<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter year ended March 31, 1995
------------------------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-10971
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ABIGAIL ADAMS NATIONAL BANCORP, INC.
- - - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1508198
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(State or other jurisdiction of (I.R.S. Employer ID No.)
Incorporation or organization)
1627 K Street, N.W. Washington, D.C. 20006
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(Address of principal executive officers) (Zip code)
N / A
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Former name, address, and fiscal year, if changes since last report
Indicate by check 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 the number of shares outstanding of each of the issuer's
classes of common stock as of May 8, 1995.
284,844 shares of Common Stock, Par Value $10/share.
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PART I.
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ITEM 1 - FINANCIAL STATEMENTS
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The information furnished herewith reflects all adjustments which are,
in the opinion of management, necessary to a fair statement of the results for
the interim periods presented. All adjustments are of a normal and recurring
nature. Certain reclassifications have been made to amounts previously
reported in 1994 to conform with the 1995 presentation.
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 1995 and 1994 and December 31, 1994
<TABLE>
<CAPTION>
March 31 March 31 December 31,
1995 1994 1994
---- ---- ----
Assets (unaudited) (unaudited)
- - - - ------------------------------
<S> <C> <C> <C>
Cash and due from banks $ 4,073,412 $ 5,247,142 $ 4,349,250
Short-term investments:
Federal funds sold and securities purchased
under agreements to resell 3,975,000 5,025,000 1,300,000
Interest bearing deposits in other banks 490,715 490,715 490,715
------------------------------------------------
Total short-term investments 4,465,715 5,515,715 1,790,715
Securities available for sale 5,520,812 10,995,274 6,009,025
Investments securities (market value of $8,836,148,
$5,815,803 and $8,838,874 at March 31, 1995,
March 31, 1994 and December 31, 1994, respectively) 8,911,113 5,744,584 9,080,778
Loans held for sale -- 111,446 --
Loans: 58,920,594 56,546,554 60,729,437
Less: Allowance for loan losses (1,290,313) (1,470,963) (1,289,562)
------------------------------------------------
57,630,281 55,075,591 59,439,875
Bank premises and equipment 342,757 345,365 369,218
Other real estate owned -- -- --
Other assets 1,286,258 1,409,097 1,221,580
------------------------------------------------
Total assets $82,230,348 $84,444,214 $82,260,441
================================================
Liabilities
- - - - ------------------------------
Demand deposits 16,798,411 17,686,594 19,677,159
NOW accounts 9,429,915 13,655,605 10,381,478
Money market deposit accounts 18,703,312 15,968,832 17,850,822
Savings deposits 1,125,675 1,152,916 1,225,538
CD's $100,000 and over 14,413,240 15,293,101 13,651,233
CD's under $100,000 14,445,064 11,893,294 12,507,272
------------------------------------------------
Total deposits 74,915,617 75,650,342 75,293,502
Federal funds purchased and securities sold
under agreements to repurchase 547,905 1,457,620 360,708
Long-term debt -- capital note 260,750 307,500 260,750
Other liabilities 542,777 895,044 583,211
------------------------------------------------
Total liabilities 76,267,049 78,310,506 76,498,171
Stockholders' Equity
- - - - ------------------------------
Common stock, par value, $10 per share,
authorized 800,000 shares;
issued 286,404; outstanding 284,844 2,864,040 2,864,040 2,864,040
Surplus 3,291,973 3,291,973 3,291,973
Retained earnings (deficit) (100,424) 9,349 (284,646)
------------------------------------------------
6,055,589 6,165,362 5,871,367
Less: Treasury Stock, 1,560 shares at cost (28,710) (28,710) (28,710)
Unrealized loss on securities, net of taxes (63,580) (2,944) (80,387)
------------------------------------------------
Total stockholders' equity 5,963,299 6,133,708 5,762,270
------------------------------------------------
Total liabilities and stockholders' equity $82,230,348 $84,444,214 $82,260,441
================================================
</TABLE>
2
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three Months Ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest income:
- - - - ------------------------------
Interest and fees on loans $1,418,178 $1,163,657
