BankAnnapolis :: News From 2006

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2006 Releases

Foundation For Community Partnerships Names BankAnnapolis As Principal Partner
BankAnnapolis CEO Richard M. Lerner Joins Foundation Board

Stevensville, MD, November 8, 2006 -- At a reception of community leaders and board members, the President of the Foundation for Community Partnerships Wayne Humphries introduced BankAnnapolis as its new principal partner. The event was held at the BankAnnapolis Branch on Kent Island, a state-of-the-art facility completed earlier this summer. As the Foundation's principal partner, BankAnnapolis will help steer the course of the Foundation and provide invaluable resources and support.

"We are inspired by the leadership role BankAnnapolis has taken on behalf of our community and we are grateful for its trust and belief in the Foundation," said Humphries. "This partnership is for all the right reasons. We look forward to working closely with BankAnnapolis and we know that together we can make a significant impact in our community."

Humphries also announced that BankAnnapolis Chairman and CEO Richard M. Lerner has joined the Foundation Board and will lend his considerable expertise in finance and business to the Foundation's projects. Founded in 1990, BankAnnapolis serves small businesses, professional concerns and individuals through seven community banking branch offices in Anne Arundel and Queen Anne's counties. Its headquarters is located in Annapolis, Maryland.

Known as the "unbank" for providing flexible financial solutions and extraordinary, hassle-free service to its customers, BankAnnapolis applies that same out-of-the-box thinking to its corporate philanthropy. "I was struck by the tangible nature of the work being done by the Foundation. It actually changes lives with the donations and assistance it provides," Lerner explained.

"It is a very impressive organization with a dedicated board and a vision that clearly puts people and their needs first. BankAnnapolis is proud to join in its efforts and support its mission in the community," Lerner said.

Last year the Foundation attracted over $500,000 in donor funds. It is committed to sustaining organizations that make a difference in the community. Foundation fund recipients have included a homeless shelter, the Partnering for Youth after school program, a child advocacy center, the Character Counts program, the Corsica River Conservancy, Healthy Families, the Kent County High School Stadium Improvement Project, Adopt-A-Bear and many others.

"We have been able to leverage local funds in a new way in which everyone benefits," stated Linda Kohler, chief financial officer of the Foundation, "Local service organizations, unable to fund worthwhile community groups without their own 501(c)(3) designation, are now able to support these groups through the Foundation. The recipients are in genuine need and the service organizations are delighted that they can put the money back into the community easily and effectively," Kohler said.

Another unique attribute of the Foundation is the people who get involved in charity. "We are able to empower those in our community who are not the traditional donors. Since there is no minimum amount to set up a fund, even the smallest donor can participate," Humphries noted.

"Among our donors are 8-year olds who sold lemonade and brownies to benefit others, a local high school football team who collected lunch money in the school cafeteria and average citizens who were able to spare as little as $3.00 to help someone else. It is a revolutionary departure from the million dollar endowments on which many organizations focus," he explained.

To learn more about the Foundation for Community Partnerships, please call (410) 758-6677 or e-mail Linda Kohler at lindakohler@verizon.net.

Third Quarter Earnings Up 9% Despite Mounting Margin Pressure

Annapolis, MD, November 1, 2006 -- Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, today announced net income of $740,000 ($0.18 per basic and diluted share) for the third quarter of 2006, a 9.1% increase over third quarter 2005 net income of $678,000 ($0.17 per basic and $0.16 per diluted share).

Year-to-date earnings improved by 7.8%, with net income totaling $2.12 million ($0.52 per basic and $0.50 per diluted share) compared to $1.97 million ($0.49 per basic and $0.47 per diluted share) for the nine months ended September 30, 2005.

Total assets for the Company reached $332.5 million at September 30, 2006, an increase of $27.6 million or 9.0% from $304.9 million at December 31, 2005. Total assets grew by $8.7 million or 2.7% in the third quarter.

Year-to-date growth in total assets was funded by $20.6 million in new deposit and repurchase agreement balances, a $5.0 million short-term floating rate advance from the Federal Home Loan Bank, and $2.1 million in retained earnings. Most of the deposit growth came in money market accounts (up $8.1 million or 14.1%) and certificates of deposit (up $9.4 million or 11.0%). NOW account balances also rose by $3.6 million or 9.4%, while savings accounts dipped by $3.2 million or 17.3%.

The loan portfolio grew by $13.1 million or 6.4% in the first nine months of 2006. Real estate lending accounted for all of the growth, with residential and commercial mortgage loan balances rising by $16.5 million or 13.7% while construction loans declined by $2.5 million or 9.8%, installment loans fell by $0.8 million or 4.0%, and commercial loans dropped by $0.2 million or 0.5%. The remaining asset growth came in cash and investments, with federal funds sold balances swelling by $13.5 million or 397.1%, and investment securities increasing by $1.4 million or 1.9%.

In the third quarter, total gross loans declined by $2.0 million or 0.9% from levels reported at June 30, 2006. Deposit growth of $11.2 million was invested in securities (up $8.5 million or 12.9%) and federal funds sold (up $2.2 million or 15.0%).

