Residential mortgages classified consisted of 17 loans with
balances ranging from $5,000 to $165,000. Classified consumer
loans consisted of 12 loans with balances ranging from $1,000 to
$71,000 as of June 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.
20
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
CAPITAL ADEQUACY
- ----------------
The Company Capital adequacy refers to the level of capital
- ----------- required to sustain asset growth and to absorb
losses. There are currently no regulatory capital guidelines
or requirements for the Company.
The Banks' The Office of Thrift Supervision ("OTS"), which is
- --------- both Banks' principle 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, 1999:
<TABLE>
<CAPTION>
CECIL FEDERAL SAVINGS BANK
Tangible Core Risk Based
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Available capital $8,233 $8,233 $8,466
Required capital 1,079 2,878 3,721
------ ------ ------
Excess $7,154 $5,355 $4,745
====== ====== ======
Available capital 11.44% 11.44% 18.20%
Required capital 1.50% 4.00% 8.00%
------ ------ ------
Excess 9.94% 7.44% 10.20%
====== ====== ======
COLUMBIAN BANK, F.S.B.
Tangible Core Risk Based
- -----------------------------------------------------------------------------
Available capital $2,191 $2,191 $2,294
Required capital 431 1,148 1,168
------ ------ ------
Excess $1,760 $1,043 $1,126
====== ====== ======
Available capital 7.63% 7.63% 15.71%
Required capital 1.50% 4.00% 8.00%
------ ------ ------
Excess 6.13% 3.63% 7.71%
====== ====== ======
</TABLE>
21
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 insti-
tutions, 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, 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>
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
On June 10, 1999, the Company filed a Form 8-K
announcing, under "Item 5. Other Events," that
its Cecil Federal Subsidiary had reached
agreement with Susquehanna Bank for Cecil
Federal to acquire Susquehanna Bank's two
branch offices located in Elkton, Maryland.
These branches had total deposits of $23.5
million at May 31, 1999. The transaction,
which is subject to regulatory approval and the
satisfaction of certain other conditions is
expected to close in the Fall of 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,428,868
<INT-BEARING-DEPOSITS> 1,783,585
<FED-FUNDS-SOLD> 1,075,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,940,547
<INVESTMENTS-CARRYING> 8,021,262
<INVESTMENTS-MARKET> 7,859,911
<LOANS> 81,376,677
<ALLOWANCE> 413,513
<TOTAL-ASSETS> 100,719,473
<DEPOSITS> 84,601,704
<SHORT-TERM> 3,500,000
<LIABILITIES-OTHER> 461,559
<LONG-TERM> 0
<COMMON> 6,098
0
0
<OTHER-SE> 10,480,442
<TOTAL-LIABILITIES-AND-EQUITY> 100,719,473
<INTEREST-LOAN> 3,278,199
<INTEREST-INVEST> 275,009
<INTEREST-OTHER> 168,599
<INTEREST-TOTAL> 3,721,807
<INTEREST-DEPOSIT> 1,843,195
<INTEREST-EXPENSE> 1,904,430
<INTEREST-INCOME-NET> 1,817,377
<LOAN-LOSSES> 45,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,340,535
<INCOME-PRETAX> 594,886
<INCOME-PRE-EXTRAORDINARY> 594,886
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 374,580
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.63
<YIELD-ACTUAL> 3.93
<LOANS-NON> 821,136
<LOANS-PAST> 128,147
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 388,863
<CHARGE-OFFS> 2,090
<RECOVERIES> 4,240
<ALLOWANCE-CLOSE> 413,513
<ALLOWANCE-DOMESTIC> 413,513
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
