SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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| | TRANSITION REPORT UNDER 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 small business issuer 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 offices)
202-466-4090
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Issuer's telephone number including area code
N / A
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Former name, address, and fiscal year, if changes since last report
Indicate by check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No .
-- --
State the number of shares outstanding of each of the issuer's classes of
common equity as of July 28, 1997:
1,651,226 shares of Common Stock, Par Value $0.01/share
Transitional Small Business Disclosure Format (check one): Yes______ No X
<PAGE>
PART I.
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Item 1 - Financial Statements
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1
<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1997 and 1996 and December 31, 1996
<TABLE>
<CAPTION>
June 30, June 30, Dec 31,
1997 1996 1996
-------------- -------------- ----------
Assets (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 9,570,362 $ 5,824,109 $ 9,785,132
Short-term investments:
Federal funds sold 3,850,000 9,950,000 4,100,000
Interest-bearing deposits in other banks 1,479,000 486,715 1,479,000
---------- ------------ ---------
Total short-term investments 5,329,000 10,436,715 5,579,000
Securities available for sale 9,577,815 3,997,812 11,205,282
Investment securities (market value of $10,565,358, $7,562,045
and $11,679,607 at June 30,1997, June 30, 1996 and
December 31, 1996, respectively) 10,517,060 7,536,421 11,640,813
Loans (net of deferred fees and unearned discounts) 84,627,598 59,400,325 73,013,413
Less: Allowance for loan losses (1,116,201) (1,260,922) (1,048,487)
----------- ----------- -----------
Loans, net 83,511,397 58,139,403 71,964,926
----------- ----------- ----------
Bank premises and equipment, net 893,371 500,009 840,051
Other real estate owned -- 317,381 --
Other assets 1,460,145 1,283,441 1,147,100
------------- ----------- ------------
Total assets $ 120,859,150 $ 88,035,291 $ 112,162,304
============== ============= =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand deposits $ 26,618,370 $ 20,295,942 $ 23,678,374
NOW accounts 7,721,611 7,503,649 8,039,994
Money market accounts 25,317,094 22,070,938 29,533,210
Savings accounts 1,601,558 1,273,014 1,379,554
Certificates of deposit of $100,000 or greater 22,516,474 8,804,361 15,657,818
Certificates of deposit less than $100,000 19,787,373 18,636,549 16,865,790
------------- ----------- -----------
Total deposits 103,562,480 78,584,453 95,154,740
------------- ------------ -----------
Short-term borrowings 1,823,709 1,738,580 1,916,689
Long-term borrowings/debt 1,108,578 -- 1,138,815
Other liabilities 1,035,277 743,326 811,863
-------------- -------------- -------------
Total liabilities 107,530,044 81,066,359 99,022,107
------------ ------------ -----------
Stockholders' equity:
Common stock, par value $0.01 per share, authorized 5,000,000 shares; issued
1,655,906 at June 30, 1997, 859,212 at June 30, 1996 and
1,654,712 shares at December 31, 1996; outstanding 1,651,226 shares at June
30, 1997, 854,532 shares at June 30, 1996 and 1,650,032
shares at December 31, 1996 16,559 8,592 16,547
Surplus 12,182,466 6,147,421 12,172,435
Retained earnings 1,351,868 874,888 1,191,706
------------- ------------- ------------
13,550,893 7,030,901 13,380,688
Less: Employee Stock Ownership Plan shares, 20,243 shares at cost (177,126) -- (177,791)
Less: Treasury stock, 4,680 shares at cost (28,710) (28,710) (28,710)
Less: Unrealized loss on securities, net of taxes (15,951) (33,259) (33,990)
-------------- ------------ -------------
Total stockholders' equity 13,329,106 6,968,932 13,140,197
------------ ----------- -----------
Total liabilities and stockholders' equity $ 120,859,150 $ 88,035,291 $ 112,162,304
============== ============= =============
2
</TABLE>
<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Period Ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
Ended June 30, Ended June 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $1,903,418 $1,470,918 $3,600,845 $ 2,979,645
Interest on securities available for sale:
U.S. Treasury 3,378 14,266 3,378 40,828
Obligations of U.S. government agencies and corporations 111,724 37,928 264,605 85,239
--------- ---------- --------- ---------
Total interest on securities available for sale 115,102 52,194 267,983 126,067
Interest and dividends on investment securities:
U.S. Treasury 11,780 11,659 26,850 19,148
Obligations of U.S. government agencies and corporations 135,526 91,838 279,714 177,431
Mortgage-backed securities 4,185 7,139 8,982 15,267
Obligations of states and municipalities 3,991 -- 7,982 --
Other securities 9,084 6,941 21,162 13,977
--------- ----------- --------- ---------
Total interest and dividends on investment securities 164,566 117,577 344,690 225,823
Interest on short-term investments:
Federal funds sold 86,246 105,043 138,207 214,281
Deposits with other banks 22,198 8,980 42,257 15,846
--------- ------------ ----------- -----------
Total interest on short-term investments 108,444 114,023 180,464 230,127
--------- ---------- ---------- ---------
Total interest income 2,291,530 1,754,712 4,393,982 3,561,662
---------- ---------- ----------- ----------
Interest expense
Interest on deposits:
NOW accounts 44,673 45,554 88,888 91,618
Money market accounts 265,629 253,398 516,293 470,786
Savings accounts 10,757 8,492 20,385 17,178
Certificates of deposit:
$100,000 or greater 318,449 116,072 552,142 287,541
Less than $100,000 240,066 228,090 454,700 466,765
--------- ---------- --------- --------
Total interest on deposits 879,574 651,606 1,632,408 1,333,888
Federal funds purchased and
repurchase agreements 29,975 22,963 63,766 51,410
Interest on long-term borrowings/debt 18,696 1,425 38,697 4,219
--------- ----------- --------- ---------
Total interest expense 928,245 675,994 1,734,871 1,389,517
--------- ---------- ----------- ---------
Net interest income 1,363,285 1,078,718 2,659,111 2,172,145
Other income
Service charges on deposit accounts 273,068 175,764 564,145 348,033
Other income 26,166 47,285 37,759 59,435
--------- ----------- ---------- ---------
Total other income 299,234 223,049 601,904 407,468
--------- ---------- ---------- --------
Other expense
Salaries and employee benefits 544,806 452,756 1,083,090 884,447
Occupancy and equipment expense 244,071 183,601 472,693 355,325
Professional fees 86,464 (27,390) 151,097 15,227
Data processing fees 115,413 86,454 212,802 173,333
Other operating expense 274,370 211,791 545,651 380,214
---------- ---------- ------------ --------
Total other expense 1,265,124 907,212 2,465,333 1,808,546
---------- ---------- ----------- ----------
Income (loss) before taxes 397,395 394,555 795,682 771,067
Applicable income tax expense 160,019 147,108 309,335 285,587
--------- --------- ----------- ---------
Net income $ 237,376 $ 247,447 $ 486,347 $ 485,480
========= ========= ========== =========
Net income per common share $ .15 $ .28 $ .30 $ .56
============ ============ ============ ==========
Weighted average number of shares
used to compute EPS 1,630,948 868,423 1,630,559 864,682
========= ======= ========= =======
</TABLE>
3
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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, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Employee
Additional Retained Stock Unrealized
Common Paid-in Earnings Treasury Ownership Loss on
Stock Capital (Deficit) Stock Plan Securities Total
