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 September 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 October 30, 1997:
1,651,226 shares of Common Stock, Par Value $0.01/share
Transitional Small Business Disclosure Format (check one): Yes No X
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PART I.
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Item 1 - Financial Statements
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1
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 1997 and 1996 and December 31, 1996
<TABLE>
<CAPTION>
September 30, September 30, December 31,
1997 1996 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Assets (Unaudited) (Unaudited)
Cash and due from banks $ 5,688,064 $ 6,570,628 $ 9,785,132
Short-term investments:
Federal funds sold 3,950,000 24,800,000 4,100,000
Interest-bearing deposits in other banks 1,479,000 1,476,715 1,479,000
---------- ------------ ---------
Total short-term investments 5,429,000 26,276,715 5,579,000
Securities available for sale 18,052,860 3,496,562 11,205,282
Investment securities (market value of $8,551,040, $9,874,241
and $11,679,607 at September 30,1997, September 30, 1996
and December 31, 1996, respectively) 8,513,840 9,854,361 11,640,813
Loans (net of deferred fees and unearned discounts) 84,728,757 63,342,910 73,013,413
Less: Allowance for loan losses (1,123,642) (1,278,531) (1,048,487)
----------- ----------- -----------
Loans, net 83,605,115 62,064,379 71,964,926
----------- ----------- ----------
Bank premises and equipment, net 981,070 763,268 840,051
Other real estate owned -- 104,800 --
Other assets 1,707,167 1,452,993 1,147,100
------------- ----------- ------------
Total assets $ 123,977,116 $ 110,583,706 $ 112,162,304
============== ============= =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand deposits $ 26,754,959 $ 28,205,478 $ 23,678,374
NOW accounts 7,783,730 8,702,104 8,039,994
Money market accounts 24,893,285 25,709,472 29,533,210
Savings accounts 1,699,123 1,249,828 1,379,554
Certificates of deposit of $100,000 or greater 23,961,781 12,902,087 15,657,818
Certificates of deposit less than $100,000 20,353,335 18,108,949 16,865,790
------------ ----------- -----------
Total deposits 105,446,213 94,877,918 95,154,740
------------- ------------ -----------
Short-term borrowings 2,879,419 2,074,705 1,916,689
Long-term borrowings/debt 1,095,100 -- 1,138,815
Other liabilities 1,049,830 725,711 811,863
-------------- -------------- -------------
Total liabilities 110,470,562 97,678,334 99,022,107
------------ ------------ -----------
Stockholders' equity:
Common stock, par value $0.01 per share, authorized 5,000,000 shares; issued
1,655,906 at September 30, 1997, 1,654,712 at September 30,
1996 and December 31, 1996; outstanding 1,651,226 shares at September 30,
1997, 1,650,032 shares at September 30, 1996 and
December 31, 1996 16,559 16,547 16,547
Surplus 12,182,595 12,158,394 12,172,435
Retained earnings 1,521,505 1,007,284 1,191,706
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13,720,659 13,182,225 13,380,688
Less: Employee Stock Ownership Plan shares, 20,574 shares at cost (176,899) (218,750) (177,791)
Less: Treasury stock, 4,680 shares at cost (28,710) (28,710) (28,710)
Less: Unrealized loss on securities, net of taxes (8,496) (29,393) (33,990)
------------- ------------ -------------
Total stockholders' equity 13,506,554 12,905,372 13,140,197
------------ ------------ -----------
Total liabilities and stockholders' equity $ 123,977,116 $ 110,583,706 $ 112,162,304
============== ============== =============
</TABLE>
2
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Period Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $2,138,827 $1,514,188 $5,739,672 $ 4,493,833
Interest on securities available for sale:
U.S. Treasury 14,854 7,270 18,232 48,098
Obligations of U.S. government agencies and corporations 136,573 36,060 401,178 121,299
-------- ---------- --------- ----------
Total interest on securities available for sale 151,427 43,330 419,410 169,397
Interest and dividends on investment securities:
U.S. Treasury 15,237 15,237 42,087 34,385
Obligations of U.S. government agencies and corporations 100,627 107,722 380,341 285,153
Mortgage-backed securities 3,662 6,507 12,644 21,774
Obligations of states and municipalities 3,992 -- 11,974 --
Other securities 6,923 7,628 28,085 21,605
--------- ---------- --------- ---------
Total interest and dividends on investment securities 130,441 137,094 475,131 362,917
Interest on short-term investments:
Federal funds sold 116,307 227,991 254,514 442,272
Deposits with other banks 21,943 15,302 64,200 31,148
--------- ---------- ----------- -----------
Total interest on short-term investments 138,250 243,293 318,714 473,420
--------- --------- ---------- ---------
Total interest income 2,558,945 1,937,905 6,952,927 5,499,567
---------- ---------- ----------- ----------
Interest expense
Interest on deposits:
NOW accounts 46,646 50,422 135,534 142,040
