Recent Press Releases 

 
Annapolis Bancorp Announces Second Quarter Results

Annapolis, MD, August 5, 2008 – Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, today announced net income of $458,000 ($0.12 per basic and diluted share) for the second quarter of 2008, down from $628,000 ($0.15 per basic and diluted share) for the same period last year.

“At a time of deteriorating economic conditions and considerable distress in the banking industry, we are pleased to report that Annapolis Bancorp earned a very respectable profit in the quarter just ended,” said Chairman and CEO Richard M. Lerner.  “Although not at last year’s levels, we believe that our earnings reflect continued solid performance by BankAnnapolis under the most challenging of circumstances.”

Amidst growing economic uncertainty, falling real estate collateral values and rapidly changing market conditions, the Company prudently elected to fortify its reserves in the second quarter by recording a $367,000 provision for credit losses, up $357,000 from the same period in 2007.  After net charge-offs of $178,000 in the second quarter, the allowance for credit losses amounted to $2,593,000 (1.02% of total gross loans) at June 30, 2008 compared to $2,283,000 (0.93% of total gross loans) at December 31, 2007.

The increase in second quarter provision for credit losses also reflected substantial growth in the Company’s loan portfolio, as total gross loans increased to $255.0 million from $244.5 million at March 31, 2008, an annualized growth rate of 17.2%.  Through the first six months of 2008, the Company’s loan portfolio has grown by $8.8 million or 3.6% (7.2% annualized).

“The growth in our loan portfolio is a clear indication that BankAnnapolis is actively developing business and pursuing opportunities to extend credit to deserving local businesses,” said Lerner.  “Because we maintained rigorous lending standards in the past, we have no need to tighten them now.”

Total assets dropped by $7.8 million or 2.0% from their level at March 31, 2008, primarily because of a $5.0 million Federal Home Loan Bank advance that was called and repaid by the Company.  Since December 31, 2007, total assets have risen by 3.6% from $361.9 million to $374.9 million at June 30, 2008.

Year-to-date balance sheet growth was funded by $20.0 million in new Federal Home Loan Bank advances, as well as by higher repurchase agreement and demand deposit account balances, offset by a $7.6 million or 3.0% decline in interest-bearing deposits.

The Company’s mix of interest-bearing deposits continued its dramatic transformation since year-end 2007, with savings account balances increasing by $29.5 million or 66.2%, while money market account balances fell by $25.9 million or 30.4%.  Certificate of deposit balances declined by $8.2 million or 9.4% due in large part to the deliberate runoff of $8.0 million in brokered deposits in the first quarter.

“The Company continues to be extremely pleased with the success of its Superior Savings Account which was introduced in April of 2007,” said Lerner.  “Since then, almost 3,000 new accounts have been opened, with the average balance per account exceeding $20,000.  This product has proven invaluable in attracting and retaining significant core deposit relationships at a time when prevailing rates on money market accounts and certificates of deposit were on the decline.”  The Annual Percentage Yield on the Superior Savings Account was 3.00% at June 30, 2008.

Stockholders’ equity totaled $25.9 million at the end of the second quarter, a decrease of $1.0 million or 3.7% from year-end 2007.  Approximately $1.5 million of capital surplus was utilized to complete the Company’s stock repurchase program in the first half of 2008.  In total, 300,000 shares (approximately 7.3% of the outstanding common stock) were repurchased between May 2007 and June 2008 at an average price per share of $7.79.  Book value per share at quarter-end was $6.78.

At June 30, 2008, Annapolis Bancorp met all federal regulatory requirements for a well-capitalized institution, with a Tier 1 capital ratio of 11.8%, a total capital ratio of 12.8%, and a leverage ratio of 9.0%.  To be considered “well-capitalized” under federal definitions, a bank holding company must have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least 10%, and a leverage ratio of at least 5%.

