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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________
FORM 10-QSB
(Amendment No. __)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] 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 March 31, 2000
$0.01 par value common stock 615,742 shares
- ---------------------------- -------------------
Class Outstanding
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CECIL BANCORP, INC. AND SUBSIDIARIES
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Condensed Statements
of Financial Condition - March 31,
2000 and December 31, 1999 3-4
Consolidated Condensed Statements of
Income and Comprehensive Income for
Three Months Ended March 31, 2000
and 1999 5-6
Consolidated Condensed Statements of
Cash Flows for Three Months Ended
March 31, 2000 and March 31, 1999 7-8
Notes to Consolidated Condensed
Financial Statements 9
ITEM 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations 10-18
PART II. Other Information 19
Signature 20
2
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
Cash $ 744,396 $ 2,466,580
Cash - Interest bearing 2,951,366 3,515,501
Federal funds sold 270,000 50,000
Investment securities
Securities held-to-maturity, at cost 5,493,172 5,479,757
Securities available-for-sale at estimated
market value 1,302,220 1,328,199
Mortgage-backed securities
Securities held-to-maturity, at cost 949,727 1,071,123
Securities available-for-sale at estimated
market value 1,761,953 1,853,793
Loans receivable, net 99,424,991 92,098,839
Real estate owned 478,740 371,178
Office properties, equipment and leasehold
improvements at cost, less accumulated
depreciation and amortization 2,006,386 2,008,791
Stock in Federal Home Loan Bank of
Atlanta - at cost 745,800 657,800
Accrued interest receivable 710,839 618,702
Mortgage servicing rights 94,882 98,575
Prepaid expenses 173,777 145,243
Deferred taxes 287,989 257,337
Goodwill, less accumulated amortization 2,674,886 2,745,278
Other assets 54,423 157,159
------------ ------------
TOTAL ASSETS $120,125,547 $114,923,855
============ ============
</TABLE>
3
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
<S>
LIABILITIES <C> <C>
Savings deposits $100,409,711 $101,217,544
Advance payments by borrowers for
property taxes and insurance 1,096,805 777,509
Employee stock ownership debt 192,540 192,540
Other liabilities 487,082 529,802
Advances from Federal Home Loan Bank
of Atlanta 7,100,000 1,500,000
------------ ------------
TOTAL LIABILITIES 109,286,138 104,217,395
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par value
Authorized: 4,000,000 shares
Issued and outstanding: 615,742 shares
at March 31, 2000 and December 31, 1999 6,158 6,158
Additional paid in capital 4,898,025 4,898,025
Employee stock ownership debt (192,540) (192,540)
Deferred compensation - Management
Recognition Plan (45,383) (45,383)
Retained earnings, substantially
restricted 6,202,555 6,063,589
Accumulated other comprehensive income (29,406) (23,389)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,839,409 10,706,460
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $120,125,547 $114,923,855
============ ============
</TABLE>
4
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME
Loans receivable $1,970,248 $1,633,336
Mortgage-backed securities 44,657 46,289
Investment securities 95,575 99,500
Other interest-earning assets 61,631 83,863
---------- ----------
Total interest income 2,172,111 1,862,988
---------- ----------
INTEREST EXPENSE
Interest expense on deposits 1,024,947 942,321
Borrowing 48,307 30,623
---------- ----------
Total interest expense 1,073,254 972,944
---------- ----------
Net interest income 1,098,857 890,044
Provision for loan losses 55,500 22,500
---------- ----------
Net interest income after provision
for loan losses 1,043,357 867,544
---------- ----------
NONINTEREST INCOME
Loan service charges 18,717 13,874
Dividends on FHLB stock 12,850 12,621
Commission income 24,331 13,943
Checking account fees 58,127 37,400
Other 19,691 --
---------- ----------
Total noninterest income 133,716 77,838
---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 447,886 347,538
Occupancy 43,718 35,152
Equipment and data processing expense 103,781 77,474
SAIF deposit insurance premium 15,065 21,352
Merger and branch acquisition expense 2,726
Amortization of goodwill 70,392
Other 173,982 169,027
---------- ----------
Total noninterest expense 854,824 653,269
---------- ----------
Income before income taxes 322,249 292,113
---------- ----------
INCOME TAXES
Current 150,501 146,977
Deferred (26,867) (33,262)
---------- ----------
Total income taxes 123,634 113,715
---------- ----------
NET INCOME $ 198,615 $ 178,398
========== ==========
</TABLE>
5
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
----------------------------------------------------------
(Continued)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET INCOME $ 198,615 $ 178,398
OTHER COMPREHENSIVE INCOME
Unrealized losses on investment
securities, net of deferred taxes (6,017) (15,469)
