-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ET22+2Nr75J/RTZ/3ekrazoCFO/Dsa2PvW6KcRx2IJYNH4IGKWV6DszObnlGZaU8 V6krAALtyyKbVlJg947D2A== 0000928385-02-001855.txt : 20020507 0000928385-02-001855.hdr.sgml : 20020507 ACCESSION NUMBER: 0000928385-02-001855 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANNAPOLIS NATIONAL BANCORP INC CENTRAL INDEX KEY: 0001041429 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 521648903 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22961 FILM NUMBER: 02635952 BUSINESS ADDRESS: STREET 1: 1000 BESTGATE ROAD CITY: ANNAPOLIS STATE: MD ZIP: 21401 BUSINESS PHONE: 4102244455 MAIL ADDRESS: STREET 1: 1000 BESTGATE ROAD CITY: ANNAPOLIS STATE: MD ZIP: 21401 10QSB 1 d10qsb.txt FORM 10QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-QSB QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2002 Commission File Number 0-22961 --------------- -------
ANNAPOLIS BANCORP, INC. ---------------------- (Exact name of small business issuer as specified in its charter) Maryland 52-1595772 -------- ---------- (State or other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1000 Bestgate Road, Annapolis, Maryland 21401 --------------------------------------------- (Address of principal executive offices) (410) 224-4455 -------------- (Issuer's telephone number, including area code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. (1) YES X NO ---------- -------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At May 7, 2002, the Registrant had 3,008,195 shares of Common Stock outstanding. Transitional Small Business Disclosure Format YES NO X ---------- -------- TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE - ------------------------------ ---- Item 1 - Consolidated Financial Statements Balance Sheets as of March 31, 2002 and December 31, 2001 1 Statements of Income for the Three Month Periods Ended March 31, 2002 and 2001 2 Statements of Cash Flows for the Three Month Periods Ended March 31, 2002 and 2001 3 Statement of Changes in Stockholders' Equity for the Three Month Periods Ended March 31, 2002 and 2001 4 Notes to Consolidated Financial Statements 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 6-8 PART II - OTHER INFORMATION - --------------------------- Item 1 - Legal Proceedings 9 Item 2 - Changes in Securities 9 Item 3 - Defaults Upon Senior Securities 9 Item 4 - Submission of Matters to a Vote of Security Holders 9 Item 5 - Other Information 9 Item 6 - Exhibits and Reports on Form 8-K 9, 11 SIGNATURES........................................................................... 10
This Report contains statements, which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements appear in a number of places in this Report and include all statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) the Company's financing plans; (ii) trends affecting the Company's financial condition or results of operations; (iii) the Company's growth strategy; and (iv) the declaration and payment of dividends. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, including but not limited to: changes in interest rates, deposit flows, cost of funds and demand for financial services; general economic conditions; legislative and regulatory changes; changes in tax policies, rates and regulations of federal, state and local tax authorities; and changes in accounting principles, policies and guidelines. Actual results may differ materially from those projected in the forward-looking statements as a result of various factors discussed herein and those factors discussed in the Company's filings with the Securities and Exchange Commission. PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Annapolis Bancorp, Inc. and Subsidiary Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001 (In thousands)
(Unaudited) (Audited) March 31, December 31, 2002 2001 ------------------ ------------------ Assets Cash and due from banks $ 5,124 $ 3,632 Federal funds sold and other overnight investments 12,746 13,710 Investment securities available for sale 25,111 28,637 Federal Reserve Bank stock, at cost 358 358 Loans, less allowance for credit losses of $1,550 and $1,576 123,141 111,347 Premises and equipment 7,306 7,375 Accrued interest receivable 780 855 Deferred income taxes 410 335 Other assets 526 432 ----------------- ----------------- Total assets $ 175,502 $ 166,681 ================= ================= Liabilities and Stockholders' Equity Deposits Noninterest-bearing $ 27,141 $ 23,721 Interest-bearing 124,969 121,163 ----------------- ----------------- Total deposits 152,110 144,884 Securities sold under agreements to repurchase 8,994 7,674 Accrued interest and other liabilities 520 263 ----------------- ----------------- Total liabilities 161,624 152,821 Stockholders' Equity Common stock - $0.01 par value 30 30 Capital surplus 12,845 12,796 Retained earnings 948 833 Accumulated other comprehensive income 55 201 ----------------- ----------------- Stockholders' equity 13,878 13,860 Total liabilities and stockholders' equity $ 175,502 $ 166,681 ================= =================
1 Annapolis Bancorp, Inc. and Subsidiary Consolidated Statements of Income for The Three Month Periods Ended March 31, 2002 and 2001 (Unaudited) (In thousands, except Per Share data)