Money market accounts 289,760 273,618 806,053 744,404
Savings accounts 11,026 8,479 31,411 25,657
Certificates of deposit:
$100,000 or greater 324,740 110,945 876,882 398,486
Less than $100,000 284,441 267,523 739,141 734,288
--------- ---------- --------- --------
Total interest on deposits 956,613 710,987 2,589,021 2,044,875
Federal funds purchased and
repurchase agreements 31,626 28,173 95,392 79,583
Interest on long-term borrowings/debt 19,605 -- 58,302 4,219
--------- ---------- --------- ---------
Total interest expense 1,007,844 739,160 2,742,715 2,128,677
--------- --------- ----------- ---------
Net interest income 1,551,101 1,198,745 4,210,212 3,370,890
Provision (benefit) for loan losses -- (50,000) -- (50,000)
------------ ---------- ------------- ----------
Net interest income after provision (benefit)
for loan losses 1,551,101 1,248,745 4,210,212 3,420,890
Other income
Service charges on deposit accounts 280,905 189,706 845,050 537,739
Other income 13,737 82,553 51,496 141,988
--------- ----------- ---------- ---------
Total other income 294,642 272,259 896,546 679,727
--------- --------- ---------- --------
Other expense
Salaries and employee benefits 544,626 461,150 1,627,716 1,345,597
Occupancy and equipment expense 257,940 196,613 730,633 551,938
Professional fees 71,589 71,972 222,686 87,199
Data processing fees 137,363 85,233 350,165 258,566
Other operating expense 278,030 235,764 823,681 615,978
---------- ---------- ------------ --------
Total other expense 1,289,548 1,050,732 3,754,881 2,859,278
---------- ----------- ----------- ----------
Income (loss) before taxes 556,195 470,272 1,351,877 1,241,339
Applicable income tax expense 223,579 172,873 532,914 458,460
--------- --------- ----------- ---------
Net income $ 332,616 $ 297,399 $ 818,963 $ 782,879
========= ========= ========== =========
Net income per common share $ .20 $ .20 $ .50 $ .73
============ ============ ============== =============
Weighted average number of shares
used to compute EPS 1,630,945 1,502,192 1,630,505 1,077,659
========= ========= ========= =========
3
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
</TABLE>
<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
Issuance of 795,500 shares of
Common Stock 7,955 6,010,973 -- -- -- -- 6,018,928
Loan to ESOP to finance purchase of
25,000 shares of Common Stock -- -- -- -- (218,750) -- (218,750)
Net income -- -- 782,879 -- -- -- 782,879
Dividends declared -- -- (307,425) -- -- -- (307,425)
Unrealized gain on securities,
net of taxes -- -- -- -- -- 10,874 10,874
--------- --------- --------- -------- ---------- ----------- -----------
Balance at September 30, 1996 $ 16,547 $12,158,394 $1,007,284 $ (28,710) $ (218,750) $ (29,393) $ 12,905,372
========== ============ =========== ========= ============ ============ ============
Balance at January 1,1997 $ 16,547 $12,172,435 $1,191,706 $ (28,710) $ (177,791) $ (33,990) $13,140,197
Net income -- -- 818,963 -- -- -- 818,963
Dividends declared -- -- (489,164) -- -- -- (489,164)
Dividends on allocated shares
of the Employee Stock
Ownership Plan -- 405 -- -- 892 -- 1,297
Issuance of common stock under
the Employee Incentive Stock
Option Plan 12 9,755 -- -- -- -- 9,767
Unrealized loss on securities,
net of taxes -- -- -- -- -- 25,494 25,494
--------- ---------- ---------- --------- --------- ----------- ----------
Balance at September 30, 1997 $ 16,559 $12,182,595 $1,521,505 $ (28,710) $ (176,899) $ (8,496) $13,506,554
============ ============ =========== ========= ============ ============ ============
</TABLE>
4
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- -------
<S> <C> <C>
Operating Activities
Net income $ 818,963 $ 782,879
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision (benefit) for loan losses -- (50,000)
Depreciation and amortization 217,974 102,108
Accretion of loan discounts and fees (111,197) (81,515)
Amortization and accretion of discounts and
premiums on securities (131,718) 2,258
Gain on sale of other real estate -- (16,789)
Provision for deferred income taxes (101,724) (370,744)
Decrease (increase) in other assets (458,343) 70,514
Increase in other liabilities 220,245 (86,623)
----------- ------------
Net cash provided by operating activities 454,200 352,088
----------- ---------
Investing Activities
Proceeds from repayment and maturity
of investment securities 4,150,000 4,300,000
Proceeds from maturity of securities
available for sale 11,175,000 6,500,000
Proceeds from repayment of mortgage-
backed securities 46,596 87,037
Purchase of investment securities (1,048,000) (6,020,712)
Purchase of securities available for sale (17,869,387) (4,500,000)
Increase in short-term investments -- (990,000)
Principal collected on loans 12,820,752 8,581,976
Loans originated (24,818,779) (9,880,446)
Net increase in short-term loans (92,819) (12,463)
Net decrease in lines of credit 561,855 1,696,498
Purchase of bank premises and equipment (358,993) (587,859)
Purchase of other real estate -- (317,381)
