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 March 31, 1998
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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 April 30, 1998:
1,665,158 shares of Common Stock, Par Value $0.01/share
Transitional Small Business Disclosure Format (check one): Yes No X
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<PAGE>
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
March 31, 1998 and 1997 and December 31, 1997
<TABLE>
<CAPTION>
March 31, March 31, Dec 31,
1998 1997 1997
-------------- -------------- ----------
Assets (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and due from banks $ 8,771,647 $ 6,292,403 $ 7,654,347
Short-term investments:
Federal funds sold 10,175,000 7,875,000 6,450,000
Interest-bearing deposits in other banks 1,880,000 1,479,000 1,781,000
----------- ---------- ------------
Total short-term investments 12,055,000 9,354,000 8,231,000
Restricted interest-bearing deposits in other banks 1,132,266 -- --
Securities available for sale 16,747,565 10,069,844 20,452,799
Investment securities (market value of $6,058,118, $10,510,704, and $7,532,256
at March 31,1998, March 31, 1997 and
December 31, 1997, respectively) 6,063,852 10,522,526 7,508,850
Loans (net of deferred fees and unearned discounts) 82,483,660 78,632,100 85,313,591
Less: Allowance for loan losses (1,138,257) (1,094,952) (1,141,719)
----------- ----------- -----------
Loans, net 81,345,403 77,537,148 84,171,872
----------- ----------- ----------
Bank premises and equipment, net 1,291,436 865,669 1,252,413
Other assets 1,850,289 1,377,446 1,967,733
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Total assets $ 129,257,458 $ 116,019,036 $ 131,239,014
============== ============== =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand deposits $ 30,422,028 $ 27,926,140 $ 27,184,087
NOW accounts 10,721,978 7,345,828 9,880,968
Money market accounts 24,443,852 20,160,965 26,969,638
Savings accounts 2,156,873 1,594,957 1,898,721
Certificates of deposit of $100,000 or greater 23,085,404 21,414,578 25,255,095
Certificates of deposit less than $100,000 19,008,902 19,102,010 21,072,887
------------ ------------- ----------
Total deposits 109,839,037 97,544,478 112,261,396
------------ ------------- -----------
Short-term borrowings 4,288,796 2,904,217 3,489,263
Long-term borrowings/debt 1,067,168 1,121,742 1,085,936
Other liabilities 734,532 1,219,238 1,372,681
-------------- -------------- ---------
Total liabilities 115,929,533 102,789,675 118,209,276
------------ ------------ -----------
Stockholders' equity:
Common stock, par value $0.01 per share, authorized 5,000,000 shares; issued
1,660,915 at March 31, 1998 and 1,655,906 at March 31, 1997 and December
31, 1997; outstanding 1,656,235 shares at March 31,
1998, 1,651,226 shares at March 31, 1997 and December 31, 1997 16,609 16,559 16,559
Surplus 12,230,824 12,182,300 12,187,657
Retained earnings 1,309,085 1,277,587 1,044,369
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13,556,518 13,476,446 13,248,585
Less: Employee Stock Ownership Plan shares, 20,086 shares at
March 31,1998, 20,278 shares at March 31, 1997 and 20,086
shares at December 31, 1997, at cost (175,757) (177,433) (175,757)
Less: Treasury stock, 4,680 shares at cost (28,710) (28,710) (28,710)
Less: Unrealized loss on securities, net of taxes (24,126) (40,942) (14,380)
----------- -------------- -----------
Total stockholders' equity 13,327,925 13,229,361 13,029,738
----------- ------------ ----------
Total liabilities and stockholders' equity $ 129,257,458 $ 116,019,036 $ 131,239,014
============== ============== =============
</TABLE>
2
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------ ------
Interest income
<S> <C> <C>
Interest and fees on loans $ 2,124,451 $1,697,427
Interest on securities available for sale:
U.S. Treasury 14,201 --
Obligations of U.S. government agencies and corporations 281,744 152,881
---------- --------
Total interest on securities available for sale 295,945 152,881
Interest and dividends on investment securities:
U.S. Treasury 21,881 15,070
Obligations of U.S. government agencies and corporations 51,532 144,188
Mortgage-backed securities 4,014 4,797
Obligations of states and municipalities 3,991 3,991
Other securities 8,878 12,078
--------- --------
Total interest and dividends on investment securities 90,296 180,124
Interest on restricted interest-bearing deposits with other banks 3,849 --
Interest on short-term investments:
Federal funds sold 97,206 51,961
Deposits with other banks 26,304 20,059
--------- ----------
Total interest on short-term investments 123,510 72,020
----------- ----------
Total interest income 2,638,051 2,102,452
--------- ----------
Interest expense
Interest on deposits:
NOW accounts 56,190 44,215
Money market accounts 280,673 250,664
Savings accounts 12,935 9,628
Certificates of deposit:
$100,000 or greater 301,997 233,693
Less than $100,000 322,145 214,634
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Total interest on deposits 973,940 752,834
Federal funds purchased and
repurchase agreements 41,785 33,791
Interest on long-term borrowings/debt 18,467 20,001
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Total interest expense 1,034,192 806,626
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Net interest income 1,603,859 1,295,826
Benefit for loan losses (25,000) --
----------- ------------
Net interest income after benefit for loan losses 1,628,859 1,295,826