Interest and dividends on investment securities:
U.S. Treasury 18,004 --
Obligations of U.S. government agencies 110,816 67,130
Mortgage-backed securities 0 15,008
Other 11,496 2,267
--------------------------
Total interest and dividends on investment securities 140,316 84,405
Interest on securities available/held for sale:
U.S. Treasury 45,956 70,079
Obligations of U.S. government agencies 41,289 63,219
--------------------------
87,245 133,298
Interest on federal funds sold 18,904 20,671
Interest on deposit with other banks 5,837 3,809
--------------------------
Total interest income 1,670,480 1,405,840
Interest expense
- - - - ------------------------------
Interest on deposits:
NOW 70,655 64,484
Money market deposit accounts 205,839 109,916
Savings deposits 7,719 6,863
CD's $100,000 and over 178,362 125,597
CD's under $100,000 158,990 86,930
--------------------------
621,565 393,790
Interest on Federal funds purchased and securities
sold under agreements to repurchase 26,147 10,135
Interest on other borrowings 5,113 --
Interest on subordinated note 3,911 4,755
--------------------------
Total interest expense 656,736 408,680
--------------------------
Net interest income 1,013,744 997,160
Provision for loan losses 0 75,000
--------------------------
Net interest income after provision for loan losses 1,013,744 922,160
</TABLE>
3
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three Months Ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Other income:
- - - - ------------------------------
Service charges on deposit accounts 179,753 172,575
Other fees and commissions 11,878 28,465
----------------------------
Total other income 191,631 201,040
Other expense:
- - - - ------------------------------
Salaries and employee benefits 414,145 418,592
Net occupancy expense 185,494 183,168
Professional fees 92,419 89,264
Data processing fees 64,632 64,219
Other operating expense 194,586 245,830
----------------------------
Total other expense 951,276 1,001,073
----------------------------
Income before taxes 254,099 122,127
Income tax expense 69,877 12,264
----------------------------
Net income $184,222 $109,863
============================
Earnings per share:
- - - - ------------------------------
Net income per share $0.65 $0.39
============================
Average shares outstanding 284,844 284,844
============================
</TABLE>
4
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
For the Three Months Ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
Unrealized Loss
Additional Retained on Securities
Common Paid-in Earnings Treasury Available
Stock Capital (Deficit) Stock For Sale Total
----- ------- --------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $2,864,040 $3,291,973 ($100,514) ($28,710) --- $6,026,789
Net income --- --- 109,863 --- --- $109,863
Unrealized loss on securities,
net of taxes --- --- --- --- (2,944) ($2,944)
--------------------------------------------------------------------------------------------
Balance, March 31, 1994 $2,864,040 $3,291,973 $9,349 ($28,710) ($2,944) $6,133,708
============================================================================================
Balance, January 1, 1995 $2,864,040 $3,291,973 ($284,646) ($28,710) (80,387) $5,762,270
Net income --- --- 184,222 --- --- 184,222
Unrealized gain on securities,
net of taxes 16,807 16,807
--------------------------------------------------------------------------------------------
Balance, March 31, 1995 $2,864,040 $3,291,973 ($100,424) ($28,710) ($63,580) $5,963,299
============================================================================================
</TABLE>
5
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
Operating Activities ---- ----
- - - - ------------------------------
<S> <C> <C>
Net income $184,222 $109,863
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses -- 75,000
Depreciation and amortization on bank premises & equipment 40,617 36,618
Loss sale of other real estate -- 11,516
Accretion of loan discounts (5,774) (448)
Amortization and accretion of discounts and premiums on investment securities 7,698 8,475
Increase in other assets (64,679) (378,429)
Decrease in other liabilities (66,459) (233,269)
----------------------------
Net cash provided (used) by operating activities 95,625 (370,674)
Investing Activities
- - - - ------------------------------
Proceeds from repayment and maturity of investment securities 150,000 150,000
Proceeds from repayment of mortgage-backed securities 28,583 110,000
Proceeds from repayment and maturity of securities available for sale 2,088,400 --
Purchase of investment securities -- (1,000,000)
Purchase of securities available for sale (1,588,400) --