Based on March 31, 2008 financial data, BankAnnapolis was assigned a 5-Star “Superior” rating by BauerFinancial, an independent research firm that analyzes and reports on the financial condition of the nation’s banking industry.  According to information published on its web site (www.bauerfinancial.com), “5-Stars” is BauerFinancial’s top rating, signifying superior safety and soundness based on such factors as capital ratios, liquidity, loan delinquency rates and profitability trends.

In the quarter ended June 30, 2008, average interest-earning assets rose to $362.2 million from $330.9 million in the same period last year.  The yields on loans and overnight investments declined significantly, offsetting a modest improvement in the yield on investment securities.  Overall, the yield on interest-earning assets dropped to 6.01% from 6.83% in the second quarter of last year, and as a result, total interest income fell by $206,000 or 3.7%.

Average interest-bearing liabilities grew to $315.4 million from $283.6 million in the second quarter of 2007, but total interest expense plummeted by $566,000 or 20.8% compared to the same period last year as the deposit mix shifted and interest rates on deposits and borrowings fell sharply in every category.  The overall cost of interest-bearing liabilities dropped by 110 basis points to 2.74% in the three months just ended from 3.84% in the comparable period last year.

Due primarily to the substantial reduction in second quarter interest expense, net interest income improved by $360,000 or 12.3% compared to the same period in 2007, and for the first time in two years, the Company’s net interest margin expanded, from 3.54% in the second quarter of 2007 to 3.64% in the three months just ended.  On a sequential quarter basis, the Company’s net interest margin improved by 5 basis points, continuing a trend of stabilization or improvement in this key metric over the past three quarters.

As previously mentioned, the Company’s second quarter provision for credit losses increased to $367,000 from $10,000 in the same period last year.  Nonperforming assets at June 30, 2008 amounted to $2.2 million or 0.86% of total gross loans compared to $1.1 million or 0.44% of total gross loans at December 31, 2007.  An increase in loans greater than 90 days past due but still accruing accounted for the higher level of nonperforming assets.

“We are constantly reviewing our loan portfolio, adjusting internal risk ratings as warranted, and modifying the qualitative factors in our methodology to reflect changing economic and market conditions,” said Lerner.  “These practices help us manage credit quality and deal proactively with potential problem loans.”

Noninterest income decreased by $36,000 or 7.4% in the second quarter compared to the same period last year, due primarily to lower transaction-based service charges.  Noninterest expense increased by $268,000 or 11.3%, reflecting the cost of recent strategic investments in personnel, and higher legal, audit, and consulting fees compared to the second quarter of 2007.

Annapolis Bancorp’s annualized return on average equity for the second quarter of 2008 was 7.08% compared to 9.94% for the same period in the prior year.  The second quarter annualized return on average assets was 0.48% compared to 0.72% for the three months ended June 30, 2007.

Year-to-date net income for 2008 declined by 20.1% to $983,000 ($0.25 per basic and $0.24 per diluted share) from $1,231,000 ($0.30 per basic and $0.29 per diluted share) in the first six months of last year.  Net interest income improved by $557,000 or 9.5%, with the net interest margin contracting slightly to 3.61% from 3.64% in the first half of 2007.  After a $468,000 increase in the provision for credit losses compared to the same period last year, net interest income after provision increased by $89,000 or 1.5%.  Year-to-date noninterest income declined by $7,000 or 0.8%, and noninterest expense increased by $503,000 or 10.6%.

For the six months ended June 30, 2008, Annapolis Bancorp’s annualized return on average equity was 7.40% compared to 9.97% for the same period of 2007.  The 2008 six-month annualized return on average assets was 0.53% compared to 0.72% in 2007.

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.  In the fourth quarter of 2008, the Bank will open its eighth office in the Annapolis Towne Centre at Parole.  The Bank’s headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Westfield Annapolis Mall.