In the three months ended September 30, 2006, average interest-earning assets grew to $307.9 million from $298.1 million in the third quarter of 2005, with total interest income improving by $747,000 or 16.8%. The yield on average earning assets increased to 6.68% in the quarter just ended compared to 5.91% in the same period of 2005. The yield on average earning assets was 6.61% in the second quarter of this year.

Average interest-bearing liabilities increased to $260.7 million in the third quarter from $253.2 million in the same period last year due primarily to higher money market account balances. Total interest expense increased by $665,000 or 43.3% as the Company's cost of average interest-bearing liabilities climbed to 3.35% from 2.41% in the third quarter of 2005. The cost of average interest-bearing liabilities was 3.05% in the second quarter of this year.

Third quarter net interest income rose by $82,000 or 2.8%, with the net interest margin declining to 3.85% from 3.87% in the third quarter of 2005. "After rising to 4.20% in the first quarter of this year, the net interest margin has been negatively impacted by the flattened yield curve, which has narrowed spreads between short-term and long-term interest rates," said Richard M. Lerner, Chairman and CEO.

"Rising rates have caused depositors to migrate toward higher yielding products such as our indexed money market account and certificates of deposit. That, combined with intense local competition for retail deposits, has exerted immense upward pressure on our cost of funds," said Lerner. "Our yield on assets has not risen commensurately because loan demand has softened and approximately half of our year-to-date asset growth has been invested in lower-yielding federal funds sold and investment securities."

With stable asset quality and no third quarter growth in the loan portfolio, the bank did not record a provision for credit losses in the period just ended. After net charge-offs of $43,000 in the third quarter, the allowance for credit losses stood at $2,013,000 or 0.92% of total gross loans compared to 0.98% of total gross loans at December 31, 2005. Nonperforming assets of $0.9 million accounted for 0.40% of total gross loans at quarter-end, and the allowance for credit losses provided 232.3% coverage of nonperforming assets.

At September 30, 2006, total stockholders' equity amounted to $23.2 million, up 10.5% from $21.0 million at year-end 2005. Book value per share at the end of the third quarter was $5.68.

In the quarter just ended, noninterest income fell by $90,000 or 16.7% as fees earned on brokered mortgage loans fell by $78,000 or 73.6% compared to the third quarter of last year. Noninterest expense held steady in the third quarter, with increases in compensation and occupancy expense offset by decreases in professional fees, data processing expense and depreciation.

BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through seven community banking offices located in Anne Arundel and Queen Anne's Counties in Maryland. The bank's headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Annapolis Mall.

Certain statements contained in this release, including without limitation, statements containing the words "believes," "plans," "expects," "anticipates," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

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BankAnnapolis Opens Branch In Historic Market House
Lion Mascot arrives by city trolley on opening day

Annapolis, MD, August 10, 2006 -- Arriving by a City of Annapolis trolley Mr. Bucksworth, BankAnnapolis' popular and familiar lion mascot, carried his money bags into his new quarters at Market House. His manners were impeccable as he offered a paw to city spokesman Ray Weaver and waved and posed for pictures. His first official act was to declare downtown Annapolis "Lion Country."

The Market House in Annapolis can now boast that it is home to downtown's only independent, locally owned bank - BankAnnapolis. The bank, now open for business, proudly points out that its seventh branch, the first within the city limits, is a prize location.

"We have been seeking to establish a presence in downtown Annapolis for some time," said BankAnnapolis President and CEO Richard M. Lerner. "Market House is arguably the premier downtown business location for BankAnnapolis-few other city locations are as central, convenient, and highly-trafficked. We are proud to now be a part of this time-honored local institution."

The historic landmark, dark and empty for more 15 months, is again the center of commerce at the City Dock. BankAnnapolis at Market House offers its customers extended hours, longer than any other downtown financial institution. Through the summer it is open Monday through Friday from 8 a.m. to 6 p.m. and Saturday from 9 a.m. to 3 p.m. It features an indoor, secure ATM machine and a night drop that is accessible from 8 a.m. to late evening daily for the summer crowds.

The Market House branch is similar in size to that of a grocery store bank branch and includes two teller stations and a customer service desk. "The site will offer all the services of our larger branches, as well as a change machine that will convert bills to quarters for use in parking meters," Lerner said.

"We are known as the 'Unbank' for providing flexible financial solutions and extraordinary, hassle-free service to our customers," Lerner said. "We are committed to our community and look forward to introducing 'the bank that doesn't act like one' to downtown residents and businesses."

About BankAnnapolis
Founded in 1990, BankAnnapolis serves small businesses, professional concerns and individuals through six community banking offices in Anne Arundel and Queen Anne's Counties. A seventh branch in the Market House, downtown Annapolis, is set to open in June 2006 and an eighth office in Odenton, MD, is scheduled to open in 2007. The Bank's parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB) reported earnings of $3.0 million in 2005, up 37 percent from 2004. Total assets at December 31, 2005 were $305 million. For more information, visit www.bankannapolis.com.