Other income
Service charges on deposit accounts 295,695 291,077
Other income 15,392 11,593
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Total other income 311,087 302,670
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Other expense
Salaries and employee benefits 586,641 538,284
Occupancy and equipment expense 285,209 228,622
Professional fees 183,238 64,633
Data processing fees 118,699 97,389
Other operating expense 328,012 271,281
----------- -----------
Total other expense 1,501,799 1,200,209
----------- ----------
Income before taxes 438,147 398,287
Applicable income tax expense 173,431 149,316
----------- ----------
Net income $ 264,716 $ 248,971
========== ==========
Basic earnings per share $ .16 $ .15
========== ===========
Diluted earnings per share $ .16 $ .14
========== ===========
Weighted average number of shares used to compute EPS:
Basic 1,631,643 1,630,165
========= =========
Diluted 1,678,453 1,671,100
========= =========
</TABLE>
3
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Employee
Additional Retained Stock Unrealized Compre-
Common Paid-in Earnings Treasury Ownership Loss on hensive
Stock Capital (Deficit) Stock Plan Securities Total Income
----- ------- --------- ----- ---- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,1997 $ 16,547 $12,172,435 $1,191,706 $ (28,710) $ (177,791) $ (33,990) $13,140,197
Net income --- --- 248,971 --- --- --- 248,971 $ 248,971
Dividends declared --- --- (163,090) --- --- --- (163,090)
Dividends on
allocated shares of
the Employee Stock
Ownership Plan --- 110 --- --- 358 --- 468
Issuance of common
stock under the
Employee Incentive
Stock Option Plan 12 9,755 --- --- --- --- 9,767
Unrealized loss on
securities, net of taxes --- --- --- --- --- (6,952) (6,952) (6,952)
-------
Comprehensive income $ 242,019
-------------------------------------------------------------------------------------------- =========
Balance at March 31, 1997 $ 16,559 $12,182,300 $1,277,587 $ (28,710) $ (177,433) $ (40,942) $13,229,361
=========== =========== ========== =========== =========== =========== ===========
Balance at January 1,1997 $ 16,559 $12,187,657 $1,044,369 $ (28,710) $ (175,757) $ (14,380) $13,029,738
Net income --- --- 264,716 --- --- --- 264,716 $ 264,716
Issuance of shares under
Employee Incentive
Stock Option Plan 50 43,167 --- --- --- --- 43,217
Unrealized loss on
securities, net of taxes --- --- --- --- --- (9,746) (9,746) (9,746)
------
Comprehensive income $ 254,970
--------------------------------------------------------------------------------------------- =========
Balance at March 31, 1998 $ 16,609 $12,230,824 $1,309,085 $ (28,710) $ (175,757) $ (24,126) $13,327,925
=========== ============ =========== =========== ========== ========== ===========
</TABLE>
4
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- -------
Operating Activities
<S> <C> <C>
Net income $ 264,716 $ 248,971
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Benefit for loan losses (25,000) --
Depreciation and amortization 107,879 68,169
Accretion of loan discounts and fees (58,905) (23,429)
Amortization and accretion of discounts and
premiums on securities (22,463) (58,989)
Provision for deferred income taxes 17,283 (110,755)
Increase in other assets 100,161 (119,590)
Increase in other liabilities (631,464) 412,021
--------- -----------
Net cash provided by operating activities (247,793) 416,398
--------- -----------
Investing Activities
Proceeds from repayment and maturity
of investment securities 4,998,193 1,150,000
Proceeds from maturity of securities
available for sale 7,500,000 2,675,000
Proceeds from repayment of mortgage-
backed securities 12,185 23,997
Purchase of investment securities (3,554,113) (48,000)
Purchase of securities available for sale (3,800,000) (1,500,000)
Purchase of short-term investments (99,000) --
Purchase of restricted investments (1,132,266) --
Principal collected on loans 8,695,087 4,537,194
Loans originated (6,327,698) (8,831,355)
Net decrease in short-term loans 219,492 101,178
Net decrease (increase) in lines of credit 323,493 (1,355,811)
Purchase of bank premises and equipment (146,902) (93,787)
----------- ------------
Net cash provided (used) by investing activities 6,688,471 (3,341,584)
---------- -----------
Financing Activities
Net increase in transaction and savings deposits 1,811,316 (5,603,242)
Proceeds from issuance of time deposits 11,316,677 17,273,769
Payments for maturing time deposits 15,550,353) (9,280,789)
Net increase in short-term borrowings 799,533 987,528
Payments on long-term debt (18,768) (17,073)
Proceeds from issuance of common stock 43,217 9,767
Cash dividends paid to common stockholders -- (162,503)
----------- -------------
Net cash provided (used) by financing activities (1,598,378) 3,207,457
----------- -----------
Increase in cash and cash equivalents 4,842,300 282,271
Cash and cash equivalents at beginning of year 14,104,347 13,885,132
----------- ----------
Cash and cash equivalents at end of year $18,946,647 $ 14,167,403
=========== ============
</TABLE>
5
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ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1998 and 1997
(Continued)
(Unaudited)
<TABLE>
Supplementary disclosures:
<S> <C> <C>
Interest paid on deposits and borrowings $ 1,120,039 $ 783,903
=========== ===============
Income taxes paid $ - $ 0
============ ===============
</TABLE>
6
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Abigail Adams National Bancorp, Inc.
