UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended ~~March~~June 3130, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 000-53801

Cullman Bancorp, Inc.

(Exact Name of Registrant as Specified in Charter)


Federal		63-0052835
(State of Other Jurisdiction of Incorporation)		(I.R.S Employer Identification Number)

316 Second Avenue S.W., Cullman, Alabama		35055
(Address of Principal Executive Officer)		(Zip Code)

256-734-1740

Registrant’s telephone number, including area code

Not Applicable

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock as of the latest practicable date.

2,564,458 of Common Stock, par value $.01 per share, were issued and outstanding as of ~~May~~August 78, 2012.

CULLMAN BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

	PART I
ITEM 1.	FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CULLMAN BANCORP, INC.	23
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2829
ITEM 4.	CONTROLS AND PROCEDURES	2829
	PART II
ITEM 1.	LEGAL PROCEEDINGS	2930
ITEM 1A.	RISK FACTORS	2930
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	2930
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	2930
ITEM 4.	MINE SAFETY DISCLOSURES	2930
ITEM 5.	OTHER INFORMATION	2930
ITEM 6.	EXHIBITS	2930
	SIGNATURES	3031

Part I

ITEM 1.

FINANCIAL STATEMENTS

CULLMAN BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(All amounts in thousands, except share and per share data)

	March 31,			December 31,
	June 30,			December 31,
	2012			2011
ASSETS
Cash and cash equivalents	$	23,~~570~~114		$	1,997
Federal funds sold		65,~~091~~099			7,479
Cash and cash equivalents		8,~~661~~213			9,476
Securities available for sale		3328,~~308~~011			29,706
Loans, net of allowance of $1,236 and $1,108, respectively		161,398			164,215
Loans, net of allowance of $1,509 and $1,108, respectively		160,974			164,215
Loans held for sale		68312			441
Premises and equipment, net		10,~~807~~766			10,870
Foreclosed real estate		~~561~~531			1,541
Accrued interest receivable		1,~~026~~019			1,056
Restricted equity securities		2,~~410~~265			2,410
Bank owned life insurance		4,~~480~~526			2,455
Other assets		1,~~674~~543			781
Total assets	$	~~224~~218,~~393~~160		$	222,951
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non-interest bearing	$	105,~~401~~833		$	9,906
Interest bearing		~~128~~126,~~445~~945			128,241
Total deposits		~~138~~132,~~846~~778			138,147
Federal Home Loan Bank advances		42,000			42,000
Long-term debt		787			787
Accrued interest payable and other liabilities		1,~~978~~675			1,624
Total liabilities		~~183~~177,~~611~~240			182,558
Shareholders’ equity
Common stock, $0.01 par value; 20,000,000 shares authorized; 2,564,458 and 2,561,996 shares outstanding, respectively, at March 31, 2012 and December 31, 2011		26			26
Common stock, $0.01 par value; 20,000,000 shares authorized; 2,564,458 and 2,561,996 shares outstanding, respectively, at June 30, 2012 and December 31, 2011		26			26
Additional paid-in capital		10,~~516~~546			10,461
Retained earnings		3130,~~006~~876			30,589
Accumulated other comprehensive income		~~234~~472			317
Unearned ESOP shares, at cost		(~~809~~797	)		(821	)
Amount reclassified on ESOP shares		(~~191~~203	)		(179	)
Total shareholders’ equity		40,~~782~~920			40,393
Total liabilities and shareholders’ equity	$	~~224~~218,~~393~~160		$	222,951

See accompanying notes to the consolidated financial statements

CULLMAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

(All amounts in thousands, except share and per share data)

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
	2012			2011			2012		2011
Interest and dividend income:
Loans, including fees	$	2,~~632~~539		$	2,~~768~~715		$	5,171	$	5,484
Securities, taxable		~~236~~230			~~227~~222			466		449
Federal funds sold and other		11			6
Securities, tax exempt		2			—			2		—
Total interest income		2,879			3,001
Federal funds sold and other		10			8			21		14
Interest expense:
Total interest income		2,781			2,945			5,660		5,947
Deposits		286			441
Interest expense:
Federal Home Loan Bank advances and other borrowings		369			424
Deposits		263			422			549		863
Total interest expense		655			865
Federal Home Loan Bank advances and other borrowings		369			429			737		853
Net interest income		2,224			2,136
Total interest expense		632			851			1,286		1,716
Provision for loan losses		127			92
Net interest income		2,149			2,094			4,374		4,231
Net interest income after provision for loan losses		2,097			2,044
Provision for loan losses		877			107			1,005		199
Noninterest income:
Net interest income after provision for loan losses		1,272			1,987			3,369		4,032
Service charges on deposit accounts		115			99
Noninterest income:
Income on bank owned life insurance		26			26
Service charges on deposit accounts		111			102			223		202
Gain on sales of mortgage loans		75			57
Income on bank owned life insurance		45			27			70		53
Other		61			14
Gain on sales of mortgage loans		39			42			114		99
Total noninterest income		277			196
Other		5			13			18		28
Noninterest expense:
Total noninterest income		200			184			425		382
Salaries and employee benefits		793			766
Noninterest expense:
Occupancy and equipment		157			157
Salaries and employee benefits		860			826			1,654		1,592
Data processing		136			132
Occupancy and equipment		162			143			321		300
Professional and supervisory fees		79			139
Data processing		130			121			267		253
Office expense		36			34
Professional and supervisory fees		78			92			155		233
Advertising		18			20
Office expense		36			30			71		64
FDIC deposit insurance		33			32
Advertising		24			13			42		34
Losses on foreclosed real estate		85			50
FDIC deposit insurance		26			38			58		70
Other		66			84
Losses (gains) on foreclosed real estate		(13	)		86			23		136
Total noninterest expense		1,403			1,414
Other		86			49			149		131
Income before income taxes		971			826
Total noninterest expense		1,389			1,398			2,740		2,813
Income tax expense		349			303
Income before income taxes		83			773			1,054		1,601
Net income	$	622		$	523
Income tax expense		7			283			357		586
Other comprehensive income, net of tax
Net income	$	76		$	490		$	697	$	1,015
Unrealized (loss) on securities available for sale, net of tax	$	(83	)	$	(53	)
Other comprehensive income, net of tax
Reclassification adjustment for losses (gains) realized in income, net of tax		—			—
Unrealized gain on securities available for sale	$	378		$	578		$	246	$	494
Other comprehensive income (loss)		(83	)		(53	)
Less income tax effect		140			214			91		183
Comprehensive income	$	539		$	470
Reclassification adjustment for losses (gains) realized in income, net of tax		—			—			—		—
Earnings per share: (Note 3)
Other comprehensive income		238			364			155		311
Basic	$	0.25		$	0.21
Comprehensive income	$	314		$	854		$	852	$	1,326
Diluted	$	0.25		$	0.21
Earnings per share: (Note 3)
Dividends declared per common share	$	0.08		$	0.08
Basic	$	0.03		$	0.20		$	0.28	$	0.41
Diluted	$	0.03		$	0.20		$	0.28	$	0.41
Dividends declared per common share	$	0.08		$	—		$	0.16	$	0.08

See accompanying notes to the consolidated financial statements

CULLMAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(All amounts in thousands, except share and per share data)

	CommonStock		AdditionalPaid-InCapital			RetainedEarnings			AccumulatedOtherComprehensiveIncome (loss)			UnearnedESOPShares			AmountReclassifiedon ESOPShares			Total
			Additional						Accumulated Other			Unearned			Amount Reclassified on
	Common		Paid-In			Retained			Comprehensive			ESOP			ESOP
	Stock		Capital			Earnings			Income (loss)			Shares			Shares			Total
Balance at January 1, 2011	$	25	$	10,330		$	29,134		$	(232	)	$	(887	)	$	(100	)	$	38,270
Net income							~~523~~1,015												~~523~~1,015
Net change in accumulated other comprehensive income										~~(53~~311	)					—			~~(53~~311	)
ESOP shares earned		—		—			—			—			1325			—			1325
Stock-based compensation expense				3060															3060
Dividends (1)							(125	)											(125	)
Issuance of 49,249 shares of restricted stock		1		(1	)														—
Reclassification of common stock in ESOP subject to repurchase obligation		—		—			—			—			—			(1325	)		(1325	)
Balance at March 31, 2011	$	26	$	10,359		$	29,532		$	(285	)	$	(874	)	$	(113	)	$	38,645
Balance at June 30, 2011	$	26	$	10,389		$	30,024		$	79		$	(862	)	$	(125	)	$	39,531
Balance at January 1, 2012	$	26	$	10,461		$	30,589		$	317		$	(821	)	$	(179	)	$	40,393
Net income							~~622~~697												~~622~~697
Net change in accumulated other comprehensive income										~~(83~~155	)		—						~~(83~~155	)
ESOP shares earned													1224						1224
Exercise of 2,462 common stock options				25															25
Stock-based compensation expense				3060															3060
Dividends							(~~205~~410	)											(~~205~~410	)
Reclassification of common stock in ESOP subject to repurchase obligation		—		—			—			—			—			(1224	)		(1224	)
Balance at March 31, 2012	$	26	$	10,516		$	31,006		$	234		$	(809	)	$	(191	)	$	40,782
Balance at June 30, 2012	$	26	$	10,546		$	30,876		$	472		$	(797	)	$	(203	)	$	40,920

(1)

Cash dividends of $0.08 per share were declared on March 15, 2011 for 1,554,984 of the 2,561,996 shares outstanding at March 31, 2011. Cullman Savings Bank, MHC, the Company’s mutual holding company, was granted a dividend payment waiver from the Office of Thrift Supervision for all but 375,000 of the 1,382,012 shares of the Company’s stock held by Cullman Savings Bank, MHC. No future dividend waivers are expected to be granted by the Federal Reserve Bank, the regulatory body now responsible for mutual holding companies.

See accompanying notes to the consolidated financial statements

CULLMAN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(All amounts in thousands, except share and per share data)

	Three Months
	Six Months EndedJune 30,
	Ended March 31,
	2012			2011
Cash Flows From Operating Activities
Net income	$	~~622~~697		$	~~523~~1,015
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses		~~127~~1,005			92199
Depreciation and amortization, net		8238			80157
Deferred income tax benefit		(4395	)		(45150	)
Loss on sale and impairments of foreclosed real estate		8523			50136
Income on bank owned life insurance		(2670	)		(2653	)
ESOP compensation expense		1224			1325
Stock based compensation expense		3060			3060
Gain on sale of mortgage loans		(75114	)		(5799	)
Mortgage loans originated for sale		(24,~~649~~216	)		(24,~~937~~478	)
Mortgage loans sold		34,~~097~~459			34,~~141~~897
Net change in operating assets and liabilities
Accrued interest receivable		3037			~~(36~~33	)
Accrued interest payable		(12	)		(146	)
Other		~~343~~(208	)		~~277~~278
Net cash from operating activities		1,~~634~~642			12,~~091~~014
Cash Flows From Investing Activities
Purchases of premises and equipment		(2061	)		(36329	)
Purchases of securities		(1217,~~995~~495	)		(12,~~000~~996	)
Proceeds from maturities, paydowns and calls of securities		919,~~262~~441			23,~~447~~711
Proceeds from sales of foreclosed real estate		~~300~~611			—10
Purchases of bank owned life insurance		(2,000	)		—
Loan originations and payments, net		2,485			2,419
Redemptions of restricted equity securities		145			50
Net cash from investing activities		(2,968	)		3,830
Loan originations and payments, net		2,208			3,463
Net cash from investing activities		2,849			3,909
Cash Flows from Financing Activities
Net change in deposits		~~699~~(5,369	)		(28,~~442~~478	)
Exercise of common stock options		25			—
Cash payment of dividends		(~~205~~410	)		—(125	)
Net cash from financing activities		~~519~~(5,754	)		(28,~~442~~353	)
Change in cash and cash equivalents		(~~815~~1,263	)		214,~~479~~276
Cash and cash equivalents, beginning of period		9,476			2,542
Cash and cash equivalents, end of period	$	8,~~661~~213		$	516,~~021~~818
Cash paid during the period for:
Interest paid	$	~~656~~1,284		$	~~879~~1,722
Income taxes paid	$	—656		$	—720
Supplemental noncash disclosures:
Transfers from loans to foreclosed assets	$	~~241~~423		$	~~966~~1,051
Loans advanced for sales of foreclosed assets	$	87272		$	~~627~~1,200

See accompanying notes to the consolidated financial statements

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

(1) BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Cullman Bancorp, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulations S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements of Cullman Bancorp, Inc. (“the Bancorp” or the “Company”) include the accounts of its wholly owned subsidiary, Cullman Savings Bank (“the Bank”) and its 99% ownership of Cullman Village Apartments (collectively referred to herein as “the Company,” “we,” “us,” or “our”). Intercompany transactions and balances are eliminated in the consolidation. The Company is majority owned (5354.95%) by Cullman Savings Bank, MHC. These financial statements do not include the transactions and balances of Cullman Savings Bank, MHC.