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Renewed Growth Leads To Elevated Earnings At Annapolis Bancorp

Annapolis, MD, August 2, 2006 -- With its loan portfolio growing at an annualized rate of 20% in the second quarter, Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, earned net income of $694,000 ($0.17 per basic and diluted share), a 3.3% increase over second quarter net income of $672,000 ($0.17 per basic and $0.16 per diluted share) in 2005.

Year-to-date net income of $1,385,000 ($0.34 per basic and $0.33 per diluted share) improved by 7.1% compared to net income of $1,292,000 ($0.32 per basic and $0.31 per diluted share) for the first six months of 2005.

Total assets reached a record level at June 30, 2006, expanding to $323.8 million from $304.9 million at December 31, 2005. Loan growth accounted for $15.0 million of this $18.9 million increase, with the balance explained by an $11.3 million increase in federal funds sold offset by reductions of $7.2 million in investment securities and $1.0 million in cash balances. Fixed assets also grew by $0.6 million as the Bank completed construction of its new branch building in Stevensville on Kent Island.

Real estate lending accounted for essentially all of the loan growth, with residential and commercial mortgage loan balances rising by $19.8 million or 16.5% since year-end 2005. In the same six month period, construction loans declined by $3.1 million or 12.1%, installment loans fell by $1.0 million or 5.2%, and commercial loans dropped by $0.7 million or 1.8%.

"With the rise in conventional mortgage rates, we are seeing more demand for our adjustable rate portfolio mortgage products," said Richard M. Lerner, Chairman and CEO. "Until recently, many of our construction/perm borrowers were choosing to take advantage of historically low 30-year fixed rates by refinancing their construction loans with permanent mortgages in the secondary market. Now they are increasingly opting for our portfolio ARMs, with rates that are typically locked in up to twelve months in advance."

Asset growth was funded by the generation of $13.5 million in new deposits and repurchase agreements, and by a short-term floating rate advance of $5.0 million from the Federal Home Loan Bank. The bulk of the deposit growth came in money market accounts (up $5.2 million or 9.0%), certificates of deposit (up $2.6 million or 3.0%) and demand deposit accounts (up $2.4 million or 5.5%). Repurchase agreement balances swelled by $6.2 million or 47.7% as the Bank's business development group succeeded in procuring several new large commercial sweep account relationships.

Although nonperforming assets increased in the second quarter as one commercial relationship and several boat loans were placed on nonaccrual status, strong overall asset quality and net year-to-date recoveries of $31,000 enabled the Bank to record no second quarter provision for credit losses. Nonperforming assets of $1.0 million at June 30, 2006 accounted for 0.46% of total gross loans.

The allowance for credit losses at quarter-end stood at $2,055,000 (0.94% of total gross loans) compared to $2,012,000 (0.98% of total gross loans) at December 31, 2005, and provided 2:1 coverage of nonperforming assets.

Average interest-earning assets grew to $291.0 million in the second quarter compared to $287.1 million in the same period last year. The yields on loans, investment securities, and federal funds sold all improved significantly, causing the Bank's overall yield on average interest-earning assets to climb to 6.61% from 5.90% in the second quarter of 2005. As a result, total interest income improved by $573,000 or 13.6%.

Average interest-bearing liabilities remained basically unchanged in the quarter just ended ($244.1 million vs. $243.6 million in the second quarter of 2005). However, total interest expense increased by $482,000 or 35.0% as the cost of interest-bearing deposits and other debt instruments rose in the second quarter to 3.05% from 2.27% in the three-month period ended June 30, 2005.

Second quarter net interest income improved by $91,000 or 3.2%, with the net interest margin improving to 4.05% from 3.98% in the second quarter of 2005. The net interest margin expanded as a result of improved loan and investment yields, offset by the increased cost of money market accounts, certificates of deposit, repurchase agreements and other debt. On a sequential quarter basis, the net interest margin declined to 4.05% from 4.20% in the first quarter of 2006, as increases in the cost of interest-bearing liabilities outstripped modest improvements in asset yields.

"Considering the intense competition for local retail deposits and the resulting impact on our cost of funds, low-cost core deposit relationships are more important than ever," said Lerner. "We've made a great deal of progress extending our reach into the small business and professional communities, two key sources of valuable core deposits. Our challenge now is to leverage that success and our growing reputation for exceptional customer service and hassle-free banking by further sharpening our focus on these critical market segments."

Compared to the second quarter of 2005, noninterest income declined by $37,000 or 7.3% in the period just ended due to a $37,000 or 40.7% reduction in fees earned on brokered mortgage loans. With the local real estate market cooling and conventional mortgage rates on the rise, overall transaction volume fell and demand shifted toward adjustable rate portfolio mortgage products.

