2007 Annapolis Bancorp Annual Report

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iankEasy
• BankEasy (bangkee-zee).
verb.
1) to utilize
ankmg services or maintain an account with BankAnnapolis,
rhereby one is free from excessive hassles or red tape. When
BankEasy at BankAnnapolis, I get the personal attention I deserve.
The Definition of A Local Banl<
Annual
l a n k L o c a l • BankLocal (bangkloh-kuhl).
Report
verb.
2007
1) to utilize
king services or maintain an account w i t h BankAnnapolis,
here decision makers are neighbors and deposits are reinvested
I the community. / love where I live, so I BankLocal at BankAnnapolis.
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April 15, 2008
SNL Financial, LC
1-800-969-4121
INC.
Fellow Shareholders:
In the face of a faltering economy^ our goal at Annapolis Bancorp is not
simply to weather the crisis, but to emerge at its end as a stronger and
more prosperous institution. Accordingly, in 2007 we took a number of
steps that helped bolster the near-term performance of our wholly owTied
subsidiary, BankAnnapolis, while positioning it for further growth when
more favorable economic conditions prevail.
Like other finandal institutions in 2007, our results were impacted by a flat yield curve that compressed margins, as well as by a dramatic
slump in real estate and a crisis in the credit markets that affected the greater economy. Net income for 2007 totaled $2.42 million, down
17.9% from $2.95 million in 2006. While total assets increased by only $10.0 million or 2.8"/) in 2007, total gross loans grew by $24.6
million or 11.1% as we successfully shifted our asset mix away from ovemight investments toward higher-yielding commercial and
real estate loans that met our rigorous underwriting standards.
Given these drcnimstances, our stock price declined, but less severely than other commimity bank stocks. In 2007, the America's Community
Bankers NASDAQ Index'" lost 24.8% of its value. Our decline at Annapolis Bancorp was 19.7%. Given our strong fundamentals and solid
prospects, our Board of Directors determined that our shares represented a sound investment and authorized the repurchase of up to 7.5%
or 300,000 shares on the open market, a dedsion that we believe will be accretive to the Company's retum on average equity.
Our confidence in the future is based in part on our response to qualitative market research that we commissioned at the beginning of the
year. Independent focus groups revealed that our most effective strategy for growing the bank would be to entice prospective customers with
a compelling offer and then broaden the relationship by providing high-quality personal service and aoss-selling other banking products.
These condusions led directly to two important initiatives in 2007. First, in April we introduced our highly successful Superior Savings
Account, which featured an introdurtory APY of 6.10'Ki, a rate higher than the yields available on any money market account or CD in the
local market. The response was immediate and dramatic. By year's end, 2,100 new Superior Savings Accounts had been opened, with
total balances of $33.6 million. A successful onboarding progTcim helped to convert many of these new customers into full-fledged loan
and deposit relationships.
Our Superior Savings Account satisfied another important goal: boosting our deposits to fund growth. In 2007, total deposits grew by 6.4%
to $291.6 million. The success of the Suf)erior Savings Account campaign also enabled us to retire $25.0 million in Federal Home Loan Bank
debt. Later in the year as opportunities for lending increased, we borrowed $15.0 million from the FHLB at more favorable rates, helping us
ease the pressure on our net interest margin.
The second, complementary initiative was the addition of a number of highly seasoned bankers with the skills and insight to transform these
single-product relationships into durable, long-term partnerships with the bank. The bank's burgeoning reputation in the community aided
these efforts, enabling us to recmit Ronald Voigt from Bank of America as senior vice president and chief business development officer.
We also brought on senior real estate banker John Miller and business bankers Kathy Coursey and Kim Sherman, all accomplished local
bankers with impressive credentials.
These experienced bankers were attracted by our approach to community banking, which is captured by our new slogan:
"BankEasy. BankLocal." Both employees and customers appreciate the depth of our involvement in the Greater Annapolis area and our
willingness to seek innovative ways to meet the banking needs of people who live and work here. They also value our longstanding
dedication to community service. Among other activities this year, we pledged $20,000 to help update and consolidate facilities at the
Providence Center, a nonprofit organi2ation dedicated to serving adults with developmental disabilities.
Our distinctive commitment to community banking is the primary reason that Annapolis Bancorp has been able to attract an outstanding
Board of Directors, including Kendel Ehrlich, Maryland's former first lady, who joined us this year. With their guidance, we have established
an ambitious set of goals for 2008 that includes opening our eighth branch at the $400 million Annapolis Towne Centre in Parole.
In closing, we would like to thank our shareholders for their ongoing confidence and our staff for their dedication. It is because of your
continued support that we believe BankAnnapwIis will be stronger than ever when the economy recovers. You can leam more about our
efforts in the attached Form 10-KSB.
