<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 June 30, 1995
-------------------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________________to_________________
Commission file number 0-10971
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ABIGAIL ADAMS NATIONAL BANCORP, INC.
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(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 August 7, 1995.
284,844 shares of Common Stock, Par Value $10/share.
<PAGE> 2
PART I.
ITEM 1 - FINANCIAL STATEMENTS
The information furnished herewith reflects all adjustments which are,
in the opinion of management, necessary to a fair statement of the results of
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.
1
<PAGE> 3
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1995 and 1994 and December 31, 1994
<TABLE>
<CAPTION>
June 30 June 30 December 31
1995 1994 1994
Assets (unaudited) (unaudited)
-------------------------------------
<S> <C> <C> <C>
Cash and due from banks $4,086,467 $4,502,320 $4,349,250
Short-term investments:
Federal funds sold and securities purchased under agreements to resell 5,025,000 3,450,000 1,300,000
Interest bearing deposits in other banks 391,715 490,715 490,715
----------------------------------------------
Total short-term investments 5,416,715 3,940,715 1,790,715
Securities available for sale 4,504,375 5,804,453 6,009,025
Investments securities (market value of $9,964,271, $9,514,366 and $8,838,874
at June 30, 1995, June 30, 1994 and December 31, 1994, respectively) 9,883,256 9,512,105 9,080,778
Loans: 60,839,436 57,265,345 60,729,437
Less: Allowance for loan losses (1,310,944) (1,366,320) (1,289,562)
----------------------------------------------
59,528,492 55,899,025 59,439,875
Bank premises and equipment 318,448 391,104 369,218
Other assets 1,225,320 955,195 1,221,580
----------------------------------------------
Total assets $84,963,073 $81,004,917 $82,260,441
==============================================
Liabilities
-------------------------------------
Demand deposits 18,897,823 19,109,203 19,677,159
NOW accounts 12,930,951 11,085,834 10,381,478
Money market deposit accounts 15,024,490 17,032,964 17,850,822
Savings deposits 1,079,085 1,167,658 1,225,538
CD's $100,000 and over 15,325,158 14,176,589 13,651,233
CD's under $100,000 13,698,756 11,475,273 12,507,272
----------------------------------------------
Total deposits 76,956,263 74,047,521 75,293,502
Federal funds purchased and securities sold under agreements to repurchase 1,128,389 379,543 360,708
Long-term debt -- capital note 223,500 298,000 260,750
Other liabilities 483,316 776,014 583,211
----------------------------------------------
Total liabilities 78,791,468 75,501,078 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) 97,428 (550,429) (284,646)
----------------------------------------------
6,253,441 5,605,584 5,871,367
Less: Treasury Stock, 1,560 shares at cost (28,710) (28,710) (28,710)
Unrealized loss on securities, net of taxes (53,126) (73,035) (80,387)
----------------------------------------------
Total stockholders' equity 6,171,605 5,503,839 5,762,270
----------------------------------------------
Total liabilities and stockholders' equity $84,963,073 $81,004,917 $82,260,441
==============================================
</TABLE>
2
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Period Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
For three months For six months
Ended June 30, Ended June 30,
1995 1994 1995 1994
---- ---- ---- ----
Interest income:
-------------------------------------
<S> <C> <C> <C> <C>
Interest and fees on loans $1,479,528 $1,251,239 $2,897,706 $2,414,896
Interest and dividends on investment securities:
U.S. Treasury 18,123 8,673 36,127 8,673
Obligations of U.S. government agencies 85,378 91,754 196,194 158,884
Mortgage-backed securities 21,300 13,117 21,300 28,125
Other 6,987 2,266 18,483 4,533
---------------------------------------------------------------
Total interest and dividends on investment securities 131,788 115,810 272,104 200,215
Interest on securities available/held for sale:
U.S. Treasury 46,239 58,340 92,195 128,419
Obligations of U.S. government agencies 37,281 45,364 78,570 108,583
---------------------------------------------------------------
83,520 103,704 170,765 237,002
Interest on federal funds sold 46,171 30,258 65,075 50,929
Interest on deposit with other banks 4,975 4,135 10,812 7,944
---------------------------------------------------------------
Total interest income 1,745,982 1,505,146 3,416,462 2,910,986
Interest expense
-------------------------------------
Interest on deposits:
NOW 72,543 67,963 143,198 132,447
Money market deposit accounts 201,160 122,335 406,999 232,251
Savings deposits 7,229 6,621 14,948 13,484
CD's $100,000 and over 198,700 119,277 377,062 244,874
CD's under $100,000 224,081 119,328 383,071 206,258