Cullman Bancorp, Inc., headquartered in Cullman, Alabama was formed to serve as the stock holding company for Cullman Savings Bank as part of the mutual-to-stock conversion of Cullman Savings Bank. On October 8, 2009, the Bank completed its conversion and reorganization from a mutual savings bank into a two-tier mutual holding company. In accordance with the plan of reorganization, Cullman Bancorp, Inc. (of which Cullman Savings Bank became a wholly-owned subsidiary) issued and sold shares of capital stock to eligible depositors of Cullman Savings Bank and others.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s financial position as of ~~March~~June 3130, 2012 and December 31, 2011 and the results of operations and cash flows for the interim periods ended ~~March~~June 3130, 2012 and 2011. All interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Form 10-K Annual Report of Cullman Bancorp, Inc. for the year ended December 31, 2011.

(2) NEW ACCOUNTING STANDARDS

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments to the FASB Accounting Standards Codification in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The implementation of this update did not have a significant effect to the consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU amends the FASB Accounting Standards Codification to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The Company has implemented this update and comprehensive income is reflected in our consolidated statements of income.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

(3) EARNINGS PER SHARE (“EPS”)

Basic EPS is determined by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period. ESOP shares are considered outstanding for this calculation unless unearned. Diluted EPS is determined by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period, adjusted for the dilutive effect of common share equivalents. The factors used in the earnings per common share computation follow:

	Three months ended						Six months ended
	March 31,			March 31,
	June 30,2012			June 30,2011			June 30,2012			June 30,2011
	2012			2011
Earnings per share
Earnings per share
Net Income	$	76		$	490		$	697		$	1,015
Net Income	$	622		$	523
Less: Distributed earnings allocated to participating securities		(3	)		—			(6	)		(4	)
Less: Distributed earnings allocated to participating securities		(3	)		(4	)
Less: (Undistributed income) dividends in excess of earnings allocated to participating securities		2			(9	)		(4	)		(8	)
Less: (Undistributed income) dividends in excess of earnings allocated to participating securities		(6	)		(8	)
Net earnings available to common stock	$	75		$	481		$	687		$	1,003
Net earnings allocated to common stock	$	613		$	511
Weighted common shares outstanding including participating securities		2,564,458			2,561,996			2,564,052			2,557,099
Weighted common shares outstanding including participating securities		2,563,646			2,552,147
Less: Participating securities		(39,400	)		(49,249	)		(39,400	)		(49,249	)
Less: Participating securities		(39,400	)		(49,249	)
Less: Average Unearned ESOP Shares		(82,140	)		(88,650	)		(82,128	)		(88,650	)
Less: Average Unearned ESOP Shares		(82,140	)		(88,650	)
Weighted average shares		2,442,918			2,424,097			2,442,524			2,419,200
Weighted average shares		2,442,106			2,414,248
Basic earnings per share	$	0.03		$	0.20		$	0.28		$	0.41
Basic earnings per share	$	0.25		$	0.21
Net earnings available to common stock	$	75		$	481		$	687		$	1,003
Net earnings allocated to common stock	$	613		$	511
Weighted average shares		2,442,918			2,424,097			2,442,524			2,419,200
Weighted average shares		2,442,106			2,414,248
Add: dilutive effects of assumed exercises of stock options		12,608			7,601			13,342			3,837
Add: dilutive effects of assumed exercises of stock options		13,341			—
Average shares and dilutive potential common shares		2,455,526			2,431,698			2,455,866			2,423,037
Average shares and dilutive potential common shares		2,455,447			2,414,248
Dilutive earnings per share	$	0.03		$	0.20		$	0.28		$	0.41
Dilutive earnings per share	$	0.25		$	0.21

Options to purchase 120,662 shares of the Company’s common stock at a weighted-average exercise price of $10.30 per share were outstanding and considered dilutive for the three and six months ended ~~March~~June 3130, 2012. There were no ~~potential~~options ~~dilutive~~considered ~~common~~antidilutive ~~shares~~ for the three ~~months~~and ~~ended~~six ~~March 31~~month periods ending June 30, 2012 and 2011.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

(4) SECURITIES AVAILABLE FOR SALE

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income ~~(loss)~~ at ~~March~~June 3130, 2012 and December 31, 2011 were as follows:

			Gross		Gross			Estimated
	AmortizedCost		GrossUnrealizedGains		GrossUnrealizedLosses			EstimatedFairValue
	Amortized		Unrealized		Unrealized			Fair
June 30, 2012
	Cost		Gains		Losses			Value
U.S. Government sponsored entities	$	17,992	$	82	$	—		$	18,074
March 31, 2012
Municipal—taxable		5,141		512		—			5,653
U.S. Government sponsored entities	$	23,987	$	14	$	(210	)	$	23,791
Municipal—tax exempt		500		—		(4	)		496
Municipal—taxable		5,144		397		—			5,541
Residential mortgage-backed, GSE		1,700		84		—			1,784
Residential mortgage-backed, GSE		1,803		87		—			1,890
Residential mortgage-backed, private label		514		4		—			518
Residential mortgage-backed, private label		590		12		—			602
Ultra Short mortgage mutual fund		1,414		72		—			1,486
Ultra Short mortgage mutual fund		1,414		70		—			1,484
Total	$	27,261	$	754	$	(4	)	$	28,011
Total	$	32,938	$	580	$	(210	)	$	33,308
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2011
U.S. Government sponsored entities	$	19,989	$	29	$	(25	)	$	19,993
Municipal—taxable		5,146		327		—			5,473
Residential mortgage-backed, GSE		2,032		93		—			2,125
Residential mortgage-backed, private label		623		8		—			631
Ultra Short mortgage mutual fund		1,414		70		—			1,484
Total	$	29,204	$	527	$	(25	)	$	29,706

The Company’s mortgage-backed securities are primarily issued by government sponsored enterprises (“GSEs”) such as Fannie Mae and Ginnie Mae as denoted in the table above as GSE. At March 31, 2012 and December 31, 2011, the Company had only one private label mortgage-backed security.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2011
U.S. Government sponsored entities	$	19,989	$	29	$	(25	)	$	19,993
Municipal—taxable		5,146		327		—			5,473
Residential mortgage-backed, GSE		2,032		93		—			2,125
Residential mortgage-backed, private label		623		8		—			631
Ultra Short mortgage mutual fund		1,414		70		—			1,484

Total	$	29,204	$	527	$	(25	)	$	29,706

~~There~~The ~~were~~Company’s nomortgage-backed ~~sales~~securities ofare ~~securities~~primarily ~~for~~issued by government sponsored enterprises (“GSEs”) such as Fannie Mae and Ginnie Mae as denoted in the ~~three~~table ~~months~~above ~~ended~~as ~~March~~GSE. At June 3130, 2012 and December 31, 2011, the Company had only one private label mortgage-backed security.

There were no sales of available for sales securities for the three and six months ended June 30, 2012 and 2011, respectively.

The amortized cost and fair value of the investment securities portfolio are shown below by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity and securities with no maturity date are shown separately.


	June 30, 2012
	Amortized Cost		Estimated Fair Value
Due from one to five years	$	—	$	—
Due from five to ten years		12,501		12,612
Due after ten years		11,132		11,611
Mutual fund		1,414		1,486
Residential mortgage-backed		2,214		2,302

Total	$	27,261	$	28,011

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

~~The~~Carrying ~~amortized~~amounts ~~cost~~of ~~and~~securities ~~fair~~pledged ~~value~~to ofsecure ~~the~~public ~~investment~~deposits, ~~securities~~repurchase ~~portfolio~~agreements, and ~~are~~Federal ~~shown~~Home ~~below by~~Loan ~~expected~~Bank ~~maturity.~~advances ~~Expected~~as ~~maturities~~of ~~may~~June 30, ~~differ~~2012 ~~from~~and ~~contractual~~December 31, ~~maturities~~2011 ifwere ~~borrowers~~$6,787 ~~have~~and ~~the~~$6,786, ~~right~~respectively. toAt ~~call~~June 30, or2012 ~~prepay~~and ~~obligations~~December 31, ~~with~~2011, orthere ~~without~~were ~~call~~no orholdings ~~prepayment~~of ~~penalties.~~securities ~~Securities~~of ~~not~~any ~~due~~one atissuer, aother ~~single~~than ~~maturity~~the U.S. ~~and~~Government ~~securities~~sponsored ~~with~~entities, ~~no maturity~~in ~~date~~an ~~are~~amount ~~shown~~greater ~~separately~~than 10% of shareholders’ equity.

	March 31, 2012
	Amortized		Estimated
	Cost		Fair Value
Due from one to five years	$	—	$	—
Due from five to ten years		12,998		12,931
Due after ten years		16,133		16,401
Mutual fund		1,414		1,484
Residential mortgage-backed		2,393		2,492
Total	$	32,938	$	33,308

The following table shows securities with unrealized losses at June 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

Carrying amounts of securities pledged to secure public deposits, repurchase agreements, and Federal Home Loan Bank advances as of March 31, 2012 and December 31, 2011 were $6,695 and $6,786, respectively. At March 31, 2012 and December 31, 2011, there were no holdings of securities of any one issuer, other than the U.S. Government sponsored entities, in an amount greater than 10% of shareholders’ equity.


	Less than 12 months					12 Months or More				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 30, 2012
Municipal—tax exempt	$	496	$	(4	)	$	—	$	—	$	496	$	(4	)

Total temporarily impaired	$	496	$	(4	)	$	—	$	—	$	496	$	(4	)


	Less than 12 months					12 Months or More				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
December 31, 2011
U.S. Government sponsored entities	$	7,970	$	(25	)	$	—	$	—	$	7,970	$	(25	)

Total temporarily impaired	$	7,970	$	(25	)	$	—	$	—	$	7,970	$	(25	)

~~The~~There ~~following~~was ~~table~~one ~~shows~~tax ~~securities~~exempt municipal security with an unrealized ~~losses~~loss at ~~March~~June 3130, 2012. None of the unrealized loss for this security has been recognized into net income for the three and ~~December~~six months ended June 3130, ~~2011~~2012 because the issuer’s bonds are of high credit quality, ~~aggregated~~management bydoes ~~investment~~not ~~category~~intend to sell and ~~length~~it ofis ~~time~~likely that ~~individual~~management will not be required to sell the securities ~~have~~prior ~~been~~to their anticipated recovery, and the decline in afair ~~continuous~~value ~~unrealized~~is ~~loss~~largely ~~position:~~due to changes in interest rates. The fair value is expected to recover as the bonds approach their maturity date or reset date.