Principal collected on loans 4,140,085 1,002,363
Loans originated (2,729,731) (2,460,233)
Loans acquired from FDIC as receiver for other banks -- (493,086)
Net decrease in short-term loans (24,031) 133,891
Net increase in lines of credit 443,475 60,529
Purchase of bank premises and equipment (14,156) (42,872)
Proceeds from disposition of other real estate -- 716,984
----------------------------
Net cash provided (used) by investing activities 2,494,225 (1,822,424)
Financing Activities
- - - - ------------------------------
Net increase in transaction and savings deposits (3,077,684) 2,277,424
Proceeds from issuance of time deposits 13,860,339 9,583,817
Payments for maturing time deposits (11,160,540) (8,667,176)
Net increase in Federal funds purchased 187,197 1,262,730
Payments on long-term debt -- (9,500)
----------------------------
Net cash provided (used) by financing activities (190,688) 4,447,295
----------------------------
Increase in cash & cash equivalents 2,399,162 2,254,197
Cash and cash equivalents at beginning of period 5,649,250 8,017,945
----------------------------
Cash and cash equivalents at end of period $8,048,412 $10,272,142
============================
Supplementary disclosures:
Interest paid on deposits and borrowings $629,244 $568,539
============================
Income taxes paid $0 $436,250
============================
</TABLE>
6
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PART I. FINANCIAL INFORMATION (CONTINUED)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Analysis of Financial Condition
Total assets of Abigail Adams National Bancorp, Inc. and subsidiary
(the "Company") were $82,230,000 at March 31, 1995 as compared to $82,260,000
at December 31, 1994 and $84,444,000 at March 31, 1994. Total assets at March
31, 1995 decreased by $30,000 from December 31, 1994, while short-term
investments increased by $2,675,000 and loans and securities decreased by
$2,467,000. Total deposits of $74,916,000 at March 31, 1995 decreased by
$378,000, or less than 1%, from $75,294,000 at December 31, 1994.
The loan portfolio at March 31, 1995 of $58,921,000 decreased by
$1,808,000, or 3%, over the December 31, 1994 balance of $60,729,000. New
loans of approximately $2,730,000 were originated in the first quarter of 1995,
however loan principal payments more than offset this increase. The loan to
deposit ratio of 79% at March 31, 1995 is up from 75% at March 31, 1994 and
down from 81% at December 31, 1994. On average, the loan to deposit ratio for
the first quarter of 1995 was 82% as compared to 78% for the comparable 1994
period, due largely to strong loan growth experienced in late 1994.
The Company accounts for its securities in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (SFAS No. 115). SFAS No. 115 requires that upon
the purchase of debt and marketable equity securities, the Company must
classify the securities into one of three categories: trading, available for
sale or held to maturity. Trading securities are bought and held principally
for the purpose of selling them in the near term and are reported at fair
value, with unrealized gains and losses included in earnings. Held to maturity
securities are those securities in which the Company has the ability and the
intent to hold the security until maturity and are reported at amortized cost.
All other securities not included in trading or held to maturity are classified
as available for sale and are reported at fair value, with the unrealized gains
and losses, net of taxes, reported as a separate component of shareholders'
equity. The available for sale portfolio exists to maintain adequate liquidity
and to provide a base for executing asset/liability management strategy. The
value of available for sale securities fluctuates based on changes in interest
rates and other factors. Generally an increase in interest rates will result
in a decline in the value of securities available for sale, while a decline in
interest rates will result in an increase in the value of such securities.
Therefore, the value of securities available for sale and the Company's
shareholders' equity is subject to fluctuation based on changes in interest
rates. Unrealized gains in the available for sale portfolio at March 31, 1995
were approximately $2,000, net of taxes. Unrealized losses, net of taxes, at
March 31, 1995 on
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<PAGE> 9
securities previously classified as available for sale in early 1994 which were
subsequently reclassified to held to maturity were $66,000. For the period
ended March 31, 1995, unrealized gains, net of taxes, were $16,800.