---------------------------------------------------------------
703,713 435,524 1,325,278 829,314
Interest on Federal funds purchased and securities
sold under agreements to repurchase 16,683 6,838 42,830 16,973
Interest on other borrowings 1,446 -- 6,559 --
Interest on subordinated note 3,632 4,613 7,543 9,368
---------------------------------------------------------------
Total interest expense 725,474 446,975 1,382,210 855,655
---------------------------------------------------------------
Net interest income 1,020,508 1,058,171 2,034,252 2,055,331
Provision for loan losses 0 76,048 0 151,048
---------------------------------------------------------------
Net interest income after provision for loan losses 1,020,508 982,123 2,034,252 1,904,283
</TABLE>
3
<PAGE> 5
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Period Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
For three months For six months
Ended June 30, Ended June 30,
1995 1994 1995 1994
---- ---- ---- ----
Other income:
----------------------------------
<S> <C> <C> <C> <C>
Service charges on deposit accounts 190,099 176,222 369,852 348,797
Other fees and commissions 36,553 19,811 48,431 48,276
Gain (loss) on securities transaction -- (281) -- (281)
-------------------------------------------------------------
Total other income 226,652 195,752 418,283 396,792
Other expense:
----------------------------------
Salaries and employee benefits 414,869 415,867 829,014 834,459
Net occupancy expense 191,071 182,383 376,565 365,551
Professional fees 86,041 482,552 178,460 571,816
Data processing fees 69,881 64,575 134,513 128,794
Other operating expense 214,323 604,540 408,909 850,370
-------------------------------------------------------------
Total other expense 976,185 1,749,917 1,927,461 2,750,990
-------------------------------------------------------------
Income before taxes 270,975 (572,042) 525,074 (449,915)
Income tax expense 73,123 (12,264) 143,000 --
-------------------------------------------------------------
Net income $197,852 ($559,778) $382,074 ($449,915)
=============================================================
Earnings per share:
----------------------------------
Net income per share $0.69 ($1.97) $1.34 ($1.58)
=============================================================
Average shares outstanding 284,844 284,844 284,844 284,844
=============================================================
</TABLE>
4
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Additional Retained
Common Paid-in Earnings Treasury Unrealized Loss
Stock Capital (Deficit) Stock on Securities 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 --- --- (449,915) --- --- (449,915)
Unrealized loss on securities,
net of taxes --- --- --- --- (73,035) (73,035)
------------------------------------------------------------------------------------
Balance, June 30, 1994 $2,864,040 $3,291,973 ($550,429) ($28,710) ($73,035) $5,503,839
====================================================================================
Balance, January 1, 1995 $2,864,040 $3,291,973 ($284,646) ($28,710) ($80,387) $5,762,270
Net income --- --- 382,074 --- --- 382,074
Unrealized gain on securities,
net of taxes --- --- --- --- 27,261 27,261
------------------------------------------------------------------------------------
Balance, June 30, 1995 $2,864,040 $3,291,973 $97,428 ($28,710) ($53,126) $6,171,605
====================================================================================
</TABLE>
5
<PAGE> 7
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Operating Activities
---------------------------------
Net income (loss) $382,074 ($449,915)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses -- 151,048
Depreciation and amortization on bank premises & equipment 80,035 74,460
Loss (gain) on sale of securities -- 281
Loss sale of other real estate -- 11,516
Accretion of loan discounts (33,425) (3,088)
Amortization and accretion of discounts and premiums on investment securities 14,305 16,993
Decrease (increase) in other assets (3,741) 75,473
Decrease in other liabilities (131,729) (298,127)
------------------------------
Net cash provided (used) by operating activities 307,519 (421,359)
Investing Activities
---------------------------------
Proceeds from repayment and maturity of investment securities 150,000 150,000
Proceeds from repayment of mortgage-backed securities 69,140 197,162
Proceeds from repayment and maturity of securities available for sale 6,088,400 4,000,000
Proceeds from sale of securities -- 449,719
Proceeds from repayment and maturity of time deposits 99,000 --
Purchase of investment securities (1,003,825) (1,495,234)
Purchase of securities available for sale (4,568,466) (2,747,500)
Principal collected on loans 8,598,610 4,717,521
Loans originated (8,036,642) (5,843,815)
Loans acquired from FDIC as receiver for other banks -- (493,086)