Proceeds from disposition of other real estate -- 229,370
------------ ---------
Net cash used by investing activities (15,433,775) (913,980)
------------ ---------
Financing Activities
Net increase (decrease) in transaction and savings deposits (1,514,886) 10,370,623
Proceeds from issuance of time deposits 43,238,503 16,010,647
Payments for maturing time deposits (31,432,145) (14,566,547)
Net increase in short-term borrowings 962,731 289,302
Payments on long-term debt (43,715) (186,250)
Proceeds from issuance of common stock (net) 9,767 6,018,928
Loan to KSOP -- (218,750)
Cash dividends paid to common stockholders (487,748) (213,633)
------------ ------------
Net cash provided by financing activities 10,732,507 17,504,320
------------ ----------
Increase (decrease) in cash and cash equivalents (4,247,068) 16,942,428
Cash and cash equivalents at beginning of year 13,885,132 14,428,200
----------- ----------
Cash and cash equivalents at end of year $ 9,638,064 $31,370,628
============ ===========
Supplementary disclosures:
Interest paid on deposits and borrowings $ 2,697,404 $ 2,104,774
============ ===========
Income taxes paid $ 553,000 $ 458,500
============= ============
</TABLE>
5
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Abigail Adams National Bancorp, Inc.
Notes to Consolidated Financial Statements
September 30, 1997 and 1996
1. General
The unaudited information at and for the nine months ended September 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 $304,000 at September 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
6
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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 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
7
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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 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, 1,630,505 and 1,077,659 for the nine months ended
September 30, 1997 and 1996, respectively and 1,630,945 and 1,502,192 for the
three months ended September 30, 1997 and 1996, respectively. Stock options
8
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are included as common share equivalents in 1996 but are not included in 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
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PART I. FINANCIAL INFORMATION (Continued)
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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 $123,977,000 at September 30, 1997 as compared to $112,162,000
at December 31, 1996. Total assets at September 30, 1997 increased by
$11,815,000 from December 31, 1996 predominantly due to increases in loans of
$11,715,000. Total deposits increased by $10,291,000 during the same period to
$105,446,000 at September 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 nine months of 1997 of
$819,000, or $0.50 per share, for an annualized return on average assets of .96%
and an annualized return on average equity of 8.21%. This compares with return
on assets of 1.15% and return on equity of 12.41% for the first nine months of
1996. Net income for the first nine months of 1997 reflects an increase of 5%
over the $783,000 net income, or $0.73 per share, recorded for the first nine
months of 1996. Income before taxes of $1,352,000 for the first nine months of
1997 reflects a 9% 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 $839,000, or 25%, to $4,210,000 for the first nine months
of 1997 as compared to $3,371,000 for the comparable 1996 period. Average
earning assets for the first nine months of 1997 of $106,840,000 increased by
$22,175,000, or 26%, 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 nine months of 1997 from 77%
for the comparable prior year period and a 9% increase in average demand deposit
accounts during the same period. The net interest spread for the first nine
months of 1997 of 3.88% and a net interest margin of 5.28% for the same period,
reflected a decrease of 8 basis points and 4 basis points, respectively, from
the prior year.
Other Income
Total other income increased by approximately $217,000, or 32%, to $897,000
for the first
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nine 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 $1,628,000 for the first nine months of 1997
increased by $282,000, or 21%, over the first nine 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 $731,000 for the first nine months of 1997 reflects an increase of
$179,000, or 32%, 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 last
quarter of 1997, with the opening of the Company's fifth branch scheduled for
the fall of 1997. Professional fees of $223,000 for the first nine 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 $350,000 for the first
nine months of 1997 increased by $91,000, or 35%, 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 $824,000 for the first nine months of 1997 reflects
an increase of $208,000, or 34%, 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.