Notes to Consolidated Financial Statements
March 31, 1998 and 1997
1. General
The unaudited information at and for the three months ended March 31, 1998
and 1997 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. Certain
reclassifications have been made to amounts previously reported in 1997 to
conform with the 1998 presentation.
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 $363,000 at March 31, 1998.
Under the terms of severance agreements with seven key management
officials of the Bank, the Bank is obligated to make payments totaling $594,000
under certain conditions in the event of a change in control of the Company or
the Bank.
On February 25, 1998, the Board of Directors of the Company approved the
Company and the Bank each establishing a grantor trust with a third party
trustee for the purpose of funding the severance agreements with seven key
management officials and for other amounts payable to the President and Chief
Executive Officer in connection with the termination of their employment
following a change of control. The trusts are irrevocable for one year.
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.
The Company commenced an action against three directors and certain
shareholders alleging, among other things, that the defendants had violated
federal securities laws. (See Part II, Item 1 -
7
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"Legal Proceedings.") On May 4, 1998, the Company discontinued this action by
filing a Notice of Dismissal without prejudice.
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 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
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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 March 31,
1998, 4,959 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 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 March 31, 1998, 1,244
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 their respective 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 1998). 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;
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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. Change in Accounting Principles
(a) 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 has not had a material
impact on the Company.
The increase in the average number of shares outstanding on a diluted
basis as compared to basic results from the Company's stock options outstanding.
(b) 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 has not had a material impact on the Company.
(c) Reporting Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130). SFAS No. 130 requires that certain financial activity typically
disclosed in stockholders' equity be reported in the financial statements as an
adjustment to net income in determining comprehensive income. Items applicable
to the Company would include unrealized gains and losses on securities available
for sale. Items identified as comprehensive income have been presented in the
statement of changes in stockholders' equity, under separate captions. SFAS No.
130 is effective for the Company on January 1, 1998 including the restatement of
prior periods reported consistent with this pronouncement. The implementation of
SFAS No. 130 has not had a material impact on the Company.
(d) Disclosures about Segments of an Enterprise and Related Information
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 requires the
reporting of selected segment information in quarterly and annual reports.
Information from operating segments is derived from
10
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methods used by the Company's management to allocate resources and measure
performance. The Company is required to disclose profit and loss, revenues and
assets for each segment identified including reconciliations of these items to
consolidated totals. The Company is also required to disclose the basis for
identifying the segments and the types of products and services within each
segment. SFAS No. 131 is effective for the Company on January 1, 1998, including
the restatement of prior periods reported consistent with this pronouncement, if
practical. The Company does not anticipate any material impact from the
implementation of SFAS No. 131.
(e) Employers' Disclosures about Pensions and Other Postretirement Benefits In
February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits - an amendment of FASB Statements No. 87, 88
and 106" (SFAS No. 132). SFAS No. 132 revises employers' disclosures about
pension and other postretirement benefit plans. It standardizes the disclosure
requirement for pensions and other postretirement benefits and requires
additional information on changes in the benefit obligations and fair values of
plan assets. SFAS No. 132 also eliminates certain disclosures which were
required by SFAS No. 87, "Employers' Accounting for Pensions", SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 132 is
effective for the Company on January 1, 1998. The implementation of SFAS No. 132
has not had a material impact on the Company.
11
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PART I. FINANCIAL INFORMATION (Continued)
- --------------------------------------------------------------------------------
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, 1997.
Overview
Total assets of Abigail Adams National Bancorp, Inc. and subsidiary (the
"Company") were $129,257,000 at March 31, 1998 as compared to $131,239,000 at
December 31, 1997. Total assets at March 31, 1998 decreased by $1,982,000 from
December 31, 1997 predominantly due to decreases in loans of $2,830,000. See
"Analysis of Loans." Total deposits decreased by $2,422,000 during the same
period to $109,839,000 at March 31, 1998 due primarily to decreases in
certificates of deposit of $100,000 or greater, partially offset by increases in
demand deposit accounts. See "Deposits."
The Company reported net income for the first three months of 1998 of
$265,000, or $0.16 per share, a 6% increase over the $249,000, or $.14 per share
for the comparable period in 1997. Income before taxes of $438,000 for the first
three months of 1998 reflects a 10% increase over the comparable 1997 period.