2002 2001 ------------------ ------------------ Interest income: Loans $ 2,153 $ 2,191 Investment securities 348 493 Federal funds sold and overnight investments 36 91 ----------------- ----------------- Total interest income 2,537 2,775 Interest expense: Interest-bearing deposits 791 1,081 Securities sold under agreements to repurchase 56 46 ----------------- ----------------- Total interest expense 847 1,127 ----------------- ----------------- Net interest income 1,690 1,648 Provision for credit losses - - ----------------- ----------------- Net interest income after provision for credit losses 1,690 1,648 Noninterest income: Service charges and fees 175 165 Mortgage banking fees 53 29 Other fee income 91 46 ---------------- ---------------- Total noninterest income 319 240 Noninterest expense: Personnel 961 895 Occupancy and equipment 225 214 Other operating expenses 602 548 ----------------- ----------------- Total noninterest expense 1,788 1,657 Income before income taxes 221 231 Income tax expense 76 79 ----------------- ----------------- Net income $ 145 $ 152 ================= ================= Basic Earnings Per Share* $ 0.05 $ 0.05 ================= ================= Diluted Earnings Per Share* $ 0.05 $ 0.05 ================= =================
*2001 results reflects the effect of the four for three stock split in the form of a stock dividend that occurred on August 24, 2001. 2 Annapolis Bancorp, Inc. and Subsidiary Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 2002 and 2001 (Unaudited and in thousands)
------------------------------- 2002 2001 ------------- -------------- Cash flows from operating activities: Net income $ 145 $ 152 Adjustments to reconcile net income to net cash provided by operating activities Deferred income taxes 75 21 Depreciation and amortization of furniture, Equipment and leasehold improvements 110 73 Amortization of premiums and accretions of discounts, net 3 (36) Decrease in accrued interest receivable 75 176 Loans charged-off, net 26 - Directors fees 20 - Other, net 42 41 ------------- -------------- Net cash provided by operating activities 504 427 Cash flows from investing activities: Net (increase) decrease in loans (11,783) (7,359) Purchases of investment securities - available-for-sale (2,000) (6,965) Proceeds from redemption of securities and principal repayments 5,303 17,180 Net (decrease) increase in federal funds sold 964 (11,446) Purchase of furniture, equipment and leasehold improvements (41) (1,146) ------------- -------------- Net cash used in investing activities (7,557) (9,736) Cash flows from financing activities: Net increase in deposits 7,226 9,651 Net increase in securities sold under agreements to repurchase 1,320 1,901 Proceeds from stock options exercised 29 - Stock repurchase - (128) Payment of dividends (30) (23) ------------- -------------- Net cash provided by financing 8,545 11,401 ------------- -------------- Net increase in cash and due from banks 1,492 2,092 Cash and due from banks, beginning of period 3,632 3,177 ------------- -------------- Cash and due from banks, end of period $ 5,124 $ 5,269 ============= ============== Supplemental cash flow information: Interest paid on deposits and repurchase agreements $ 820 $ 1,119 Income taxes paid $ 58 $ 120
3 Annapolis Bancorp, Inc. and Subsidiary Consolidated Statements of Changes in Stockholders' Equity for the Three Month Periods Ended March 31, 2002 and 2001 (Dollars in thousands)
Accumulated Common Stock Other --------------------------------- Retained Comprehensive Comprehensive Shares Par Value Surplus Earnings Income Total Income ----------- ---------- ---------- ------------ --------------- ----------- ------------ Balance, January 1, 2002 2,996,629 $ 30 $12,796 $ 833 $ 201 $ 13,860 Net income --- --- --- 145 --- 145 $ 145 Dividends paid ($0.01 per share) (30) (30) Stock options exercised 8,799 49 49 Issuance of restricted stock 2,667 Unrealized gain on investment securities available for sale, net of tax --- --- --- --- (146) (146) (146) ----------- ---------- ---------- ------------ --------------- ----------- ------------ Balances, March 31, 2002 (unaudited) 3,008,095 $ 30 $12,845 $ 948 $ 55 $ 13,878 $ (1) =========== ========== ========== ============ =============== =========== ============ Accumulated Common Stock Other --------------------------------- Retained Comprehensive Comprehensive Shares Par Value Surplus Earnings Income Total Income ----------- ---------- ---------- ------------ --------------- ----------- ------------ Balance, January 1, 2001 2,262,406 $ 23 $12,881 $ 425 $ 33 $ 13,362 Net income --- --- --- 152 --- 152 $ 152 Dividends paid ($0.01 per share) (23) (23) Stock repurchase (24,500) (1) (127) (128) Unrealized gain on investment securities available for sale, net of tax --- --- --- --- 45 45 45 ----------- ---------- ---------- ------------ -------------- ----------- ------------ Balances, March 31, 2001 (unaudited) 2,237,906 $ 22 $12,754 $ 554 $ 78 $ 13,408 $ 197 =========== ========== ========== ============ ============== =========== ============