The Company has reviewed the data processing systems provided by the
Bank's outside data processor as well as those computer applications which are
used in-house and has determined that the Bank's data processing will not be
materially impacted by any date-sensitive calculations related to the year 2000.
The Bank's contract with its outside data processor is scheduled to expire in
mid 1998. While the Bank is presently considering renewal options as well as
other data processing alternatives, the Bank will only consider data processing
systems which can appropriately recognize this date-sensitive information.
Income Tax Expense
Income tax expense of $533,000 for the first nine months of 1997 reflects
an increase of $75,000 over the $458,000 tax expense recorded one year earlier
due to an increases in pretax income. The Company's effective tax rate for the
first nine months of 1997 increased to 39% from approximately 37% for the first
nine months of 1996.
Analysis of Loans
The loan portfolio at September 30, 1997 of $84,729,000 increased by
$11,715,000, or 16%, as compared to the December 31, 1996 balance of $73,013,000
primarily as a result of increased lending activity during 1997 associated with
the arrival of the Company's new Chief Lending Officer
11
<PAGE>
in January 1997. New loans of $24,819,000, exclusive of short-term loans and
lines of credit, were originated in the first nine months of 1997. Loan
principal payments of $12,821,000 offset only a portion of this increase. The
loan to deposit ratio at September 30, 1997 was 80% as compared to 77% at
December 31, 1996. On average, the loan to deposit ratio for the first nine
months of 1997 was 82% as compared to 77% during the comparable period of the
prior year.
12
<PAGE>
Loan concentrations at September 30, 1997 and December 31, 1996 are
summarized as follows:
Loan Concentrations
At September 30, 1997 and December 31, 1996
September 30, December 31,
1997 1996
------- ----
Service industry 38% 38%
Real estate development/finance 26 30
Wholesale/retail 25 22
Other 11 10
----- -----
Total 100% 100%
===== ====
Analysis of Investments
Securities available for sale totaling $11,175,000 matured during the
first nine months of 1997 as compared to purchases of $17,869,000 during the
same period. These securities transactions coupled with scheduled amortization
and accretion for the first nine months accounted for the $6,848,000 increase in
the available for sale portfolio to $18,053,000 at September 30, 1997 as
compared to $11,205,000 at December 31, 1996. Long-term investment maturities
and repayments totaling $4,150,000 and normal pay downs on mortgage-backed and
other amortizing securities, partially offset by purchases of $1,048,000,
account for the $3,127,000 decrease in long-term investments to $8,514,000 at
September 30, 1997 from $11,641,000 at December 31, 1996. Proceeds from maturing
securities were reinvested in similar investments.
Short-term investments decreased by $150,000 to $5,429,000 at September
30, 1997 from December 31, 1996 due to normal fluctuations in the Company's
liquidity.
Noninterest-Earning Assets
Cash and due from banks of $5,688,000 at September 30, 1997 decreased
by $4,097,000 from the December 31, 1996 balance of $9,785,000. A large deposit
received from one of the Company's large commercial customers at December 31,
1996, which was not available for investment with other financial institutions
until the following business day, accounted for the relatively high cash and due
from balance on that date.
At September 30, 1997, other assets include approximately $144,000 in
capitalized costs in connection with the Company's contemplated acquisition of
Ballston Bancorp, Inc.
Deposits
Total deposits of $105,446,000 at September 30, 1997 increased by
$10,291,000, or 11%, from the December 31, 1996 balance of $95,155,000. Demand
deposits of $26,755,000 at September 30, 1997 reflect a $3,077,000, or 13%,
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 normal
fluctuations in the deposits of some of the Company's large corporate customers.
Normal fluctuations in the deposits of personal accounts make up the majority of
the $256,000 decrease in
13
<PAGE>
NOW accounts to $7,784,000 at September 30, 1997 as compared to $8,040,000 at
December 31, 1996. Money market accounts of $24,893,000 at September 30, 1997
decreased by $4,640,000 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 large corporate customers. Certificates of deposit at September 30,
1997 of $44,315,000 increased by $11,791,000 from the $32,524,000 balance at
December 31, 1996, with certificates of deposit $100,000 and over increasing by
$8,304,000 and certificates of deposit under $100,000 increasing by $3,487,000.