----- ------- --------- ----- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,1996 $ 8,592 $ 6,147,421 $ 531,830 $ (28,710) $ --- $ (40,267) $ 6,618,866
Net income --- --- 485,480 --- --- --- 485,480
Dividends declared --- --- (142,422) --- --- --- (142,422)
Unrealized gain on securities,
net of taxes --- --- --- --- --- 7,008 7,008
----------------------------------------------------------------------------------------
Balance at June 30, 1996 $ 8,592 $ 6,147,421 $ 874,888 $ (28,710) $ --- $ (33,259) $ 6,968,932
======== ============ =========== ============ ============ =========== ===========
Balance at January 1,1997 $ 16,547 $12,172,435 $1,191,706 $ (28,710) $ (177,791) $ (33,990) $13,140,197
Net income --- --- 486,347 --- --- --- 486,347
Dividends declared --- --- (326,185) --- --- --- (326,185)
Dividends on allocated shares
of the Employee Stock
Ownership Plan --- 276 --- --- 665 --- 941
Issuance of common stock under
the Employee Incentive Stock
Option Plan 12 9,755 --- --- --- --- 9,767
Unrealized loss on securities,
net of taxes --- --- --- --- --- 18,039 18,039
------------------------------------------------------------------------------------------
Balance at June 30, 1997 $ 16,559 $12,182,466 $1,351,868 $ (28,710) $ (177,126) $ (15,951) $13,329,106
======== =========== ========== ========== =========== =========== ===========
</TABLE>
4
<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- -------
Operating Activities
<S> <C> <C>
Net income $ 486,347 $ 485,480
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 138,882 57,307
Accretion of loan discounts and fees (60,345) (17,956)
Amortization and accretion of discounts and
premiums on securities (87,043) (182)
Provision for deferred income taxes (106,874) (192,146)
Increase (decrease) in other assets (206,171) 61,466
Increase in other liabilities 210,842 27,464
----------- ----------
Net cash provided by operating activities 375,638 421,433
----------- ---------
Investing Activities
Proceeds from repayment and maturity
of investment securities 2,150,000 3,150,000
Proceeds from maturity of securities
available for sale 8,675,000 4,500,000
Proceeds from repayment of mortgage-
backed securities 35,862 50,716
Purchase of investment securities (1,048,000) (2,521,806)
Purchase of securities available for sale (6,944,107) (3,000,000)
Principal collected on loans 6,842,511 4,129,198
Loans originated (18,449,315) (3,892,818)
Net decrease in short-term loans 57,343 59,184
Net decrease in lines of credit 63,336 3,901,418
Purchase of bank premises and equipment (192,204) (279,798)
Purchase of other real estate -- (317,381)
------------- ------------
Net cash provided (used) by investing activities (8,809,574) 5,778,713
----------- -----------
Financing Activities
Net increase in transaction and savings deposits (1,372,499) (2,352,716)
Proceeds from issuance of time deposits 30,790,345 8,934,363
Payments for maturing time deposits (21,010,106) (11,060,389)
Net increase in short-term borrowings (92,979) (46,823)
Payments on long-term debt (30,237) (186,250)
Proceeds from issuance of common stock 9,767 --
Cash dividends paid to common stockholders (325,125) (142,422)
------------ ------------
Net cash provided (used) by financing activities 7,969,166 (4,854,237)
----------- -----------
Increase (decrease) in cash and cash equivalents (464,770) 1,345,909
Cash and cash equivalents at beginning of year 13,885,132 14,428,200
----------- ----------
Cash and cash equivalents at end of year $13,420,362 $15,774,109
============ ===========
Supplementary disclosures:
Interest paid on deposits and borrowings $ 1,698,883 $ 1,433,843
============ ===========
Income taxes paid $ 535,000 $ 246,500
============= ============
</TABLE>
5
<PAGE>
Abigail Adams National Bancorp, Inc.
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
1. General
The unaudited information at and for the six months ended June 30, 1997 and
1996 furnished herein 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. All financial
information presented gives retroactive effect to (i) an increase in the number
of shares of authorized Common Stock from 800,000 to 5,000,000 and a reduction
of par value to $0.01 per share as of July 8, 1996, and (ii) the issuance by the
Company on July 9, 1996 of a three-for-one stock split in the form of a stock
dividend of two shares of Common Stock for each share of Common Stock issued and
outstanding.
2. Contingent Liabilities
In the normal course of business, there are various outstanding commitments
and contingent liabilities such as commitments to extend credit and standby
letters of credit that are not reflected in the accompanying consolidated
financial statements. No material losses are anticipated as a result of these
transactions on either a completed or uncompleted basis.
Under the terms of an employment agreement with the President and Chief
Executive Officer of the Company and the Bank, the Company is obligated to make
payments to her under certain conditions, totaling approximately $389,000, in
the event her employment is terminated. In addition, upon termination, certain
unvested stock options granted to the President and Chief Executive Officer
shall become immediately vested. Such unvested options are estimated to have an
aggregate value of approximately $395,000 at June 30, 1997.
Under the terms of severance agreements with eight key management officials
of the Bank, the Bank is obligated to make payments totaling $633,000 under
certain conditions in the event of a change in control of the Company or the
Bank.
The Company maintains directors' and officers' liability insurance in the
amount of $5,000,000, subject to certain exclusions. In addition, according to
the by-laws, the Company is obligated to indemnify any director or officer for
any losses incurred in the performance of their duties as director to the full
extent authorized or permitted by Delaware general corporation law.
3. Shareholder Rights Plan
On April 12, 1994, the Board of Directors of the Company adopted a Rights
Agreement ("Rights Agreement"), which was amended April 20, 1995. Pursuant to
the Rights Agreement, the Board of Directors of the Company declared a dividend
of one share purchase right for each share of the Company's common stock
outstanding on April 25, 1994 ("Right"). Among other things, each Right entitles
the holder to purchase one share of the Company's common stock at an exercise
price
6
<PAGE>
of $20.11.
Subject to certain exceptions, the Rights will be exercisable if a person
or group of persons acquires 25% or more of the Company's common stock
("Acquiring Person"), or announces a tender offer, the consummation of which
would result in ownership by a person or group of persons of 25% or more of the
common stock, or if the Board determines that a person or group of persons
holding 15% or more of the Company's common stock is an Adverse Person, as
defined in the Rights Agreement.
Upon the occurrence of one of the triggering events, all holders of Rights,
except the Acquiring Person or Adverse Person, would be entitled to purchase the
Company's common stock at 50% of the market price. If the Company is acquired in
a merger or business combination, each holder of a Right would be entitled to
purchase common stock of the Acquiring Person at a similar discount.
The Board of Directors may redeem the Rights for $0.01 per share or amend
the Plan at any time before a person becomes an Acquiring Person. The Rights
expire on December 31, 2003.
4. Employee Benefits
The Company has adopted a Nonqualified Stock Option Plan for certain
officers and key employees and has reserved 90,000 shares of common stock for
options to be granted under the plan. No options have been granted to date.