Increases in net interest income, partially offset by increases in operating
expenses associated with the opening of a new branch in the fourth quarter of
1997 and professional fees, accounted for the growth in net income.
Analysis of Net Interest Income
Net interest income, the most significant component of the Company's
earnings, increased by $308,000, or 24%, to $1,604,000 for the first three
months of 1998 as compared to $1,296,000 for the comparable 1997 period. Average
earning assets for the first three months of 1998 of $120,188,000 increased by
$20,299,000, or 20%, over the comparable 1997 period. The increase in net
interest income resulted from increased earning assets, a 20% increase in
average demand deposit accounts during the same period and the recovery of back
interest and fees on one nonaccrual loan. The net interest spread for the first
three months of 1998 of 4.14% and a net interest margin of 5.41% for the same
period, reflected an increase of 34 basis points and 15 basis points,
respectively, from the prior year.
Other Income
Total other income increased by approximately $8,000, or 3%, to $311,000
for the first three months of 1998, primarily due to increased income recognized
on ATM transactions.
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<PAGE>
Other Expense
Salaries and benefits of $587,000 for the first three months of 1998
increased by $49,000, or 9%, over the first three months of 1997, due primarily
to an increase in the number of employees attributable to the new branch and
normal merit increases, and partially offset by decreases in the cost of
employee benefits. Net occupancy expense of $285,000 for the first three months
of 1998 reflects an increase of $56,000, or 24%, from one year earlier due both
to the opening of the new branch in the last quarter of 1997 and additional
depreciation expense associated with office renovations and technology
investments. Professional fees of $183,000 for the first three months of 1998
increased by $118,000 from one year earlier due primarily to legal fees incurred
in connection with the Company's lawsuit against three directors, partially
offset by the reimbursement during 1998 of fees collected on one loan previously
recorded as nonaccrual. Data processing expense of $119,000 for the first three
months of 1998 increased by $22,000, 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 $328,000 for the first three months of 1998 reflects
an increase of $57,000, or 21%, over the prior year due primarily to increases
in advertising, public relations, travel and insurance costs, as well as
increases in administrative and overhead expenses associated with opening the
new branch.
The Bank contracts with an outside firm to provide data processing and
back-room operations. The enhanced resources provided by this firm, in
conjunction with the Bank's internal data management system, enable the Bank to
provide a high level of customer service while effectively managing its growth.
The Bank has reviewed its data processing systems provided by its outside data
processor, as well as computer applications which are used in-house to identify
systems which could be affected by the "Year 2000" issue and has developed an
approach to address the issue. The Year 2000 problem is the result of computer
programs being written using two digits rather than four to define the
applicable year. Any of the programs used by the Bank that have time- sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in major miscalculations or system failure. To date,
representations have been received from the Bank's primary processing vendors
that their systems already adequately address the Year 2000 issue or that plans
have been developed to address the issue. However, the Year 2000 problem is
pervasive and complex, and virtually every computer operation will be affected
in some way. Consequently, no assurance can be given that unforeseen problems in
the computer systems used by the Bank and its software maintained by third party
providers, will not have a material impact on the Bank's ability to conduct
business. The Bank's contract with its primary outside data processor was
renewed in 1997 for one year and is now scheduled to expire in the second
quarter of 1998. While the Bank is presently considering renewal options as well
as other state-of-the-art data processing alternatives, the Bank will only
consider data processing systems which can appropriately address the Year 2000
issue.
The Bank's customers, including its borrowers, are also faced with
potential Year 2000 problems. Through its Loan Committee, the Bank has analyzed
its customer base to determine which types of customers are likely to be
affected and has adopted procedures to inquire of those borrowers whether they
are taking steps to address the problem. The failure of its borrowers to
13
<PAGE>
resolve the problem could adversely affect their operations and impair their
ability to repay their loans to the Bank. Therefore, even if the Bank adequately
addresses its own Year 2000 problems, it could nevertheless be materially and
adversely affected if its borrowers do not also successfully resolve their Year
2000 problems. Incremental expenses for the Bank to address the Year 2000 issue
are not expected to materially impact operating results in any one period.
Income Tax Expense
Income tax expense of $173,000 for the first three months of 1998 reflects
an increase of $24,000 over the $149,000 tax expense recorded one year earlier
due to an increase in pretax income. The Company's effective tax rate for the
first three months of 1998 increased to 40% from approximately 37% for the first
three months of 1997.
Analysis of Loans
The loan portfolio at March 31, 1998 of $82,484,000 decreased by
$2,830,000, or 3%, as compared to the December 31, 1997 balance of $85,314,000
due to loan repayments. New loans of $6,328,000, exclusive of short-term loans
and lines of credit, were originated in the first three months of 1998. Loan
principal payments of $8,695,000 more than offset this increase. The loan to
deposit ratio at March 31, 1998 was 75% as compared to 76% at December 31, 1997.
On average, the loan to deposit ratio for the first three months of 1998 was 77%
as compared to 82% during the comparable period of the prior year.