Securities available for sale totaling $2,088,000 matured during the
first quarter of 1995 as compared to purchases of $1,588,000 during the same
period. These securities transactions, coupled with scheduled amortization and
accretion for the quarter, account for the $488,000 decrease in the available
for sale portfolio from $6,009,000 at December 31, 1994 to $5,521,000 at March
31, 1995. The long-term investment portfolio of $8,911,000 at March 31, 1995
decreased by $170,000, or 2%, from December 31, 1994 due principally to normal
paydowns on mortgage-backed securities.
Short-term investments increased by $2,675,000 to $4,466,000 at March
31, 1995 from $1,791,000 at December 31, 1994 due principally to normal
fluctuations in the Company's liquidity.
Cash and due from banks of $4,073,000 at March 31, 1995 decreased by
$276,000 from the December 31, 1994 balance of $4,349,000 due primarily to
variations in the level of balances maintained at correspondent banks.
Other assets of $1,286,000 at March 31, 1995 reflect an increase of
$65,000, or 5% from the $1,222,000 balance reported at December 31, 1994. This
increase is principally due to increases in accrued interest receivable.
Total deposits of $74,916,000 at March 31, 1995 decreased by $378,000,
or less than 1%, from the December 31, 1994 balance of $75,294,000. Demand
deposits of $16,798,000 at March 31, 1995 reflect a $2,879,000, or 15%,
decrease over the balance at December 31, 1994 due in large part to normal
fluctuations in large business demand deposit accounts. Normal fluctuations in
the deposit accounts of one large national organization account for the
$951,000 decrease in NOW accounts of $9,430,000 at March 31, 1995 as compared
to $10,381,000 one year earlier. Money market accounts of $18,703,000 at March
31, 1995 increased by $852,000 during the same period. Certificates of deposit
at March 31, 1995 of $28,858,000 increased by $2,700,000 over the $26,159,000
balance at December 31, 1994 with 72% of the increase in certificates of
deposit under $100,000. The increase in certificates of deposit under $100,000
from December 31, 1994 to March 31, 1995 is principally due to the issuance of
approximately $3,500,000 in brokered certificates of deposit during the first
quarter of 1995. During 1994, certificates of deposit under $100,000 were
issued to custodial accounts for pension funds. As a result of the interest
rate increases experienced in 1994 and early 1995, approximately $1,500,000 of
these deposits have been withdrawn in the first quarter of 1995 prior to the
contractual maturity of the certificate of deposit.
Average noninterest-bearing demand deposits for the first quarter of
1995 of $16,591,000 decreased by $761,000, or 4%, from the comparable 1994
period, while average interest-bearing deposits grew by $1,790,000, or 3%,
during the same period to $55,951,000 for the first quarter
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of 1995. On average, all interest-bearing deposit categories showed growth
except for certificates of deposit $100,000 and over, which decreased by
$1,952,000, or 12%, to $14,034,000 for the first quarter of 1995. Despite the
decrease in average demand deposits during the first quarter of 1995 as
compared to the first quarter of 1994, average noninterest-bearing deposits to
average total deposits represents 23% for 1995 as compared to 24% one year
earlier.
Results of Operations
The Company recorded net income of $184,000 for the first three months
of 1995, as compared to $110,000 for the comparable 1994 period. This increase
of over 67% in net income occurred despite an increase in the Company's
effective tax rate to 27.5% in 1995 from 10% in 1994. A $50,000 decrease in
other operating expenses coupled with a $75,000 decrease in the loan loss
provision during the first quarter of 1995 as compared to the prior year
contributed to the increase in net income.
Net interest income, the most significant component of the Company's
earnings, increased by $17,000, or 2%, to $1,014,000 for the first quarter of
1995 as compared to $997,000 for the comparable 1994 period. Average earning
assets for the first quarter of 1995 increased by approximately 2% over the
comparable 1994 period and the average loan to deposit ratio for 1995 increased
to 82% from 78% the prior year, indicating a more effective utilization of
earning assets. However a 156 basis point increase in the average cost of
interest-bearing deposits coupled with a $761,000 decrease in average demand
deposits caused a negative impact on the Company's net interest income. These
factors resulted in a 34 basis point decrease in the net interest spread from
the first quarter of 1994 to 4.31% for the first quarter of 1995. The net
interest margin remained unchanged at 5.39% for both the first quarter of 1995
and 1994.