4 Annapolis Bancorp, Inc. and Subsidiary Notes to Consolidated Financial Statements (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Annapolis Bancorp, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all the information and footnotes required for complete financial statements. In the opinion of management, all adjustments and reclassifications that are normal and recurring in nature and are considered necessary for fair presentation have been included. Operating results for the three month period ended March 31, 2002, are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. These unaudited consolidated financial statements should be read in conjunction with Form 10-KSB which includes the consolidated financial statements and footnotes for the year-ended December 31, 2001. Certain reclassifications, including offsetting commission expenses against mortgage broker fees, have been made to amounts previously reported to conform with the classifications made in 2002. Note B - Business The Company was incorporated on May 26, 1988, under the laws of the State of Maryland to serve as a bank holding company. Effective November 1, 2000 the Bank changed its charter from a national charter to a state charter and joined the State of Maryland and the Federal Reserve banking systems. Also effective November 1, 2000 the Bank changed its name from Annapolis National Bank to BankAnnapolis. The bank holding company changed its name from Annapolis National Bancorp, Inc. to Annapolis Bancorp, Inc. effective June 1, 2001. The Company (as a bank holding company) and the Bank are subject to governmental supervision, regulation, and control. Note C - New Accounting Pronouncement In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and Statement No. 142, "Goodwill and Other Intangible Assets". Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS No. 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The adoption of SFAS No. 141 effective June 30, 2001 and SFAS No. 142 effective January 1, 2002 had no impact on the financial position or results of operations of the Company. 5 In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which supersedes both SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 retains the fundamental provisions in SFAS No. 121 for recognizing and measuring impairment losses in long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS No. 121. The provisions of SFAS No. 144 are effective for years beginning after December 15, 2001, and its adoption had no effect on the financial position or results of operations of the Company. Item 2 - Management Discussion and Analyses of Financial Condition and Results of Operation Comparison of Financial Condition at March 31, 2002 and December 31, 2001 Total assets at March 31, 2002 were $175.5 million, an increase of $8.8 million or 5.3% from total assets at December 31, 2001 of $166.7 million. Federal funds sold and other overnight investments and securities-available for sale decreased $4.5 million or 10.5%, the proceeds of which were used to fund loan growth. Net loans receivable at March 31, 2002 were $123.1 million, up from $111.3 million at December 31, 2001, an increase of $11.8 million or 10.6%. The increase resulted from an $8.3 million increase in real estate and construction loans, a $2.0 million increase in commercial loans and a $1.5 million increase in consumer and installment loans. The allowance for credit losses decreased $26,000 to $1,550,000 at March 31, 2002 from $1,576,000 at December 31, 2001. The decrease in the allowance is attributed to a charge-off of $31,000 offset by recoveries on loans previously charged off of $5,000. Management makes periodic provisions to the allowance for credit losses to maintain the allowance at an acceptable level commensurate with management's assessment of the credit risk inherent in the loan portfolio. At March 31, 2002 and December 31, 2001 the allowance for credit losses to total loans was 1.24% and 1.40% respectively and provides 720.2% coverage of nonperforming assets. Deposits of $152.1 million at March 31, 2002 represent a $7.3 million or 5.0% increase from December 31, 2001 deposits of $144.8 million. The increase was due to a $7.9 million or a 9.5% increase in core deposits which include DDAs, NOW accounts, savings and money markets offset by a decrease of $600,000 or 1.0% decrease in IRAs and certificates of deposit. 6 Comparison of Operating Results for the Three Months Ended March 31, 2002 and 2001. General. Net income for the three months ended March 31, 2002 totaled $145,000 or $0.05 per basic and diluted share as compared to $152,000 or $0.05 per basic and diluted share (adjusted to reflect the four-for-three stock split in the form of a dividend that took place on August 24, 2001) for the three months ended March 31, 2001. Net interest income improved by $42,000 for 2002 while noninterest income of $319,000 increased by $79,000. Offsetting these improvements was an increase in noninterest expense of $131,000. The Bank recorded no provision for credit losses during the quarters ended March 31, 2002 or 2001. Interest Income. Interest income decreased $238,000 as a result of lower interest rates on higher average levels of loans. Also contributing to the decrease in interest income was a decrease in the yield on the investment portfolio