Loan concentrations at March 31, 1998 and December 31, 1997 are summarized
as follows:
Loan Concentrations
At March 31, 1998 and December 31, 1997
March 31, December 31,
1998 1997
------- ----
Service industry 33% 34%
Real estate development/finance 32 31
Wholesale/retail 24 23
Other 11 12
----- ----
Total 100% 100%
===== ====
Analysis of Investments
Securities available for sale totaling $7,500,000 were repaid during
the first three months of 1998 as compared to purchases of $3,800,000 during the
same period. These securities transactions coupled with scheduled amortization
and accretion for the first three months accounted for the $3,705,000 decrease
in the available for sale portfolio to $16,748,000 at March 31, 1998 as compared
to $20,453,000 at December 31, 1997. Net proceeds from these securities
repayments are temporarily invested in short-term investments pending loan
fundings, resulting in a $3,824,000 increase in short-term investments to
$12,055,000 at March 31, 1998 from $8,231,000 at December 31, 1997. Long-term
investment maturities and repayments totaling $4,998,000 and normal pay downs on
mortgage-backed and other amortizing securities, partially offset by purchases
of $3,554,000, account for the $1,445,000 decrease in long-term investments to
$6,064,000 at March 31, 1998 from $7,509,000 at December 31, 1997.
14
<PAGE>
Noninterest-Earning Assets
Cash and due from banks of $8,772,000 at March 31, 1998 increased by
$1,118,000 from the December 31, 1997 balance of $7,654,000. This increase is
attributable higher balances maintained at the Federal Reserve Bank.
Deposits
Total deposits of $109,839,000 at March 31, 1998 decreased by
$2,422,000, or 2%, from the December 31, 1997 balance of $112,261,000. Demand
deposits of $30,422,000 at March 31, 1998 reflect a $3,238,000, or 12%, increase
from the $27,184,000 balance at December 31, 1997 due principally to growth in
the deposits of the Company's new branches as well as normal fluctuations in the
deposits of some of the Company's large corporate customers. Normal fluctuations
in the deposits of nonprofit accounts make up the majority of the $841,000
increase in NOW accounts to $10,722,000 at March 31, 1998 as compared to
$9,881,000 at December 31, 1997. Money market accounts of $24,444,000 at March
31, 1998 decreased by $2,526,000 from the $26,970,000 balance reported at
December 31, 1997 due primarily to fluctuations in the balances of some of the
Company's large corporate customers. Certificates of deposit at March 31, 1998
of $42,094,000 decreased by $4,234,000 from the $46,328,000 balance at December
31, 1997, with certificates of deposit $100,000 and over decreasing by
$2,170,000 and certificates of deposit under $100,000 decreasing by $2,064,000.
The decrease in certificates of deposit under $100,000 is primarily due to the
planned runoff of brokered deposits. The decrease in certificates of deposit
over $100,000 is primarily attributable to decreases in the collateral balances
for two loans.
Average noninterest-bearing demand deposits for the first three months
of 1998 of $27,539,000 increased by $4,530,000, or 20%, from the comparable 1997
period, while average interest-bearing deposits increased by $18,363,000 during
the same period to $83,519,000. Average NOW accounts for the first three months
of 1998 of $10,745,000 increased by $3,322,000. Average money market deposits
for the first three months of 1998 of $25,437,000 increased by $2,681,000 over
the prior year's average balance. Average certificates of deposit of $100,000
and over increased by $4,056,000 to $21,827,000 for the first three months of
1998 as compared to the first three months of 1997 due principally to increases
in both collateralized government deposits and brokered deposits which were
raised late in the first quarter of 1997 which matured late in the first quarter
of 1998. Average certificates of deposit under $100,000 for the first three
months of 1998 of $23,524,000 increased by $7,794,000 over the comparable period
of the prior year primarily due to the new branches as well as an increase in
brokered deposits late in the first quarter of 1997 which matured late in the
first quarter of 1998. Average noninterest-bearing deposits to average total
deposits during the first three months of 1998 represent 25% as compared to 26%
one year earlier.
Asset Quality
Loan Portfolio and Adequacy of Allowance for Loan Losses
The Company manages the risk characteristics of its loan portfolio
through various control processes, such as credit evaluation of individual
borrowers, establishment of lending limits to individuals and application of
lending procedures, such as the holding of adequate collateral and the
maintenance of compensating balances. Although credit policies are designed to
minimize risk,
15
<PAGE>
management recognizes that loan losses will occur and that the amount of these
losses will fluctuate depending on the risk characteristics of the loan
portfolio as well as general and regional economic conditions.
Net recoveries during 1997 added to the level of available reserves.