On January 23, 1996, the Company adopted a nonqualified Directors Stock
Option Plan (the "Directors Plan") and a qualified Employee Incentive Stock
Option Plan covering key employees (the "Employee Plan"), which were approved by
the shareholders on October 15, 1996. Shares subject to options under these
plans may be authorized but unissued shares or treasury shares. Options under
the Directors Plan are granted at a price not less than 85% of the fair market
value of the Company's common stock on the date of grant. The options vest
beginning in 1996 at an annual rate of 20% at the end of each year and become
fully vested in the event of a Change in Control, as defined in the Directors
Plan, or in the event that the Director leaves the Board. Options under the
Employee Plan are granted at a price of 100% of the fair market value of the
Company's common stock on the date of grant and are immediately exercisable.
Options under both plans expire not later than ten years after the date of
grant. Options for a total of 16,416 shares of common stock available for grant
under the above Plans were granted in 1996 at a price of $6.74 for directors and
$7.93 for employees. As of June 30, 1997, 1,194 options have been exercised
under these plans.
On November 19, 1996, the Company adopted a nonqualified Directors Stock
Option Plan (the "1996 Directors Plan") and a qualified Employee Incentive Stock
Option Plan covering key employees (the "1996 Employee Plan"). Shares subject to
options under these plans may be authorized but unissued shares or treasury
shares. Options under the 1996 Directors Plan are granted at a price not less
than 85% of the fair market value of the Company's common stock on the date of
grant. Options under the 1996 Employee Plan are granted at a price of 100% of
the
7
<PAGE>
fair market value of the Company's common stock on the date of grant. The
options granted under both the 1996 Directors Plan and the 1996 Employee Plan
vest beginning in 1997 at an annual rate of 33.3% to 100% at the end of each
year and become fully vested in the event of a Change in Control, as defined in
the 1996 Directors Plan and the 1996 Employee Plan. Options under both plans
expire not later than ten years after the date of grant. Options for a total of
22,113 shares of common stock are available for grant under the above Plans.
Options totaling 20,608 were granted in 1996 at a price of $9.13 for directors
and $10.74 for employees. Options totaling 1,505 were granted to employees in
1997 at prices ranging from $11.71 to $11.83. As of June 30, 1997, no options
have been exercised under these plans.
On March 29, 1996, the Company granted the President and Chief Executive
Officer a nonqualified stock option to purchase 75,000 shares at a price equal
to 85% of the fair market value of the Company's common stock on the date of
grant ($6.74). The option vests beginning in 1996 at an annual rate of 20% at
the end of each year and becomes fully vested in the event of a Change in
Control as defined in the Agreement, or in the event that she leaves the Company
or the Bank.
Compensation expense is recognized on the Directors Plan, the 1996
Directors Plan and the options granted to the President and Chief Executive
Officer in an amount equal to the difference between the quoted market price of
the stock at the date of grant and the amount the employee/director is required
to pay, ratably over the five year vesting periods.
On April 16, 1996, the Company and the Bank adopted an employee stock
ownership plan ("ESOP") with 401(k) provisions, replacing the Bank's former
401(k) Plan, which covered all full-time employees 21 years of age or older who
have completed one year of service. Participants may elect to contribute to the
ESOP a portion of their salary, which may not be less than 1% nor more than 15%,
of their annual salary (up to $9,500 for 1997). In addition, the Bank may make a
discretionary matching contribution equal to one-half of the percentage amount
of the salary reduction elected by each participant (up to a maximum of 3%),
which percentage will be determined each year by the Bank, and an additional
discretionary contribution determined each year by the Bank. Employee
contributions and the employer's matching contributions immediately vest. The
initial employer's discretionary contribution was immediately vested. All future
employer's discretionary contributions are vested as follows: 33 and 1/3% for
one year of service; 66 and 2/3% for two years of service; 100% for three years
of service, however, an employee's vested percentage will not be less than their
vested percentage under the former 401(k) Plan.
5. Net Income Per Share
Net income per common share is calculated by dividing net income by the
weighted average number of common shares and common share equivalents
outstanding during the period, 1,630,559 and 864,682 for the six months ended
June 30, 1997 and 1996, respectively and 1,630,948 and 868,423 for the three
months ended June 30, 1997 and 1996, respectively. Stock options are included as
common share equivalents in the first and second quarters of 1996 but are not
included
8
<PAGE>
in the first and second quarters of 1997 as the dilution is immaterial.
6. Change in Accounting Principles
(a) Accounting for Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" (SFAS No. 123). SFAS No. 123 allows companies either to continue
to account for stock-based employee compensation plans under existing accounting
standards or to adopt a fair-value-based method of accounting as defined in the
new standard. The Company follows the existing accounting standards for these
plans, but provides annual pro-forma disclosure of net income and earnings per
share as if the expense provisions of SFAS No. 123 had been adopted.
(b) Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128).
SFAS No. 128 specifies the computation, presentation and disclosure requirements
for earning per share for entities with publicly held common stock or potential
common stock. The objective of SFAS No. 128 is to simplify the computation of
earnings per share and to make the U.S. standard for computing earnings per
share more compatible with the standards of other countries. SFAS No. 128 is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. The adoption of SFAS No. 128 is not expected to have a
material impact on the Company.
(c) Disclosure of Information about Capital Structure
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure" (SFAS No. 129). SFAS No. 129 continues the existing
requirements for companies to disclose the pertinent rights and privileges of
all securities other than ordinary common stock, but expands the number of
companies subject to portions of its requirements. SFAS No. 129 is effective for
financial statements for periods ending after December 15, 1997. The adoption of
SFAS No. 129 is not expected to have a material impact on the Company.
9
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
The following discussion should be read and reviewed in conjunction Management's
Discussion and Analysis of Financial Condition and Results of Operations set
forth in the Company's Form 10-KSB (File No. 0-10971) for the year ended
December 31, 1996.
Overview
Total assets of Abigail Adams National Bancorp, Inc. and subsidiary (the
"Company") were $120,859,000 at June 30, 1997 as compared to $112,162,000 at
December 31, 1996. Total assets at June 30, 1997 increased by $8,697,000 from
December 31, 1996 predominantly due to increases in loans of $11,615,000, offset
by decreases in securities of $2,751,000. Total deposits increased by $8,407,000
during the same period to $103,562,000 at June 30, 1997 due primarily to
increases in demand deposits and certificates of deposit, partially offset by
normal fluctuations in money market accounts.
The Company reported net income for the first six months of 1997 of
$486,000, or $0.30 per share, for an annualized return on average assets of .89%
and an annualized return on average equity of 7.38%. This compares with return
on assets of 1.12% and return on equity of 14.32% for the first six months of
1996. Net income for the first six months of 1997 remains virtually unchanged
from the $485,000 net income, or $0.56 per share, recorded for the first six
months of 1996. Income before taxes of $796,000 for the first six months of 1997
reflects a 3% increase over the comparable 1996 period. Increases in net
interest income and other income, partially offset by increases in operating
expenses associated with the opening of a new branch in the fourth quarter of
1996 and professional fees, accounted for the growth in net income. Net income
per share declined during this period as a result of the issuance of 795,500
shares of common stock in the public stock offering completed in the third
quarter of 1996.
Analysis of Net Interest Income
Net interest income, the most significant component of the Company's
earnings, increased by $487,000, or 22%, to $2,659,000 for the first six months
of 1997 as compared to $2,172,000 for the comparable 1996 period. Average
earning assets for the first six months of 1997 of $103,649,000 increased by
$22,808,000, or 28%, over the comparable 1996 period. The increase in net
interest income resulted from increased earning assets, an increase in the
average loan to deposit ratio of 82% for the first six months of 1997 from 78%
for the comparable prior year period and a 10% increase in average demand
deposit accounts during the same period. The net interest spread for the first
six months of 1997 of 3.77% and a net interest margin of 5.18% for the same
period, reflected decrease of 32 basis points and 22 basis points, respectively,
from the prior year.