The increase in certificates of deposit over $100,000 is primarily due to
increases in brokered deposits, collateralized government deposits and
compensating and collateral balances for loans as well as new certificates of
deposit issued to commercial customers. 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 nine months
of 1997 of $23,906,000 increased by $2,067,000, or 9%, from the comparable 1996
period, while average interest-bearing deposits increased by $14,186,000 during
the same period to $72,182,000. Average NOW accounts for the first nine months
of 1997 of $7,462,000 decreased by $395,000. Average money market deposits for
the first nine months of 1997 of $23,860,000 increased by $1,900,000 over the
prior year's average balance. Average certificates of deposit $100,000 and over
increased by $11,446,000 to $21,413,000 for the first nine months of 1997 as
compared to the first nine 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 nine months of 1997 of $17,861,000
increased by $933,000 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 nine
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, $50,000 of which was reversed in the third quarter of
1996. 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 $1,124,000 at September 30, 1997 to be adequate.
The allowance for loan losses as a percentage of outstanding loans at September
30, 1997 was 1.33%, 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 September 30, 1997 have increased from December 31,
1996 due in large part to the net recoveries received during 1997. The
unallocated portion of the allowance for loan losses of $233,000 increased from
the December 31, 1996 level of $117,000 despite the 16% growth in the total loan
portfolio.
14
<PAGE>
15
<PAGE>
Allocation of Allowance for Loan Losses
At September 30, 1997 and December 31, 1996
(In thousands)
September 30, December 31,
1997 1996
---------------------------------------------
Reserve % of loans Reserve % of loans
Amount to total loans Amount to total loans
------ -------------- ------ --------------
Commercial $ 434 43.0% $ 438 53.8%
Real estate - commercial mortgage 355 45.2 360 33.9
Real estate - residential mortgage 14 2.5 19 3.6
Real estate - construction 39 7.0 31 5.7
Installment 49 2.3 83 3.0
Unallocated 233 -- 117 --
------ ------- ------- ----
Total $ 1,124 100.0% $ 1,048 100.0%
======= ====== ======= ======
Transactions in the allowance for loan losses for the nine months ended
September 30, 1997 and 1996 are summarized as follows:
Transactions in the Allowance for Loans Losses for the
Nine Months Ended September 30, 1997 and 1996
(In thousands)
1997 1996
------- ------
Balance at January 1 $1,048 $1,274
Provision (benefit) -- (50)
Recoveries:
Commercial 105 130
Real estate - commercial mortgage 35 1
Installment to individuals 13 21
----- -----
Total recoveries 153 152
Loans charged off:
Commercial (32) (72)
Installment to individuals (46) (25)
------- --------
Total charge-offs (78) (97)
------ --------
Net recoveries (charge-offs) 75 55
------ ------
Balance at September 30 $ 1,123 $ 1,279
======= =======
Ratio of net recoveries (charge-offs)
to average loans (1) 0.13% 0.12%
====== ======
- ----------
(1) Ratio of net charge-offs to average loans is computed on an
annualized basis for the nine months ended September 30, 1997 and
1996.
Nonperforming Assets
Nonaccrual loans at September 30, 1997 of $433,000 are down by
$530,000 from the $963,000 reported at December 31, 1996. Nonaccrual loans at
September 30, 1997 include loans
16
<PAGE>
guaranteed by the U.S. Small Business Administration ("SBA") totaling $106,000.
Banking regulations require that the full balance of these loans be placed on
nonaccrual status, despite the SBA guarantee on an average of 90% of the total.
Restructured loans at September 30, 1997 of $562,000 decreased $11,000 from the
$573,000 reported at December 31, 1996. Loans past due 90 days or more increased
to $297,000 at September 30, 1997 from $153,000 at December 31, 1996 due
principally to two loans to one borrower which were repaid subsequent to
September 30, 1997.
Analysis of Nonperforming Assets
At September 30, 1997 and December 31, 1996
(In thousands)
September 30, December 31,
1997 1996
------ -----
Nonaccrual loans:
Commercial $ 433 $ 863
Real estate - commercial mortgage -- 100
------ ------
Total nonaccrual loans (1) 433 963
----- ------
Past due loans:
Commercial 178 --
Real estate - commercial mortgage 119 142
Installment - individuals -- 11
----- ------
Total past due loans 297 153
---- ------
Restructured loans:
Commercial 562 573
---- -----
Total restructured loans 562 573
---- -----
Total nonperforming assets $ 1,292 $ 1,689
======= =======
Total nonperforming assets exclusive of
SBA guaranteed balances $ 1,196 $ 1,094
======= =======
Ratio of nonperforming assets
to gross loans plus foreclosed properties (2) 1.52% 2.31%
Ratio of nonperforming assets to total
assets (2) 1.04% 1.51%
Percentage of allowance for loan losses to
nonperforming assets (2) 86.99% 62.05%
- ----------------------------
(1) Nonaccrual loans include $106,000 and $607,000 in loans guaranteed by
the SBA at September 30, 1997 and December 31, 1996, respectively. The
outstanding balance of these loans are insured for 90.0%, or $95,000
and 97.9%, or $594,000, respectively.