Net decrease in short-term loans 161,274 41,935
Net increase in lines of credit (766,721) (968,397)
Purchase of bank premises and equipment (29,264) (126,452)
Proceeds from disposition of other real estate -- 716,984
------------------------------
Net cash provided (used) by investing activities 761,506 (1,401,163)
Financing Activities
---------------------------------
Net increase (decrease) in transaction and savings deposits (1,202,648) 2,209,136
Proceeds from issuance of time deposits 23,451,248 15,795,789
Payments for maturing time deposits (20,585,839) (16,413,681)
Net increase in Federal funds purchased and repurchase agreements 767,681 184,653
Payments on long-term debt (37,250) (19,000)
------------------------------
Net cash provided by financing activities 2,393,192 1,756,897
------------------------------
Increase (decrease) in cash & cash equivalents 3,462,217 (65,625)
Cash and cash equivalents at beginning of period 5,649,250 8,017,945
------------------------------
Cash and cash equivalents at end of period $9,111,467 $7,952,320
==============================
Supplementary disclosures:
Interest paid on deposits and borrowings $1,350,927 $713,118
==============================
Income taxes paid $95,593 $511,250
==============================
</TABLE>
6
<PAGE> 8
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Analysis of Financial Condition
Total assets of Abigail Adams National Bancorp, Inc. and subsidiary
(the "Company") were $84,963,000 at June 30, 1995 as compared to $82,260,000 at
December 31, 1994 and $81,005,000 at June 30, 1994. Total assets at June 30,
1995 increased by $2,703,000 from December 31, 1994, while total short-term
investments increased by $3,626,000 and total securities decreased by $702,000
during the same period. Total deposits of $76,956,000 at June 30, 1995
increased by $1,663,000 coupled with a $768,000 increase in short-term
borrowings.
While the loan portfolio at June 30, 1995 of $60,839,000 increased by
$110,000, or less than 1%, as compared to the December 31, 1994 balance of
$60,729,000, the loan portfolio increased by $1,918,000 from the $58,921,000
balance reported at March 31, 1995. New loans of approximately $8,037,000 were
originated in the first two quarters of 1995, however loan principal payments
offset this increase. The loan to deposit ratio of 79% is up from 77% reported
at June 30, 1994 and down from 81% reported at December 31, 1994. On average
the loan to deposit ratio for the first six months of 1995 was 81% 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.
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<PAGE> 9
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 fluctuations based on changes in interest rates. Unrealized gains in the
available for sale portfolio at June 30, 1995 were approximately $6,000, net of
taxes. Unrealized losses, net of taxes, at June 30, 1995 on securities
previously classified as available for sale in early 1994 which were
subsequently reclassified to held to maturity were $59,000.
Securities available for sale totaling $6,100,000 matured during the
first six months of 1995 as compared to purchases of $4,568,000 during the same
period. These securities transactions coupled with scheduled amortization and
accretion for the first six months, account for the $1,505,000 decrease in the
available for sale portfolio from $6,009,000 at December 31, 1994 to $4,504,000
at June 30, 1995. The long-term investment portfolio of $9,883,000 at June 30,
1995 increased by $802,000, or 9%, from December 31, 1994 due principally to
the purchase of one security, partially offset by normal paydowns on
mortgage-backed securities.
Short-term investments increased by $3,626,000 to $5,417,000 at June
30, 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 $4,086,000 at June 30, 1995 decreased by
$263,000 from the December 31, 1994 balance of $4,349,000 due primarily to
variations in the level of balances maintained at correspondent banks.
Total deposits of $76,956,000 at June 30, 1995 increased by
$1,662,000, or 2%, from the December 31, 1994 balance of $75,294,000. Demand
deposits of $18,898,000 at June 30, 1995 reflect a $779,000, or 4%, decrease
over the balance at December 31, 1994 due primarily to normal fluctuations in
both Treasury Tax and Loan deposits as well as official checks issued by the
Company's wholly owned subsidiary, The Adams National Bank (the "Bank") which
have not yet been presented for payment. Normal fluctuations in the deposit
accounts of one large national organization account for the majority of the
$2,550,000 increase in NOW accounts of $12,931,000 at June 30, 1995 as compared
to $10,381,000 at December 31, 1994. Money market accounts of $15,024,000 at
June 30, 1995 decreased by $2,827,000 during the same period due principally to
normal fluctuations in the balances of several large commercial customers.