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<PAGE>
Other Income
Total other income increased by approximately $194,000, or 47%, to
$602,000 for the first six months of 1997, primarily due to increased income
recognized on ATM transactions resulting from the implementation in September
1996 of the $1.00 surcharge on noncustomer ATM transactions.
Other Expense
Salaries and benefits of $1,083,000 for the first six months of 1997
increased by $199,000, or 22%, over the first six months of 1996, due primarily
to an increase in the number of employees attributable to the new branch, normal
merit increases and associated increases in employee benefits. Net occupancy
expense of $473,000 for the first six months of 1997 reflects an increase of
$117,000, or 33%, from one year earlier due both to the opening of the new
branch during 1996 and additional depreciation expense of a local area network
installed in the later part of the second quarter of 1996. It is anticipated
that both salaries and benefits and net occupancy will increase during the
second half of 1997, with the opening of the Company's fifth branch scheduled
for the fall of 1997. Professional fees of $151,000 for the first six months of
1997 increased by $136,000 from one year earlier due primarily to consulting
expenses incurred in connection with augmenting the Company's compliance
infrastructure as well as to partial reimbursement during 1996 by the Small
Business Administration ("SBA") of legal fees incurred for the workout of two
troubled SBA guaranteed loans. Data processing expense of $213,000 for the first
six months of 1997 increased by $39,000, or 23%, over the prior year due to the
opening of the new branch as well as increased activity levels and item charges.
Other operating expense of $546,000 for the first six months of 1997 reflects an
increase of $165,000, or 44%, over the prior year due primarily to increases in
advertising, public relations, printing and regulatory fees, as well as
increases in administrative and overhead expenses associated with opening the
new branch.
Income Tax Expense
Income tax expense of $309,000 for the first six months of 1997 reflects
an increase of $24,000 over the $286,000 tax expense recorded one year earlier
due to an increases in pretax income. The Company's effective tax rate for the
first six months of 1997 increased to 39% from approximately 37% for the first
six months of 1996.
Analysis of Loans
The loan portfolio at June 30, 1997 of $84,628,000 increased by
$11,615,000, or 16%, as compared to the December 31, 1996 balance of $73,013,000
primarily as a result of increased lending activity in the first six months of
1997 associated with the arrival of the Company's new Chief Lending Officer in
January 1997. New loans of $18,449,000, exclusive of short-term loans and lines
of credit, were originated in the first six months of 1997. Loan principal
payments of $6,843,000 offset only a portion of this increase. The loan to
deposit ratio at June 30, 1997 was 82% as compared to 77% at December 31, 1996.
On average, the loan to deposit ratio for the first six months of 1997 was 82%
as compared to 78% during the comparable period of the prior year.
11
<PAGE>
Loan concentrations at June 30, 1997 and December 31, 1996 are summarized as
follows:
Loan Concentrations
At June 30, 1997 and December 31, 1996
June 30, December 31,
1997 1996
------- ----
Service industry 39% 38%
Real estate development/finance 26 30
Wholesale/retail 24 22
Other 11 10
------ -----
Total 100% 100%
===== ====
Analysis of Investments
Securities available for sale totaling $8,675,000 matured during the
first six months of 1997 as compared to purchases of $6,944,000 during the same
period. These securities transactions coupled with scheduled amortization and
accretion for the first six months accounted for the $1,628,000 decrease in the
available for sale portfolio to $9,578,000 at June 30, 1997 as compared to
$11,205,000 at December 31, 1996. Long-term investment purchases of $1,048,000
partially offset by maturities totaling $2,150,000 and normal pay downs on
mortgage-backed and other amortizing securities, account for the $1,124,000
decrease in long-term investments to $10,517,000 at June 30, 1997 from
$11,641,000 at December 31, 1996. Proceeds from maturing securities net of
reinvestments were used to fund new loans.
Short-term investments decreased by $250,000 to $5,329,000 at June 30,
1997 from December 31, 1996 due to normal fluctuations in the Company's
liquidity.
Noninterest-Earning Assets
Cash and due from banks of $9,570,000 at June 30, 1997 decreased by
$215,000 from the December 31, 1996 balance of $9,785,000. Large deposits were
received from one of the Company's large commercial customers at both June 30,
1997 and December 31, 1996. The deposits were not available for investment with
other financial institutions until the business day following those dates.
Deposits
Total deposits of $103,562,000 at June 30, 1997 increased by
$8,407,000, or 9%, from the December 31, 1996 balance of $95,155,000. Demand
deposits of $26,618,000 at June 30, 1997 reflect a $2,940,000, or 12%, increase
from the $23,678,000 balance at December 31, 1996 due principally to growth in
the deposits of the Company's new branch as well as an increase in the Company's
official checks outstanding. Normal fluctuations in the deposits of both
personal and nonprofit accounts make up the majority of the $318,000 decrease in
NOW accounts to $7,722,000 at June 30, 1997 as compared to $8,040,000 at
December 31, 1996. Money market accounts of $25,317,000 at June 30, 1997
decreased by $4,216,000 from the $29,533,000 balance reported at December 31,
1996 due primarily to normal fluctuations in the balances of some of the
Company's
12
<PAGE>
large corporate customers. Certificates of deposit at June 30, 1997 of
$42,304,000 increased by $9,780,000 from the $32,524,000 balance at December 31,
1996, with certificates of deposit $100,000 and over increasing by $6,858,000
and certificates of deposit under $100,000 increasing by $2,921,000. The
increase in certificates of deposit over $100,000 is primarily due to increases
in both brokered deposits and collateralized government deposits, while the
increase in certificates of deposit under $100,000 is primarily due to both new
products and the new branch opened in the fall of 1996.
Average noninterest-bearing demand deposits for the first six months of
1997 of $23,388,000 increased by $2,215,000, or 10%, from the comparable 1996
period, while average interest-bearing deposits increased by $13,008,000 during
the same period to $69,332,000. Average NOW accounts for the first six months of
1997 of $7,451,000 decreased by $178,000. Average money market deposits for the
first six months of 1997 of $23,144,000 increased by $2,389,000 over the prior
year's average balance. Average certificates of deposit $100,000 and over
increased by $10,013,000 to $20,581,000 for the first six months of 1997 as
compared to the first six months of 1996 due principally to increases in both
collateralized government deposits and brokered deposits. Average certificates
of deposit under $100,000 for the first six months of 1997 of $16,604,000
increased by $529,000 over the comparable period of the prior year primarily due
to the issuance of brokered deposits during the first quarter of 1997. Average
noninterest-bearing deposits to average total deposits during the first six
months of 1997 represent 25% as compared to 27% one year earlier.
Asset Quality
Loan Portfolio and Adequacy of Allowance for Loan Losses
As a result of improvement in the quality of the loan portfolio over
the last few years as well as relatively low levels of net charge-offs from mid
1994 through mid 1996, the Company did not record a provision for loan losses.
