EX-99.1 2 a5262966ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Third Quarter Earnings Up 9% at Annapolis Bancorp Despite Mounting Margin Pressure ANNAPOLIS, Md.--(BUSINESS WIRE)--Nov. 1, 2006--Annapolis Bancorp, Inc. (NASDAQ:ANNB), parent company of BankAnnapolis, today announced net income of $740,000 ($0.18 per basic and diluted share) for the third quarter of 2006, a 9.1% increase over third quarter 2005 net income of $678,000 ($0.17 per basic and $0.16 per diluted share). Year-to-date earnings improved by 7.8%, with net income totaling $2.12 million ($0.52 per basic and $0.50 per diluted share) compared to $1.97 million ($0.49 per basic and $0.47 per diluted share) for the nine months ended September 30, 2005. Total assets for the Company reached $332.5 million at September 30, 2006, an increase of $27.6 million or 9.0% from $304.9 million at December 31, 2005. Total assets grew by $8.7 million or 2.7% in the third quarter. Year-to-date growth in total assets was funded by $20.6 million in new deposit and repurchase agreement balances, a $5.0 million short-term floating rate advance from the Federal Home Loan Bank, and $2.1 million in retained earnings. Most of the deposit growth came in money market accounts (up $8.1 million or 14.1%) and certificates of deposit (up $9.4 million or 11.0%). NOW account balances also rose by $3.6 million or 9.4%, while savings accounts dipped by $3.2 million or 17.3%. The loan portfolio grew by $13.1 million or 6.4% in the first nine months of 2006. Real estate lending accounted for all of the growth, with residential and commercial mortgage loan balances rising by $16.5 million or 13.7% while construction loans declined by $2.5 million or 9.8%, installment loans fell by $0.8 million or 4.0%, and commercial loans dropped by $0.2 million or 0.5%. The remaining asset growth came in cash and investments, with federal funds sold balances swelling by $13.5 million or 397.1%, and investment securities increasing by $1.4 million or 1.9%. In the third quarter, total gross loans declined by $2.0 million or 0.9% from levels reported at June 30, 2006. Deposit growth of $11.2 million was invested in securities (up $8.5 million or 12.9%) and federal funds sold (up $2.2 million or 15.0%). In the three months ended September 30, 2006, average interest-earning assets grew to $307.9 million from $298.1 million in the third quarter of 2005, with total interest income improving by $747,000 or 16.8%. The yield on average earning assets increased to 6.68% in the quarter just ended compared to 5.91% in the same period of 2005. The yield on average earning assets was 6.61% in the second quarter of this year. Average interest-bearing liabilities increased to $260.7 million in the third quarter from $253.2 million in the same period last year due primarily to higher money market account balances. Total interest expense increased by $665,000 or 43.3% as the Company's cost of average interest-bearing liabilities climbed to 3.35% from 2.41% in the third quarter of 2005. The cost of average interest-bearing liabilities was 3.05% in the second quarter of this year. Third quarter net interest income rose by $82,000 or 2.8%, with the net interest margin declining to 3.85% from 3.87% in the third quarter of 2005. "After rising to 4.20% in the first quarter of this year, the net interest margin has been negatively impacted by the flattened yield curve, which has narrowed spreads between short-term and long-term interest rates," said Richard M. Lerner, Chairman and CEO. "Rising rates have caused depositors to migrate toward higher yielding products such as our indexed money market account and certificates of deposit. That, combined with intense local competition for retail deposits, has exerted immense upward pressure on our cost of funds," said Lerner. "Our yield on assets has not risen commensurately because loan demand has softened and approximately half of our year-to-date asset growth has been invested in lower-yielding federal funds sold and investment securities." With stable asset quality and no third quarter growth in the loan portfolio, the bank did not record a provision for credit losses in the period just ended. After net charge-offs of $43,000 in the third quarter, the allowance for credit losses stood at $2,013,000 or 0.92% of total gross loans compared to 0.98% of total gross loans at December 31, 2005. Nonperforming assets of $0.9 million accounted for 0.40% of total gross loans at quarter-end, and the allowance for credit losses provided 232.3% coverage of nonperforming assets. At September 30, 2006, total stockholders' equity amounted to $23.2 million, up 10.5% from $21.0 million at year-end 2005. Book value per share at the end of the third quarter was $5.68. In the quarter just ended, noninterest income fell by $90,000 or 16.7% as fees earned on brokered mortgage loans fell by $78,000 or 73.6% compared to the third quarter of