Richard M. Lerner
Chairman and CEO
Annapolis Bancorp, Inc. and BankAnnapolis
••i
2003 2004 2005 2006 2007
Directors & Officers
BOARD OF DIRECTORS OF
ANNAPOLiS BANCORP, INC.
Walter L. "Skip" Bennett, IV
Clyde E. Gulp, III
Kendel S. Ehrlich
F, Carter Heim
Stanley J. KIos, Jr.
Lawrence E. Lerner
Richard M. Lerner
Lawrence W. Schwartz
Ermis Sfakiyanudis
Clifford T. Solomon
BOARD OF DIRECTORS
OF BANKANNAPOLIS
Joseph G. "Jay" Baldwin
Walter L. "Skip" Bennett, IV
Clyde E. Gulp, III
Kendel S. Ehrlich
P. Carter Heim
Stanley J. KIos, Jr.
Lawrence E. Lerner
Richard M. Lerner
Lawrence W. Schwartz
Ermis Sfakiyanudis
Clifford T. Solomon
EXECUTIVE OFFICERS OF
ANNAPOLIS BANCORP, INC.
SENIOR VICE PRESIDENTS
Kim M. Sherman
Business Development
Micnaei L. irwin
Richard M. Lerner
Business Development
Ciiairman & Chief Executive Officer
Carol A. Kasper
Margaret Theiss Faison
Business Development
Treasurer & Chief Financial Officer
J. Mitchell Krebs
Rita D. Demma
Secretary
Business Development
Lori J. Mueller
Marketing
Tracy L. Smith
Branch Banking
lonnie L. Beck
Human Resources
Rhonda C. Crankfield
Branch Banking
OFFICERS OF
BANKANNAPOLIS
Penny Dove
Diane Benyus
Finance
Richard M. Lerner
Barbara A. Cadden
Chairman, President &
Chief Executive Officer
Tamara S. Cleaver
Margaret Theiss Faison
Loan Operations
Senior Vice President
Chief Financial Officer & Treasurer
Kathryn E. Coursey
Patsy J. Houck
Michael E. Haske
Senior Vice President
Chief Operations Officer
Technology
Finance
Business Development
Andrew Hines
Robert E. Kendrick, III
Credit
Senior Vice President
Chief Credit Officer
Joseph F. McNally
Mortgage Banking
Ronald M. Voigt
Senior Vice President
Chief Business Development Officer
Rita D. Demma
Jo A n n Pyles
Mortgage Banking
Cathy L. Seitz
Deposit Operations
Eba Elorza
Credit
Carllene Hurd
Branch Banking
Carol A. Joyner
Branch Banking
Jessica M c M i l l i o n
Deposit Operations
Dana Miele
Branch Banking
Parag Patel
Branch Banking
Brenda L. Spies
Branch Banking
Tricia Stein
Business Development
Business Development
Secretary
Corporate Information
EXECUTIVE OFFICES
lOuO Bestgate Road
Suite 400
Annapolis, MD 21401
410-224-4455
Annapolis
1000 Bestgate Road
Annapolis, MD 21401
410-224-4483
BayWoods
7101 Bay Front Drive
Annapolis, MD 21403
410-280-8715
Cape St. Claire
1372-B Cape St. Claire Road
Annapolis, MD 21409
410-974-1515
Edgewater
120 Central Avenue
Edgewater, MD 21037
410-956-2900
Kent Island
1245 Shopping Center Road
Stevensville, MD 21666
410-643-4191
Market House at City Dock
25 Market Place
Annapohs, MD 21401
410-280-0534
Severna Park
50 West McKinsey Road
Severna Park, MD 21146
410-518-6885
AL OFFICE
Annapolis Bancorp, Inc.
1000 Bestgate Road, Suite 4i
Annapolis, MD 21401
www.bankannapolis.com
INDEPENDENT AUDIT FIRM
Stegman fct Company
405 East Joppa Road
Baltimore, MD 21286
Analysts, stocKhoiciers and
others seeking information
about Annapolis Bancorp, Inc.
are invited to contact:
Richard M. Lemer
Patton Boggs, L.L.R
2550 M Street, NW
Washington, DC 20037
Chairman & Chief Executive Officer
Margaret Theiss Faison
Treasurer & Chief Financial Officer
ANNUA'
The Annual Meeting of the
Stockholders of Annapolis
Bancorp, Inc. will be held at:
1000 Bestgate Road, Suite 300
Annapolis, MD 21401
at 6:00 p.m. on Thursday,
May 15, 2008
Registrar & Transfer Company
10 Commerce Drive
Cranford, NJ 07016
Annapolis Bancorp, Inc.
1000 Bestgate Road
Suite 400
Annapolis, MD 21401
410-224-4455
The Company's shares are
listed on the NASDAQ
Capital Market* under the
symbol "ANNB"
ft
ANNAPOLIS
INVESTOR INFORMATION
Member, Federal Deposit
Insurance Corporation
INC.