	Less than 12 months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Loss			Value		Loss		Value		Loss
March 31, 2012
U.S. Government sponsored entities	$	19,779	$	(210	)	$	—	$	—	$	19,779	$	(210	)
Total temporarily impaired	$	19,779	$	(210	)	$	—	$	—	$	19,779	$	(210	)

	Less than 12 months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Loss			Value		Loss		Value		Loss
December 31, 2011
U.S. Government sponsored entities	$	7,970	$	(25	)	$	—	$	—	$	7,970	$	(25	)
Total temporarily impaired	$	7,970	$	(25	)	$	—	$	—	$	7,970	$	(25	)

There were seven U.S. Government sponsored entities securities unrealized losses at March 31, 2012. None of the unrealized losses for these securities have been recognized into net income for the three months ended March 31, 2012 because the issuer’s bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach their maturity date or reset date.

The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company considers the length of time and the extent to which the fair value has been less than cost and the financial condition and near-term prospects of the issuer. Additionally, the Company considers its intent to sell or whether it will be more likely than not required to sell the security prior to the security’s anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal Government sponsored entities, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

(5) LOANS

Loans at ~~March~~June 3130, 2012 and December 31, 2011 were as follows:

	March 31,			December 31,
	June 30,2012			December 31,2011
	2012			2011
Real estate loans:
One- to four-family	$	7776,~~133~~219		$	78,869
Multi-family		5,~~127~~076			5,184
Commercial real estate		6362,~~243~~338			63,336
Construction		12,~~409~~927			1,667
Total real estate loans		146,~~912~~560			149,056
Commercial loans		7,~~115~~467			7,221
Consumer loans:
Home equity loans and lines of credit		45,~~945~~147			5,286
Other consumer loans		3,~~980~~611			4,097
Total loans		162,~~952~~785			165,660
Net deferred loan fees		(~~318~~302	)		(337	)
Allowance for loan losses		(1,~~236~~509	)		(1,108	)
Loans, net	$	~~161~~160,~~398~~974		$	164,215

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

The following tables present the activity in the allowance for loan losses for the three and six months ended ~~March~~June 3130, 2012 and 2011 and the balances of the allowance for loan losses and recorded investment in loans based on impairment method at ~~March~~June 3130, 2012, 2011 and December 31, 2011. The recorded investment in loans in any of the following tables does not include accrued and unpaid interest or any deferred loan fees or costs, as amounts are not significant.

	Real estate
March 31, 2012	One-to-FourFamily			Multi-family		Commercial			Construction			Commercial			Consumer			Total
Six months ended June 30, 2012	One-to-FourFamily			Multi-family		Commercial			Construction			Commercial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	540		$	10	$	413		$	2		$	18		$	125		$	1,108
Charge-offs		—(330	)		—		—(186	)		—			—(98	)		—			—(614	)
Recoveries		—8			—		—			—			—			12			110
Provisions		8398			—59		~~(47~~634	)		(137	)		98177			(6—	)		~~127~~1,005
Ending balance	$	~~623~~316		$	1069	$	~~366~~861		$	139		$	~~116~~97		$	~~120~~127		$	1,~~236~~509
Ending allowance attributed to loans:
Individually evaluated for impairment		~~330~~—			—		~~110~~—			—			98—			—		$	~~538~~—
Collectively evaluted for impairment		293			10		256			1			18			120			698
Collectively evaluated for impairment		316			69		861			39			97			127			1,509
Total ending allowance balance:	$	~~623~~316		$	1069	$	~~366~~861		$	139		$	~~116~~97		$	~~120~~127		$	1,~~236~~509
Loans:
Loans individually evaluated for impairment:	$	~~2,657~~988		$	~~1,901~~—	$	1,~~863~~610		$	—		$	98—		$	122		$	62,~~641~~720
Loans collectively evaluated for impairment:		7475,~~476~~231			35,~~226~~076		6160,~~380~~728			12,~~409~~927			7,~~017~~467			8,~~803~~636			~~156~~160,~~311~~065
Total ending loans balance	$	7776,~~133~~219		$	5,~~127~~076	$	6362,~~243~~338		$	12,~~409~~927		$	7,~~115~~467		$	8,~~925~~758		$	162,~~952~~785
	Real estate
March 31, 2011	One-to-FourFamily			Multi-family		Commercial			Construction			Commercial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	332		$	9	$	356		$	9		$	47		$	101		$	854
Charge-offs		(2	)		—		(47	)		—			—			—			(49	)
Recoveries		—			—		—			—			—			1			1
Provisions		61			1		31			(4	)		—			3			92
Ending balance	$	391		$	10	$	340		$	5		$	47		$	105		$	898
Ending allowance attributed to loans:
Individually evaluated for impairment		25			—		35			—			25			—		$	85
Collectively evaluted for impairment		366			10		305			5			22			105			813
Total ending allowance balance:	$	391		$	10	$	340		$	5		$	47		$	105		$	898
Loans:
Loans individually evaluated for impairment:	$	2,464		$	1,980	$	4,198		$	—		$	109		$	158		$	8,909
Loans collectively evaluated for impairment:		81,402			3,392		59,422			4,779			7,382			10,477			166,854
Total ending loans balance	$	83,866		$	5,372	$	63,620		$	4,779		$	7,491		$	10,635		$	175,763


	Real estate
Three months ended June 30, 2012	One-to- Four Family			Multi-family		Commercial			Construction		Commercial			Consumer		Total
Allowance for loan losses:
Beginning balance	$	623		$	10	$	366		$	1	$	116		$	120	$	1,236
Charge-offs		(330	)		—		(186	)		—		(98	)		—		(614	)
Recoveries		8			—		—			—		—			2		10
Provisions		15			59		681			38		79			5		877

Ending balance	$	316		$	69	$	861		$	39	$	97		$	127	$	1,509

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)


	Real estate
Six months ended June 30, 2011	One-to- Four Family			Multi-family		Commercial			Construction			Commercial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	332		$	9	$	356		$	9		$	47	$	101	$	854
Charge-offs		(2	)		—		(47	)		—			—		—		(49	)
Recoveries		—			—		—			—			—		5		5
Provisions		118			1		81			(4	)		—		3		199

Ending balance	$	448		$	10	$	390		$	5		$	47	$	109	$	1,009

Ending allowance attributed to loans:
Individually evaluated for impairment		100			—		85			—			25		—		210
Collectively evaluted for impairment		348			10		305			5			22		109		799

Total ending allowance balance:	$	448		$	10	$	390		$	5		$	47	$	109	$	1,009

Loans:
Loans individually evaluated for impairment:		2,384			1,939		3,409			—			108		123		7,963
Loans collectively evaluated for impairment:		81,019			3,354		59,659			5,174			7,463		10,552		167,221

Total ending loans balance	$	83,403		$	5,293	$	63,068		$	5,174		$	7,571	$	10,675	$	175,184


	Real estate
Three months ended June 30, 2011	One-to- Four Family		Multi-family		Commercial		Construction		Commercial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	391	$	10	$	340	$	5	$	47	$	105	$	898
Charge-offs		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		4		4
Provisions		57		—		50		—		—		—		107

Ending balance	$	448	$	10	$	390	$	5	$	47	$	109	$	1,009


	Real estate
December 31, 2011	One-to- Four Family		Multi-family		Commercial		Construction		Commercial		Consumer		Total
Allowance for loan losses:
Ending allowance attributed to loans:
Individually evaluated for impairment	$	240	$	—	$	110	$	—	$	—	$	—	$	350
Collectively evaluted for impairment		300		10		303		2		18		125		758

Total ending allowance balance:	$	540	$	10	$	413	$	2	$	18	$	125	$	1,108

Loans:
Loans individually evaluated for impairment:	$	2,582	$	1,910	$	1,712	$	—	$	99	$	122	$	6,425
Loans collectively evaluated for impairment:		76,287		3,274		61,624		1,667		7,122		9,261		159,235

Total ending loans balance	$	78,869	$	5,184	$	63,336	$	1,667	$	7,221	$	9,383	$	165,660

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

The following ~~table~~tables ~~presents~~present loans individually evaluated for impairment by portfolio class at ~~March~~June 3130, 2012 and December 31, 2011 and the respective average balances of impaired loans and interest income recognized for the three and six months ended June 30, 2012 and 2011:

	March 31, 2012										December 31, 2011
	June 30, 2012						December 31, 2011
	Unpaidprincipalbalance		Recordedinvestment		Relatedallowance		~~AverageRecordedInvestment~~Unpaidprincipalbalance		~~InterestIncomeRecognized~~Recordedinvestment		~~Unpaidprincipalbalance~~Relatedallowance		~~Recordedinvestment~~		~~Relatedallowance~~		~~AverageRecordedInvestment~~		~~InterestIncomeRecognized~~
With no recorded allowance:
Real estate loans:
One- to four-family	$	1,~~417~~228	$	~~1,417~~988	$	—	$	1,~~392~~367	$	261,367	$	~~1,367~~—	$	~~1,367~~	$	—	$	~~1,255~~	$	88
Multi-family		~~1,901~~—		~~1,901~~—		—		1,~~906~~910		371,910		~~1,910~~—		~~1,910~~		—		~~1,939~~		~~138~~
Commercial		1,~~666~~738		1,~~666~~610		—		1,~~591~~515		321,515		~~1,515~~—		~~1,515~~		—		~~3,030~~		~~167~~
Construction		—		—		—		—		—		—		—		—		—		—
Total real estate loans		42,~~984~~966		42,~~984~~598		—		4,~~889~~792		954,792		~~4,792~~—		~~4,792~~		—		~~6,224~~		~~393~~
Commercial		—		—		—		5099		—99		99—		99		—		52		1
Consumer:
Home equity loans and lines of credit		122		122		—		122		2122		~~122~~—		~~122~~		—		~~131~~		3
Other consumer loans		—		—		—		—		—		—		—		—		—		—
Total	$	53,~~106~~088	$	52,~~106~~720	$	—	$	5,~~061~~013	$	975,013	$	~~5,013~~—	$	~~5,013~~	$	—	$	~~6,407~~	$	~~397~~
With recorded allowance:
Real estate loans:
One- to four-family	$	~~1,240~~—	$	~~1,240~~—	$	~~330~~—	$	1,~~228~~215	$	41,215	$	~~1,215~~240	$	~~1,215~~	$	~~240~~	$	~~1,120~~	$	34
Multi-family		—		—		—		—		—		—		—		—		—		—
Commercial		~~197~~—		~~197~~—		~~110~~—		197		—197		~~197~~110		~~197~~		~~110~~		~~179~~		—
Construction		—		—		—		—		—		—		—		—		—		—
Total real estate loans		~~1,437~~—		~~1,437~~—		~~440~~—		1,~~425~~412		41,412		~~1,412~~350		~~1,412~~		~~350~~		~~1,299~~		34
Commercial		98—		98—		98—		49—		2—		—		—		—		40		—
Consumer:
Home equity loans and lines of credit		—		—		—		—		—		—		—		—		—		—
Other consumer loans		—		—		—		—		—		—		—		—		—		—
Total	$	~~1,535~~—	$	~~1,535~~—	$	~~538~~—	$	1,~~474~~412	$	61,412	$	~~1,412~~350	$	~~1,412~~	$	~~350~~	$	~~1,339~~	$	34
Totals:
Real estate	$	62,~~421~~966	$	62,~~421~~598	$	~~440~~—	$	6,~~314~~204	$	996,204	$	~~6,204~~350	$	~~6,204~~	$	~~350~~	$	~~7,523~~	$	~~427~~
Commercial and Consumer		~~220~~122		~~220~~122		98—		221		4221		~~221~~—		~~221~~		—		~~223~~		4
Total	$	63,~~641~~088	$	62,~~641~~720	$	~~538~~—	$	6,~~535~~425	$	~~103~~6,425	$	~~6,425~~350	$	~~6,425~~	$	~~350~~	$	~~7,746~~	$	~~431~~