Nonetheless, the unallocated portion of the Company's allowance for loan losses
continued to increase. In the last half of 1996, the Company reversed $275,000
of loan loss provision. Throughout this process, 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, and deems the allowance for loan losses of $1,116,000 at June 30,
1997 to be adequate. The allowance for loan losses as a percentage of
outstanding loans at June 30, 1997 was 1.32%, down from the 1.44% reported at
December 31, 1996. Both the total dollar amount of the allowance for loan
losses, as well as the portion of the allowance for loan losses which is not
allocated to any particular component of the loan portfolio at June 30, 1997
have increased from December 31, 1996. The unallocated portion of the allowance
for loan losses of $126,000 increased from the December 31, 1996 level of
$117,000 despite the 16% growth in the total loan portfolio.
13
<PAGE>
Allocation of Allowance for Loan Losses
At June 30, 1997 and December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------------------------------
Reserve % of loans Reserve % of loans
Amount to total loans Amount to total loans
<S> <C> <C> <C> <C>
Commercial $465 46.7% $ 438 53.8%
Real estate - commercial mortgage 400 40.3 360 33.9
Real estate - residential mortgage 20 3.5 19 3.6
Real estate - construction 37 6.5 31 5.7
Installment 68 3.0 83 3.0
Unallocated 126 -- 117 --
------- ------- ------- ----
Total $ 1,116 100.0% $ 1,048 100.0%
======= ====== ======= ======
</TABLE>
Transactions in the allowance for loan losses for the six months ended
June 30, 1997 and 1996 are summarized as follows:
Transactions in the Allowance for Loans Losses for the
Six Months Ended June 30, 1997 and 1996
(In thousands)
1997 1996
-------- ------
Balance at January 1 $1,048 $1,274
Recoveries:
Commercial 89 31
Real estate - mortgage 16 1
Installment to individuals 10 17
----- ----
Total recoveries 115 49
Loans charged off:
Commercial (3) (41)
Installment to individuals (44) (21)
------- --------
Total charge-offs (47) (62)
------- --------
Net recoveries (charge-offs) 68 (13)
------- --------
Balance at March 31 $ 1,116 $ 1,261
======= =======
Ratio of net recoveries (charge-offs)
to average loans (1) 0.09% 0.04%
====== ======
- ----------
(1) Ratio of net charge-offs to average loans is computed on an annualized
basis for the six months ended June 30, 1997 and 1996.
Nonperforming Assets
Nonaccrual loans at June 30, 1997 of $966,000 are up by $3,000 from
the $963,000 reported at December 31, 1996. Nonaccrual loans at June 30, 1997
include loans guaranteed by the U.S. Small Business Administration ("SBA")
totaling $653,000. Banking regulations require that
14
<PAGE>
the full balance of these loans be placed on nonaccrual status, despite the SBA
guarantee on an average of 100% of the total. Restructured loans at June 30,
1997 of $571,000 remain virtually unchanged from the $573,000 reported at
December 31, 1996. Loans past due 90 days or more increased to $177,000 at June
30, 1997 from $153,000 at December 31, 1996 due principally to the addition of
three loans to two borrowers at June 30, 1997.
Analysis of Nonperforming Assets
At June 30, 1997 and December 31, 1996
(In thousands)
June 30, December 31,
1997 1996
------ -----
Nonaccrual loans:
Commercial $ 966 $ 863
Real estate - commercial mortgage -- 100
------ ------
Total nonaccrual loans (1) 966 963
----- ------
Past due loans:
Commercial 177 --
Real estate - commercial mortgage -- 142
Installment - individuals -- 11
----- ------
Total past due loans 177 153
---- ------
Restructured loans:
Commercial 571 573
---- -----
Total restructured loans 571 573
---- -----
Total nonperforming assets $ 1,714 $ 1,689
======= =======
Total nonperforming assets exclusive of
SBA guaranteed balances $ 1,072 $ 1,094
======= =======
Ratio of nonperforming assets
to gross loans plus foreclosed properties (2) 2.03% 2.31%
Ratio of nonperforming assets to total
assets (2) 1.42% 1.51%
Percentage of allowance for loan losses to
nonperforming assets (2) 65.11% 62.05%
- ----------------------------
(1) Nonaccrual loans include $653,000 and $607,000 in loans guaranteed by
the SBA at June 30, 1997 and December 31, 1996, respectively. The
outstanding balance of these loans are insured for 98.3%, or $642,000
and 97.9%, or $594,000, respectively.
(2) Ratios include SBA guaranteed loan balances.
Potential Problem Loans
At June 30, 1997 and December 31, 1996, respectively, loans totaling
$1,029,000 and $781,000 were classified as potential problem loans which are not
reported in the table entitled "Analysis of Nonperforming Assets." The loans are
subject to management attention as a result of
15
<PAGE>
financial difficulties of the borrowers and their classification is reviewed on
a quarterly basis. All of the potential problem loans at June 30, 1997 are
partially to fully secured. At December 31, 1996, 91% of potential problem loans
were partially to fully secured, with $66,000 of the remaining 9%, or $73,000,
guaranteed by the SBA. The $248,000 increase in potential problem loans from
December 31, 1996 to June 30, 1997 is primarily attributable to the addition in
1997 of three potential problem loans offset by the transfer of one loan to
nonaccrual status.
Impaired Loans
At June 30, 1997 and December 31, 1996, respectively, loans totaling
$2,091,000 and $1,955,000 were classified as impaired loans, all of which are
reported above as nonaccrual, restructured or potential problem loans.
Interest Sensitivity
Through the Bank's Asset/Liability Investment Committee, sensitivity of
net interest income to fluctuations in interest rates is considered through
analysis of the interest sensitivity positions of major asset and liability
categories. As a result of inherent limitations in this type of analysis, the
Company does not necessarily attempt to maintain a matched position for each
time frame. To augment this analysis, the Company also prepares an analysis of
the effect on net interest income of 1%, 2% and 3% interest rate movements in
either direction. Based on the Company's interest sensitivity position and the
analyses performed on the effect of interest rate movements at June 30, 1997 net
interest income will not be materially impacted by either a rising or declining
interest rate environment.
Liquidity and Capital Resources
Liquidity
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 $14,900,000 in cash and short-term investments at June 30, 1997, the
Company has a securities portfolio which can be pledged to raise additional
deposits and borrowings, if necessary. At June 30, 1997, the Company had
$3,729,000 in unpledged securities which were available for such use. As a
percentage of total assets, the amount of these cash equivalent assets at June
30, 1997 and December 31, 1996 was 15% and 20%, respectively. Normal
fluctuations in the deposit levels of some of the Company's large corporate
customers resulted in corresponding fluctuations in the Company's liquidity
position (short-term investments). 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 financial institutions and custodial funds
raised under deposit acquisition programs) representing 70% of average total
deposits for the six months ended June 30, 1997 and 79% of average total
deposits for the year ended December 31, 1996. In addition, the Bank has
unsecured lines of credit from correspondent financial institutions which can
provide up to an additional $3,000,000 in liquidity as well as access to other
collateralized borrowing programs. The Company maintained an average loan to
deposit ratio of 82% and 76% for the first
16
<PAGE>
six months of 1997 and the year ended December 31, 1996, respectively, and can
access collateralized deposit programs through U.S. government agencies to raise
additional deposits, when liquidity needs dictate.