Certificates of deposit at June 30, 1995 of $29,024,000 increased by $2,865,000
over the $26,159,000 balance at December 31, 1994 with increases in both the
under and over $100,000 categories. The increase in certificates of deposit
under $100,000 from December 31, 1994 to
8
<PAGE> 10
June 30, 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. Although some of these custodial and pension fund deposits
were withdrawn in the first three months of 1995 prior to their contractual
maturity, as a result of interest rate increases experienced in 1994 and early
1995, approximately $2,200,000 in these certificates of deposit under $100,000
remain outstanding at June 30, 1995. Certificates of deposit over $100,000 at
June 30, 1995 of $15,325,000 increased by $1,674,000 over the December 31, 1994
balance of $13,651,000. Although $2,000,000 in local government funds which
were on deposit at December 31, 1994 have been withdrawn, increases in
certificates of deposit over $100,000 issued to large individual customers,
Fortune 500 companies, pension funds and financial institutions have more than
offset this decrease.
Average noninterest-bearing demand deposits for the first six months
of 1995 of $17,456,000 decreased by $1,365,000, or 7%, from the comparable 1994
period, while average interest-bearing deposits grew by $2,025,000, or 4%,
during the same period to $56,670,000 for the first six months of 1995. On
average, all interest-bearing deposit categories showed little change from the
prior year, except for certificates of deposit. Average noninterest-bearing
deposits to average total deposits during the first six months of 1995
represents 24% as compared to 26% one year earlier.
Results of Operations
The Company reported record net income of $382,000 for the first six
months of 1995, as compared to a loss of $450,000 for the comparable 1994
period. The 1994 results include $375,000 in legal and related costs
associated with two employment related lawsuits, $125,000 in legal and other
related costs regarding the issue of the Company's ownership and $210,000
related to the expensing of previously deferred professional fees related to
the Company's proposed securities offering. Similar expenses have not been
incurred during 1995, thus accounting for the improvement in net income.
Net interest income, the most significant component of the Company's
earnings, decreased by $21,000, or 1%, to $2,034,000 for the first six months
of 1995 as compared to $2,055,000 for the comparable 1994 period. Average
earning assets for the first six months of 1995 increased by $606,000, or 1%,
over the comparable 1994 period and the average loan to deposit ratio for 1995
increased to 81% from 78% the prior year, indicating a more effective
utilization of earning assets. Although the average yield earned on
interest-earning assets increased 121 basis
9
<PAGE> 11
points to 8.89%, a 166 basis point increase in the average cost of
interest-bearing deposits coupled with a $1,365,000 decrease in average demand
deposits caused a negative impact on the Company's net interest income. These
factors resulted in a 48 basis point decrease in the net interest spread from
the first six months of 1994 to 4.13% for the first six months of 1995. The
net interest margin decreased to 5.29% for the first six months of 1995 from
5.42% for the comparable 1994 period.
As a result of improvement in the quality of the loan portfolio as
well as net recoveries in the allowance for loan losses for the first six
months of 1995, the Company did not record a provision for loan losses during
the first six months of 1995, while a $151,000 provision was recorded during
the first six months 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 $1,311,000 at June 30, 1995 to
be adequate. The allowance for loan losses as a percentage of outstanding
loans was 2.15% at June 30, 1995 as compared to 2.12% at December 31, 1994 and
2.39% at June 30, 1994. While this ratio at June 30 ,1995 has declined from
one year earlier, nonperforming assets of $2,745,000 at June 30, 1995 have
declined by $27,000, or 1%, from one year earlier. Of the $2,745,000
nonperforming asset balance at June 30, 1995, $759,000 represents the
guaranteed portion of loans insured by the Small Business Administration
("SBA") which were on nonaccrual status. This compares with total
nonperforming assets of $2,772,000 at June 30, 1994 of which $614,000
represents the guaranteed portion of the loans insured by the SBA. 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. The
ratio of nonperforming loans to gross loans at June 30, 1995 is 4.51% down from
4.84% one year earlier.
Total other income of $418,000 for the first six months of 1995
increased by $21,000 from the $397,000 reported for the comparable 1994 period
due primarily to a greater volume of ATM income resulting from the installation
of newer ATM equipment in our Union Station location as well as the addition of
one new ATM machine in late 1994. A greater level of service chargeable
activities on deposit accounts also contributed to the increase.