As a result of improvement in the quality of the loan portfolio, the
Company did not record a provision for loan losses during the first quarter of
1995, while a $75,000 provision was recorded during the first quarter of 1994.
While the Company continues to recognize the risk characteristics of the loan
portfolio, including specific reserves for problem credits and general reserves
for the overall loan portfolio, the Company deems the allowance for loan losses
of $1,290,000 at March 31, 1995 to be adequate. The allowance for loan losses
as a percentage of outstanding loans was 2.19% at March 31, 1995 as compared to
2.12% at December 31, 1994 and 2.60% at March 31, 1994. While this ratio at
March 31, 1995 has declined from one year earlier, nonperforming assets of
$2,415,000 at March 31, 1995 have declined by $801,000, or 25%, from one year
earlier. Of the $2,415,000 nonperforming asset balance at March 31, 1995,
$767,000 represents the guaranteed portion of loans insured by the Small
Business Administration ("SBA") which were on nonaccrual status. Banking
regulations require that the full balance of these loans be placed on
nonaccrual status, despite the SBA guarantee on a portion of the loan. When
the guaranteed portion of these loans is excluded from the nonperforming assets
balance for both years, nonperforming assets at March 31, 1995 and 1994 are
$1,647,000 and $1,681,000, respectively. The ratio of nonperforming loans
(adjusted to
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<PAGE> 11
exclude SBA guaranteed portions) to gross loans at March 31, 1995 is 2.80% down
from 2.97% one year earlier.
Total other income of $192,000 for the first quarter of 1995 decreased
by $9,000 from the $201,000 reported for the first quarter of 1994. While
service charges on deposits increased by $7,000 to $180,000 for the first
quarter of 1995, other fees decreased by $17,000 during the same period,
principally due to a reduction in mortgage loan origination fees on loans
originated for sale.
Total other expenses for the first quarter of 1995 of $951,000
decreased by $50,000, or 5%, from $1,001,000 for the comparable 1994 period.
Salaries and benefits for the first quarter of 1995 reflect a $4,000, or 1%,
decrease over the comparable 1994 period, while net occupancy expense increased
by $2,000, or 1% during the same period. The majority of the $50,000 decrease
is primarily attributable to decreases in telephone, stationery and supplies
and branch-related losses. In addition, during the first quarter of 1994, the
Company recorded a $12,000 loss on the sale of property recorded as other real
estate owned at December 31, 1993. During April 1995, the Company made an
initial payment of $20,000 to its investment advisor in connection with the
sale of the Company's stock. Upon final consummation of the sale of the
Company's stock, the Company will make an additional payment of approximately
$45,000 to its investment advisor. (See Analysis of "Liquidity and Capital
Resources" for a further discussion of issues relating to the Company's
ownership.)
Based on the financial results for the first quarter of 1995, as well
as earnings projections for the remainder of the year, the Company has recorded
tax expense of $70,000 using an effective tax rate of 27.5%. This effective
tax rate of 27.5% is used instead of the statutory rate of 40.77% as a result
of reductions in the deferred tax asset valuation allowance in existence at the
beginning of the year. Should actual financial results for subsequent quarters
differ materially from projections, the Company's effective tax rate for 1995
will change accordingly.