Through its membership in the Federal Home Loan Bank of Atlanta (the
"FHLB"), which serves as a reserve or central bank for member institutions
within its region, the Bank is eligible to borrow up to approximately $1,501,000
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. At June 30, 1997, $1,109,000 in borrowings from the FHLB were
outstanding. The Bank is eligible to increase the maximum amount to be borrowed
by $7,499,000 with the purchase of up to $1,648,000 in additional stock in the
FHLB. The Company has adequate resources to meet its liquidity needs.
In June 1997, the Company entered into an agreement to acquire the
stock of Ballston Bancorp, Inc. in exchange for both stock and cash. The cash
consideration in connection therewith, is expected to be funded through both
internally generated funds as well as external funding sources (approximately
$3,000,000). Although at this time, no definitive agreement has been entered
into for the external funds, the Company believes that the funds are obtainable
at commercially reasonable rates.
Increases in deposit levels comprise the majority of the Company's net
cash inflows from financing activities for the first six months of 1997. Loan
originations, net of repayments and maturities of securities, during the first
six months of 1997 constitute the majority of the Company's cash outflows from
investing activities.
Stockholders' Equity
In the third quarter of 1996, the Company completed a stock offering
issuing 795,500 shares at a price of $8.75 per share, resulting in net proceeds
to the Company of $6,019,000 after underwriting discounts, commissions and
expenses. Of these proceeds, $219,000 was used to fund a loan to The Adams
National Bank Employee Stock Ownership Plan with 401(k) Provisions ("ESOP") to
purchase stock in that public offering. Immediately prior to the stock offering,
the Company increased the number of shares of authorized Common Stock from
800,000 to 5,000,000, reduced the par value to $0.01 per share and effected a
three-for-one stock split in the form of a stock dividend of two shares of
Common Stock for each share of Common Stock issued and outstanding. As of July
12, 1996, the effective date of the offering, the Company's Common Stock was
approved for listing on the Nasdaq National Market.
Stockholders' equity at June 30, 1997 of $13,329,000 increased by
$189,000 from December 31, 1996. Common stock issued through the exercise of
options granted under the Employee Incentive Stock Option Plan coupled with
dividends paid on allocated shares of the Employee Stock Ownership Plan with
401(k) Provisions accounted for a portion of this increase. Net income of
$486,000 for the first six months of 1997 and an $18,000 increase in unrealized
17
<PAGE>
losses on securities, net of taxes, were partially offset by dividends declared
during the quarter of $326,000. Average stockholders' equity as a percentage of
average total assets for 1997 was 12.02% as compared to 7.80% for the comparable
prior year period.
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, 1997, the Company's total risk-based
capital ratio and Tier 1 capital ratio of 15.81% and 14.59%, 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 Company's
June 30, 1997 ratios are based on total capital of $14,461,000, Tier 1 capital
of $13,345,000 and risk adjusted assets of $91,472,000. At June 30, 1997, the
Bank's total risk-based capital ratio and Tier 1 capital ratio of 10.23% and
9.01%, respectively, also met the definition of "well-capitalized." The June 30,
1997 ratios for the Bank are based on total capital of $9,140,000, Tier 1
capital of $8,049,000 and risk- adjusted assets of $89,346,000.
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,
1997, the Company's and the Bank's Tier 1 leverage ratios based on annual
average assets of $110,551,000 and $108,228,000 were 12.07% and 7.44%,
respectively, meeting the regulatory definition of "well-capitalized."
Factors Affecting Future Results
In addition to historical information, this Form 10-QSB includes
certain forward looking statements based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal and local tax authorities, changes in interest rates, deposit flows, the
cost of funds, demand for loan products, demand for financial services,
competition, changes in the quality or composition of the Bank's loan and
investment portfolios, changes in ownership status resulting in the loss of
eligibility for
18
<PAGE>
participation in government and corporate programs for minority and women-owned
banks, changes in accounting principles, policies or guidelines, and other
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices.
19
<PAGE>
PART II.
- --------------------------------------------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- --------------------------------------------------------------------------------
On June 17, 1997, Abigail Adams National Bancorp, Inc. (the "Company")
held its Annual Meeting of Shareholders. At the meeting, the following persons
were elected to the Board of Directors to hold office until the next Annual
Meeting of Stockholders or until their respective successors have been elected
and qualified. The votes cast and withheld for each such director was as
follows:
Barbara Davis Blum FOR 1,091,722 WITHHELD 126,854
--------- -------
Shireen L. Dodson FOR 1,094,322 WITHHELD 124,254
--------- -------
Susan Hager FOR 1,094,322 WITHHELD 124,254
--------- -------
Jeanne D. Hubbard FOR 1,094,322 WITHHELD 124,254
--------- -------
Clarence L. James, Jr. FOR 1,094,322 WITHHELD 124,254
--------- -------
Steve Protulis FOR 1,094,322 WITHHELD 124,254
--------- -------
Marshall T. Reynolds FOR 1,091,190 WITHHELD 127,386
--------- -------
Robert L. Shell, Jr. FOR 1,091,190 WITHHELD 127,386
--------- -------
Dana B. Stebbins FOR 1,094,322 WITHHELD 124,254
--------- -------
Susan J. Williams FOR 1,094,322 WITHHELD 124,254
--------- -------
In addition, the Company's stockholders approved the following
proposals:
Ratification of the selection of the firm of Arthur Andersen LLP as
independent certified public accountants for the Company for 1997, as
follows:
FOR 1,210,495 AGAINST 705 ABSTAIN 7,376 BROKER NON-VOTES: N/A
--------- ---- ----- ---
Approval of the 1996 Employee Incentive Stock Option Plan, as follows:
FOR 1,153,953 AGAINST 45,192 ABSTAIN 19,166 BROKER NON-VOTES: N/A
--------- ------ ------ ---
Approval of the 1996 Directors Stock Option Plan, as follows:
FOR 1,128,695 AGAINST 56,985 ABSTAIN 32,631 BROKER NON-VOTES: N/A
--------- ------ ------ ---
20
<PAGE>
- --------------------------------------------------------------------------------
Item 5. Other Information
- --------------------------------------------------------------------------------
Letter of Intent and Definitive Agreement to Acquire Stock of Ballston Bancorp
Inc.
On June 18, 1997, the Company issued a press release announcing the
signing of a non-binding letter of intent for the Company's acquisition of the
stock of Ballston Bancorp, Inc. A copy of this press release is attached to this
report as Exhibit 99.1, and incorporated herein by this reference. On June 23,
1997, the Company issued a press release announcing the signing of a definitive
agreement for the Company's acquisition of the stock of Ballston Bancorp, Inc. A
copy of this press release is attached to this report as Exhibit 99.2, and
incorporated herein by this reference.
- --------------------------------------------------------------------------------
Item 6 - Exhibits and Reports on Form 8-K
- --------------------------------------------------------------------------------
(a) Exhibits
Exhibit No. Description of Exhibit
- ----------- ----------------------
13 Abigail Adams National Bancorp, Inc. Financial Summary for
June 30, 1997
27 Financial Data Schedule
99.1 Press Release regarding Signing of Letter of Intent
for the Company's Acquisition of the Stock of
Ballston Bancorp, Inc.
99.2 Press Release regarding Signing of Definitive Agreement for the
Company's Acquisition of the Stock of Ballston Bancorp, Inc.
(b) No reports on From 8-K were filed during the quarter ended June 30,
1997.