--------- ---------
TOTAL COMPREHENSIVE INCOME $ 192,598 $ 162,929
========= =========
Earnings per common share and
common share equivalent $ 0.33 $ 0.31
========= =========
Earnings per common share -
assuming full dilution $ 0.33 $ 0.30
========= =========
</TABLE>
6
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest and fees received on loans
and investments $ 2,198,710 $ 1,947,117
Cash paid to suppliers and employees (681,007) (767,142)
Origination of loans held for sale (1,581,800)
Interest paid (1,073,254) (972,944)
Income taxes paid (183,689) (253,500)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 260,760 (1,628,269)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of
investment securities 35,193 3,901,851
Proceeds from maturities of mortgage-backed
securities 199,478 703,221
Purchases of investment securities (2,815,390)
Loans originated (10,147,407) (8,915,487)
Principal collected on loans 2,765,755 6,972,501
Purchases of office properties, equipment
and leasehold improvements (36,350) (45,597)
Purchase of real estate owned (107,562)
Purchase of stock in Federal Home Loan
Bank of Atlanta (88,000) (13,200)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (7,378,893) (212,101)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW
accounts, and savings accounts 3,789,406 9,813,584
Proceeds from sales of certificates 3,793,588 1,809,262
Payments of maturing certificates of
deposits (8,390,827) (12,343,070)
Increase in advance payments by borrowers
for property taxes and insurance 319,296 336,871
Proceeds from issuance of common stock 13,606
Advances from Federal Home Loan Bank of
Atlanta 5,600,000 750,000
Dividends paid (59,649) (58,460)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,051,814 321,793
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,066,319) (1,518,577)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 6,032,081 10,062,190
----------- -----------
END OF PERIOD $ 3,965,762 $ 8,543,613
=========== ===========
</TABLE>
7
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CECIL BANCORP, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Continued)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
Net Income $ 198,615 $ 178,398
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Amortization of goodwill 70,392 --
Depreciation 38,755 32,453
Provision for loan losses 55,500 22,500
Amortization of investment security
premiums and (discounts) (8,580) 4,230
Stock dividends received (10,093) (7,493)
Increase in accrued interest receivable (92,137) (8,050)
Increase in deferred taxes (26,867) (33,262)
Decrease in mortgage servicing rights 3,693 17,604
Increase in prepaid expenses (28,534) (105,271)
(Increase) decrease in other assets 102,736 (13,892)
Decrease in other liabilities (42,720) (133,686)
Increase in loans held for sale -- (1,581,800)
---------- -----------
62,145 (1,806,667)
---------- -----------
$ 260,760 $(1,628,269)
========== ===========
</TABLE>
8
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CECIL BANCORP, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
MARCH 31, 2000
--------------
(1) BASIS OF PRESENTATION
---------------------
(1) In the opinion of the Company, the accompanying
unaudited consolidated condensed financial
statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to
present fairly the financial position as of March
31, 2000 and the results of its operations and cash
flows for the three months ended March 31, 2000 and
1999. These statements are condensed and therefore
do not include all of the information and footnotes
required by generally accepted accounting principles
for complete financial statements. The statements
should be read in conjunction with the consolidated
financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the year
ended December 31, 1999. The results of operations
for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected
for the full 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 596,489 in
2000 and 1999. The weighted average number of
shares of common stock for computation of diluted
earnings per common share was 606,105.
9
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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 consist 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.
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 our existing branch network, and
is expected to benefit Cecil Federal's net income in future
periods. We look forward to offering the services of Cecil
Federal to the customers of these branches and welcome them as
well as Susquehanna's employees to the Cecil Federal family.
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
10
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CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 27, 1999. The transaction resulted in the acquisition
of the 200 North Street office, which was subsequently closed
and the assumption of the lease of the Big Elk Mall office.
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.