Liquidity and Capital Resources
Principal sources of liquidity are cash and unpledged assets that can
be readily converted into cash, including investment securities maturing within
one year, the available for sale security portfolio and short-term loans. In
addition to $8,539,000 in cash and short-term investments at March 31, 1995,
the Company has a securities portfolio which can be pledged to raise additional
deposits and borrowings, if necessary. At March 31, 1995, the Company had
$3,889,000 in unpledged securities which were available for such use. This
compares with cash and short-term investments of $10,763,000 and unpledged
securities of $3,849,000 at March 31, 1994 and cash and short-term investments
of $6,140,000 and unpledged securities of $2,738,000 at December 31, 1994. As
a percentage of total assets, the amount of these cash equivalent assets at
March 31, 1995, March 31, 1994 and December 31, 1994 was 15%, 17% and 11%,
respectively. The Bank's liquidity needs are mitigated by the sizeable base of
relatively stable funds which includes demand deposits, NOW and money market
accounts, savings deposits and
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<PAGE> 12
nonbrokered certificates of deposit under $100,000 (excluding such certificates
of deposit issued to financial institutions) representing 76% of the average
deposit base for both the first quarter of 1995 and 1994. In addition, the
Bank has lines of credit from correspondent financial institutions which can
provide up to an additional $1,000,000 in liquidity. The Bank is also a member
of the Federal Home Loan Bank of Atlanta (the "FHLB"), which serves as a
reserve or central bank for member institutions within its region. Based on
the Bank's purchase of approximately $250,000 of stock in the FHLB, the Bank is
eligible to borrow up to approximately $1,200,000 in funds from the FHLB
collateralized by loans secured by first liens on one to four family,
multifamily and commercial mortgages as well as investments securities. The
Bank is eligible to increase the maximum amount to be borrowed by $6,869,000
with the purchase of up to $1,357,000 of additional stock in the FHLB. The
Bank has drawn on borrowings from the FHLB during the first quarter of 1995,
however no borrowings were outstanding at March 31, 1995. The Company has
adequate resources to meet its liquidity needs.
During April 1995, Citibank, N.A. (the beneficial owner of
approximately 71% of the Company's common stock) entered into a definitive
agreement to sell its stock holdings to a group of investors. Based on a
Schedule 13D filing with the Securities and Exchange Commission, the
composition of the investment group will maintain the Company's status as a
women-owned financial institution. Assuming regulatory approval of this
investment group, the Company will be able to maintain approximately $5,300,000
in deposits and other borrowings which have been placed in the Bank as a result
of its status as a minority business enterprise.
Under the risk-based capital guidelines issued by the Federal Reserve
Board and the Comptroller of the Currency, total capital consists of core
capital (Tier 1) and supplementary capital (Tier 2). For the Company and the
Bank, Tier 1 capital consists of stockholders' equity, excluding unrealized
gains and losses on securities, and Tier 2 capital consists of long-term debt
and a portion of the allowance for loan losses. Assets include items both on
and off the balance sheet, with each item being assigned a "risk-weight" for
the determination of the ratio of capital to risk-adjusted assets. These
guidelines require a minimum of 8% total capital to risk-adjusted assets, with
at least 4% being in Tier 1 capital. At March 31, 1995, the Company's total
risk-based capital ratio and Tier 1 capital ratio of 11.15% and 9.79%,
respectively, met the regulatory definition of "well capitalized." Under
regulatory guidelines, an institution is generally considered
"well-capitalized" if it has a total risk-based capital ratio of 10% or
greater, a Tier 1 capital ratio of 6% or greater and a leverage ratio of 5% or
greater (discussed below). The March 31, 1995 ratios are based on Tier 1
capital of $6,027,000, total capital of $6,863,000 and risk-adjusted assets of
$61,563,000. At March 31, 1995, the Bank's total risk-based capital ratio and
Tier 1 capital ratio of 11.02% and 9.66%, respectively, also met the regulatory
definition of "well-capitalized." The 1995 ratios for the Bank are based on
Tier 1 capital of $5,950,000, total capital of $6,787,000 and risk-adjusted
assets of $61,590,000.
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The Federal Reserve Board and the Comptroller of the Currency have
also adopted a minimum leverage ratio of Tier 1 capital to total assets which
is intended to supplement the risk-based capital guidelines. The minimum Tier
1 leverage ratio is 3% for the most highly rated institutions which meet
certain standards. For other banks and bank holding companies, the guidelines
provide that the Tier 1 leverage ratio should be at least 1% to 2% higher. At
March 31, 1995, the Company's and the Bank's Tier 1 leverage ratio based on
annual average assets of $81,322,000 and $81,178,000, were 7.41% and 7.33%,
respectively, meeting the regulatory definition of "well-capitalized."
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PART II. OTHER INFORMATION
- - - - --------------------------------------------------------------------------------
ITEM 1 - LEGAL PROCEEDINGS
- - - - --------------------------------------------------------------------------------
See "Item 5 - Other Events - Legal Proceedings."