last year. Noninterest expense held steady in the third quarter, with increases in compensation and occupancy expense offset by decreases in professional fees, data processing expense and depreciation. BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through seven community banking offices located in Anne Arundel and Queen Anne's Counties in Maryland. The bank's headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Annapolis Mall. Certain statements contained in this release, including without limitation, statements containing the words "believes," "plans," "expects," "anticipates," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Annapolis Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005 ($000) (Unaudited) September 30, December 31, 2006 2005 ------------- ------------- Assets Cash and due $ 8,542 $ 9,603 Federal funds sold 16,856 3,400 Investments 75,283 73,902 Loans, net of allowance 215,644 202,568 Acc int rec 1,598 1,423 Def inc taxes 1,094 1,128 Premises and equip 9,258 8,550 Investment in BOLI 3,739 3,638 Other assets 480 704 ------------- ------------- Total Assets $ 332,494 $ 304,916 ============= ============= Liabilities and Stockholders' Equity Deposits Noninterest bearing $ 43,247 $ 43,448 Interest bearing 225,160 206,501 ------------- ------------- Total deposits 268,407 249,949 Sec under agree to repurchase 15,116 12,986 Other borrowed funds 20,000 15,000 Junior subordinated debentures 5,000 5,000 Acc int & acc exp 781 1,022 ------------- ------------- Total Liabilities 309,304 283,957 Stockholders' Equity Common stock 41 41 Paid in capital 13,261 13,171 Retained Earnings 10,982 8,858 Comprehensive loss (1,094) (1,111) ------------- ------------- Total Equity 23,190 20,959 Total Liabilities and Equity $ 332,494 $ 304,916 ============= ============= Annapolis Bancorp, Inc. and Subsidiaries Consolidated Statements of Income for the Three and Nine Month Periods Ended September 30, 2006 and 2005 (Unaudited) (In thousands, except per share data) For the Three Months For the Nine Months Ended September 30, Ended September 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Interest Income Loans $ 4,144 $ 3,570 $ 11,822 $ 10,493 Investments 760 648 2,260 1,697 Federal funds sold 283 222 402 416 ----------- ----------- ----------- ----------- Total int inc 5,187 4,440 14,484 12,606 Interest expense Deposits 1,721 1,156 4,429 3,004 Sec sold under agree to repurch 148 82 377 199 Borrowed funds 221 212 573 629 Junior debentures 110 85 309 236 ----------- ----------- ----------- ----------- Total int exp 2,200 1,535 5,688 4,068 Net int inc 2,987 2,905 8,796 8,538 Prov for credit losses - 73 12 293 ----------- ----------- ----------- ----------- Net int inc after prov 2,987 2,832 8,784 8,245 NonInterest Income Service charges 297 314 882 910 Mortgage banking 28 106 124 255 Other fee income 125 120 350 349 Loss on sale of securities - - (23) - ----------- ----------- ----------- ----------- Total nonint inc 450 540 1,333 1,514 NonInterest Expense Personnel 1,349 1,327 3,858 3,781 Occ and equip 305 280 857 836 Data processing exp 203 228 623 671 Other operating exp 457 473 1,383 1,360 ----------- ----------- ----------- ----------- Total Nonint Exp 2,314 2,308 6,721 6,648 Income before taxes 1,123 1,064 3,396 3,111 Income tax expense 383 386 1,272 1,141 ----------- ----------- ----------- ----------- Net income $ 740 $ 678 $ 2,124 $ 1,970 =========== =========== =========== =========== Basic EPS $ 0.18 $ 0.17 $ 0.52 $ 0.49 =========== =========== =========== =========== Diluted EPS $ 0.18 $ 0.16 $ 0.50 $ 0.47 =========== =========== =========== =========== Book value per share $ 5.68 $ 4.98 $ 5.68 $ 4.98 =========== =========== =========== =========== Avg fully diluted shares 4,220,174 4,219,374 4,217,080 4,207,727 =========== =========== =========== =========== Annapolis Bancorp, Inc. and Subsidiaries Financial Ratios and Average Balance Highlights (In thousands) For the Three Months For the Nine Months Ended September 30, Ended September 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Performance Ratios (annualized) Return on average assets 0.90% 0.85% 0.91% 0.86% Return on average equity 12.94% 13.37% 13.00% 13.48% Average equity to average assets 6.92% 6.32% 6.99% 6.39% Net interest margin 3.85% 3.87% 4.03% 3.99% Efficiency ratio 67.33% 67.00% 66.43% 66.14% Other Ratios Allow for credit losses to loans 0.92% 1.01% 0.92% 1.01% Nonperforming to gross loans 0.40% 1.57% 0.40% 1.57% Net charge-offs to avg loans 0.02% 0.04% 0.01% 0.05% Tier 1 capital ratio 12.7% 11.9% 12.7% 11.9% Total capital ratio 13.6% 12.8% 13.6% 12.8% Average Balances Assets 327,702 318,258 312,378 305,831 Earning assets 307,936 298,137 292,101 286,247 Loans, gross 218,183 207,664 212,341 210,662 Interest Bearing Liabilities 260,715 253,155 246,554 242,709 Stockholders' Equity 22,693 20,124 21,839 19,533 CONTACT: Annapolis Bancorp, Inc. Richard M. Lerner, 410-224-4455