Total other expenses for the first six months of 1995 of $1,927,000
decreased by $824,000, or 30%, from $2,751,000 for the comparable 1994 period.
Salaries and benefits of $829,000 for the first six months of 1995 reflect a
$5,000, or 1%, decrease over the first six months of 1994, while occupancy
expense of $377,000 increased by $11,000, or 3%, during the same period due to
increases in rental and depreciation expenses. Professional fees for the first
six months of 1995 of $178,000 decreased by $394,000, or 69%, to $178,000 for
the first six months of 1994.
10
<PAGE> 12
In 1994, legal and other related costs were incurred in connection with the
issue of the Company's ownership, the Company's proposed securities offering
and three employment related lawsuits which were concluded in late 1994. Legal
expenses during the first six months of 1995 were incurred primarily to resolve
the Company's ownership issue and work out problem loans. Other operating
expenses for the first six months of 1995 of $409,000 decreased by $441,000, or
52%, from $850,000 reported for the prior year, due primarily to the employment
related lawsuits settled in late 1994. 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. As of the consummation of the final sale on July
21, 1995, the Company is obligated to pay its investment advisor an additional
$23,000. In addition, the investment advisor is entitled to receive an
additional transaction fee based on the number of shares sold pursuant to a
tender offer in an amount up to an additional $21,000. (See Item 5 - "Other
Events - Changes in Control of the Registrant" for a further discussion of
issues relating to the Company's ownership.) Other expenses are expected to
decrease in the future due to the Federal Deposit Insurance Corporation's
recent announcement that deposit insurance premium assessment rates will
decrease effective July 1, 1995.
Based on the financial results for the first six months of 1995, as
well as earnings projections for the remainder of the year, the Company has
recorded tax expense of $143,000 using an effective tax rate of 27.5% in 1995
as compared to a 0% tax rate on 1994's loss. This effective tax rate for 1995
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 $9,503,000 in cash and short-term investments at June 30, 1995, the
Company has a securities portfolio which can be pledged to raise additional
deposits and borrowings, if necessary. At June 30, 1995, the Company had
$4,976,000 in unpledged securities which were available for such use. This
compares with cash and short-term investments of $8,443,000 and unpledged
securities of $2,747,000 at June 30, 1994 and cash and short-term investments
of $6,140,000 and unpledged securities of $2,738,000 at December
11
<PAGE> 13
31, 1994. As a percentage of total assets, the amount of these cash equivalent
assets at June 30, 1995, June 30, 1994 and December 31, 1994 was 17%, 14% 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 nonbrokered certificates of deposit under
$100,000 (excluding such certificates of deposit issued to financial
institutions) representing 74% of the average deposit base for the first six
months of 1995 and 77% for the first six months of 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 in stock in the FHLB, the Bank is eligible
to borrow up to approximately $1,500,000 in funds from the FHLB collateralized
by loans secured by first liens on one to four family, multifamily and
commercial mortgages as well as investment securities. The Bank is eligible to
increase the maximum amount to be borrowed by $7,500,000 with the purchase of
up to $1,200,000 of additional stock in the FHLB. The Bank has drawn on
borrowings from the FHLB during the first six months of 1995, however no
borrowings were outstanding at June 30, 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 the
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. Regulatory approval was granted and on July
21, 1995, the sale was consummated.
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 June 30, 1995, the Company's total
risk-based capital ratio and Tier 1 capital ratio of 10.94% and 9.62%,
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
12
<PAGE> 14
capital ratio of 6% or greater and a leverage ratio of 5% or greater (discussed
below). The June 30 ,1995 ratios are based on Tier 1 capital of $6,225,000,
total capital of $7,078,000 and risk-adjusted assets of $64,674,000. At June
30, 1995, the Bank's total risk-based capital ratio and Tier 1 capital ratio of
10.82% and 9.50%, respectively, also met the regulatory definition of
"well-capitalized." The 1995 ratios for the Bank are based on Tier 1 capital
of $6,138,000, total capital of $6,991,000 and risk-adjusted assets of
$64,634,000.
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
June 30, 1995, the Company's and the Bank's Tier 1 leverage ratio based on
annual average assets of $82,590,000 and $82,487,000, were 7.54% and 7.44%,
respectively, meeting the regulatory definition of "well-capitalized."
13
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
See "Item 5 - Other Events - Legal Proceedings."