Noninterest expense increased by a modest 3.1% or $68,000 in the second quarter due in large part to rising benefit costs and higher occupancy expense related to the transition from a temporary facility on Kent Island to the newly completed branch building. Data processing costs dipped by $34,000 or 15.2% as the Bank began to realize the benefits of successful contract renegotiations with its principal data processing service provider. Legal and professional fees rose by $21,000 or 41.2%, but the amount reported in this category in the second quarter of 2005 included a recovery of $19,000 related to the collection of a nonperforming loan.

On a year-to-date basis, net interest income improved by $176,000 or 3.1%, with the net interest margin rising to 4.12% from 4.05% in the first six months of 2005. Net interest income after provision jumped by $384,000 or 7.1% in the first half of 2006, as the provision for credit losses dropped to $12,000 from $220,000 in the same period last year. Year-to-date noninterest income declined by $91,000 or 9.3% due primarily to lower mortgage banking fees and a loss on the sale of investment securities. Noninterest expense increased by $66,000 or 1.5% as compensation and marketing costs grew in accordance with the Bank's operating plans.

BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through six community banking offices located in Anne Arundel and Queen Anne's Counties in Maryland. On August 7, 2006, the Bank will open its seventh branch in the historic Market House at City Dock in downtown Annapolis. The Bank's headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Annapolis Mall.

Certain statements contained in this release, including without limitation, statements containing the words "believes," "plans," "expects," "anticipates," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

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BankAnnapolis Kent Island Branch Observes Opening With Community Day And Week-Long Celebation
Presents $10,000 Check to Volunteer Fire Department

Stevensville, MD, June 27, 2006 -- Local and state dignitaries joined BankAnnapolis Chairman and CEO Richard M. Lerner, along with bank employees and community members, to kick-off a week-long community celebration of its new branch building on Kent Island with a Community Day event. The attractive brick structure, with its familiar yellow and black lion logo gracing the entrance, is located off of MD Route 50 in Stevensville, Maryland-visible from the main highway.

Community Day's highlight was a $10,000 check presentation to the President of the Kent Island Volunteer Fire Department (KIVFD) Francis Roudiez for the fire company's Capital Campaign.

"We are grateful to BankAnnapolis for its generous contribution," said KIVFD President Roudiez. "The bank is an important member of our business community on Kent Island and a good neighbor. BankAnnapolis demonstrates how a local business can make a real difference in the community through its public involvement," he continued.

Approximately 100 people stopped by for the afternoon event including State Senator E.J. Pipkin, State Delegate Richard Sossi and Queen Anne County Commissioners Joseph Cupani and Benjamin Cassell. The event's festivities included a family style cookout, a KIVFD fire truck on display, face painting and balloon animals for the children, giveaways and a special appearance by the BankAnnapolis lion mascot.

"We deeply appreciate the patience and loyalty of our customers during the construction process. And today, we celebrate the new branch building's completion together as a community," said BankAnnapolis CEO Lerner. "Providing our clients with a state-of-the-art facility designed to deliver customer-focused service is part of our ongoing commitment to the Kent Island community," Lerner explained.

The new 3200 square-foot branch architecturally mirrors the BankAnnapolis headquarters building in Annapolis and is designed to facilitate fast and friendly customer service, while providing additional services to the community. It includes three drive-through lanes-one dedicated exclusively for ATM customers. To support the continued growth of the community, the bank has added a mortgage origination office to its location.

A hosting station, just inside the bank's entrance, will be staffed by an employee who directs customers and helps expedite non-cash transactions, such as deposits or account inquiries. The service-focused branch features a lounge area offering hot coffee, financial periodicals and other informational materials, and a plasma screen television to watch the latest news. A conference room for loan closings also will be available for use by small non-profit community organizations.

Since June 1990, BankAnnapolis has had a presence on Kent Island. In early 2005, the Bank demolished its former building, replacing it with a temporary facility on the property. It then broke ground in July for a new branch on the existing site.

BankAnnapolis' week-long activities include giving away "free samples"- new $2 bills to the first 50 people through the bank's door on Monday and Friday (June 26 and June 29)! Every day during the business week customers and the public are invited to drop by to admire the new building, enter the "Pieces of the Eastern Shore" drawing and enjoy refreshments.

The BankAnnapolis Kent Island Branch is located in the Kent Island Shopping Center at 1245 Shopping Center Road, Kent Island, MD. (Across from Dunkin' Donuts, just off of MD Route 50.) For more information please contact Carllene Hurd, Branch Manager, at 410-643-4191.

About BankAnnapolis
Founded in 1990, BankAnnapolis serves small businesses, professional concerns and individuals through six community banking offices in Anne Arundel and Queen Anne's Counties. A seventh branch in the Market House, downtown Annapolis, is set to open in June 2006 and an eighth office in Odenton, MD, is scheduled to open in 2007. The Bank's parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB) reported earnings of $3.0 million in 2005, up 37 percent from 2004. Total assets at December 31, 2005 were $305 million. For more information, visit www.bankannapolis.com.