RECENT EVENTS:
On February 8, 2000, the Company announced an agreement
with the Winstead Agency to offer a variety of property and
casualty and automobile insurance products to the customers of
Cecil Federal and Columbian. In addition, the Winstead Agency
will be leasing an office in Columbian's new Route 40 office
upon its completion.
On March 30, 2000, the Company approved the Cecil Bancorp,
Inc. Dividend Reinvestment Plan. The plan provides shareholders
of record of at least 50 shares of the Company's common stock
with a way to reinvest, at no cost, all or a portion of their
regular cash dividends and to invest optional cash payments,
subject to minimum and maximum purchase limitations, in
additional shares of Company Common Stock. A Registration
Statement and Prospectus on Form S-3 was filed on April 19, 2000
with the Securities and Exchange Commission which describes in
more detail the terms of the plan.
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.
11
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CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 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.
FINANCIAL SERVICES
- ------------------
Since September 1997, Cecil Financial Services, a service
corporation of Cecil Federal Savings Bank, has offered a full
range of brokerage and investment services in all branches,
through a partnership with UVEST Investment Services. Mr. Roger
L. Owens, CLU, serves as investment representative. Through
UVEST, he provides comprehensive investment products tailored to
meet current and future individual financial needs.
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.
12
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CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ASSET/LIABILITY MANAGEMENT
- --------------------------
The ability to maximize net interest income is largely
dependent upon the achievement of a positive interest rate
spread (the difference between the weighted average interest
yields earned on interest-earning assets and the weighted
average interest rates paid on interest-bearing liabilities)
that can be sustained during fluctuations in prevailing interest
rates. Cecil Federal's asset/liability management policies are
designed to reduce the impact of changes in interest rates on
its net interest income by achieving a more favorable match
between the maturities or repricing dates of its interest-
earning assets and interest-bearing liabilities. The Bank has
implemented these policies by generally emphasizing the
origination of one-year, three-year and five-year adjustable
rate mortgage loans and short-term consumer lending. The bank
also offers an adjustable rate product which remains fixed for
the first ten years and then converts to a one-year adjustable.
Since 1995, Cecil Federal has, from time to time, originated
fixed rate mortgages for sale in the secondary market.
Presently, the Banks are not originating loans for sale in the
secondary market, but are retaining them in portfolio.
Management has been monitoring the retention of fixed rate loans
through its asset/liability management policy.
Management intends to continue to concentrate on maintaining its
interest rate spread in a manner consistent with its lending
policies, which are principally the origination of adjustable-
rate mortgages, with an appropriate blend of fixed-rate mortgage
loans in its primary market area.
Comparison of Financial Condition at March 31, 2000 and December
- ----------------------------------------------------------------
31, 1999
- --------
The Company's assets increased by $5,201,692, or 4.5% to
$120,125,547 at March 31, 2000 from $114,923,855 at December 31,
1999. The Company's emphasis on expanding the loans receivable
portfolio continued. The loans receivable portfolio increased
by $7,326,152 or 8.0% to $99,424,991 at March 31, 2000 from
$92,098,839 at December 31, 1999. The remainder of the
Company's interest earning assets, primarily invested for
liquidity, were reduced due to increased loan demand and a
reduction in savings deposits. The Company's stock investment
in Federal Home Loan Bank of Atlanta increased by $88,000, or
13.4% to $745,800 at March 31, 2000 from $657,800 at December
31, 1999, as a result of stock purchase requirements imposed by
the Federal Home Loan Bank of Atlanta. Federal Home Loan Bank
of Atlanta stock is currently paying an annualized dividend rate
of 7.75%.
The Company's liabilities increased $5,068,743, or 4.9% to
$109,286,138 at March 31, 2000 from $104,217,395 at December 31,
1999. During the three months ended March 31, 2000, the
Company's savings deposits decreased due to repositioning of the
savings rates at both Cecil Federal and Columbian. Savings
deposits decreased $807,833, or 0.8% to $100,409,711 at March
31, 2000 from $101,217,544 at December 31, 1999. Advances from
the Federal Home Loan Bank of Atlanta increased by $5,600,000,
or 373.3% to $7,100,000 at March 31, 2000 from $1,500,000 at
December 31, 1999. These increases were used to fund the Bank's
increased loan originations. Escrow payments received in
advance for the payment of taxes and insurance on loans
receivable increased $319,296, or 41.1% to $1,096,805 at March
31, 2000 from $777,509 at December 31, 1999. Other liabilities
decreased $42,720, or 8.1% from $529,802 at December 31, 1999 to
$487,082 at March 31, 2000.