(2) Ratios include SBA guaranteed loan balances.
Potential Problem Loans
At September 30, 1997 and December 31, 1996, respectively, loans
totaling $1,027,000 and $781,000 were classified as potential problem loans
which are not reported in the table entitled
17
<PAGE>
"Analysis of Nonperforming Assets." An additional $153,000 in unfunded letters
of credit were also classified as potential problem loans. The loans are subject
to management attention as a result of financial difficulties of the borrowers
and their classification is reviewed on a quarterly basis. Eighty-five percent
of the potential problem loans at September 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 $399,000 increase in potential problem loans from December 31, 1996 to
September 30, 1997 is primarily attributable to the addition in 1997 of two
potential problem loans and one unfunded letter of credit offset by the transfer
of one loan to nonaccrual status.
Impaired Loans
At September 30, 1997 and December 31, 1996, respectively, loans
totaling $1,633,000 (inclusive of $153,000 in unfunded letters of credit) 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 September 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 $11,117,000 in cash and short-term investments at September 30,
1997, the Company has a securities portfolio which can be pledged to raise
additional deposits and borrowings, if necessary. At September 30, 1997, the
Company had $7,671,000 in unpledged securities which were available for such
use. As a percentage of total assets, the amount of these cash equivalent assets
at September 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 71% of
average total deposits for the nine months ended September 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
18
<PAGE>
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 nine
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 September 30, 1997, $1,095,000 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 there can be no assurance that such financing will be
consummated, the Company has received a commitment from George Mason Bank for a
line of credit of $3 million with a five year term, payable interest only the
first year with outstanding sums bearing interest at prime less one-half
percent. The line of credit will be secured by a pledge o f the stock of The
Adams National Bank. In the event that such financing is not consummated, the
Company would be required to seek additional financing from other commercial
lending sources or through one or more debt or equity offerings in the capital
markets.
Increases in deposit levels comprise the majority of the Company's net
cash inflows from financing activities for the first nine months of 1997. Loan
originations, net of repayments, and purchases of securities, net of maturities,
during the first nine 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.
19
<PAGE>
Stockholders' equity at September 30, 1997 of $13,507,000 increased by
$366,000 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
$819,000 for the first nine months of 1997 and a $25,000 decrease in unrealized
losses on securities, net of taxes, were partially offset by dividends declared
during the quarter of $489,000. Average stockholders' equity as a percentage of
average total assets for 1997 was 11.69% as compared to 9.23% 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 September 30, 1997, the Company's total risk-based
capital ratio and Tier 1 capital ratio of 15.82% and 14.61%, 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
September 30, 1997 ratios are based on total capital of $14,639,000, Tier 1
capital of $13,515,000 and risk adjusted assets of $92,514,000. At September 30,
1997, the Bank's total risk-based capital ratio and Tier 1 capital ratio of
10.57% and 9.34%, respectively, also met the definition of "well-capitalized."
The September 30, 1997 ratios for the Bank are based on total capital of
$9,463,000, Tier 1 capital of $8,364,000 and risk-adjusted assets of
$89,530,000.
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 September
30, 1997, the Company's and the Bank's Tier 1 leverage ratios based on annual
average assets of $114,094,000 and $111,688,000 were 11.85% and 7.49%,
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
20
<PAGE>
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 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.
21
<PAGE>
PART II.
- --------------------------------------------------------------------------------
Item 5 - Other Information
- --------------------------------------------------------------------------------
On November 7, 1997, the SEC declared the Company's Form S-4
Registration Statement effective in connection with the contemplated acquisition
of Ballston Bancorp, Inc. A meeting of shareholders has been scheduled for
December 17, 1997. A copy of the press release announcing the date is attached
as an exhibit thereto.
- --------------------------------------------------------------------------------
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
September 30, 1997
27 Financial Data Schedule
99 Press Release regarding Announcement of Shareholders Meeting
Regarding Ballston Bancorp, Inc.
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1997.