Interest income recognized was equal to cash collected during the three months ended March 31, 2012 and the year ended December 31, 2011.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

The following tables present the aging of the recorded investment in past due loans at March 31, 2012 and December 31, 2011 by portfolio class of loans:


	Six months ended June 30, 2012				Three months ended June 30, 2012				Six months ended June 30, 2011				Three months ended June 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no recorded allowance:
Real estate loans:
One- to four-family	$	1,178	$	53	$	1,202	$	47	$	1,837	$	34	$	1,638	$	15
Multi-family		955		—		951		—		1,971		71		1,976		34
Commercial		1,563		76		1,638		47		3,577		150		3,826		102
Construction		—		—		—		—		—		—		—		—

Total real estate loans		3,696		129		3,791		94		7,385		255		7,440		151
Commercial		50		—		—		—		57		—		58		—
Consumer:
Home equity loans and lines of credit		122		3		122		1		149		3		153		2
Other consumer loans		—		—		—		—		—		—		—		—

Total	$	3,868	$	132	$	3,913	$	95	$	7,591	$	258	$	7,651	$	153


With recorded allowance:
Real estate loans:
One- to four-family	$	608	$	—	$	620	$	—	$	683	$	22	$	854	$	9
Multi-family		—		—		—		—		—		—		—		—
Commercial		99		—		99		—		200		1		162		—
Construction		—		—		—		—		—		—		—		—

Total real estate loans		707		—		719		—		883		23		1,016		9
Commercial		—		—		49		—		52		—		51		—
Consumer:
Home equity loans and lines of credit		—		—		—		—		—		—		—		—
Other consumer loans		—		—		—		—		—		—		—		—

Total	$	707	$	—	$	768	$	—	$	935	$	23	$	1,067	$	9

Totals:
Real estate	$	4,401	$	129	$	4,401	$	94	$	8,268	$	278	$	8,456	$	160
Commercial and Consumer		172		3		172		1		258		3		262		2

Total	$	4,573	$	132	$	4,573	$	95	$	8,526	$	281	$	8,718	$	162

March 31, 2012	30-59DaysPast Due		60-89DaysPast Due		90 Daysor MorePast Due		TotalPast Due		Current		TotalLoans		Accruingloanspast due 90days or more
Real estate loans:
One- to four-family	$	1,265	$	107	$	189	$	1,561	$	75,572	$	77,133	$	—
Multi-family		589		—		—		589		4,538		5,127		—
Commercial		602		18		—		620		62,623		63,243		—
Construction		—		—		—		—		1,409		1,409		—
Total real estate loans		2,456		125		189		2,770		144,142		146,912		—
Commercial loans		381		—		—		381		6,734		7,115		—
Consumer loans:
Home equity loans and lines of credit		—		—		—		—		4,945		4,945		—
Other consumer loans		10		4		—		14		3,966		3,980		—
Total	$	2,847	$	129	$	189	$	3,165	$	159,787	$	162,952	$	—
December 31, 2011	30-59DaysPast Due		60-89DaysPast Due		90 Daysor MorePast Due		TotalPast Due		Current		TotalLoans		Accruingloanspast due 90days or more
Real estate loans:
One- to four-family	$	2,157	$	130	$	122	$	2,409	$	76,460	$	78,869	$	—
Multi-family		—		—		—		—		5,184		5,184		—
Commercial		32		—		—		32		63,304		63,336		—
Construction		—		—		—		—		1,667		1,667		—
Total real estate loans		2,189		130		122		2,441		146,615		149,056		—
Commercial loans		150		25		—		175		7,046		7,221		—
Consumer loans:
Home equity loans and lines of credit		—		—		—		—		5,286		5,286		—
Other consumer loans		84		2		—		86		4,011		4,097		—
Total	$	2,423	$	157	$	122	$	2,702	$	162,958	$	165,660	$	—

Interest income recognized was equal to cash collected during the three and six months ended June 30, 2012 and June 30, 2011.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

~~Nonaccrual~~The ~~loans~~following attables ~~March 31,~~present ~~2012~~the ~~and~~aging ~~December 31,~~of ~~2011~~the ~~were~~recorded ~~$189~~investment ~~and~~in ~~$1,572, respectively.~~past ~~These~~due loans ~~are disclosed in one-to-four family class above~~ at ~~March~~ June 3130, 2012 and December 31, 2011. ~~Additional required disclosure~~ by portfolio class ~~was~~of ~~deemed immaterial to the financial statements. Non-performing~~ loans: ~~and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.~~


													Accruing
	30-59		60-89		90 Days								loans
	Days		Days		or More		Total				Total		past due 90
June 30, 2012	Past Due		Past Due		Past Due		Past Due		Current		Loans		days or more
Real estate loans:
One- to four-family	$	144	$	607	$	149	$	900	$	75,319	$	76,219	$	48
Multi-family		—		—		—		—		5,076		5,076		—
Commercial		280		458		212		950		61,388		62,338		—
Construction		—		—		—		—		2,927		2,927		—

Total real estate loans		424		1,065		361		1,850		144,710		146,560		48
Commercial loans		—		25		—		25		7,442		7,467		—
Consumer loans:
Home equity loans and lines of credit		35		—		—		35		5,112		5,147		—
Other consumer loans		61		15		5		81		3,530		3,611		—

Total	$	520	$	1,105	$	366	$	1,991	$	160,794	$	162,785	$	48


													Accruing
	30-59		60-89		90 Days								loans
	Days		Days		or More		Total				Total		past due 90
December 31, 2011	Past Due		Past Due		Past Due		Past Due		Current		Loans		days or more
Real estate loans:
One- to four-family	$	2,157	$	130	$	122	$	2,409	$	76,460	$	78,869	$	—
Multi-family		—		—		—		—		5,184		5,184		—
Commercial		32		—		—		32		63,304		63,336		—
Construction		—		—		—		—		1,667		1,667		—

Total real estate loans		2,189		130		122		2,441		146,615		149,056		—
Commercial loans		150		25		—		175		7,046		7,221		—
Consumer loans:
Home equity loans and lines of credit		—		—		—		—		5,286		5,286		—
Other consumer loans		84		2		—		86		4,011		4,097		—

Total	$	2,423	$	157	$	122	$	2,702	$	162,958	$	165,660	$	—

Nonaccrual loans at June 30, 2012 and December 31, 2011 were $3,635 and $1,572, respectively. Nonaccrual loans consisted of $1,589 of one-to four-family, $1,884 of commercial real estate, $157 of commercial, and $5 of consumer loans at June 30, 2012. Nonaccrual loans at December 31, 2011 consisted of one-to four-family loans. Non-performing loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

Troubled Debt Restructurings:

Troubled debt restructurings at ~~March~~June 3130, 2012 and December 31, 2011 were $2,~~932~~508 and $3,033, respectively. The amount of impairment allocated to loans whose loan terms have been modified in troubled debt restructurings at ~~March~~June 3130, 2012 and December 31, 2011 was $~~350~~0 and $260, respectively. The decrease in the impairment was the result of charge-offs and partial charge-offs of these troubled loans. The Company has committed to lend no additional amounts at ~~March~~June 3130, 2012 to customers with outstanding loans that are classified as troubled debt restructurings. There were no loans modified as troubled debt restructurings during the three ~~month~~and ~~period~~six ~~March~~months ended June 3130, 2012.

~~There~~14 was one residential real estate loan with a recorded investment of $122 that was modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended March 31, 2012. A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms. The troubled debt restructuring that subsequently defaulted as described above did not increase the allowance for loans losses or result in any charge off during the three months ended March 31, 2012.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

There was one residential real estate loan with a recorded investment of $122 that was modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2012. A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms. The troubled debt restructuring that subsequently defaulted as described above did not increase the allowance for loans losses or result in any charge off during the three and six months ended June 30, 2012.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Credit Quality Indicators:

The Company utilizes a grading system whereby all loans are assigned a grade based on the risk profile of each loan. Loan grades are determined based on an evaluation of relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. All loans, regardless of size, are analyzed and are given a grade based upon the management’s assessment of the ability of borrowers to service their debts. Loans with balances greater than $100 are evaluated on a quarterly basis and smaller loans are reviewed as necessary based on change in borrower status or payment history.

The Company uses the following definitions for loan grades:

•	Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the loan or of the institution’s credit position at some future date.

•

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

•	Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above are graded Pass. These loans are included within groups of homogenous pools of loans based upon portfolio segment and class for estimation of the allowance for loan losses on a collective basis. Loan relationships graded substandard and doubtful of $100 or more are individually evaluated for impairment.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

At March 31, 2012 and December 31, 2011 and based on the most recent analysis performed, the loan grade for each loan by portfolio class is as follows:

	Real estate
	One-to-fourFamily				Multi-family				Commercial				Construction
	March 31,2012		December 31,2011		March 31,2012		December 31,2011		March 31,2012		December 31,2011		March 31,2012		December 31,2011
Pass	$	72,909	$	74,761	$	3,226	$	3,274	$	53,007	$	54,291	$	1,409	$	1,667
Special mention		1,567		1,041		—		—		8,163		7,223		—		—
Substandard		2,657		3,067		1,901		1,910		2,073		1,822		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	77,133	$	78,869	$	5,127	$	5,184	$	63,243	$	63,336	$	1,409	$	1,667
	Commercial				Home Equity Loans and Lines of Credit				Other Consumer Loans				Totals
	March 31,2012		December 31,2011		March 31,2012		December 31,2011		March 31,2012		December 31,2011		March 31,2012		December 31,2011
Pass	$	6,351	$	7,122	$	4,823	$	5,164	$	3,949	$	4,066	$	145,674	$	150,345
Special mention		666		—		—		—		25		25		10,421		8,289
Substandard		98		99		122		122		6		6		6,857		7,026
Doubtful		—		—		—		—		—		—		—		—
Total	$	7,115	$	7,221	$	4,945	$	5,286	$	3,980	$	4,097	$	162,952	$	165,660

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

At June 30, 2012 and December 31, 2011 and based on the most recent analysis performed, the loan grade for each loan by portfolio class is as follows:


	Real estate
	One-to-four
	Family				Multi-family				Commercial				Construction
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2012		2011		2012		2011		2012		2011		2012		2011
Pass	$	73,187	$	74,761	$	4,495	$	3,274	$	54,933	$	54,291	$	2,927	$	1,667
Special mention		264		1,041		—		—		2,463		7,223		—		—
Substandard		2,768		3,067		581		1,910		4,942		1,822		—		—
Doubtful		—		—		—		—		—		—		—		—

Total	$	76,219	$	78,869	$	5,076	$	5,184	$	62,338	$	63,336	$	2,927	$	1,667


	Commercial				Home Equity Loans and Lines of Credit				Other Consumer Loans				Totals
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2012		2011		2012		2011		2012		2011		2012		2011
Pass	$	6,802	$	7,122	$	4,990	$	5,164	$	3,576	$	4,066	$	150,910	$	150,345
Special mention		—		—		—		—		—		25		2,727		8,289
Substandard		665		99		157		122		35		6		9,148		7,026
Doubtful		—		—		—		—		—		—		—		—

Total	$	7,467	$	7,221	$	5,147	$	5,286	$	3,611	$	4,097	$	162,785	$	165,660

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Investment Securities:

The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). The Company’s taxable municipal investment securities’ fair values are determined based on a discounted cash flow analysis prepared by an independent third party.