However, strong loan growth during 1997, coupled with a more conservative
allocation of the loan loss reserves to nonclassified commercial and real estate
loans resulted in a decrease in the unallocated portion of the allowance for
loan losses at December 31, 1997 as compared to earlier periods. During the
first quarter of 1998, the Abigail Adams National Bancorp, Inc., the parent
company, down streamed $2,000,000 in capital to its wholly-owned subsidiary, The
Adams National Bank (the "Bank"), thus enabling the Bank to repurchase loan
participations from the Company on which the Company maintained a $25,000 loan
loss reserve. As a result, during the first quarter of 1998, with loans no
longer outstanding at the parent company and with an increasing unallocated
balance in the Bank's allowance for loan losses, the parent company reversed the
$25,000 loan loss reserve recorded on its books. Nonetheless, improvement in
economic and other trends in the loan portfolio, coupled with a decrease in
classified real estate loans and related loan loss history, caused the
unallocated portion of the allowance for loan losses of $175,000 at March 31,
1998 to increase from December 31, 1997. 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 $1,138,000 at March 31,
1998 to be adequate.
At March 31, 1998, the allowance for loan losses as a percentage of
outstanding loans was 1.38% as compared to 1.34% at December 31, 1997. Despite
the reversal of $25,000 of loan loss allowance, net recoveries coupled with a
modest decrease in the loans outstanding, resulted in an increase in this ratio.
Allocation of Allowance for Loan Losses
At March 31, 1998 and December 31, 1997
(In thousands)
March 31, December 31,
1998 1997
----------------------- --------------------
Reserve % of loans Reserve % of loans
Amount to total loans Amount to total loans
Commercial $ 537 45.2% $ 486 45.6%
Real estate - commercial mortgage 313 45.5 464 45.1
Real estate - residential mortgage 15 2.3 23 2.3
Real estate - construction 34 5.1 49 4.9
Installment 64 1.9 59 2.1
Unallocated 175 -- 61 --
------ ------- ------- ----
Total $ 1,138 100.0% $1,142 100.0%
======= ====== ======= ======
16
<PAGE>
Transactions in the allowance for loan losses for the three months
ended March 31, 1998 and 1997 are summarized as follows:
Transactions in the Allowance for Loans Losses for the
Three Months Ended March 31, 1998 and 1997
(In thousands)
1998 1997
-------- ------
Balance at January 1 $1,142 $1,048
Benefit (25) --
Recoveries:
Commercial 5 53
Real estate - commercial mortgage 8 --
Installment to individuals 16 6
----- ----
Total recoveries 29 59
Loans charged off:
Installment to individuals (8) (12)
------- --------
Total charge-offs (8) (12)
------- --------
Net recoveries (charge-offs) 21 47
------- ------
Balance at March 31 $ 1,138 $ 1,095
======= =======
Ratio of net recoveries (charge-offs)
to average loans (1) 0.10% 0.26%
====== ======
- ----------
(1) Ratio of net charge-offs to average loans is computed on an annualized
basis for the three months ended March 31, 1998 and 1997.
Nonperforming Assets
Nonaccrual loans at March 31, 1998 of $501,000 increased by $90,000
from $411,000 reported at December 31, 1997. Nonaccrual loans at March 31, 1998
include loans guaranteed by the U.S. Small Business Administration ("SBA")
totaling $103,000. 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. Loans past due 90 days or more decreased to $17,000 at March
31, 1998 from $103,000 at December 31, 1997 due principally to one loan which
was transferred to nonaccrual status. The Company had no restructured loans at
March 31, 1998 or December 31, 1997.
17
<PAGE>
Analysis of Nonperforming Assets
At March 31, 1998 and December 31, 1997
(In thousands)
March 31, December 31,
1998 1997
------ -----
Nonaccrual loans:
Commercial $ 404 $ 411
Real estate - commercial mortgage 95 --
Installment - individuals 2 --
------ -------
Total nonaccrual loans (1) 501 411
----- ------
Past due loans:
Commercial 9 --
Real estate - commercial mortgage -- 96
Installment - individuals 8 7
---- ------
Total past due loans 17 103
--- -----
Restructured loans:
Commercial -- --
----- ----
Total restructured loans -- --
----- ----
Total nonperforming assets $ 519 $ 514
===== =====
Total nonperforming assets exclusive of
SBA guaranteed balances $ 425 $ 420
===== =====
Ratio of nonperforming assets
to gross loans plus foreclosed properties (2) .63% .60%
Ratio of nonperforming assets to total
assets (2) .40% .32%
Percentage of allowance for loan losses to
nonperforming assets (2) 201.93% 222.12%
- ----------------------------
(1) Nonaccrual loans include $103,000 and $104,000 in loans guaranteed by the
SBA at March 31, 1998 and December 31, 1997, respectively. The outstanding
balance of these loans are insured for 90.0%, or $93,000 and 90%, or
$94,000, respectively.
(2) Ratios include SBA guaranteed loan balances.
Potential Problem Loans
At March 31, 1998 and December 31, 1997, respectively, loans totaling
$1,284,000 and $1,154,000 were classified as potential problem loans which are
not reported in the table entitled "Analysis of Nonperforming Assets." Included
in these amounts at March 31, 1998 and December 31, 1997 are $153,000 in
unfunded letters of credit which were 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. At
March 31, 1998 and December 31, 1997, 88% and 100%, respectively, of the
potential problem loans were partially to fully secured.