22
<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: November 12, 1997 /s/ Barbara Davis Blum
------------------- -----------------------
Barbara Davis Blum
Chairwoman of the Board,
President and Director
(Principal Executive Officer)
Date: November 12, 1997 /s/ Kimberly J. Levine
------------------- -----------------------
Kimberly J. Levine
Senior Vice President &
Chief Financial Officer
(Principal Financial and
Accounting Officer)
23
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE>
<CASH> 5,688,064
<INT-BEARING-DEPOSITS> 1,479,000
<FED-FUNDS-SOLD> 3,950,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,052,860
<INVESTMENTS-CARRYING> 8,513,840
<INVESTMENTS-MARKET> 8,551,040
<LOANS> 84,728,757
<ALLOWANCE> (1,123,642)
<TOTAL-ASSETS> 123,977,116
<DEPOSITS> 105,446,213
<SHORT-TERM> 2,879,419
<LIABILITIES-OTHER> 1,049,830
<LONG-TERM> 1,095,100
0
0
<COMMON> 16,559
<OTHER-SE> 13,489,995
<TOTAL-LIABILITIES-AND-EQUITY> 123,977,116
<INTEREST-LOAN> 5,739,672
<INTEREST-INVEST> 894,541
<INTEREST-OTHER> 318,714
<INTEREST-TOTAL> 6,952,927
<INTEREST-DEPOSIT> 2,589,021
<INTEREST-EXPENSE> 2,742,715
<INTEREST-INCOME-NET> 4,210,212
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,754,881
<INCOME-PRETAX> 1,351,877
<INCOME-PRE-EXTRAORDINARY> 1,351,877
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 818,963
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.28
<LOANS-NON> 432,780
<LOANS-PAST> 296,481
<LOANS-TROUBLED> 562,401
<LOANS-PROBLEM> 1,179,540
<ALLOWANCE-OPEN> (1,048,487)
<CHARGE-OFFS> 77,733
<RECOVERIES> (152,888)
<ALLOWANCE-CLOSE> (1,123,642)
<ALLOWANCE-DOMESTIC> (1,123,642)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 233,117
</TABLE>
ABIGAIL ADAMS NATIONAL BANCORP, INC. ANNOUNCES SHAREHOLDER
MEETING REGARDING BALLSTON BANCORP, INC.
WASHINGTON -- November 12, 1997 -- Abigail Adams National Bancorp, Inc.
(Nasdaq:AANB), today announced that the meeting of its shareholders to approve
the acquisition of Ballston Bancorp, Inc. has been scheduled for December 17,
1997. The related meeting of shareholders of Ballston Bancorp, Inc., which is
the parent company of The Bank of Northern Virginia, has been scheduled for
December 15, 1997. Materials relating to such meetings have been mailed to
shareholders of each company.
Barbara Davis Blum, Chairwoman and CEO said, "The Board of Directors of
Abigail Adams National Bancorp, Inc. believes the acquisition of the Bank of
Northern Virginia will have a positive financial impact as well as strategic
benefits. The acquisition, which will result in a combined bank with assets of
approximately $200 million, establishes Adams' presence in the high growth
Northern Virginia market and nearly doubles our legal lending limit."
In connection with this transaction, management estimates annual direct
cost savings of approximately $750,000, before taxes and $500,000 after taxes,
the majority of which management expects will be realized beginning in the first
half of 1998. The elimination of duplicate management positions accounts for
approximately two thirds of the estimated savings. There are no costs associated
with the buyout of management contracts or other severance arrangements.
Management estimates also include savings in occupancy expenses of approximately
$62,000 and with the remainder of the estimated savings comprised of
administrative costs, such as directors' fees, professional fees, insurance and
other administrative costs. A common data processing system currently used by
both institutions will smooth the transition to one institution. Management's
estimates are based on assumptions which management believes to be reasonable.
Any revenue enhancements resulting from synergy or further cost savings
resulting from economies of scale would be in addition to that estimated by
management.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995: Certain statements made in this release contain information that is
not historical. Such statements including, specifically, estimates of cost
savings resulting from the proposed transaction mentioned in this release, are
forward-looking and are subject to risks and uncertainties, including the
accuracy of information supplied by other parties upon which the company based
its estimates and other risks detailed from time to time in AANB's filing with
the Securities and Exchange Commission.
##
(The following quarterly financial report was
printed in a 11 x 8 1/2 landscrape presentation.
Wile five (5) pages are presented here, the actual
report produced was a one page 3-fold format.)
October 31, 1997
Dear Shareholder:
The third quarter of 1997 was marked by
substantial growth for Abigail Adams National
Bancorp, Inc., along with strong gains in
profitability. Our profits increased 12 percent
over the same quarter of the prior year, while at
the same time, our total loans increased 34
percent and net interest income grew 29 percent.
Adams recovered interest income, as well as
principal, on one nonaccrual loan which was repaid
during the third quarter of 1997. Net income for
the nine months ended September 30, 1997 was
$819,000 as compared to $783,000 one year earlier.
Adams' growth is reflected in more than just
financials, however, as we move ever closer to the
November 6, 1997 opening of our new Chinatown
branch at 7th and H Streets, across from the
soon-to-be-opened MCI Center. The new branch is
uniquely designed to allow us to deliver our high
technology banking services in an atmosphere that
reflects our respect for the Chinese customs and
culture of the area.