Impaired Loans:

At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned:

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

For appraisals where the value is $250 or above for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with via independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value. The most recent analysis performed indicated that a discount of 10% should be applied to properties with appraisals performed within 12 months.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

~~The~~Impaired ~~tables below present the balances of assets and liabilities measured at fair value on a recurring and non-recurring basis by level within the hierarchy as of March 31, 2012 and December 31, 2011~~Loans:

Other Real Estate Owned:

For appraisals where the value is $250 or above for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value. The most recent analysis performed indicated that a discount of 10% should be applied to properties with appraisals performed within 12 months.

The tables below present the balances of assets and liabilities measured at fair value on a recurring and non-recurring basis by level within the hierarchy as of June 30, 2012 and December 31, 2011:

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
	March 31,		March 31,		March 31,		December 31,		December 31,		December 31,
	June 30,2012		June 30,2012		June 30,2012		December 31,2011		December 31,2011		December 31,2011
	2012		2012		2012		2011		2011		2011
Financial assets:
U.S. Government sponsored entities	$	—	$	2318,~~791~~074	$	—	$	—	$	19,993	$	—
Municipal - taxable		—		1,942		3,599		—		1,914		3,559
Municipal—taxable		—		1,988		3,665		—		1,914		3,559
Residential mortgage-backed, GSE		—		1,890		—		—		2,125		—
Municipal—tax exempt		—		496		—		—		—		—
Residential mortgage-backed, private label		—		602		—		—		631		—
Residential mortgage-backed, GSE		—		1,784		—		—		2,125		—
Ultra Short mortgage mutual fund		1,484		—		—		1,484		—		—
Residential mortgage-backed, private label		—		518		—		—		631		—
Total investment securities available for sale	$	1,484	$	28,225	$	3,599	$	1,484	$	24,663	$	3,559
Ultra Short mortgage mutual fund		1,486		—		—		1,484		—		—
Total investment securities available for sale	$	1,486	$	22,860	$	3,665	$	1,484	$	24,663	$	3,559

There were no significant transfers between Level 1 and Level 2 during 2012 or 2011.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2012:

	Municipals - Taxable
	2012
Balance of recurring level 3 assets at January 1	$	3,559
Unrealized gains		40
Balance of recurring Level 3 assets at March 31	$	3,599

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2012:


	Municipals—Taxable
	2012
Balance of recurring level 3 assets at January 1	$	3,559
Unrealized gain		40
Balance at March 31		3599

Transfers into Level 3		—
Unrealized gain		66

Balance of recurring Level 3 assets at June 30	$	3,665

There were no municipal securities that were considered level 3 for the six months ended June 30, 2011.

Our state and municipal securities valuations are supported by analysis prepared by an independent third party. Their approach to determining fair value involves using recently executed transactions for similar securities and market quotations for similar securities. As these securities are not rated by the rating agencies and trading volumes are thin, it was determined that these were valued using Level 3 inputs. The significant unobservable inputs used in the fair value measurement of the Company’s taxable municipal securities are discount rates and credit spreads that the market would require for taxable municipal securities with similar maturities and risk characteristics. Significant increases/(decreases) in any of those inputs in isolation would result in a significantly lower/(higher) fair value measurement.

Assets and Liabilities Measured on a Non-Recurring Basis

Level 3 assets and liabilities measured at fair value on a non-recurring basis are summarized below:

	Fair Value Measurements
	(Level 3)
	March 31,		December 31,
	June 30,2012		December 31,2011
	2012		2011
Assets:
Impaired loans, with specific allocations
Real estate loans:
One-to four-family	$	~~910~~811	$	975
Commercial		8786		87
Total loans	$	~~997~~897	$	1,062
Foreclosed real estate:
One-to four-family	$	~~130~~160	$	1,025
Commercial		~~431~~371		516
Total foreclosed real estate	$	~~561~~531	$	1,541

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral ~~dependent~~ dependent loans, had carrying amounts of $~~997~~897 and $1,062, which consists of the unpaid principal balances of $1,~~535~~265 and $1,412 less ~~valuation~~partial ~~allowances~~charge-offs of $~~538~~368 ~~and $350~~ at ~~March~~June 3130, 2012 and less valuation allowance of $350 at December 31, 2011~~, respectively~~. The impact to the provision to loan losses from the ~~change~~changes in the valuation allowances ~~was~~were $0 and $127 for the three and six months ended ~~March~~June 3130, 2012 and $230 for the year ended December 31, 2011.

Foreclosed real estate, which is measured at fair value less costs to sell, had a net carrying amount of $~~561~~531 and $1,541 at ~~March~~ June 3130, 2012 and December 31, 2011, respectively. The net carrying amount consists of the outstanding balance net of a valuation allowance. The outstanding balance and valuation allowance of other real estate owned at ~~March~~June 3130, 2012 ~~and~~ and December 31, 2011 were $~~975~~854 and $1,963, and $~~414~~323 and $422, respectively. The resulting write-downs for the three and six months ended ~~March~~June 3130, 2012 were $0 and $75, respectively, and $212 for the year ended December 31, 2011

Loans held for sale, which are carried at the lower of cost or fair value, had fair values that approximated costs at March 31, 2012 and December 31, 2011 and were therefore carried at cost with no fair value valuation allowance at both period ends.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

~~The~~Loans ~~following~~held ~~table~~for ~~presents~~sale, ~~quantitative~~which ~~information~~are ~~about~~carried ~~level~~at 3the lower of cost or fair value, had fair ~~measurements~~values ~~for~~that ~~financial~~approximated ~~instruments~~costs ~~measured~~at June 30, 2012 and December 31, 2011 and were therefore carried at ~~fair~~cost ~~value~~with onno afair ~~non-recurring~~value ~~basis~~valuation allowance at ~~March 31,~~both ~~2012~~period ends.

Level 3 Quantitative Information at March 31, 2012

Fair Value

ValuationTechnique(s)

UnobservableInputs(s)

Range(WeightedAverage)

Assets:

Impaired loans, with specific allocations

Real estate loans:

One-to four-family

910

Sales comparisonapproach

Adjustment fordifferencesbetween thecomparable sales

0% to20%(10%

)

Commercial

Sales comparisonapproach

Adjustment fordifferencesbetween thecomparable sales

0% to20%(10%

)

Total loans

997

Foreclosed real estate:

One-to four-family

130

Sales comparisonapproach

Adjustment fordifferencesbetween thecomparable sales

0% to20%(10%

)

Commercial

431

Sales comparisonapproach

Adjustment fordifferencesbetween thecomparable sales

0% to20%(10%

)

Total foreclosed real estate

561

The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012:

Level 3 Quantitative Information at June 30, 2012

Fair Value

Valuation
Technique(s)

Unobservable
Inputs(s)

Range
(Weighted
Average)

Assets:

Impaired loans, with specific allocations

Real estate loans:

Adjustment for

differences

Sales comparison

between the

% to

One-to four-family

811

approach

comparable sales

%(13%)

adjustment for

differences

Sales comparison

between the

% to

Commercial

approach

comparable sales

%(10%)

Total loans

897

Foreclosed real estate:

Management

adjustment for

Sales comparison

differences

% to

One-to four-family

160

approach

between the

%(10%)

Adjustment for

differences

Sales comparison

between the

% to

Commercial

371

approach

comparable sales

%(10%)

Total foreclosed real estate

531

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

The following tables present the carrying amounts and estimated fair values of the Company’s on-balance sheet financial instruments at ~~March~~June 3130, 2012 and December 31, 2011:

Carrying

March 31, 2012

June 30, 2012

Amount

(Level 1)

(Level 2)

(Level 3)

Total

CarryingAmount

(Level 1)

(Level 2)

(Level 3)

Total

Financial assets

Cash and cash equivalents

8,~~661~~213

—

8,~~661~~213

Securities available for sale

3328,~~308~~011

1,~~484~~486

2822,~~265~~860

3,~~559~~665

3328,~~308~~011

Loans, net

~~161~~160,~~398~~974

—

0—

~~163~~173,~~143~~848

Loans held for sale

68312

—

68312

—

68312

Accrued interest receivable

1,~~026~~019

~~1,026~~2

—148

—869

1,~~026~~019

Restricted equity securities

2,~~410~~265

N/A

Financial liabilities

Deposits

~~138~~132,~~846~~778

6257,~~598~~161

7675,~~636~~616

—

~~139~~132,~~243~~777

Federal Home Loan Bank Advances

42,000

—

46,~~059~~413

—

46,~~059~~413

Long-term debt

787

—

787

—

787

Accrued interest payable

~~222~~225

~~222~~3

—222

—

~~222~~225


	December 31, 2011
	Carrying Amount		Fair Value
Financial assets
Cash and cash equivalents	$	9,476	$	9,476
Securities available for sale		29,706		29,706
Loans, net		164,215		173,842
Loans held for sale		441		441
Accrued interest receivable		1,056		1,056
Restricted equity securities		2,410		N/A
Financial liabilities
Deposits		138,147		139,464
Federal Home Loan Bank Advances		42,000		46,297
Long-term debt		787		787
Accrued interest payable		223		223

The methods and assumptions, not previously presented, used to estimate fair value are described as follows:

Carrying amount is the estimated fair value for cash and cash equivalents, accrued interest receivable and payable, ~~demand~~ demand deposits and deposits that reprice frequently or fully and are classified as Level 1. The methods for determining fair values for securities were described previously. For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit and long-term borrowings are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. It is not practicable to determine the fair value of restricted equity securities due to restrictions placed on transferability. The fair value of off-balance sheet items is not considered material.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

based upon binding contracts and quotes from third party investors resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit and long-term borrowings are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. It is not practicable to determine the fair value of restricted equity securities due to restrictions placed on transferability. The fair value of off-balance sheet items is not considered material.

(7) STOCK BASED COMPENSATION

In December of 2010, the stockholders approved the Cullman Bancorp, Inc. 2010 Equity Incentive Plan (the “Equity Incentive Plan”) for employees and directors of the Company. The Equity Incentive Plan authorizes the issuance of up to 172,373 shares of the Company’s common stock, with no more than 49,249 of shares as restricted stock awards and 123,124 as stock options, either incentive stock options or non-qualified stock options. The exercise price of options granted under the Equity Incentive Plan may not be less than the fair market value on the date the stock option is granted. The compensation committee of the board of directors has sole discretion to determine the amount and to whom equity incentive awards are granted.

On January 18, 2011, the compensation committee of the board of directors approved the issuance of 123,124 options to purchase Company stock and 49,249 shares of restricted stock. Stock options and restricted stock vest ratably over a five year period, and stock options expire ten years after issuance. Apart from the vesting schedule for both stock options and restricted stock, there are no performance-based conditions or any other material conditions applicable to the awards issued. At ~~March~~June 3130, 2012 there were no shares available for future grants under this plan.