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Foundation For Community Partnerships Names Richard M. Lerner As Board Chair

Centreville, MD, June 27, 2008 – The Foundation for Community Partnerships has named Richard M. Lerner, Chairman and CEO of BankAnnapolis as Chairman of its Board of Directors.  Lerner joined the Foundation’s Board in 2006 when BankAnnapolis agreed to become the organization’s principal partner. 

 “With his strong leadership skills and extensive business expertise, Rick has been a real asset to the Foundation during the past two years,” said Wayne Humphries, President of the Foundation for Community Partnerships.  “He truly understands the communities that we serve and shares our commitment to strengthening the community through public service and giving back.  We are delighted that Rick has agreed to take on this important role.” 

The Foundation for Community Partnerships is a public charity that works with individuals, families, businesses and other groups to create permanent charitable funds, then uses the proceeds from these funds to award grants to a wide variety of humanitarian, educational and cultural organizations in the Chesapeake Bay region and beyond.

“Rick’s belief in the work of the Foundation is very real and we grateful that he has agreed to take on this important leadership role,” added Mike Clark, executive director of the Foundation.  “We look forward to working even more closely with him in the years ahead so we can make an even bigger impact on the community.” 
“It is an honor and privilege to Chair the Foundation’s board,” Lerner said.  “The Foundation for Community Partnerships is a very special organization with a dedicated board and a vision that clearly puts people and their needs first.  It actually changes lives with the assistance it provides.”

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, the Eastern Shore Police Canine fund, the Character Counts program, the Corsica River Conservancy, Healthy Families, the Kent County High School Stadium Improvement Project, Adopt-A-Bear and many others. Last year the Foundation disbursed more than $305,000 for charitable activities.

“We have been able to leverage local funds in a new way in which everyone benefits,” explained Linda Kohler, chief financial officer of the Foundation. “Local service organizations, other foundations and donor advisors, unable to fund worthwhile community groups without their own 501(c)(3) designation, can support these groups through the Foundation. The recipients provide valuable services and donors are delighted that they can give back to their community easily and effectively.  The resulting partnership has yielded just under $1,000,000 of charitable investment since 2005.”

Lerner has served as CEO of Annapolis Bancorp, Inc. (NASDAQ:ANNB) since 1999 and became Chairman in 2001.  He was appointed head of BankAnnapolis, Annapolis Bancorp’s principal subsidiary in 2002.  Prior to this, he spent 16 years as President of White Flint Builders, Inc., an upscale residential development and construction company.  In addition to his work with the Foundation, he also serves on the Board of the Hospice of the Chesapeake Foundation, where he is Vice Chair.  Lerner, who holds an MBA from the A.B. Freeman School of Business at Tulane University, resides in Annapolis.

BankAnnapolis contributes financial, in-kind and volunteer assistance to numerous nonprofit institutions and organizations that assist people and enhance the quality of life in the Greater Annapolis community.  Through its seven community banking offices in Anne Arundel and Queen Anne's Counties, BankAnnapolis serves the financial needs of small businesses, professional concerns and individuals. 

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BankAnnapolis Joins Surcharge-Free Atm Network
New Service Gives Bank Customers Access to Cash with No Service Charge at 12,000 ATMs across the Country

Annapolis, MD, June 26, 2008 – BankAnnapolis today announced that it has partnered with MoneyPass, one of the nation’s fastest growing surcharge-free ATM networks, to provide the Bank’s customers with access to their cash without having to pay service fees at more than 12,000 ATMs across the country. 
The new service gives BankAnnapolis customers holding ATM cards the option of withdrawing funds from thousands of ATMs located where they live, work or travel.  MoneyPass ATMs can be found at financial institutions as well as retail locations such as gas stations, supermarkets, convenience stores, restaurants and a variety of other locations. 

The MoneyPass service is available immediately.  Bank customers can locate ATM’s in the network by logging into the BankAnnapolis web site at www.bankannapolis.com and clicking on the MoneyPass link.