ITEM 5 - OTHER EVENTS
Changes in Control of the Registrant
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. On July 21,
1995, this group of investors (the "Purchaser Group") purchased from Citibank,
N.A. an aggregate of 203,038 shares (the "Shares") of common stock, par value
$10.00 per share (the "Common Stock"), of the Company. According to an
Amendment No. 1 to a Schedule 13D filed by the Purchaser Group (the "Schedule
13D"), the Shares were acquired at a purchase price of $17.00 per share. Under
an Agreement, dated as of April 20, 1995, between Marshall T. Reynolds, a
member of the Purchaser Group, and the Company, Mr. Reynolds is obligated to
commence, within 20 business days after July 21, 1995, a tender offer at $21.00
per share for all of the outstanding shares of the Company's common stock not
owned by the Purchaser Group (the "Tender Offer"). Mr. Reynolds has further
agreed that prior to the commencement of the Tender Offer, and payment in full
for the shares tendered, no member of the Purchaser Group will vote any of the
Shares, without the consent of the Company's board of directors, to change in
any respect the composition of the board of directors. According to the
Schedule 13D, the Purchaser Group intends, following the completion of the
Tender Offer, to cause the election to the Board of Directors of Jeanne D.
Hubbard, Robert L. Shell and Marshall T. Reynolds.
Legal Proceedings
A condition of consummation of the Stock Purchase Agreement required
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 required that both the Company and the Bank enter into
mutual releases with Citibank in which each
14
<PAGE> 16
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. On July 21, 1995, such mutual releases (with the exception of one of
the Company's directors, Richard W. Naing) were executed and the Citibank
litigation was dismissed with prejudice.
A further condition of consummation of the Stock Purchase Agreement
required 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. All
of such releases (with the exception of one of the Company's directors, Richard
W. Naing) have been executed and delivered.
15
<PAGE> 17
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
10.3.1 Second Amendment to Employment Agreement dated April
19, 1995 between the Company and Barbara Davis Blum
10.3.2 Third Amendment to Employment Agreement dated July
26, 1995 between the Company and Barbara Davis Blum
27 Financial Data Schedule
(b) On April 21, 1995, the Company filed a report on Form 8-K (earliest
event reported April 20, 1995) reporting that Reynolds and Citibank
had entered into a Stock Purchase Agreement. On August 4, 1995, the
Company filed a report on Form 8-K (earliest event reported July 21,
1995) reporting the purchase by a group of investors from Citibank,
N.A. of 203,038 shares of common stock of Abigail Adams National
Bancorp, Inc. (see "Item 5 - Other Events - Changes in Control of the
Registrant").
16
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ABIGAIL ADAMS NATIONAL BANCORP, INC.
------------------------------------
(Registrant)
Date: August 14, 1995 /s/ Barbara Davis Blum
----------------- ----------------------------
Barbara Davis Blum
Chairwoman of the Board,
President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1995 /s/ Kimberly J. Levine
----------------- -----------------------------
Kimberly J. Levine
Senior Vice President & Treasurer
(Principal Financial and
Accounting Officer)
17
<PAGE> 1
EXHIBIT 10.3.1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement is entered into by and
among Abigail Adams National Bancorp, Inc. (the "Company"), The Adams National
Bank (the "Bank") and Barbara Davis Blum ("Blum").
Whereas, the Company, the Bank and Blum entered into an Employment
Agreement on March 31, 1993; and
Whereas, such Employment Agreement was due to expire on December 31,
1994, and
Whereas, such Employment Agreement was extended on December 30, 1994
by the parties until June 30, 1995 under that certain Amendment to Employment
Agreement; and
Whereas, the parties hereto wish to extend the Employment Agreement on
the same terms and conditions until a date thirty (30) days following the
consummation of a sale of the Bancorp shares pledged to Citibank, N.A.;
Now, therefore, in consideration of the foregoing, the parties hereto
agree as follows:
The Employment Agreement dated March 31, 1993 by and among the Company,
the Bank and Blum, as previously amended by that certain Amendment to
Employment Agreement, is hereby amended to extend Blum's term of employment
with the Company and the Bank until and including thirty (30) days following
the consummation of a sale of the Bancorp shares pledged to Citibank, N.A. and
each reference therein to the date December 31, 1994, as amended to read June
30, 1995, is hereby amended to read until or to "thirty (30) days following the
consummation of a sale of the Bancorp
18
<PAGE> 2
shares pledged to Citibank, N.A." is hereby amended to read December
31, 1995. All other terms and conditions of Blum's employment shall remain
the same.