18
<PAGE>
Impaired Loans
At March 31, 1998 and December 31, 1997, respectively, loans totaling
$1,407,000 (inclusive of $153,000 in unfunded letters of credit) and $698,000
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. A rate sensitivity position is computed for various repricing
intervals by calculating rate sensitivity gaps. In these rate sensitivity
position, interest earning assets and interest bearing liabilities are
distributed based on their repricing opportunities, giving consideration to
projected prepayment patterns, historical relationships to changes in market
interest rates, or call dates of securities in light of current market interest
rates. Although rate sensitivity gaps constantly change as funds are acquired
and invested, the Company's positive gap of $1,600,000 at one year or less as of
March 31, 1998, was approximately 1.9% of total interest-earning assets within
one year. 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 if all market rates were to uniformly increase
or decrease by 1%, 2% and 3% as compared to the results of a flat interest rate
environment. Based on the Company's interest sensitivity position and the
analyses performed on the effect of interest rate movements at March 31, 1998
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 $20,827,000 in cash and short-term investments at March 31, 1998,
the Company has a securities portfolio which can be pledged to raise additional
deposits and borrowings, if necessary. At March 31, 1998, the Company had
$3,085,000 in unpledged securities which were available for such use. As a
percentage of total assets, the amount of these cash equivalent assets at March
31, 1998 and December 31, 1997 was 19% and 18%, respectively. Normal
fluctuations in the deposit levels of some of the Company's large corporate
customers, as well as loan funding requirements, 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 76% of average total deposits for the three months ended
March 31, 1998 and 74% of average total deposits for the three months ended
March 31, 1997. In addition, the Bank has unsecured lines of credit from
correspondent financial institutions which can provide up
19
<PAGE>
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 77% and 82% for the first three months of 1998 and 1997,
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 $1,757,000
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 March 31, 1998, $1,067,000 in borrowings from the FHLB were
outstanding. The Bank is eligible to increase the maximum amount to be borrowed
by $7,243,000 with the purchase of up to $1,592,000 in additional stock in the
FHLB. The Company has adequate resources to meet its liquidity needs.
Maturing time deposits comprise the majority of the Company's net cash
outflows from financing activities for the first three months of 1998.
Repayments and maturities of loans and investments, partially offset by
investment purchases and new loan originations during the first three months of
1998 constitute the majority of the Company's cash inflows from investing
activities.
Stockholders' Equity
Stockholders' equity at March 31, 1998 of $13,328,000 increased by
$298,000 from December 31, 1997 as a result of common stock issued through the
exercise of options granted under the Employee Incentive Stock Option Plan
coupled with net income of $265,000 for the first three months of 1998 and a
$10,000 increase in unrealized losses on securities, net of taxes. Average
stockholders' equity as a percentage of average total assets for the first three
months of 1998 was 10.14% as compared to 12.47% 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 March 31, 1998, the Company's total risk-based
capital ratio and Tier 1 capital ratio of 15.50% and 14.28%, 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
March 31, 1998 ratios are based on total capital of $14,490,000, Tier 1 capital
of $13,352,000 and risk adjusted assets of $93,482,000. At March 31, 1998, the
Bank's total risk-based capital ratio and Tier 1 capital ratio
20
<PAGE>
of 13.05% and 11.82%, respectively, also met the definition of
"well-capitalized." The March 31, 1998 ratios for the Bank are based on total
capital of $12,108,000, Tier 1 capital of $10,970,000 and risk-adjusted assets
of $92,815,000.
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 March 31,
1998, the Company's and the Bank's Tier 1 leverage ratios based on annual
average assets of $129,729,000 and $126,989,000 were 10.29% and 8.64%,
respectively, meeting the regulatory definition of "well-capitalized."
Factors Affecting Future Results
In addition to historical information, this Form 10-KSB includes
certain forward looking statements that involve risks and uncertainties such as
statements of the Company's plans, expectations and unknown outcomes. The
Company's actual results could differ materially from management expectations.
Factors that could contribute to those differences 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, among other
things, the loss of eligibility for participation in government and corporate
programs for minority and women-owned banks, uncertainties with respect to costs
which the Company may incur as result of litigation against director Marshall T.
Reynolds and certain related stockholders, uncertainties with respect to
policies and strategies undertaken and costs incurred following a change in
control, 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 1 - Legal Proceedings
- --------------------------------------------------------------------------------
Although the Bank, from time to time, is involved in various legal
proceedings in the normal course of business, there are no material legal
proceedings to which the Company or the Bank is a party or to which any of their
property is subject, except for the matter discussed below.