21
<PAGE>
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: August 7, 1997 /s/ Barbara Davis Blum
---------------- -----------------------
Barbara Davis Blum
Chairwoman of the Board,
President and Director
(Principal Executive Officer)
Date: August 7, 1997 /s/ Kimberly J. Levine
---------------- -----------------------
Kimberly J. Levine
Senior Vice President & Chief Financial Officer
(Principal Financial and
Accounting Officer)
22
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000356809
<NAME> ABIGAIL ADAMS NATIONAL BANCORP, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,570,362
<INT-BEARING-DEPOSITS> 1,479,000
<FED-FUNDS-SOLD> 3,850,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,577,815
<INVESTMENTS-CARRYING> 10,517,060
<INVESTMENTS-MARKET> 10,565,358
<LOANS> 84,627,598
<ALLOWANCE> (1,116,201)
<TOTAL-ASSETS> 120,859,150
<DEPOSITS> 103,562,480
<SHORT-TERM> 1,823,709
<LIABILITIES-OTHER> 1,035,277
<LONG-TERM> 1,108,578
0
0
<COMMON> 16,559
<OTHER-SE> 12,592,293
<TOTAL-LIABILITIES-AND-EQUITY>120,859,150
<INTEREST-LOAN> 3,600,845
<INTEREST-INVEST> 612,673
<INTEREST-OTHER> 180,464
<INTEREST-TOTAL> 4,393,982
<INTEREST-DEPOSIT> 1,632,408
<INTEREST-EXPENSE> 1,734,871
<INTEREST-INCOME-NET> 2,659,111
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,465,333
<INCOME-PRETAX> 795,682
<INCOME-PRE-EXTRAORDINARY> 795,682
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 486,347
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.18
<LOANS-NON> 966,441
<LOANS-PAST> 176,857
<LOANS-TROUBLED> 570,675
<LOANS-PROBLEM> 1,029,199
<ALLOWANCE-OPEN> (1,048,487)
<CHARGE-OFFS> 47,379
<RECOVERIES> (115,093)
<ALLOWANCE-CLOSE> (1,116,201)
<ALLOWANCE-DOMESTIC> (1,116,201)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 125,852
</TABLE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT: Lindsay Conn
June 18, 1997 (202) 393-5247
ABIGAIL ADAMS NATIONAL BANCORP, INC. EXECUTES LETTER OF INTENT TO
ACQUIRE BALLSTON BANCORP, INC. THROUGH MERGER
WASHINGTON, June 18, 1997 -- Abigail Adams National Bancorp, Inc. (NASDAQ:AANB),
the parent company of The Adams National Bank, announced today the signing of a
non-binding letter of intent for the acquisition of the stock of Ballston
Bancorp, Inc. The letter of intent contemplates the acquisition through merger
of the business of Ballston Bancorp's subsidiary, The Bank of Northern Virginia,
with offices in Arlington, Va., for a price of approximately $14 million,
subject to certain adjustments and offsets.
The purchase price will be paid 50 percent in cash and 50 percent in the
form of common stock of Abigail Adams. It will be accounted for as a purchase
and will be tax-free to shareholders of Ballston Bancorp to the extent of the
stock received by them.
Consummation of the transaction is subject to significant conditions,
including approval by the boards of directors and shareholders of both companies
as well as appropriate governing regulatory agencies, completion of mutual due
diligence and the final negotiations for the definitive agreement. The letter of
intent contemplates the closing of the transaction as soon as practical after
all conditions and contingencies have been fulfilled but no later than December
31, 1997.
The Adams National Bank, a full service FDIC insured bank, is the largest
federally-chartered, women-owned bank in the nation. Reporting an 18 percent
increase in net income for 1996 over 1995, the total assets of its holding
company, Abigail Adams National Bancorp, Inc., rose 21 percent in the last year
to $116 million, prior to this acquisition.
Internet users may access more information on The Adams National Bank at
http://www adamsbank.com. and on The Bank of Northern Virginia at
http://www.thebankofnova.com.
# # #
EXHIBIT 99.2
FOR IMMEDIATE RELEASE CONTACT: Lindsay P. Conn
(202) 393-5247
ABIGAIL ADAMS NATIONAL BANCORP, INC. TO ACQUIRE BALLSTON BANCORP, INC.
WASHINGTON, June 23, 1997 -- Abigail Adams National Bancorp, Inc. (NASDAQ:AANB),
the parent company of The Adams National Bank, announced today that a definitive
agreement was signed for the acquisition of the stock of Ballston Bancorp, Inc.
The agreement provides for the acquisition through merger of the business of
Ballston Bancorp's subsidiary, The Bank of Northern Virginia, with offices in
Arlington, Va., for a price of approximately $14 million, subject to certain
adjustments and offsets.
The agreement provides that the purchase price will be paid in the
aggregate 50 percent in cash and 50 percent in the form of common stock of
Abigail Adams. It will be accounted for as a purchase and will be tax- free to
shareholders of Ballston Bancorp to the extent of the stock received by them.
Consummation of the transaction is subject to significant conditions,
including approval by shareholders of both companies as well as by appropriate
governing regulatory agencies. The transaction is expected to be completed as
soon as practical after all conditions and contingencies have been fulfilled but
no later than December 31, 1997.
It is anticipated that all of the banking offices of The Bank of Northern
Virginia will become branches of The Adams National Bank, which is headquartered
in Washington, D.C., as soon as practical and after all regulatory approvals.
The Bank of Northern Virginia has operated in Arlington, Va., since 1988,
offering customers a full range of commercial and consumer banking services at
its main office, and has a branch in the Ballston Common Mall and an ATM in
Arlington Hospital. It has received regulatory approval to operate a new
full-service bank in Falls Church, Va. Assets at March 31, 1997, were $71
million.
Abigail Adams National Bancorp, Inc. will have approximately $200 million
in assets following the acquisition. Since its founding 20 years ago, The Adams
National Bank has built a track record of profitability
- more -
<PAGE>
- 2 -
and growth, bolstered in 1996 by a highly successful $6.7 million common stock
offering which nearly doubled the bank's capital. Last year, The Adams National
Bank expanded to four branches with the opening of the Dupont Circle East office
in 1996 and plans to open another branch in the fall in the burgeoning business
community directly across from the new MCI Center arena in Chinatown. Other
branches are in Georgetown, at Union Station and at 1627 K Street, NW, the
location of its main office.
"The Adams National Bank is expanding to keep pace with the growth in the
National Capital region we serve," said Barbara Davis Blum, Adams' chairwoman
and chief executive officer who will head the combined organizations. "We will
bring to Virginia our distinctive local community banking focus, developed
during two decades of service. The essence of our founding vision is sustaining
a broad socio-economic range of customers," she said. "We have done so quite
successfully by working aggressively and responding quickly to serve the
financial needs of a diverse customer base."
Fred A. Burroughs III, chairman of The Bank of Northern Virginia, said,
"Since the community banking focus of Adams is much like our own, current
customers will continue to enjoy this personal style of service with much
greater convenience. Access to Adams branches will serve the needs of both our
D.C.-based customers and our Virginia customers who have banking needs in the
District," he said. "Furthermore, the combined assets of these two banks will
provide the capacity to entertain larger loan requests. We are confident that
Adams will administer the needs of our customers in the best interests of the
Northern Virginia communities we serve."
The Adams National Bank, a full service FDIC insured bank, is the largest
women-owned bank in the nation. Reporting an 18 percent increase in net income
for 1996 over 1995, the total assets of its holding company Abigail Adams
National Bancorp, Inc. rose 21 percent in the last year to $116 million, prior
to this acquisition.