IN WITNESS WHEREOF, the Company and the Bank have caused this
Amendment to Employment Agreement to be signed by their duly authorized
officers pursuant to resolutions approved by their respective Boards of
Directors, and by Blum this 19th day of April, 1995.
Abigail Adams National
Bancorp, Inc.
By: /s/ Kimberly J. Levine /s/ Barbara Davis Blum
------------------------ -------------------------
Barbara Davis Blum
Title: SVP & Treasurer
-----------------
The Adams National Bank
By: /s/ Kimberly J. Levine
------------------------
Title: SVP & Treasurer
-----------------
19
<PAGE> 1
EXHIBIT 10.3.2
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement is entered into by and
among Abigail Adams National Bancorp, Inc. (the "Company"), The Adams National
Bank (the "Bank") and Barbara Davis Blum ("Blum").
Whereas, the Company, the Bank and Blum entered into an Employment
Agreement on March 31, 1993; and
Whereas, such Employment Agreement was due to expire on December 31,
1994, and
Whereas, such Employment Agreement was extended on December 30, 1994
by the parties until June 30, 1995 under that certain Amendment to Employment
Agreement and further extended until thirty (30) days following the
consummation of a sale of the Bancorp shares pledged to Citibank, N.A. under
that certain Second Amendment to Employment Agreement; and
Whereas, the parties hereto wish to extend the Employment Agreement on
the same terms and conditions until December 31, 1995;
Now, therefore, in consideration of the foregoing, the parties hereto
agree as follows:
The Employment Agreement dated March 31, 1993 by and among the
Company, the Bank and Blum, as previously amended by that certain Amendment to
Employment Agreement and the Second Amendment to Employment Agreement, is
hereby amended to extend Blum's term of employment with the Company and the
Bank until and including December 31, 1995 and each reference therein to the
date December 31, 1994, as amended to read June 30, 1995, and as further
amended to read "thirty (30) days following the consummation of a
20
<PAGE> 2
sale of the Bancorp shares pledged to Citibank, N.A." is hereby amended to read
December 31, 1995. All other terms and conditions of Blum's employment shall
remain the same.
IN WITNESS WHEREOF, the Company and the Bank have caused this
Amendment to Employment Agreement to be signed by their duly authorized
officers pursuant to resolutions approved by their respective Boards of
Directors, and by Blum this 26th day of July, 1995.
Abigail Adams National
Bancorp, Inc.
By: /s/ Kimberly J. Levine /s/ Barbara Davis Blum
------------------------ ------------------------
Barbara Davis Blum
Title: SVP & Treasurer
-----------------
The Adams National Bank
By: /s/ Kimberly J. Levine
------------------------
Title: SVP & Treasurer
-----------------
21
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
FINANCIAL DATA SCHEDULE
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,086,467
<INT-BEARING-DEPOSITS> 391,715
<FED-FUNDS-SOLD> 5,025,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,504,375
<INVESTMENTS-CARRYING> 9,883,256
<INVESTMENTS-MARKET> 9,964,271
<LOANS> 60,839,436
<ALLOWANCE> (1,310,944)
<TOTAL-ASSETS> 84,963,073
<DEPOSITS> 76,956,263
<SHORT-TERM> 1,128,389
<LIABILITIES-OTHER> 483,316
<LONG-TERM> 223,500
<COMMON> 2,864,040
0
0
<OTHER-SE> 3,307,565
<TOTAL-LIABILITIES-AND-EQUITY> 84,963,073
<INTEREST-LOAN> 2,897,706
<INTEREST-INVEST> 442,869
<INTEREST-OTHER> 75,887
<INTEREST-TOTAL> 3,416,462
<INTEREST-DEPOSIT> 1,325,278
<INTEREST-EXPENSE> 1,382,210
<INTEREST-INCOME-NET> 2,034,252
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,927,461
<INCOME-PRETAX> 525,074
<INCOME-PRE-EXTRAORDINARY> 525,074
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 382,074
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.89
<LOANS-NON> 1,486,169
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,259,077
<LOANS-PROBLEM> 1,383,497
<ALLOWANCE-OPEN> (1,289,562)
<CHARGE-OFFS> 24,253
<RECOVERIES> 45,635
<ALLOWANCE-CLOSE> (1,310,944)
<ALLOWANCE-DOMESTIC> (1,310,944)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 85,284
</TABLE>