The following table summarizes stock option activity for the ~~nine~~six months ended ~~March~~June 3130, 2012:

	Options			Weighted-AverageExercisePrice/Share		Weighted-AverageRemainingContractual Life(in years)		AggregateIntrinsic Value
Outstanding—January 1, 2012		123,124		$	10.30
Granted		—			—
Exercised		(2,462	)		—10.30
Forfeited		—			—
Outstanding -March 31, 2012		120,662		$	10.30		8.75	$	356	(1)
Outstanding—June 30, 2012		120,662		$	10.30		8.50	$	356	(1)
Fully vested and exercisable at March 31, 2012		22,162		$	—		—	$	—
Fully vested and exercisable at June 30, 2012		22,162		$	—		—	$	—
Expected to vest in future periods		98,500
Fully vested and expected to vest—March 31, 2012		120,662		$	10.30		8.75	$	356	(1)
Fully vested and expected to vest—June 30, 2012		120,662		$	10.30		8.50	$	356	(1)
Intrinsic value of options exercised	$	7.00
Cash received from options exercised	$	25.00

(1) Based on closing price of $13.25 per share on ~~March~~June 3130, 2012.

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price.

The fair value for each option grant is estimated on the date of grant using the Black-Scholes option pricing model that uses the following assumptions. The Company uses the U.S. Treasury yield curve in effect at the time of the grant to determine the risk-free interest rate. The expected dividend yield is estimated using the projected annual dividend level and recent stock price of the Company’s common stock at the date of grant. Expected stock volatility is based on historical volatilities of the SNL Financial Index of Thrifts. The expected life of the options is calculated based on the “simplified” method as provided for under Staff Accounting Bulletin No. 110.

CULLMAN BANCORP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(All amounts in thousands, except share and per share data)

The weighted-average assumptions used in the Black-Scholes option pricing model for the period indicated were as follows:


	2011
Risk-free interest rate		2.86	%
Expected dividend yield		4.37	%
Expected stock volatility		10.29
Expected life (years)		7
Fair value	$	0.675

There were 24,624 options that vested during the ~~three~~six months ended ~~March~~June 3130, 2012. Stock-based compensation expense for stock options for the three and six months ended ~~March~~June 3130, 2012 and 2011 was $5 and $5, and $10 and $10, respectively. Total unrecognized compensation cost related to nonvested stock options was $6258 at ~~March~~June 3130, 2012 and is expected to be be recognized over a weighted-average period of 3.755 years.

The following table summarizes non-vested restricted stock ~~activity~~ activity for the ~~three~~six months ended ~~March~~June 3130, 2012:


	2012
Balance—beginning of year		49,249
Granted		—
Forfeited		—
Earned and issued		(9,849	)

Balance—end of period		39,400

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period (generally five years) and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted that are expected to vest. The weighted-average grant date fair value of restricted stock ~~granted~~on ~~during~~ the ~~three~~grant date ~~months ended March 31, 2011~~ was $~~10.30 per share or $~~507. Stock-based compensation expense for restricted stock included in non-interest expense for the three and six months ended ~~March~~June 3130, 2012 and 2011 was $25 and $25, and $50 and $50, respectively. Unrecognized compensation expense for nonvested restricted stock awards was $~~380~~355 at June 30, 2012 and is expected to be recognized over 3.755 years.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CULLMAN BANCORP, INC.

This Quarterly Report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include:

•

statements of our goals, intentions and expectations;

•

statements regarding our business plans and prospects and growth and operating strategies;

•

statements regarding the asset quality of our loan and investment portfolios; and

•

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report.

The following factors, among others, could cause the actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•

our ability to manage our operations during the current United States weak economic condition;

•

our ability to manage the risk from the growth of our commercial real estate lending;

•

significant increases in our loan losses, exceeding our allowance;

•

changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments and inflation;

•

adverse changes in the financial industry, securities, credit and national and local real estate markets (including real estate values);

•

general economic conditions, either nationally or in our market area;

•

changes in consumer spending, borrowing and savings habits, including lack of consumer confidence in financial institutions;

•

potential increases in deposit assessments;

•

significantly increased competition among depository and other financial institutions;

•

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies and the authoritative accounting and auditing bodies;

•

legislative or regulatory changes, including increased banking assessments, that adversely affect our business and earnings; and

•

changes in our organization, compensation and benefit plans.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in Form 10-K Annual Report of Cullman Bancorp, Inc. for the year ended December 31, 2011.

Comparison of Financial Condition at June 30, 2012 and December 31, 2011

Our total assets decreased to $218.2 million at June 30, 2012 from $223.0 million at December 31, 2011. The decrease was primarily attributable to decreases in loans of $3.2 million, or 2.0%, securities available for sale of $1.7 million, or 5.7%, and a decrease in cash and cash equivalents of $1.3 million, or 13.3%. These decreases were partially offset by an increase in our investment of bank owned life insurance of $2.1 million. The decrease in total assets is reflective of an overall decrease in total deposits of $5.4 million, or 4.0%.

Total equity increased to $40.9 million at June 30, 2012 from $40.4 million at December 31, 2011. The net increase of $527,000, or 1.3%, was primarily attributable to net income of $697,000, partially offset by $410,000 of dividends paid during the six months ended June 30, 2012.

Comparison of Financial Condition at March 31, 2012 and December 31, 2011

Our total assets increased to $224.4 million at March 31, 2012 from $223.0 million at December 31, 2011. The increase was primarily attributable to an increase in securities available for sale of $3.6 million, or 12.1%, and increase in bank owned life insurance of $2.0 million, or 82.5%, partially offset by decreases in loans of $2.8 million, or 1.7%, and federal funds sold of $1.4 million, or 18.6%. As demand for loans continues to decrease, we redeployed cash from loan repayments into purchases of available for sale securities and the purchase of additional bank owned life insurance.

Total equity increased to $40.8 million at March 31, 2012 from $40.4 million at December 31, 2011. The net increase of $389,000, or 1.0%, was primarily attributable to net income of $622,000, partially offset by $205,000 of dividends paid during the three months ended March 31, 2012 and a decrease in accumulated other comprehensive income of $83,000.

Non-Performing Assets

The table below sets forth the amounts and categories of our non-performing assets at the dates indicated:

	March 31,			December 31,
	June 30,			December 31,
	2012			2011
	(Dollars in thousands)
Non-Accrual:
Real estate loans:
One- to four-family	$	~~189~~1,589		$	1,572
Multi-family		—			—
Commercial real estate		—1,884			—
Construction		—			—
Total real estate loans		~~189~~3,473			1,572
Commercial loans		—157			—
Consumer loans		—5			—
Total nonaccrual loans	$	~~189~~3,635		$	1,572
Accruing loans past due 90 days or more:
Real estate loans:
One- to four-family	$	—48		$	—
Multi-family		—			—
Commercial real estate		—			—
Construction		—			—
Total real estate loans		—48			—
Commercial loans		—			—
Consumer loans		—			—
Total accruing loans past due 90 days or more		—48			—
Total of nonaccrual and 90 days or more past due loans	$	~~189~~3,683		$	1,572
Foreclosed real estate
One- to four-family	$	~~130~~160		$	1,025
Commercial		~~431~~371			516
Other nonperforming assets		—			—
Total nonperforming assets		~~750~~4,214			3,113
Troubled debt restructurings		2,932			3,033
Troubled debt restructurings, accruing		206			2,008
Troubled debt restructurings and total nonperforming assets	$	34,~~682~~420		$	65,~~146~~121
Total nonperforming loans to gross loans		02.1226	%		0.95	%
Total nonperforming assets to total assets		01.3393	%		1.40	%
Total nonperforming assets and troubled debt restructurings to total assets		12.6403	%		2.7630	%

2524

Average Balance and Yields

The following tables set forth average balance sheets, average yields and rates, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the tables as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, fees, discounts and premiums that are amortized or accreted to income.

For The Three Months Ended March 31,

For The Three Months Ended June 30,

2012

2011

AverageBalance

Interest andDividends

YieldCost

AverageBalance

Interest andDividends

YieldCost

Average

Interest and

Yield

Average

Interest and

Yield

Balance

Dividends

Cost

Balance

Dividends

Cost

(Dollars in thousands)

Assets:

Interest-earning assets:

Loans

~~164~~163,~~593~~032

2,~~632~~539

6.4125

~~177~~175,~~114~~150

2,~~768~~715

6.3422

Securities available for sale

3031,~~319~~832

~~236~~232

32.1292

23,~~470~~118

~~227~~222

3.9285

Other interest-earning assets

105,~~604~~990

1110

0.4267

410,~~430~~524

0.5530

Total interest-earning assets

~~205~~200,~~516~~854

2,~~879~~781

5.6255

~~205~~208,~~014~~792

32,~~001~~945

5.9466

Noninterest earning assets

1719,~~318~~120

1718,~~880~~208

Total average assets

~~222~~219,~~834~~974

~~222~~227,~~894~~000

Liabilities and equity:

Interest-bearing liabilities:

NOW and demand deposits

2627,~~965~~865

0.19

2425,~~152~~551

3231

0.5449

Regular savings and other deposits

16,~~859~~895

0.24

16,~~727~~862

2321

0.5749

Money market deposits

7,~~644~~097

0.2623

87,~~091~~702

1311

0.6457

Certificates of deposit

7675,~~707~~370

~~258~~236

1.3526

80,~~188~~834

~~373~~359

1.8978

Total interest-bearing deposits

~~128~~127,~~175~~227

~~286~~263

0.8983

~~129~~130,~~158~~949

~~441~~422

1.3829

FHLB advances and other borrowings

42,~~787~~832

369

3.46

47,~~816~~815

~~424~~429

3.6360

Total interest-bearing liabilities

170,~~962~~059

~~655~~632

1.5449

~~176~~178,~~974~~764

~~865~~851

1.9891

Noninterest-bearing demand deposits

106,~~361~~959

67,~~431~~563

Other noninterest-bearing liabilities

1,~~458~~685

1,~~285~~394

Total liabilities

~~182~~178,~~781~~703

~~184~~187,~~690~~721

Equity

4041,~~053~~271

3839,~~204~~279

Total liabilities and equity

~~222~~219,~~834~~974

~~222~~227,~~894~~000

Net interest income

2,~~224~~149

2,~~136~~094

Interest rate spread

4.0806

3.9575

Net interest margin

4.3429

4.2202

Average interest-earning assets toaverage interest-bearing liabilities

1.20

1.16

Average interest-earning assets to average interest-bearing liabilities

1.18

1.17


	For The Six Months Ended June 30,
	2012								2011
	Average			Interest and		Yield			Average			Interest and		Yield
	Balance			Dividends		Cost			Balance			Dividends		Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	163,813		$	5,171		6.33	%	$	176,127		$	5,484		6.28	%
Securities available for sale		31,074			468		3.02			23,293			449		3.89
Other interest-earning assets		8,297			21		0.51			7,494			14		0.38

Total interest-earning assets		203,184			5,660		5.59			206,914			5,947		5.80
Noninterest earning assets		18,375								18,351

Total average assets	$	221,559							$	225,265


Liabilities and equity:
Interest-bearing liabilities:
NOW and demand deposits	$	27,415			26		0.19		$	24,855			65		0.52
Regular savings and other deposits		16,877			20		0.24			16,794			44		0.53
Money market deposits		7,371			9		0.24			7,896			24		0.60
Certificates of deposit		76,039			494		1.30			80,513			730		1.83

Total interest-bearing deposits		127,702			549		0.86			130,058			863		1.34
FHLB advances and other borrowings		42,832			737		3.45			47,815			853		3.60

Total interest-bearing liabilities		170,534			1,286		1.51			177,873			1,716		1.95
Noninterest-bearing demand deposits		8,343								7,023
Other noninterest-bearing liabilities		1,582								1,333

Total liabilities		180,459								186,229
Equity		41,100								39,036

Total liabilities and equity	$	221,559							$	225,265


Net interest income				$	4,374							$	4,231

Interest rate spread							4.07	%							3.85	%
Net interest margin							4.32	%							4.12	%
Average interest-earning assets to average interest-bearing liabilities		1.19	X							1.16	X

Comparison of Operating Results for the Three Months Ended June 30, 2012 and 2011

General. We recorded net income of $76,000 for the three months ended June 30, 2012 compared to net income of $490,000 for the three months ended June 30, 2011. The decrease in net income was attributable to an increase in our provision for loan losses of $770,000, or 720.0%, which was partially offset by an increase in net interest income of $55,000, or 2.6%, resulting in an overall decrease in net interest income after the provision for loan losses of $715,000, or 36.0%.