dropping to 5.12% for the three months ended March 31, 2002 compared to 6.68% for the same period in 2001. Interest Expense. Interest expense decreased by $280,000 or 24.8% for the three months ended March 31, 2002 compared to the three months ended March 31, 2001. This decrease was due primarily to a drop in the average rate of the certificates of deposit portfolio to 4.23% from 5.80% for the three months ended March 31, 2002 compared to the same period in 2001. Net Interest Income. Net interest income after provision for credit losses increased $42,000 or 2.5% for the three months ended March 31, 2002 compared to the three months ended March 31, 2001. The improvement was due primarily to an increase in the volume of all loans aided by lower deposit costs on all products except repurchase agreements. At March 31, 2002, the net interest margin decreased to 4.42% from 5.17% at March 31, 2001. The decrease in the net interest margin was the result of lower yields on loans due to the decrease in prime. The yield on earning assets decreased to 6.64% at March 31, 2002 from 8.70% at March 31, 2001 while the cost of interest bearing liabilities decreased to 2.68% at March 31, 2002 from 4.15% at March 31, 2001. Provision for Credit Losses. The Bank recorded no provision for credit losses for the three months ended March 31, 2002 and 2001. The Bank recorded a charge-off of $31,000 on a loan deemed uncollectable and recovered $5,000 of previously charged off loans. Noninterest Income. Noninterest income, which is comprised primarily of fees and charges on deposit accounts, increased by $79,000 or 33.0% to $319,000 at March 31, 2002 from $240,000 at March 31, 2001. The increase in non-interest income was due to increased mortgage broker fees, and rental income from leasing space at the Bank's headquarters building. Noninterest Expense. Noninterest expense increased by $131,000 or 7.9% for the three months ended March 31, 2002 to $1.8 million from $1.7 million. The increase in noninterest expense was due to higher compensation costs of $66,000 due to higher benefit costs and training expenses. Data Processing costs increased by $27,000 due to higher deposit and loan volumes while marketing expense increased $10,000. 7 Income Tax Expense. The Company recorded income tax expense for the three-month period ended March 31, 2002 of $76,000. This amount includes $76,000 of federal income taxes and zero state taxes. The Company's combined effective federal and state income tax rate is approximately 34.3% for the three months ended March 31, 2002 versus 34.2% for the three months ended March 31, 2001. USA Patriot Act of 2001 On October 26, 2001, the USA PATRIOT (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism) Act of 2001 (the "Act") became law. The Act, passed in response to the September 11 tragedy, includes several money laundering and banking provisions that significantly impact financial institutions, the most important of which is the requirement for all financial institutions to develop anti-money laundering programs. The Treasury Department is still releasing additional regulations that will further define the requirements of financial institutions under the Act. 8 PART II - OTHER INFORMATION Item 1 - Legal Proceedings Neither the Company nor the Bank is involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition of the Company and the Bank. Item 2 - Changes in Securities None Item 3 - Defaults Upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Certificate of Incorporation of Annapolis National Bancorp, Inc.* 3.2 Bylaws of Annapolis National Bancorp, Inc.* 3.3 Articles of Incorporation of BankAnnapolis** 3.4 Bylaws of BankAnnapolis** 11 Statement re: Computation of Earnings Per Share (b) Reports on Form 8-K None *Incorporated by reference to Registration Statement on Form SB-2, as amended, Commission File Number 333-29841, originally filed with the Securities and Exchange Commission on September 23, 1997. **Incorporated by reference to Form 10-KSB Annual Report for the fiscal year ended December 31, 2000, Commission File Number 0-22961, filed with the Securities and Exchange Commission on March 28, 2001. 9 SIGNATURES ---------- In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ANNAPOLIS BANCORP, INC. (Registrant) Date: 5/7/02 /s/ Richard M. Lerner ----------- ------------------------------- Richard M. Lerner Chief Executive Officer Date: 5/7/02 /s/ Margaret Theiss Faison ----------- --------------------------------- Margaret Theiss Faison Chief Financial Officer 10 EX-11 3 dex11.txt EXHIBIT 11 EXHIBIT 11 ---------- Statement re: Computation of Earnings Per Share (In thousands, except Earnings per Share Adjusted for the four for three stock split in the form of a stock dividend that took place on August 24, 2001)
Three Months Ended March 31, March 31, 2002 2001 --------- --------- Net income $ 145 $ 152 Average Shares Outstanding 2,997 2,997 Basic Earnings Per Share $ 0.05 $ 0.05 Net income $ 145 $ 152 Average Shares Outstanding before the effect of options 2,997 2,997 Effect of Options 20 -- Average Shares Outstanding including options 3,017 2,997 Diluted Earnings Per Share $ 0.05 $ 0.05
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