Annapolis Bancorp Inc. Reports Operating Results (10-Q)

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Aug 13, 2010
Annapolis Bancorp Inc. (ANNB, Financial) filed Quarterly Report for the period ended 2010-06-30.

Annapolis Bancorp Inc. has a market cap of $15.7 million; its shares were traded at around $4 with a P/E ratio of 12.8 and P/S ratio of 0.7. Annapolis Bancorp Inc. had an annual average earning growth of 18.6% over the past 10 years.

Highlight of Business Operations:

period in 2009. For the six month periods ended June 30, 2010 and 2009 the Bank recorded provisions of $599,000 and $5.0 million, respectively. The aggregate provision was based upon the results of quarterly evaluations using a combination of factors including the level of nonperforming loans, the Banks growth in total gross loans and the Banks net credit loss experience. Total gross loans, including loans held for sale, decreased by $5.6 million for the six months ended June 30, 2010. For the same period the Bank recorded charge-offs of $1.8 million, which included one loan for $1.0 million, on loans deemed uncollectible and recovered $24,000 on previously charged-off loans. As of June 30, 2010, the Banks allowance for credit losses was $6.8 million or 2.45% of total loans and 64.4% of nonperforming loans as compared to $7.9 million, or 2.81% of total loans and 47.2% of nonperforming loans as of December 31, 2009.

The $12.7 million in nonperforming assets at June 30, 2010 included $9.5 million in nonaccrual loans, $1.0 million in loans delinquent 90 days or more and $2.1 million in other assets. Of the $10.5 million in nonaccrual and loans delinquent 90 days or more at June 30, 2010, $7.7 million were secured by real estate, $2.2 million were commercial loans and $624,000 were consumer and other loans. At December 31, 2009 assets classified as nonperforming totaled $19.3 million and consisted of $16.8 million in nonaccrual loans and loans delinquent 90 days or more and $2.5 million in other assets. Included in the $16.8 million of nonaccrual and loans delinquent 90 days or more was $9.5 million of loans secured by real estate, $6.7 million of commercial and $517,000 of consumer and other loans.

The Company continued to strategically lower total assets ending the quarter at $431.7 million as of June 30, 2010 compared to $444.3 million at December 31, 2009. Total assets decreased $12.6 million or 2.8% for the six months ended June 30, 2010. Loan demand continued to be soft in the second quarter, with gross loans, including loans held for sale decreasing $5.6 million or 2.0% from $282.0 million at December 31, 2009 to $276.4 million at June 30, 2010. The decrease resulted primarily from the sale of $1.5 million (net of new loans originated) of mortgage loans held for sale, the payoff of $3.5 million of commercial and real estate loans and the $1.0 million charge-down of a commercial term loan. Contributing to the decrease in assets, the Company used low yielding federal funds sold to pay down $5.0 million of higher priced Federal Home Loan Bank convertible debt.

General. The Company recorded net income of $1.1 million for the six months ended June 30, 2010, compared to a net loss of $2.3 million, for the six months ended June 30, 2009. Net income available to common shareholders for the six months ended June 30, 2010 was $814,000 or $0.21 per basic and diluted common shares compared to a net loss of $2.5 million or ($0.65) per basic and diluted shares available to common shareholders for the six months ended June 30, 2009. Net interest income increased by $1.4 million or 22.4% for the six months ended June 30, 2010 compared to the same period in 2009. The provision for credit losses decreased $4.4 million from $5.0 million for the six months ended June 30, 2009 to $599,000 for the six months ended June 30, 2010.

Interest Income. Total interest income decreased $64,000 or 0.6% for the six months ended June 30, 2010 compared to the same period in 2009 as a result of lower yields on real estate loans and investment securities. Income on the loan portfolio increased $123,000 for the six months ended June 30, 2010 to $8.0 million from $7.9 million for the six months ended June 30, 2009 due in part to an increase in average loan balances of $6.4 million and the recognition of income from several loans previously classified as nonaccrual that had either been paid off or returned to performing status as of June 30, 2010. The yield, however, on the loan portfolio decreased to 5.83% for the six months ended June 30, 2010 from 5.88% for the six months ended June 30, 2009. Contributing to the lower interest income was a decrease in income on investments as the yield on the investment portfolio decreased to 4.01% from 4.80% on balances $12.5 million higher on average over the same period in 2009.

Interest Expense. Total interest expense decreased by $1.5 million or 36.7% for the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The decrease was due to reducing the yields on the Companys Superior Savings product and other interest-bearing accounts. The Companys savings product had an average balance of $142.2 million for the six months ended June 30, 2010 and a yield of 1.09% compared to an average balance of $141.5 million and a yield of 2.18% for the six months ended June 30, 2009. Contributing to the decrease in interest expense was the lower yields of all other deposit products, primarily money market accounts and certificates of deposit and the lower yields on repurchase agreements and junior subordinated debt. The average rate of interest paid on all interest-bearing liabilities was 1.42% for the six months ended June 30, 2010 compared to 2.18% for the six months ended June 30, 2009. Interest expense on long-term borrowings and junior subordinated debentures was $669,000 for the six months ended June 30, 2010 compared to $727,000 for the six months ended June 30, 2009, a decrease of $58,000. The decrease was a result of the lower yield of the trust preferred securities decreasing to 3.47% for the six months ended June 30, 2010 compared to 4.52% for the same period in 2009.

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