Interest Income. Interest income decreased by $164,000 for the three months ended June 30, 2012 from $2.9 million for the three months ended June 30, 2011, reflecting a decrease in the yield on interest earning assets to 5.6% from 5.7% and a decrease in the average balance of interest earning assets to $200.9 million for the three months ended June 30, 2012 compared to $208.8 million for the three months ended June 30, 2011. The decrease in market interest rates contributed to the downward re-pricing of a portion of our existing assets and lower rates for new assets and the decrease in the average balance of interest earning assets primarily resulted from a decrease in loan demand from the three months ended June 30, 2011.

Interest income on loans decreased by $176,000 for the three months ended June 30, 2012 from $2.7 million for the three months ended June 30, 2011, reflecting a decrease in the average balance of our loans to $163.0 million for the three months ended June 30, 2012 from $175.2 million for the three months ended June 30, 2011, which offset the slight increase in the average yield on loans to 6.3% from 6.2% for the same periods ended. The decrease in the average balances of our loans reflects the continued decline in market demand.

~~Comparison~~Interest ofincome ~~Operating~~on ~~Results~~investment securities increased slightly to $232,000 for the ~~Three~~three ~~Months~~months ended ~~Ended~~June 30, ~~March~~2012 from $222,000 for the three months ended June 3130, 2011. The decrease in the yield on securities to 2.9% for the three months ended June 30, 2012 ~~and~~from 3.9% for the three months ended June 30, 2011 was more than offset by the increase in the average balance of securities of $8.7 million for the period.

~~General~~Interest Expense. Interest Weexpense ~~recorded~~decreased ~~net~~$219,000, ~~income~~or of25.7%, to $~~622~~632,000 for the three months ended ~~March~~June 3130, 2012 ~~compared~~from ~~to net income of~~ $~~523~~851,000 for the three months ended ~~March~~June 3130, 2011. The ~~increase~~decrease inreflected ~~net~~a ~~income~~decrease ~~was~~in ~~primarily~~the ~~attributable~~average torate anpaid ~~increase~~on indeposits ~~net~~and borrowings ~~interest~~to ~~income~~1.5% ~~after~~in ~~loan~~for ~~losses~~the ofthree ~~$53,000,~~months orended ~~2.6%~~June 30, ~~and~~2012 ~~increase~~from in1.9% ~~total~~for ~~noninterest~~the ~~income~~three ofmonths ~~$81,000,~~ended ~~or 41.3%~~June 30, 2011 and a ~~slight~~ decrease in ~~total~~the ~~noninterest~~average ~~expense~~balances of ~~$11,000,~~interest-bearing ordeposits 1and borrowings of $8.~~0%.~~7 million for the period.

Interest ~~Income.~~expense ~~Interest~~on ~~income~~ certificates of deposit decreased byto $~~122~~236,000 for the three months ended ~~March~~June 3130, 2012 from $~~3.0 million~~ 359,000 for the three months ended ~~March~~June 3130, 2011, reflecting a decrease in the ~~yield on interest earning assets to 5.6% from 5.9%, offsetting a slight increase in the~~ average ~~balance~~cost of ~~interest~~certificates ~~earning~~of ~~assets~~deposit to ~~$205~~1.53% ~~million~~ for the three months ended ~~March~~June 3130, 2012 compared towith ~~$205~~1.08% ~~million~~ for the three months ended ~~March~~June 3130, 2011. ~~The~~and ~~decrease~~a decrease in ~~market~~their ~~interest~~average ~~rates~~balances ~~contributed to the downward re-pricing~~ of a$5.5 ~~portion~~million ~~of our existing assets and lower rates~~ for ~~new~~the ~~assets~~period.

Interest ~~income~~expense on ~~loans~~NOW ~~decreased~~and demand deposits, along with savings ~~slightly~~deposits byand money market deposits decreased to $~~136~~27,000 for the three months ended ~~March~~June 3130, 2012 from $~~2.8~~63,000 ~~million~~ for the three months ended ~~March~~June 3130, 2011, reflecting a decrease in the average ~~balance~~cost of ~~our~~such ~~loans~~deposits to ~~$164~~0.621% ~~million~~ for the three months ended ~~March~~ June 3130, 2012 from ~~$177~~0.150% ~~million~~ for the three months ended ~~March~~June 3130, 2011, which offset the ~~slight~~ increase in the average ~~yield~~balance onof ~~loans~~such todeposits ~~6.4%~~of ~~from 6~~$1.3%7 million for the ~~same~~three ~~periods~~months ended. ~~The~~June 30, ~~decrease in the average balances of our loans reflects the continued decline in market demand~~2012.

Interest ~~income~~expense on ~~investment~~borrowings, ~~securities~~primarily ~~increased~~advances ~~slightly~~from the Federal Home Loan Bank, decreased to $~~236~~369,000 for the three months ended ~~March~~ June 3130, 2012 from $~~227~~429,000 for the three months ended ~~March~~June 3130, 2011., ~~The~~reflecting a decrease in the ~~yield~~average rate paid on ~~securities~~such borrowings to 3.15% ~~for the three months ended March 31, 2012~~ from 3.~~9% for the three months ended March 31, 2011 was more than offset by the increase in the average balance of securities of $~~6%.8 ~~million for the period.~~

Net Interest ~~Expense~~Income. ~~Interest~~Net ~~expense~~interest ~~decreased~~increased ~~$210,000,~~slightly ~~or 24.3%, to $655,000~~ for the three months ended ~~March~~June 3130, 2012 ~~from~~ ~~$865,000~~as ~~for~~compared to the ~~three~~same ~~months~~period ~~ended~~in ~~March 31~~2011, ~~2011.~~reflecting ~~The~~the ~~decrease~~increase ~~reflected a decrease~~ in ~~the~~our ~~average~~interest rate ~~paid on deposits and borrowings~~ spread to 14.51% in for the three months ended ~~March~~June 3130, 2012 from 23.08% for the three months ended ~~March~~ June 3130, 2011 and aan ~~decrease~~increase in ~~the~~our ~~average~~net ~~balances~~interest ofmargin ~~deposits~~to ~~and~~4.3% ~~borrowings~~from ~~of $6~~4.0% ~~million~~ for the ~~period~~same periods ended.

~~Interest~~Provision ~~expense~~for onLoan ~~certificates~~Losses. ofWe ~~deposit~~recorded ~~decreased~~a toprovision for loan losses of $~~258~~877,000 for the three months ended ~~March~~ June 3130, 2012 ~~from~~compared to $~~373~~107,000 for the three months ended ~~March~~June 3130, 2011,. ~~reflecting~~The aallowance ~~decrease~~for inloan ~~the~~losses ~~average~~was ~~cost~~$1.5 ofmillion, ~~certificates~~or 0.93%, of ~~deposit~~total loans at June 30, 2012 compared to $1.41 million, or 0.67% of total loans at December 31, 2011. The increase in our provision reflected net charge offs for the three months ended ~~March~~June 3130, 2012 of $604,000. We had $2.5 million in troubled debt restructurings at June 30, 2012 compared with 1$3.9%0 ~~for~~million ~~the~~at December 31, ~~three~~2011. ~~months~~Our ~~ended~~non-accrual ~~March~~loans increased to $3.6 million at June 30, 2012 from $1.6 million at December 31, 2011. ~~and~~The aincrease ~~decrease~~in the provision was partially due to an increase in substandard commercial real estate loans and ~~their~~the ~~average~~associated ~~balances~~credit ofrisk $3related to these loans.5 ~~million~~We used the same methodology in assessing the allowance for both periods. To the ~~period~~best of our knowledge, we have recorded all losses that are both probable and reasonably estimable for the three months ended June 30, 2012 and 2011.

~~Interest~~Noninterest ~~expense~~Income. onNoninterest ~~NOW~~income ~~and~~increased ~~demand deposits, along with savings deposits and money market deposits decreased~~ to $28200,000 for the three months ended ~~March~~June 3130, 2012 from $68184,000 for the three months ended ~~March~~June 3130, 2011,. ~~reflecting~~The aincrease ~~decrease~~in ofnoninterest ~~$2.5~~income ~~million~~was due to an increase in ~~the~~service ~~average~~charges ~~balance~~on deposit accounts of ~~such~~$9,000, ~~deposits~~an asincrease ~~well~~in income from bank asowned alife ~~decrease~~insurance inof ~~the~~$18,000, ~~average~~and ~~cost~~an ofincrease ~~such~~in ~~deposits~~other tononinterest ~~0.22%~~income ~~from~~of 0$6,000.~~56%.~~

~~Interest~~Noninterest ~~expense on borrowings, primarily advances~~Expense. ~~from~~Noninterest ~~the~~expense ~~Federal~~decreased ~~Home~~only ~~Loan~~slightly ~~Bank,~~by ~~decreased to~~ $~~369~~9,000 for the three months ended ~~March~~June 3130, 2012 ~~from~~over ~~$424,000 for~~ the three months ended ~~March~~June 3130, 2011. The increase reflected increases of salaries and employee benefits of $34,000, ~~reflecting~~occupancy aand equipment ~~decrease~~expenses of $19,000 and advertising of $11,000. These increases were offset partially by decreases in ~~the~~FDIC ~~average~~deposit ~~rate~~insurance ~~paid~~of $12,000 and a decrease in losses on ~~such~~sales ~~borrowings~~of toforeclosed ~~3.5%~~real ~~from~~estate 3of $99,000.~~6%.~~

~~Net~~Income ~~Interest~~Tax ~~Income~~Expense. ~~Net~~The ~~interest~~provision for income ~~increased~~taxes towas $~~2.2~~7,000 ~~million~~ for the three months ended ~~March~~June 3130, 2012 ~~from~~compared to $~~2.1~~283,000 ~~million~~ for the three months ended ~~March~~June 3130, 2011. ~~The~~Our ~~increase~~effective ~~reflected~~tax ~~an increase in our interest~~ rate ~~spread~~decreased to 48.143% for ~~the~~ three months ended ~~March~~June 3130, 2012 from 436.06% for the three months ended ~~March~~June 3130, 2011. ~~and an~~The ~~increase~~significant decline in ~~our~~ net ~~interest~~income ~~margin~~before totaxes with ~~4.3%~~the ~~from~~same ~~4.2%~~or increasing levels of tax exempt income was the primary factor for the ~~same~~decline ~~periods~~in the effective tax rate for the three months ended June 30, 2012.