- - - - --------------------------------------------------------------------------------
ITEM 2 - CHANGES IN SECURITIES
- - - - --------------------------------------------------------------------------------
See "Item 5 - Other Events - Adoption of Amendment to Shareholder
Rights Plan."
- - - - --------------------------------------------------------------------------------
ITEM 5 - OTHER EVENTS
- - - - --------------------------------------------------------------------------------
Citibank Agreement, Proposed Tender Offer for Minority Shares and Adoption of
First Amendment to Rights Agreement
The Company has been advised that on April 21, 1995, Citibank, N.A.
("Citibank") and Marshall T. Reynolds ("Reynolds") entered into a Stock
Purchase Agreement, pursuant to which Citibank has agreed to sell Reynolds and
certain permitted assignees of Reynolds, 203,038 shares of the Company's common
stock, par value $10.00 per share ("Common Stock"), representing approximately
71% of the shares of Common Stock outstanding. The shares currently are held
by Citibank under a pledge agreement as collateral for a bank loan made by
Citibank to certain third parties. The completion of the sale of the shares is
contingent upon, among other requirements, the approval of the acquisition by
the appropriate bank regulatory authorities. Under the terms of the Stock
Purchase Agreement, consummation of the sale of the shares must occur no later
than July 21, 1995, or under certain circumstances, 30 days thereafter.
In anticipation of the entry by Citibank and Reynolds into the Stock
Purchase Agreement, the Company and Reynolds entered into an agreement, dated
as of April 20, 1995 (the "Agreement"), pursuant to which Reynolds has agreed
that, if the purchase of the shares of Common Stock from Citibank is completed,
he will within 20 business days thereafter commence a tender offer to purchase,
at a purchase price of $21.00 per share, any or all of the outstanding shares
of Common Stock not purchased from Citibank (the "Tender Offer").
13
<PAGE> 15
The Board of Directors of the Company has received from Baxter
Fentriss and Company an opinion that an offer of $21.00 per share of Common
Stock is fair, from a financial point of view, to the stockholders of the
Company. On the basis of this opinion and its own evaluation of the
circumstances of the prospective acquisition by Reynolds and his permitted
assignees of a majority interest in the Company, the Board of Directors has
determined that the Tender Offer will provide adequate protection for, and will
serve to maximize the value of the Company for the benefit of, the remaining
stockholders. Accordingly, on April 20, 1995, the day preceding the entry by
Citibank and Reynolds into the Stock Purchase Agreement, the Company and The
First National Bank of Maryland, as Rights Agent, entered into a First
Amendment to Rights Agreement, amending the Rights Agreement, dated as of April
12, 1994, to exclude the execution, delivery or performance of the Stock
Purchase Agreement or the announcement, initiation, conduct or completion of
the Tender Offer as events that would cause the Company's outstanding Common
Stock Purchase Rights to become exercisable, thereby removing the Rights
Agreement as an impediment to the transactions contemplated by the Stock
Purchase Agreement and to the Tender Offer.
Legal Proceedings
A condition of consummation of the Stock Purchase Agreement requires
that litigation in the Chancery Court of the State of Delaware between the
Company and its directors and Citibank regarding the adoption of the Rights
Agreement by the Company (Citibank , N.A. v. Abigail Adams National Bancorp,
Inc., et al. Del. Ch. C.A. No. 13464) ("Citibank litigation") be terminated
with prejudice. Further, it requires that both the Company and the Bank enter
into mutual releases with Citibank in which each releases the other, and their
respective directors, officers, employees and agents, from all claims relating
to the efforts of Citibank to dispose of the Shares.
A further condition of consummation of the Stock Purchase Agreement
requires that National Bancshares, Inc. ("NBI"), which had previously entered
into negotiations with Citibank for the purchase of Citibank's 71% stock
holdings in the Company, execute absolute and unconditional releases of any and
all claims NBI has or may have against Citibank, the Company, the Bank,
Reynolds, and their respective directors, officers, employees and agents,
provided that such parties each execute a similar release in favor of NBI. NBI
has entered into an agreement with Citibank pursuant to which it is obligated
to deliver such a release.