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 Company's stockholders' equity increased by $132,949,
or 1.2% to $10,839,409 at March 31, 2000 from $10,706,460 at
December 31, 1999. The increase was the result of an increase
in retained earnings of $138,966, or 2.3% to $6,202,555 at March
31, 2000 from $6,063,589 at December 31, 1999. The Company paid
its regular dividend of $.10 per share for the quarter ended
March 31, 2000.
Results of Operations
- ---------------------
Conversion of the Results of Operations for the Three Months
- ------------------------------------------------------------
Ended March 31, 2000 and March 31, 1999
- ---------------------------------------
Net income increased $20,217, or 11.3% to $198,615 for the three
months ended March 31, 2000, from $178,398 for the same period
in 1999. The annualized return on average assets and annualized
return on average equity were 0.67% and 7.32% respectively, for
the three months ended March 31, 2000. This compares to an
annualized return on average assets of 0.70% and 6.88%
respectively for the same period in 1999.
Net interest income, the Company's primary source of income,
increased $208,813, or 23.5% to $1,098,857 for the three months
ended March 31, 2000, from $890,044 for the three months ended
March 31, 1999, due to an increase in the weighted average
interest rate spread to 3.77% for the three months ended March
31, 2000, compared to 3.42% for the three months ended March 31,
1999, and an increase in the balance of loans outstanding. The
weighted average yield on all interest earning assets decreased
from 8.14% for the three months ended March 31, 1999, to 7.83%
for the three months ended March 31, 2000. The weighted average
rate paid on interest bearing liabilities decreased from 4.72%
for the three months ended March 31, 1999 to 4.06% for the three
months ended March 31, 2000. The decrease was a result of a
decrease in the average rate paid on deposits.
Interest on loans receivable increased by $336,912, or 20.6% to
$1,970,248 for the three months ended March 31, 2000 from
$1,633,336 for the three months ended March 31, 1999. The
increase is attributable to an increase in the average balance
outstanding. The weighted average yield decreased from 8.21%
for the three months ended March 31, 1999 to 8.11% for the three
months ended March 31, 2000. The average balance outstanding
increased $17,538,927, or 22.0% to $97,154,393 for the three
months ended March 31, 2000 from $79,615,466 for the three
months ended March 31, 1999.
Interest on mortgage backed securities decreased $1,632, or 3.5%
to $44,657 for the three months ended March 31, 2000 from
$46,289 for the three months ended March 31, 1999. The decrease
is a result of a slight decrease in the average balance
outstanding. The weighted average yield decreased from 7.54%
for the three months ended March 31, 1999 to 6.44% for the three
months ended March 31, 2000.
Interest on investment securities decreased $3,925, or 3.9% to
$95,575 for the three months ended March 31, 2000 from $99,500
for the three months ended March 31, 1999. The decrease is a
result of a decrease in the average balance outstanding and
weighted average yield. Interest on other interest earning
assets decreased $22,232, or 26.5% to $61,631 for the three
months ended March 31, 2000 from $83,863 for the three months
ended March 31, 1999. Other investments primarily are short
term liquidity accounts with variable rates.
<PAGE>
Interest paid on savings deposits increased $82,626, or 8.8% to
$1,024,947 for the three months ended March 31, 2000 from
$942,321 for the three months ended March 31, 1999. The
14
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
increase was the result of an increase in the average
outstanding balance on deposits, along with a decrease in the
weighted average yield. The average balance outstanding
increased $12,933,930, or 14.9% to $99,668,830 for the three
months ended March 31, 2000 from $86,734,900 for the same period
in 1999. The weighted average yield decreased from 4.34% for
the three months ended March 31, 1999 to 4.11% for the three
months ended March 31, 2000. Interest expense paid on
borrowings increased $17,684, or 57.7%, to $48,307 for the three
months ended March 31, 2000 from $30,623 for the same period in
1999. The average balance outstanding increased 3,248,853, or
196.6%, to $5,173,297 for the period ending March 31, 2000 from
$1,744,444 for the period ending March 31, 1999. The weighted
average yield decreased from 6.12% for the period ending March
31, 1999 to 3.74% for the period ending March 31, 2000.