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BankAnnapolis Announces New Vice President For Business Development Group

Annapolis, MD, June 6, 2006 -- BankAnnapolis recently announced the hiring of Cathy Seitz as a vice president in its Business Development Group. Ms. Seitz has worked in the banking industry for more than fifteen years and in her new position will focus on developing new business relationships for BankAnnapolis.

Most recently Ms. Seitz served as director of Business Development for Absolute Title Group, Inc. Prior to that position, she spent more than six years as a financial consultant/AVP for Sandy Spring Bank in the Annapolis/ Edgewater markets. She began her career at Wachovia Bank in Atlanta, Georgia, after graduating from the University of Georgia with a bachelor's degree in business.

"I am happy to be a part of the BankAnnapolis team and look forward to providing superior client service to our customers in the Annapolis/ Anne Arundel County market," said Ms. Seitz.

In welcoming Ms. Seitz, BankAnnapolis Senior Vice President and Chief Business Development Officer J. Mitchell Krebs said, "Cathy's expertise will be valuable in developing marketing strategies for our products. Her personal style and work ethic make her an asset to our team. "

About BankAnnapolis
Founded in 1990, BankAnnapolis serves small businesses, professional concerns and individuals through six community banking offices in Anne Arundel and Queen Anne's Counties. A seventh branch in the Market House, downtown Annapolis, is set to open in June 2006 and an eighth office in Odenton, MD, is scheduled to open in 2007. The Bank's parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB) reported earnings of $3.0 million in 2005, up 37 percent from 2004. Total assets at December 31, 2005 were $305 million. For more information, visit www.bankannapolis.com.

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BankAnnapolis Adopts A Town Home
Severn Residence Sparkles after "Rebuilding Together"

Annapolis, MD, May 30, 2006 -- For the 11th straight year, BankAnnapolis participated in Rebuilding Together's Blitz Day. On April 30th, approximately 40 workers - employees, customers, friends, and family members - spent a beautiful spring day providing a construction facelift to a senior Severn couple's town home.

With a mission of keeping elderly and disabled low-income homeowners living in warmth, safety, and dignity, Rebuilding Together (formerly known as "Christmas in April") conducts an annual one-day "home repair" blitz on the last Saturday in April. Volunteers provide the muscle, while local sponsors provide the supplies, to renovate and repair homes. Each year, BankAnnapolis adopts a residence and homeowner and assembles a team of tireless volunteers to assist with the rebuilding efforts. This year's 90 year-old recipients, who preferred to remain anonymous, were nominated by a close relative who knew that the elderly couple needed help that their family was unable to provide.

Working alongside of bank employees and other volunteers, BankAnnapolis Chairman and CEO Richard M. Lerner said, "BankAnnapolis is proud to be a sponsor for Rebuilding Together. It is an event we look forward to participating in all year. We know that what we do here makes a big difference in the homeowner's life."

Steve Pencarski was this year's team leader for the BankAnnapolis Rebuilding Together project. Steve and his band of volunteers painted, scrubbed and did repairs throughout the three-story residence. They replaced outdated light fixtures with modern ceiling fans, painted all the interior walls, cleaned appliances till they sparkled, replaced window and door jambs, and more.

The Rebuilding Together Anne Arundel County affiliate began in 1991. In addition to "Blitz Day," the last Saturday in April, they sponsor a year-round Home Modification Program. As materials and volunteer assistance are available, handicapped ramps and railings, grab bars, and personal items are provided that would improve the daily life of an elderly and/or disabled homeowner.

In addition to Rebuilding Together, BankAnnapolis supports multiple community organizations, such as Hospice of the Chesapeake, Hospice of Queen Anne County, Boys & Girls Club of Annapolis, Anne Arundel Medical Center (AAMC), YMCA of Central Anne Arundel County, YWCA of Annapolis and Anne Arundel County, CASA of Anne Arundel County, Kent Island Volunteer Fire Department, ChesterWye Foundation, The Community Center, Maryland Hall for the Creative Arts, Food Link, and America Cancer Society Relay for Life.

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Earnings Up 11% At Annapolis Bancorp
Asset Quality, Loan Production Improve in First Quarter of 2006

Annapolis, MD, May 5, 2006 -- Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, today announced net income of $690,000 ($0.17 per basic and $0.16 per diluted share) for the first quarter of 2006, an 11.3% increase over net income of $620,000 ($0.15 per basic and diluted share) in the same period last year.

Nonperforming assets fell to $270,000 at March 31, 2006 from just over $2 million at December 31, 2005, as several loans concentrated in one credit relationship were repaid, with the Bank fully recovering all principal, interest and associated fees.

The improvement in asset quality, combined with the recovery of $37,000 in previously charged-off loans, enabled the Bank to reduce its provision for credit losses in the first quarter to $12,000 compared to $145,000 in the first quarter of 2005.

At March 31, 2006 the allowance for credit losses stood at $2,061,000 (0.99% of total gross loans) compared to $2,012,000 (0.98% of total gross loans) at December 31, 2005. Nonperforming assets accounted for 0.13% of total gross loans, and the allowance for credit losses provided 8:1 coverage of nonperforming assets.