~~Provision~~Comparison ~~for Loan Losses. We recorded a provision for loan losses~~ of ~~$127,000~~Operating ~~for~~Results ~~the three months ended March 31, 2012 compared to $92,000~~ for the ~~three~~Six ~~months~~Months ~~ended~~Ended ~~March~~June 3130, ~~2011. The allowance for loan losses was $1.2 million or 0.76% of total loans at March 31,~~ 2012 compared to $1.1 million, or 0.67% of total loans at December 31, 2011. The increase in our provision was attributed to an increase in the valuation allowance related to impaired loans of $188,000 for the three months ended March 31, 2012. We had $2.9 million in troubled debt restructurings at March 31, 2012 compared with $3.0 million at December 31, 2011. Our non-accrual loans decreased to $189,000 at March 31, 2012 from $1.5 million at December 31, 2011. Our foreclosed real estate decreased to $561,000 at March 31, 2012 from $1.5 million at December 31, 2011. We used the same methodology in assessing the allowance for both periods. To the best of our knowledge, we have recorded all losses that are both probable and ~~reasonably estimable for the three months ended March 31, 2012 and~~ 2011.

General. We recorded net income of $697,000 for the six months ended June 30, 2012 compared to net income of $1.0 million for the six months ended June 30, 2011. The decrease in net income was attributable to a modest increase in net interest income of $143,000, or 3.4%, which was more than offset by an increase in our provision for loan losses of $806,000, resulting in a decrease in net interest income after the provision for loan losses of $663,000 or 16.4%.

~~Noninterest~~Interest Income. ~~Noninterest~~Interest income ~~increased~~decreased toby $~~277~~287,000 for the ~~three~~ ~~months~~six months ended ~~March~~June 3130, 2012 from $~~196,000~~5.9 million for the ~~three~~six months ended ~~March~~June 3130, 2011., ~~The~~reflecting ~~increase~~a decrease in ~~noninterest~~the ~~income~~yield ~~was~~on ~~due~~interest earning assets to an5.6% ~~increase~~from in5.8% ~~service~~and ~~charges~~a ondecrease ~~deposit~~in ~~accounts~~the average balance of interest earning assets to $16203.2 million for the six months ended June 30,~~000~~ 2012 compared to $206.9 million for the six months ended June 30, an2011. ~~increase~~The ondecrease ~~gains~~in market interest rates contributed to the downward re-pricing of ~~sales~~a portion of our existing assets and lower ~~mortgage~~rates ~~loans~~for ofnew ~~$18,000,~~assets and anthe ~~increase~~decrease in ~~other~~the ~~noninterest~~average ~~income~~balance of ~~$47,000,~~interest ~~which~~earning ~~was~~assets primarily ~~attributed~~resulted tofrom ~~gains~~a ondecrease ~~sales~~in ofloan ~~foreclosed~~demand ~~real~~from ~~estate~~the ofsix ~~$50~~months ended June 30,~~000~~ 2011.

~~Noninterest~~Interest ~~Expense.~~income ~~Noninterest~~on ~~expense~~loans decreased ~~slightly~~ by $11313,000 for the ~~three~~six months ended ~~March~~June 3130, 2012 ~~over~~from $5.5 million for the ~~three~~six months ended ~~March~~ June 3130, 2011., ~~The~~primarily ~~decrease reflected~~reflecting a decrease in ~~professional~~the ~~and~~average ~~supervisory~~balance ~~fees~~ of ~~$60,000,~~our ~~offset~~loans ~~partially~~to by$163.8 anmillion ~~increase~~for onthe ~~losses~~six ofmonths ~~foreclosed~~ended ~~real~~June 30, ~~estate~~2012 offrom $35176.1 million for the six months ended June 30,~~000~~ ~~and~~2011. anThe ~~increase~~decrease in ~~salaries~~the ~~and~~average balances ~~employee~~of ~~benefits~~our ofloans ~~$27,000~~reflects the continued decline in market demand.

~~Income~~Interest ~~Tax~~income ~~Expense.~~on ~~The~~investment ~~provision~~securities ~~for~~increased slightly ~~income~~to ~~taxes was~~ $~~349~~468,000 for the ~~three~~six months ended ~~March~~June 3130, 2012 ~~compared~~from to $~~303~~449,000 for the ~~three~~six months ended ~~March~~June 3130, 2011. ~~Our~~The ~~effective~~decrease ~~tax~~in ~~rate~~the ~~decreased~~yield on securities to 353.90% for ~~three~~the six months ended ~~March~~June 3130, 2012 from 363.79% for the ~~three~~six months ended ~~March~~June 3130, 2011 was more than offset by the increase in the average balance of securities of $7.8 million for the period.

Interest Expense. Interest expense decreased $430,000, or 25.1%, to $1.3 million for the six months ended June 30, 2012 from $1.7 million for the six months ended June 30, 2011. The decrease reflected a decrease in the average rate paid on deposits and borrowings to 1.5% in for the six months ended June 30, 2012 from 2.0% for the six months ended June 30, 2011 and a decrease in the average balances of interest-bearing deposits and borrowings of $7.4 million for the period.

Interest expense on certificates of deposit decreased to $494,000 for the six months ended June 30, 2012 from $730,000 for the six months ended June 30, 2011, reflecting a decrease in the average cost of certificates of deposit to 1.3% for the six months ended June 30, 2012 compared with 1.8% for the six months ended June 30, 2011 and a decrease in their average balances of $4.5 million for the period.

Interest expense on NOW and demand deposits, along with savings deposits and money market deposits decreased to $55,000 for the six months ended June 30, 2012 from $133,000 for the six months ended June 30, 2011, reflecting a decrease of $2.1 million in the average balance of such deposits as well as a decrease in the average cost of such deposits to 0.21% from 0.54%.

Interest expense on borrowings, primarily advances from the Federal Home Loan Bank, decreased to $737,000 for the six months ended June 30, 2012 from $853,000 for the six months ended June 30, 2011, reflecting a decrease in the average rate paid on such borrowings to 3.5% from 3.6%.

Net Interest Income. Net interest income increased to $4.4 million for the six months ended June 30, 2012 from $4.2 million for the six months ended June 30, 2011. The increase reflected an increase in our interest rate spread to 4.1% for the six months ended June 30, 2012 from 3.9% for the six months ended June 30, 2011 and an increase in our net interest margin to 4.3% from 4.1% for the same periods ended.

Provision for Loan Losses. We recorded a provision for loan losses of $1.0 million for the six months ended June 30, 2012 compared to $199,000 for the six months ended June 30, 2011. The allowance for loan losses was $1.5 million, or 0.93%, of total loans at June 30, 2012 compared to $1.1 million, or 0.67% of total loans at December 31, 2011. The increase in our provision reflected net charge offs for the six months ended June 30, 2012 of $604,000. We had $2.5 million in troubled debt restructurings at June 30, 2012 compared with $3.0 million at December 31, 2011. Our non-accrual loans increased to $3.6 million at June 30, 2012 from $1.5 million at December 31, 2011. We used the same methodology in assessing the allowance for both periods. To the best of our knowledge, we have recorded all losses that are both probable and reasonably estimable for the three months ended June 30, 2012 and 2011.

Noninterest Income. Noninterest income increased to $425,000 for the six months ended June 30, 2012 from $382,000 for the six months ended June 30, 2011. The increase in noninterest income was due to an increase in service charges on deposit accounts of $21,000, an increase in income from bank owned life insurance of $17,000, and an increase in gains on sales of mortgage loans of $15,000, offset partially by a decrease in other noninterest income of $10,000.

Noninterest Expense. Noninterest expense decreased by $73,000 for the six months ended June 30, 2012 over the six months ended June 30, 2011. The decrease reflected a decrease in professional and supervisory fees of $78,000, a decrease in FDIC deposit insurance of $12,000 and a decrease in losses on foreclosed real estate of $113,000. These decreases were offset partially by increases in salaries and employee benefits of $62,000 and occupancy and equipment expense of $21,000.

Income Tax Expense. The provision for income taxes was $357,000 for the six months ended June 30, 2012 compared to $586,000 for the six months ended June 30, 2011. Our effective tax rate decreased to 33.9% for six months ended June 30, 2012 from 36.3% for the six months ended June 30, 2011.

Liquidity and Capital Resources

Our primary sources of funds are deposits and the proceeds from principal and interest payments on loans and investment securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally manage the pricing of our deposits to be competitive within our market and to increase core deposit relationships.

Liquidity management is both a daily and long-term responsibility of management. We adjust our investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and investment securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning overnight deposits, federal funds sold, and short and intermediate-term U.S. Government sponsored agencies and mortgage-backed securities of short duration. If we require funds beyond our ability to generate them internally, we have additional borrowing capacity with the Federal Home Loan Bank of Atlanta. At ~~March~~June 3130, 2012, we had $42.0 million in advances from the Federal Home Loan Bank of Atlanta and an available borrowing limit of an additional $4644.86 million.

Common Stock Dividend Policy. During the ~~quarter~~six ~~ended~~months ~~March 31~~ended, ~~2011,~~ the Company declared a dividend of $0.0816 per share, or $~~125~~410,000 on all outstanding shares,. ~~except~~The ~~for~~determination ~~1,007,012~~ of ~~the~~future ~~1,382,012~~dividends ~~shares of~~ on the Company’s common stock ~~held~~will ~~by Cullman~~depend ~~Savings Bank, MHC. The OTS granted the Cullman Savings Bank, MHC a waiver~~ on ~~payment~~conditions ofexisting ~~the~~at ~~dividend on~~ that ~~portion of the shares~~time. ~~No future dividend waivers are expected to be granted by the Federal Reserve Bank, the regulatory body now responsible for mutual holding companies.~~

The determination of future dividends on the Company’s common stock will depend on conditions existing at that time.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosures of quantitative and qualitative market risk are not required by smaller reporting companies, such as the Company.

ITEM 4.

CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures.

An evaluation as of the end of the period covered by this quarterly report was carried out under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures,” which are defined under SEC rules as controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

b) Changes in Internal Control over Financial Reporting.

The Company’s management, including the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the quarterly period covered by this report and has concluded that there was no change during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

ITEM 1.

LEGAL PROCEEDINGS

The Company and its subsidiaries are subject to various legal actions that are considered ordinary routine litigation incidental to the business of the Company, and no claim for money damages exceeds ten percent of the Company’s consolidated assets. In the opinion of management, based on currently available information, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s results of operations.

ITEM 1A.

RISK FACTORS

Disclosures of risk factors are not required by smaller reporting companies, such as the Company.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Not applicable.

(b)

Not applicable.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

MINE SAFETY DISCLOSURES

~~NONE~~None

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed on the “Index to Exhibits” immediately following the Signatures.

2930

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Cullman Bancorp, Inc.

Date: ~~May~~August 78, 2012

/s/ John A. Riley III John A. Riley III President & Chief Executive Officer /s/ Michael Duke Michael Duke Senior Vice President and Chief Financial Officer

~~/s/~~31 ~~Michael Duke Michael Duke Senior Vice President and Chief Financial Officer~~

INDEX TO EXHIBITS

Exhibit number		Description
31.1		Certification of John A. Riley III, President and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2		Certification of Michael Duke, Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32		Certification of John A. Riley III, President and Chief Executive Officer, and Michael Duke, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following materials from the Cullman Bancorp, Inc. Form 10-Q for the quarter ended ~~March~~June 3130, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the ~~Condensed~~ Consolidated Statements of Income and Comprehensive Income, (ii) the ~~Condensed~~ Consolidated Balance Sheets, (iii) ~~Condensed~~ Consolidated Statements of Cash Flows and (iv) ~~related~~Consolidated ~~notes~~Statements of Shareholders Equity, ~~tagged~~and as(v) ~~blocks~~Notes ofto ~~text~~the Consolidated Financial Statements.

3132

Large accelerated filer

Accelerated filer

Non-accelerated file

Smaller reporting company

Filing Compare · Cullman Bancorp, Inc.