Provision for Loan Losses: Provisions for loan losses increased
- -------------------------
$33,000, or 146.7%, to $55,500 for the three months ended March
31, 2000 from $22,500 for the same period in 1999. The
provision has been increased to keep pace with a growing loan
portfolio.
Noninterest income: Noninterest income increased $55,878, or
- ------------------
71.8% to $133,716 for the three months ended March 31, 2000 from
$77,838 for the three months ended March 31, 1999. Loan
servicing fees increased 34.9%, up $4,843 for the three months
ended March 31, 2000 over the same period in 1997. Commission
income increased $10,388, or 74.5% for the three months ended
March 31, 2000 over the same period in 1997. The increase was
the result of increased sales of investment and insurance
products through Cecil Financial Services. Checking account
fees increased $20,727, or 55.4%, to $58,127 for the three
months ended March 31, 2000 from $37,400 for the three months
ended March 31, 1999. The increase were primarily attributable
to the increase in checking account deposit growth and the
acquisition of deposit accounts from Susquehanna Bancshares.
Noninterest Expense. Noninterest expense increased $201,555, or
- -------------------
30.9% to $854,824 for the three months ended March 31, 2000 from
$653,269 for the three months ended March 31, 1999. The Company
experienced an increase in compensation and benefits of
$100,348, or 28.9% to $447,886 for the three months ended March
31, 2000 from $347,538 for the three months ended March 31,
1999. The increase can be attributed to the hiring of six
additional employees from the Susquehanna Bancshares branch
acquisitions, annual salary increases and medical premium
increases. Occupancy expense increased $8,566, or 24.4% to
$43,718 for the three months ended March 31, 2000 from $35,152
for the three months ended March 31, 1999. The increase is
associated with the lease expense for the additional Big Elk
Mall branch location acquired from Susquehanna Bancshares.
Equipment and data processing expenses increased $26,307, or
34.0% to $103,781 for the three months ending March 31, 2000
from $77,474 for the three months ending March 31, 1999 as the
result of the Company's acquisition of the two Susquehanna
Bancshares branches. Non-interest expense was also increased by
the amortization of goodwill associated with the purchase of the
two Susquehanna Bancshares branches in the amount of $70,392.
Other expenses remained stable between the two periods.
Income Taxes. Income tax expense for the three months ended
- ------------
March 31, 2000 and March 31, 1999 was $123,634 and $113,715
respectively, which equates to effective rates of 38.3% and
38.9%, respectively.
15
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Nonperforming Assets and Problem Loans
- --------------------------------------
Management reviews and identifies all loans and investments that
require designation as nonperforming assets. These assets
include: (i) loans accounted for on a nonaccrual basis,
consisting of all loans 90 or more days past due; (ii) troubled
debt restructuring; and (iii) assets acquired in settlement of
loans. The following table sets forth certain information with
respect to nonperforming assets at March 31, 2000:
<TABLE>
<CAPTION>
2000 1999
----------- ---------
<S> <C> <C>
Nonperforming loans:
Residential mortgage $ 814,021 $ 437,915
Consumer and other 303,787 102,347
Assets acquired in settlement of loans:
Real estate held for development and sale
Real estate held for investment and sale
Repossessed assets 478,740 187,742
----------- ---------
Total Nonperforming Assets $ 1,596,548 $ 728,004
=========== =========
</TABLE>
Residential mortgages classified consisted of 16 loans with
balances ranging from $5,000 to $165,000. Classified consumer
loans consisted of 29 loans with balances ranging from $100 to
$40,000 as of March 31, 2000.
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.
16
<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
- ---------
the 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
March 31, 2000:
<TABLE>
<CAPTION>
CECIL FEDERAL SAVINGS BANK
Tangible Core Risk Based
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Available capital $5,983 $5,983 $6,235
Required capital 1,324 3,531 5,064
------ ------ ------
Excess $4,659 $2,452 $1,171
====== ====== ======
Available capital 6.78% 6.78% 9.85%
Required capital 1.50% 4.00% 8.00%
------ ------ ------
Excess 5.28% 2.78% 1.85%
====== ====== ======
COLUMBIAN BANK, F.S.B.