Total assets dipped slightly for the quarter as deposit levels were affected by the impact of a slowdown in mortgage activity on title and escrow company deposit balances. Total assets at March 31, 2006 totaled $303.3 million compared to $304.9 at December 31, 2005.

The Bank's loan portfolio grew at an annualized rate of 9.1% in the first quarter, adding $4.6 million to total loans outstanding. An increase of $7.5 million in real estate loans was partially offset by payoffs on commercial, construction and installment loans.

Loan growth for the quarter ended March 31, 2006 was funded by a reduction of $2.4 million in cash and $4.2 million in investment balances. The decline in investments included the sale of $3.0 million in securities at a loss of $23,000.

Total deposits fell by $3.4 million, or 1.4%, in the first quarter-with the largest decreases occurring in NOW accounts (down $4.3 million or 11.3%) and certificates of deposit (down $2.4 million or 2.8%).

Average interest-earning assets grew to $277.0 million compared to $273.2 million in the first quarter of 2005. Total interest income improved by $558,000 or 14.1%, with the yield on earning assets improving to 6.59% for the three months ended March 31, 2006 compared to 5.86% for the same period in 2005.

Average interest-bearing liabilities dipped to $229.6 million in the first quarter of 2006 from $231.2 million in the same period last year-a decrease of $1.6 million. Total interest expense increased in the first quarter by $473,000 or 40.9%, with the cost of interest-bearing liabilities rising to 2.88% from 2.03% in the quarter ended March 31, 2005.

First quarter net interest income rose by $85,000 or 3.0%, with the net interest margin improving to 4.20% from 4.14% in the first quarter of 2005.

Noninterest income decreased by $31,000 or 6.7% in the first quarter as the Company recorded a loss on the sale of securities of $23,000. Fees earned on brokered mortgage loans declined by $16,000 as mortgage activity slowed.

Noninterest expense increased by $22,000 or 1.0% compared to the first three months of 2005 due to higher marketing costs, as the Bank continued its "Inner Lion" advertising campaign in print and on local cable television. Offsetting this increase, in part, was the recovery of legal fees previously expensed in the collection of nonperforming loans.

BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through six community banking offices located in Anne Arundel and Queen Anne's Counties in Maryland. The Bank plans to open its seventh branch this summer in the historic Market House at City Dock in downtown Annapolis. It has also acquired property in Odenton, Maryland on which it intends to build a new branch in 2007. The site is located in the heart of the Odenton Town Center in western Anne Arundel County where substantial residential and commercial growth is expected over the next 5 to 10 years with the planned expansion of nearby Fort George Meade.

Committed to a unique "unbank" philosophy of personalized customer service and strategic, market-driven offerings, BankAnnapolis' goal is to be the community bank of choice in the greater Annapolis area. The Bank's headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Annapolis Mall.

Certain statements contained in this release, including without limitation, statements containing the words "believes," "plans," "expects," "anticipates," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

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BankAnnapolis Names New Manager For Edgewater Branch

Annapolis, MD, March 7, 2006 -- BankAnnapolis is pleased to welcome Tracy L. Smith as Vice President and Branch Manager of its Edgewater branch. A seasoned bank manager, Ms. Smith brings more than 15 years of financial experience to BankAnnapolis. Ms. Smith’s responsibilities include overseeing the daily operations of the branch, developing new business relationships and community involvement activities.

Since 1999, Ms. Smith served as Vice President and Community Office Manager, for Sandy Spring Bank in Olney, MD, where she sharpened her management and business development skills. She previously spent four years in the Annapolis area in a similar capacity with Mellon Bank.

“I am very happy to be joining the BankAnnapolis team! Having worked in Anne Arundel County in the past, I am excited to be back,” said Ms. Smith. “I am looking forward to working with the South County community and developing new relationships.

“Tracy’s experience in team management and business development makes her a perfect fit to manage our Edgewater Branch.” said Richard M. Lerner, Chairman and CEO of BankAnnapolis. “Her abilities to identify customer needs and establish strong relationships will be an invaluable asset to the bank. We’re very excited to have her on board.”

About BankAnnapolis
Founded in 1990, BankAnnapolis serves small businesses, professional concerns and individuals through six community banking offices in Anne Arundel and Queen Anne's Counties. A seventh branch in the Market House, downtown Annapolis, is set to open in June 2006 and an eighth office in Odenton, MD, is scheduled to open in 2007. The Bank's parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB) reported earnings of $3.0 million in 2005, up 37 percent from 2004. Total assets at December 31, 2005 were $305 million. For more information, visit www.bankannapolis.com.

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BankAnnapolis To Open New Branch In Historic Market House
Independent local bank to offer full service to downtown Annapolis

Annapolis, MD, February 27, 2006 -- The Market House in Annapolis, now a dark and empty downtown landmark, will once again bustle with action come this summer and BankAnnapolis will be there. Pending regulatory approval, the Annapolis-based community bank is projected to open its newest branch in the historic City Dock marketplace by June.