Business expansion at the Dupont Circle East
branch continues to set a healthy pace, with
deposits reaching approximately $8 million at the
end of the third quarter. Our very personal
approach to banking has not gone unnoticed by our
new customers. One typical letter begins: "I
recently opened an account at your Dupont Circle
branch. Each time I have a transaction, I am made
to feel as if I am the Bank's most important
customer..."
Acquisition of Ballston Bancorp, Inc. (parent
company of The Bank of Northern Virginia) is
expected to close in the fourth quarter following
receipt of all necessary approvals. The purchase,
made possible by last year's highly successful
third quarter stock offering, will give Adams
branches in Arlington and Ballston Common -- at
the heart of a Northern Virginia economy that
fuels a fast-growing segment of small businesses
and high tech firms.
Adams continues to maintain its
well-capitalized status with total assets of $124
million, up 12 percent from $111 million one year
ago. The Board of Directors has once more declared
a quarterly cash dividend of ten cents per share
to stockholders of record on September 30, 1997.
We look forward to the growth and expansion
of the upcoming months while providing the level
of personal service that is the foundation of our
continuing success.
Sincerely,
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
Third Quarter Report
September 30, 1997
[Page: outside back left page or the left folded front cover]
<PAGE>
Balance Sheet Abigail Adams National Bancorp, Inc.
- -------------------------------------------------------
($ IN THOUSANDS)
(UNAUDITED)
September 30,
1997 1996
- -------------------------------------------------------
Assets:
Cash and due from banks $ 5,688 $ 6,571
Short-term investments 5,429 26,277
Securities (market value of
$26,604 and $13,371 in 1997
and 1996, respectively) 26,567 13,351
Loans 84,729 63,343
Less: Allowance for loan losses (1,124) (1,279)
Loans, net 83,605 62,064
Other real estate -- 105
Other assets 2,688 2,216
------- -------
Total assets $123,977 $110,584
======== ========
Liabilities and
Stockholders' Equity:
Deposits $105,446 $ 94,878
Short-term borrowings 2,879 2,075
Long-term debt 1,095 --
Other liabilities 1,050 726
------- -------
Total liabilities 110,470 97,679
Stockholders' equity 13,507 12,905
------- -------
Total liabilities and
stockholders' equity $123,977 $110,584
======== ========
Selected Data Abigail Adams National Bancorp, Inc.
- ------------------------------------------------------------
September 30, 1997 and 1996
(UNAUDITED)
1997 1996
- -------------------------------------------------------
Allowance for loan losses as a
percentage of loans 1.33% 2.02%
Average equity to average assets 11.69% 9.23%
Return on average assets .96% 1.15%
Net interest margin 5.28% 5.32%
[Page: Inside left page]
<PAGE>
Statement of Income Abigail Adams National Bancorp, Inc.
- ----------------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three months ended: Nine months ended:
September 30, September 30,
1997 1996 1997 1996
- ----------------------------------------------------------------------------
Interest income:
Interest and fees on loans $ 2,139 $ 1,514 $ 5,740 $ 4,494
Interest on securities 281 180 894 532
Interest on short-term investments 139 244 319 474
------ ------- ------- ------
Total interest income 2,559 1,938 6,953 5,500
Interest expense:
Interest on deposits 957 711 2,589 2,045
Interest on short-term borrowings 32 28 96 80
Interest on long-term debt 19 -- 58 4
------- -------- ------- ------
Total interest expense 1,008 739 2,743 2,129
------ ------ --------- ------
Net interest income 1,551 1,199 4,210 3,371
Provision (benefit) for loan losses -- (50) -- (50)
-------- ------ -------- ------
Net interest income after
provision (benefit) for
loan losses 1,551 1,249 4,210 3,421
Other income:
Service charges on deposits 281 189 845 537
Other income 14 83 52 142
------ ------ ------ -----
Total other income 295 272 897 679
Other expense:
Salaries and employee benefits 545 461 1,628 1,346
Net occupancy expense 258 197 731 552
Professional fees 72 72 222 87
Data processing expense 137 85 350 258
Other operating expense 278 236 824 616
------ ------ ------- -----
Total other expense 1,290 1,051 3,755 2,859
------- ------- ------- ------
Income before taxes 556 470 1,352 1,241
Income tax expense 223 172 533 458
----- ------ ------ -----
Net income $ 333 $ 298 $ 819 $ 783
===== ====== ====== =======
Net income per share $ .20 $ .20 $ .50 $ .73
======= ======= ======= ========
Weighted average number of
shares used to compute EPS 1,630,945 1,502,192 1,630,505 1,077,659
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