On December 12, 1997, the Company commenced an action against three
directors, Marshall Reynolds, Jeanne Hubbard and Robert Shell, Jr., and certain
other shareholders, in United States District Court for the District of Columbia
seeking relief in various counts to enjoin the defendants from voting their
shares at the shareholders meeting scheduled to vote on the acquisition of
Ballston Bancorp, Inc., and for other relief. That complaint, in various counts,
alleged that the defendants had violated federal securities laws by inter alia,
failing to file a complete and accurate Schedule 13D, and soliciting of
shareholder proxies unlawfully by failing to file proxy solicitation material
with the Securities and Exchange Commission. The complaint also alleged that the
director defendants breached their fiduciary duties by opposing the acquisition
after they had voted for it agreeing to use their best efforts to bring it to
fruition and caused the Company to enter into a binding definitive agreement
with Ballston. On December 16, 1997, the District Court denied the Company's
motion for a preliminary injunction and, as described elsewhere, a majority of
the shareholders voted against the acquisition. Subsequently, on January 23,
1998, the Company filed an amended complaint against the same defendants, and
joined Ferris, Baker, Watts, Inc., an investment banking firm, alleging that it
also participated in an unlawful solicitation of proxies.
On May 4, 1998, the Company discontinued this action by the filing of a
Notice of Dismissal without prejudice.
- --------------------------------------------------------------------------------
Item 5 - Other Matters
- --------------------------------------------------------------------------------
On December 30, 1997, Mr. Reynolds and certain related stockholders
(the "Reynolds Group") filed an amendment to their report of beneficial
ownership on Schedule 13D originally filed on May 1, 1995 and subsequently
amended, which amendment stated, among other things, that the Reynolds Group may
seek to effect a change in the composition of the Board of Directors of the
Company. Subsequently, on March 11, 1998, Mr. Reynolds, his wife and two other
director/stockholders, Jeanne D. Hubbard and Robert L. Shell, Jr., filed a
preliminary consent solicitation statement with the Securities and Exchange
Commission, relating to their proposed solicitation of consents for the removal
of four directors - Barbara Davis Blum, Clarence L. James, Jr., Shireen L.
Dodson and Susan Hager - and the election of four new directors to fill the
vacancies created by the removal of the four directors. The Reynolds Group also
filed another amendment to
22
<PAGE>
Schedule 13D on March 11, 1998 relating to the efforts to effect the change in
the membership of the Board of Directors of the Company. Both the preliminary
consent solicitation statement and the amendment to Schedule 13D stated that it
is the intent of the Reynolds Group to dismiss the lawsuit (described in Item 1)
upon a change of control. As of May 12, 1998, to the best of management's
knowledge, the final consent solicitation statement has been mailed to
shareholders, however, as of that date the Reynolds Group has not delivered
sufficient consents to the Company to effect the removal of directors.
- --------------------------------------------------------------------------------
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 March 31, 1998
27 Financial Data Schedule
(b) On January 5, 1998, the Company filed a report on Form 8-K (earliest
event reported December 31, 1997) reporting that the shareholders did
not approve the Company's planned acquisition of Ballston Bancorp, Inc.
(the "Ballston Transaction") at the Company's Special Meeting of
Stockholders held on December 31, 1997, and that in connection with
that meeting and the Ballston Transaction, the Company filed a lawsuit
against three directors.
23
<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: May 15, 1998 /s/ Barbara Davis Blum
-------------- -----------------------
Barbara Davis Blum
Chairwoman of the Board,
President and Director
(Principal Executive Officer)
Date: May 15. 1998 /s/ Kimberly J. Levine
------------- -----------------------
Kimberly J. Levine
Senior Vice President & Chief Financial Officer
(Principal Financial and
Accounting Officer)
24
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 8,771,647
<INT-BEARING-DEPOSITS> 3,012,266
<FED-FUNDS-SOLD> 10,175,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,747,565
<INVESTMENTS-CARRYING> 6,063,852
<INVESTMENTS-MARKET> 6,058,118
<LOANS> 82,483,660
<ALLOWANCE> (1,138,257)
<TOTAL-ASSETS> 129,257,458
<DEPOSITS> 109,839,037
<SHORT-TERM> 4,288,796
<LIABILITIES-OTHER> 734,532
<LONG-TERM> 1,067,168
0
0
<COMMON> 16,609
<OTHER-SE> 13,311,316
<TOTAL-LIABILITIES-AND-EQUITY> 129,257,458
<INTEREST-LOAN> 2,124,451
<INTEREST-INVEST> 386,241
<INTEREST-OTHER> 127,359
<INTEREST-TOTAL> 2,638,051
<INTEREST-DEPOSIT> 973,940
<INTEREST-EXPENSE> 1,034,192
<INTEREST-INCOME-NET> 1,603,859
<LOAN-LOSSES> (25,000)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,501,799
<INCOME-PRETAX> 438,147
<INCOME-PRE-EXTRAORDINARY> 438,147
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264,716
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
<YIELD-ACTUAL> 8.90
<LOANS-NON> 501,253
<LOANS-PAST> 17,332
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,284,000
<ALLOWANCE-OPEN> (1,141,719)
<CHARGE-OFFS> 15,475
<RECOVERIES> (37,013)
<ALLOWANCE-CLOSE> (1,138,257)
<ALLOWANCE-DOMESTIC> (1,138,257)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 175,000
</TABLE>