"We have been seeking to establish a presence in downtown Annapolis for some time," said BankAnnapolis President and CEO Richard M. Lerner. "Market House is perhaps the premier downtown location-few others are as central, convenient, and highly-trafficked. We are proud to now be a part of this time-honored local institution."

BankAnnapolis will be the only locally-based, independent community bank in the downtown area. "We are known as the 'Unbank' for providing flexible financial solutions and extraordinary, hassle-free service to our customers," Lerner said. "We look forward to introducing 'the bank that doesn't act like one' to downtown residents and businesses."

The Market House branch will be similar in size to that of a grocery store bank branch. Preliminary plans call for two teller stations and a customer service desk. "The site will offer all the services of our larger branches, as well as an ATM and a change machine that will convert bills to quarters for use in parking meters," Lerner said.

"It is exciting for BankAnnapolis to be part of the new Market House, and to know that once again it will be a thriving center of commerce in downtown Annapolis," said Lerner.

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4th Quarter Net Income Tops $1 Million At Annapolis Bancorp
Record Full-Year Earnings Approach $3 Million

Annapolis, MD, February 10, 2006 -- Quarterly earnings at Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, exceeded $1 million for the first time in Company history, Chairman and CEO Richard M. Lerner announced today.

For the three months ended December 31, 2005, the Company posted net income of $1.01 million ($0.25 per basic and $0.24 per diluted share), a 33.9% increase over 4th quarter net income of $755,000 ($0.19 per basic and $0.18 per diluted share) in 2004.

Net income for the year ended December 31, 2005 totaled $2.98 million ($0.73 per basic and $0.71 per diluted share), up 37.2% from 2004 net income of $2.17 million ($0.54 per basic and $0.52 per diluted share).

"This is the fourth consecutive year of record earnings for Annapolis Bancorp," said Lerner. "It is also the fourth consecutive year in which we can report substantial improvement in each of the key metrics used to measure a bank's financial performance. Return on average assets rose to 0.97% from 0.84%, return on average equity climbed to 15.04% from 12.41%, and the efficiency ratio improved to 63.02% from 68.24% in 2004."

Record 4th quarter earnings were fueled by improved yields on the loan and investment portfolios and a gain on the prepayment of $10 million in Federal Home Loan Bank debt.

In the three months ended December 31, 2005, the overall yield on interest-earning assets increased to 6.19% from 5.54% in the same period of 2004. The average loan yield rose to 7.08% from 6.27%, while the average return on investment securities improved to 4.19% from 3.79%. As a result, total interest income in the 4th quarter of 2005 increased by $813,000 or 22.1% over the same period in the prior year.

Total interest expense in the final quarter of 2005 increased by $483,000 or 44.6% compared to the same period in 2004, as the overall cost of interest-bearing liabilities rose to 2.55% from 1.93%. The cost of money market deposits jumped to 2.52% in the 4th quarter of 2005 from 1.09% in the 4th quarter of 2004, driven by steadily rising rates throughout the year on the bank's indexed money fund. In the same time frame, average money market account balances grew by $15.4 million or 38.5%.

Fourth quarter net interest income rose by $330,000 or 12.7% compared to the 4th quarter of 2004. Noninterest income improved by $183,000 or 35.7% due in large part to a $201,000 one-time gain associated with the prepayment of a $10 million Federal Home Loan Bank advance. Excluding this nonrecurring item, noninterest income actually fell by $18,000 or 3.5% in the 4th quarter due to lower transaction-based fees on deposit products. Noninterest expense rose by $136,000 or 7.4% compared to the same quarter in 2004.

Total assets grew to $304.9 million at year-end 2005, a 7.3% increase over total assets of $284.2 million at December 31, 2004. Most of the growth came in the investment securities portfolio, which expanded to $73.9 million at December 31, 2005 from $54.4 million at year-end 2004, a 35.8% increase. After experiencing strong growth in the 1st quarter followed by contraction in the 2nd and 3rd, total gross loans ended the year up $0.5 million or 0.2% from year-end 2004 levels.

"Our lending activities were disrupted in the middle of the year by aggressive price competition in our marketplace and by our own reluctance to respond to the new realities of a flattened yield curve," said Lerner. "The good news is that we recovered in the 4th quarter by adding $4.7 million to the loan portfolio, which equates to an annualized growth rate of 9.2%."

Total deposit balances increased by $23.1 million or 10.2% in 2005. The bulk of the growth came in core deposit categories, with demand deposits up by $4.0 million or 9.9%, NOW accounts up by $5.4 million or 16.5%, and money market account balances up by $14.6 million or 34.2%. Repurchase agreement balances also rose by $5.1 million or 64.6% from December 31, 2004 levels.

Early in the 4th quarter, the bank elected to reduce excess cash balances by repaying a $10 million advance from the Federal Home Loan Bank prior to its maturity. This decision contributed to the decline in total assets from $322.2 million reported at September 30, 2005.