Tangible Core Risk Based
- -----------------------------------------------------------------------------
Available capital $2,161 $2,161 $2,297
Required capital 440 1,172 1,331
------ ------ ------
Excess $1,721 $ 989 $ 966
====== ====== ======
Available capital 7.38% 7.38% 13.80%
Required capital 1.50% 4.00% 8.00%
------ ------ ------
Excess 5.88% 3.38% 5.80%
====== ====== ======
</TABLE>
17
<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
institutions, thus introducing the concept of risk adjusted
premiums. This act has the effect of requiring weaker banks to
pay higher insurance premiums while allowing healthier , well
capitalized banks to pay lower premiums. The following table
summarizes the five capital categories and the minimum capital
requirements for each of the three capital requirements:
<TABLE>
<CAPTION>
Tangible Core Risk Based
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Well capitalized 5+% 6+% 10+%
Adequately capitalized 4%-4.99% 4%-5.99% 8%-9.99%
Undercapitalized 3%-3.99% 3%-3.99% 6%-7.99%
Significantly undercapitalized 2%-2.99% 2%-2.99% 0%-5.99%
Critically undercapitalized 0%-1.99% -- --
_____________________________________________________________________________
</TABLE>
On March 31, 2000, 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.
18
<PAGE>
<PAGE>
CECIL BANCORP, INC. AND SUBSIDIARIES
PART II. Other Information:
Item 1. Legal Proceedings -
Not Applicable
Item 2. Changes in Securities -
Not Applicable
Item 3. Defaults Upon Senior Securities -
Not Applicable
Item 4. Submission of Matters to a Vote of
Security Holders
The Annual Meeting of Stockholders of Cecil Bancorp,
Inc. was held on April 19, 2000, at 9:00a.m. at the
Bentleys Restaurant, Elkton, Maryland, for the purpose
of electing three members of the board of directors.
Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities Exchange Act of 1934 and
there was no solicitation in opposition to management's
solicitations.
All of management's nominee for directors as listed in
the proxy statement were elected with the following
vote:
<TABLE>
<CAPTION>
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
<S> <C> <C> <C>
To serve for a three-year term:
Mary B. Halsey 441,091 6,690 164,692
Howard J. Neff 443,091 4,690 164,692
To serve for a one-year term:
Bernard L. Siegel 443,666 4,115 164,692
</TABLE>
Item 5. Other Information -
Not Applicable
Item 6. Exhibits and Reports on Form 8-K -
Exhibits
--------
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during
the three months ended March 31, 2000
19
<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: May 4, 2000 By: /s/ Mary Beyer Halsey
------------------------
Mary Beyer Halsey
President
Chief Executive Officer
20
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 744,396
<INT-BEARING-DEPOSITS> 2,951,366
<FED-FUNDS-SOLD> 270,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,064,173
<INVESTMENTS-CARRYING> 7,188,699
<INVESTMENTS-MARKET> 6,890,728
<LOANS> 99,856,920
<ALLOWANCE> 431,929
<TOTAL-ASSETS> 120,125,547
<DEPOSITS> 100,409,711
<SHORT-TERM> 7,100,000
<LIABILITIES-OTHER> 1,776,427
<LONG-TERM> 0
<COMMON> 6,158
0
0
<OTHER-SE> 10,833,251
<TOTAL-LIABILITIES-AND-EQUITY> 120,125,547
<INTEREST-LOAN> 1,970,248
<INTEREST-INVEST> 140,232
<INTEREST-OTHER> 61,631
<INTEREST-TOTAL> 2,172,111
<INTEREST-DEPOSIT> 1,024,947
<INTEREST-EXPENSE> 1,073,254
<INTEREST-INCOME-NET> 1,098,857
<LOAN-LOSSES> 55,500
<SECURITIES-GAINS> 133,716
<EXPENSE-OTHER> 854,824
<INCOME-PRETAX> 322,249
<INCOME-PRE-EXTRAORDINARY> 198,615
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198,615
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 3.96
<LOANS-NON> 814,021
<LOANS-PAST> 303,787
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 434,515
<CHARGE-OFFS> 59,506
<RECOVERIES> 1,420
<ALLOWANCE-CLOSE> 434,929
<ALLOWANCE-DOMESTIC> 431,929
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