Internet users may access more information on The Adams National Bank at
http://www. adamsbank.com and may access more information on The Bank of
Northern Virginia at http://www.thebankofnova.com.
# # #
[The following quarterly financial report was printed in a 11 x 8 1/2 landscape
presentation. While five (5) pages are presented here, the actual report
produced was a one page, two-sided, 3-fold report.
July 31, 1997
Dear Shareholder:
With two quarters still to go, 1997 is
shaping up to be the most exciting period in the
twenty-year history of Abigail Adams National
Bancorp, Inc. Our success this year builds on the
progress of 1996, when we nearly doubled the
bank's capital and laid the financial foundation
for a new era of growth, expansion and
profitability.
As I announced at our annual meeting, we have
now signed a definitive agreement to acquire the
stock of Ballston Bancorp, Inc., with assets at
March 31, 1997 of $71 million. The agreement
provides for the acquisition at a price of
approximately $14 million of the business of
Ballston Bancorp's subsidiary, The Bank of
Northern Virginia, with branches in Arlington,
Ballston Common, and , opening in September, Falls
Church, Virginia.
The fastest-growing segment of Northern
Virginia's economy is women- and minority-owned
businesses. This niche, which we know well, can
add to and strengthen The Bank of Northern
Virginia's solid customer base. The acquisition
will be completed as soon as regulatory and
shareholder approval is obtained.
In addition to this important development,
our newest full service branch at Dupont Circle
East, which opened in October 1996, has already
attracted new deposits of approximately $8
million. The Chinatown branch remains on track to
begin operations this fall, in time for the
opening of the new MCI Arena across the street.
Our new Chinese-"speaking" ATM at the corner of
7th and H Streets is already a convenient and
popular addition to our services.
Beyond laying the groundwork for growth, we
continue to maintain our well-capitalized status.
The Board of Directors has once more declared a
quarterly cash dividend of ten cents per share to
stockholders of record on June 30, 1997. Total
assets at June 30, 1997, are $121 million, an
increase of 37 percent over the same period last
year.
As we grow, the Adams National Bank remains
committed to providing the best service to its
customers as a high tech institution with a very
personal approach to banking.
Sincerely,
/s/ Barbara Davis Blum
----------------------
Barbara Davis Blum
Chairwoman, President &CEO
[Page: Outside back right page or folded inside right page.]
<PAGE>
The
Adams
National Bank
1627 K Street, NW
Washington, DC 20006
(202) 466-4090
www.adamsbank.com
Branch Locations Board of Directors
Main Office Barbara Davis Blum
1627 K Street, NW Chairwoman, President and
Washington, DC 20006 Chief Executive Officer
(202) 466-4090 The Adams National Bank
Dupont Circle East Shireen L. Dodson
1604 17th Street NW Assistant Director
Washington, DC 20009 Center for African American
(202) 466-4090 History and Culture
Smithsonian Institution
Georgetown
2905 M Street, NW Susan Hager
Washington, DC 20007 Chairwoman and
(202) 466-4090 Chief Executive Officer
Hager Sharp, Inc.
Union Station
50 Massachusetts Ave, NE Jeanne D. Hubbard
Washington, DC 20002 Executive Vice President
(202) 466-4090 First Sentry Bank (W. Va.)
MCI Center/CHinatown Clarence L. James, Jr., Esquire
(Opening Fall, 1997) Executive Director
802 Seventh Street, NW Executive Leadership Council
Washington, DC 20001
Steve Protulis
Executive Director
National Council of
Senior Citizens
Marshall T. Reynolds
Chairman & President
Champion Industries, Inc.
Robert L. Shell, Jr.
Chief Executive Officer
Guyan International
Dana B. Stebbins, Esquire
Partner
Wilkes, Artis, Hedrick & Lane
Susan J. Williams
President
Bracy Williams & Company
FDIC
Equal Housing Lender
[Union logo 'bug' here]
[Page: Outside back middle page.]
<PAGE>
VISION LEADERSHIP STRATEGY
[Mural Artwork appears here in the background]
20
Abigail Adams National Bancorp, Inc.
years
In The National Capital Region
Second Quarter Report
June 30, 1997
[Page: Outside back left page or the left folded front cover.]
<PAGE>
Balance Sheet Abigail Adams National Bancorp, Inc.
($ IN THOUSANDS)
(UNAUDITED)
June 30,
1997 1996
- -------------------------------------------------------
Assets:
Cash and due from banks $ 9.570 $ 5,824
Short-term investments 5,329 10,437
Securities (market value of
$20,143 and $11,560 in 1997
and 1996, respectively) 20,095 11,534
Loans 84,628 59,400
Less: Allowance for loan losses (1,116) (1,261)
Loans, net 83,512 58,139
Other assets 2,353 2,101
------- -------
Total assets $120,859 $ 88,035
======== ========
Liabilities and
Stockholders' Equity:
Deposits $103,562 $ 78,584
Short-term borrowings 1,824 1,739
Long-term debt 1,109 --
Other liabilities 1,035 743
------- -------
Total liabilities 107,530 81,066
Stockholders' equity 13,329 6,969
------- ------
Total liabilities and
stockholders' equity $120,859 $ 88,035
======== ========
Selected Data Abigail Adams National Bancorp, Inc.
- ------------------------------------------------------------
June 30, 1997 and 1996
(UNAUDITED)
1997 1996
- ------------------------------------------------------------
Allowance for loan losses as a
percentage of loans 1.32% 2.12%
Average equity to average assets 12.02% 7.80%
Return on average assets .89% 1.12%
Net interest margin 5.18% 5.40%
[Page: Inside left page.]
<PAGE>
Statement of Income Abigail Adams National Bancorp, Inc.
- -----------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three months ended: Six months ended:
June 30, June 30,
1997 1996 1997 1996
Interest income:
Interest and fees on loas $ 1,903 $ 1,471 $ 3,601 $ 2,980
Interest on securities 280 170 613 352
Interest on short-term investments 108 114 180 230
------ ------- ------- ------
Total interest income 2,291 1,755 4,394 3,562
Interest expense:
Interest on deposits 879 652 1,632 1,334
Interest on short-term borrowings 30 23 64 52
Interest on long-term debt 19 1 39 4
------ -------- ------- ------
Total interest expense 928 676 1,735 1,390
----- ------ --------- ------
Net interest income 1,363 1,079 2,659 2,172
Other income:
Service charges on deposits 273 176 564 348
Other income 26 47 38 59
------ ------ ------ -----
Total other income 299 223 602 407
Other expense:
Salaries and employee benefits 545 453 1,083 885
Net occupancy expense 244 184 473 355
Professional fees 87 (27) 151 15
Data processing expense 115 86 213 173
Other operating expense 274 212 546 380
------ ------ ------- -----
Total other expense 1,265 908 2,466 1,808
------- ------ ------- ------
Income before taxes 397 394 795 771
Income tax expense 160 147 309 286
----- ------ ------ -----
Net income $ 237 $ 247 $ 486 $ 485
===== ====== ===== =======
Net income per share $ .15 $ .28 $ .30 $ .56
======= ======= ======= =======
Weighted average number of shares
used to compute EPS 1,630,948 868,423 1,630,559 864,682
[Page: Inside middle page.]