At year-end 2005, total stockholders' equity amounted to $21.0 million, up 12.3% from $18.7 million at December 31, 2004. Book value per basic share at December 31, 2005 was $5.15.

Average interest-earning assets increased in 2005 by 19.2% to $286.7 million from $240.5 million in 2004, and the overall yield on those assets improved to 5.97% from 5.51%. As a result, total interest income improved by $3,844,000 or 29.0% compared to 2004.

Total interest expense in 2005 increased by $1,992,000 or 54.7% as average interest-bearing liabilities grew by $41.2 million or 20.4% and the cost of deposits and other borrowed funds rose to 2.32% from 1.80% in 2004. The Company's overall cost of funds increased to 1.97% in 2005 from 1.51% in 2004.

For the year ended December 31, 2005, the net interest margin held steady at its 2004 level of 4.00%. Net interest income improved by $1,852,000 or 19.3% due to higher average balances of interest-earning assets and interest-bearing liabilities. Despite a rising rate environment in 2005, improvement in the net interest margin did not materialize as competition intensified for local deposits driving up the bank's cost of funds, and unexpectedly low net loan production caused a shift in the asset mix toward lower yielding investment securities.

After net charge-offs of $261,000 and a $442,000 provision for credit losses in 2005, the allowance for credit losses at December 31, 2005 stood at $2,012,000 (0.98% of total gross loans) compared to $1,832,000 (0.90% of total gross loans) at December 31, 2004. At year-end 2005, nonperforming assets amounted to $2,007,000 (0.98% of total gross loans).

Noninterest income improved by $185,000 or 9.1% in 2005. Without the one-time gain realized on the prepayment of $10 million in Federal Home Loan Bank debt, noninterest income in 2005 would have decreased by $16,000 or 0.8% when compared to the prior year. With the exception of VISA check card fees, all other transaction-based service charges fell from their 2004 levels. Offsetting this decline was a 37.7% increase in fees earned on brokered mortgage loans.

Noninterest expense in 2005 rose by $676,000 or 8.5% compared to 2004. Marketing expense increased by $156,000 or 64.5% as the bank undertook several marketing initiatives including new print and cable advertising campaigns. Legal and professional expense, a large portion of which was related to the collection of nonperforming loans, rose by $111,000 or 72.1%. (Some of this amount may be recoverable in future periods.) Occupancy and equipment expense increased in 2005 by $143,000 or 14.9% as the Company incurred costs associated with occupying a temporary facility while a new Kent Island branch was being constructed. Compensation expense also increased by $221,000 or 4.8%.

BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through six community banking offices located in Anne Arundel and Queen Anne's Counties in Maryland. In December of 2005, the bank acquired property in Odenton, Maryland on which it intends to build its seventh branch. The new site in western Anne Arundel County is located in the heart of the Odenton Town Center where substantial residential and commercial growth is expected over the next 5 to 10 years with the planned expansion of nearby Fort George Meade.

Certain statements contained in this release, including without limitation, statements containing the words "believes," "plans," "expects," "anticipates," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

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BankAnnapolis Branching Out In Odenton
Bank inks deal to open new site in 2007

Annapolis , MD , January 6, 2006 -- BankAnnapolis will be branching out next year – literally. Chairman and CEO Richard M. Lerner announced today that the bank has acquired property in Odenton, Maryland on which it intends to build its 7 th branch. BankAnnapolis has grown at a record pace over the past three years while maintaining its “unbank” approach to meeting and exceeding the needs of its customers.

The acquisition was finalized on December 16 th and provides BankAnnapolis a new location in the heart of the Odenton Town Center in western Anne Arundel County. Speaking as to the selection of the site, Mr. Lerner said, “The area has experienced tremendous residential and commercial growth in recent decades and is expected to experience even more growth in the next 5 to 10 years with the planned expansion of nearby Fort George Meade. As new residents and businesses move into the area, BankAnnapolis will be well-positioned and ready to handle all of their financial needs.”

As a result of the Base Realignment and Closure Commission’s final recommendations in November of 2005, the Ft. Meade federal campus expects to add 5,300 new people over the next 5-6 years, less than 10% of whom will be military personnel. The Department of Defense ultimately expects 8,000 contractors to follow these new high-level workers to the area, resulting in a $1 billion economic impact.

The Odenton Branch of BankAnnapolis will be prepared and conveniently located to meet the influx of new residents and businesses. The bank takes pride in offering its customers a refreshing change from the impersonal and inflexible practices of larger banks. “Whether you’re new to the county or have lived here your entire life,” said Mr. Lerner, “BankAnnapolis provides the services and personal attention that are always welcome in a banking relationship.”

The Odenton branch of BankAnnapolis is scheduled to open for business in 2007.

Founded in 1990, BankAnnapolis serves small businesses, professional concerns and individuals through six community banking offices in Anne Arundel and Queen Anne's Counties. The Bank's parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB) reported earnings of $2.2 million in 2004, up 30% from the previous year. Total assets at December 31, 2004 were $284 million.

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