14
<PAGE> 16
- - - - --------------------------------------------------------------------------------
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- - - - --------------------------------------------------------------------------------
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- - - - ----------- ----------------------
<S> <C>
4.1 First Amendment to Rights Agreement dated April 20, 1995, between the Company and The First
National Bank of Maryland, as Rights Agent. (1)
10.1 Agreement dated as of April 20, 1995, between the Company and Marshall T. Reynolds.(2)
27 Financial Data Schedule
99.1 Press Release of Abigail Adams National Bancorp, Inc. dated April 21, 1995. (3)
</TABLE>
(b) On April 21, 1995, the Company filed a report on Form 8-K (earliest
event reported April 20, 1995) reporting the Citibank Stock Purchase
Agreement with Marshall T. Reynolds for the sale of Common Shares of
the Company owned by Citibank as pledgee, the execution of an
agreement between the Company and Reynolds pursuant to which Reynolds
shall commence a tender offer to purchase any or all of the
outstanding shares of Common Stock not purchased from Citibank and the
adoption of a First Amendment to the Rights Agreement, amending the
Rights Agreement to exclude the execution, delivery or performance of
the Stock Purchase Agreement or the announcement, initiation, conduct
or completion of the Tender Offer as events that would cause the
Company's outstanding Common Stock Purchase Rights to become
exercisable (see "Item 5 - Other Events - Citibank Agreement, Proposed
Tender Offer for Minority Shares and Adoption of First Amendment to
Rights Agreement").
- - - - ------------------------------------------------------
(1) Incorporated by reference to Exhibit 4 of the Company's
Amendment No. 1 to the Registration Statement on Form 8-A/A
dated April 21, 1995, filed April 21, 1995.
(2) Incorporated by reference to Exhibit 1 of the Company's
Current Report on Form 8-K dated April 21, 1995, filed April
21, 1995.
(3) Incorporated by reference to Exhibit 2 of the Company's
Current Report on Form 8-K dated April 21, 1995, filed April
21, 1995.
15
<PAGE> 17
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
ABIGAIL ADAMS NATIONAL BANCORP, INC.
------------------------------------
Registrant
Date: May 12, 1995 /s/ Barbara Davis Blum
-------------- -----------------------------------
Barbara Davis Blum
Chairwoman of the Board,
President and Director
(Principal Executive Officer)
Date: May 12, 1995 /s/ Kimberly J. Levine
-------------- -----------------------------------
Kimberly J. Levine
Senior Vice President & Treasurer
(Principal Financial and
Accounting Officer)
16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,073,412
<INT-BEARING-DEPOSITS> 490,715
<FED-FUNDS-SOLD> 3,975,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,520,812
<INVESTMENTS-CARRYING> 8,911,113
<INVESTMENTS-MARKET> 8,836,148
<LOANS> 58,920,594
<ALLOWANCE> (1,290,313)
<TOTAL-ASSETS> 82,230,348
<DEPOSITS> 74,915,617
<SHORT-TERM> 547,905
<LIABILITIES-OTHER> 542,777
<LONG-TERM> 260,750
<COMMON> 2,864,040
0
0
<OTHER-SE> 3,099,259
<TOTAL-LIABILITIES-AND-EQUITY> 82,230,348
<INTEREST-LOAN> 1,418,178
<INTEREST-INVEST> 227,561
<INTEREST-OTHER> 24,741
<INTEREST-TOTAL> 1,670,480
<INTEREST-DEPOSIT> 621,565
<INTEREST-EXPENSE> 656,736
<INTEREST-INCOME-NET> 1,013,744
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 951,276
<INCOME-PRETAX> 254,099
<INCOME-PRE-EXTRAORDINARY> 254,099
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,222
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.88
<LOANS-NON> 1,126,982
<LOANS-PAST> 3,166
<LOANS-TROUBLED> 1,287,594
<LOANS-PROBLEM> 1,790,957
<ALLOWANCE-OPEN> (1,289,562)
<CHARGE-OFFS> 13,811
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<ALLOWANCE-CLOSE> (1,290,313)
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</TABLE>