“We have found that convenient access to a service charge-free ATM network is important to a lot of our customers, especially those who commute to the Baltimore and Washington, D.C. areas,” said Richard M. Lerner, Chairman and CEO of BankAnnapolis.  “We pride ourselves on providing hassle free banking to our customers, and MoneyPass is a natural complement to the other services we already provide.”

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Hospice Of The Chesapeake Foundation Names Richard M. Lerner As Vice Chairman

Annapolis, MD, June 23, 2008 – Hospice of the Chesapeake’s Foundation recently named Richard M. Lerner, Chairman and CEO of BankAnnapolis, as Vice Chair of its Board of Directors.
“Since joining the Board of the Hospice of the Chesapeake Foundation two years ago, Rick has demonstrated an unbelievable commitment to our mission through his contributions," said Hospice of the Chesapeake President and CEO Erwin Abrams. “With his strong leadership skills and business expertise, he has helped us immensely and we are very pleased that he has agreed to accept this important role.”

“The work that Hospice of the Chesapeake does is truly inspirational,” Lerner said. “Coping with a life-limiting illness is extremely difficult, not only for the patient, but for their family and friends as well. Hospice provides care to the patient so they can live out their lives in comfort, with dignity and on their own terms…and it embraces those who love and care for them. It is a privilege to work with them.”

Lerner has served as CEO of Annapolis Bancorp, Inc. (NASDAQ:ANNB) since 1999 and became Chairman in 2001. He was appointed head of BankAnnapolis, Annapolis Bancorp’s principal subsidiary in 2002. Prior to this, he spent 16 years as President of White Flint Builders, Inc., an upscale residential development and construction company. In addition to his work with Hospice of the Chesapeake Foundation, he also serves as Chairman of the Board of the Foundation for Community Partnerships. Lerner, who holds an MBA from the A.B. Freeman School of Business at Tulane University, resides in Annapolis.

“It is through the efforts of Hospice of the Chesapeake’s Foundation that unreimbursed expenses are covered and this allows our staff to provide exceptional hospice care and grief support,” explained Deborah Caldwell, Vice President of Philanthropy for Hospice of the Chesapeake. “Rick has been a great asset to us during his tenure on the Board and we look forward to working more closely with him in the future.”
For more information about Hospice of the Chesapeake’s Foundation, please contact Deborah Caldwell at 443-837-1527 or dcaldwell@hospicechesapeake.org.

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Kim Sherman Joins BankAnnapolis As Vice President

Annapolis, MD, June 8, 2008 – BankAnnapolis has added Kim Sherman to its staff as a Vice President in its Business Development Group.  In this post, Ms. Sherman’s primary focus will be on developing business relationships with commercial customers in Anne Arundel and Howard Counties. 

Ms. Sherman brings more than 20 years of banking and management experience to BankAnnapolis.  She comes to BankAnnapolis from Chevy Chase Bank where she was Vice President, Business Development Officer, responsible for all new business development efforts in Anne Arundel and the Eastern Shore Counties of Maryland.   

“BankAnnapolis understands what is important to its customers, and our team works quickly to address each client’s specific request”   Ms. Sherman said.  “The knowledge base of the people who work here and their willingness to use creative means to craft out-of-the-box solutions are just a few of the things that attracted me to the team.” 

“Kim’s extensive experience developing new business for the banking industry, diverse management background and knowledge of the area make her very well suited for this position at BankAnnapolis,” said Ron Voigt, Senior Vice President and Chief Business Development Officer at BankAnnapolis.  “We are delighted to have her on board.” 
In addition to her time at Chevy Chase Bank, Ms. Sherman spent several years as Director, Marketing and New Technologies for Discoptics Digital Publishing, Inc. in Columbia, Md., which offers data conversion and document management services.  She also served as Vice President, Regional Marketing Manager for Citizen’s Bancorp in Laurel, Md., managing the sales and operations of banking centers in five Maryland counties.  A graduate of Wake Forest University, she has a bachelor’s degree in English/Spanish Literature and Languages. 

BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through seven community banking offices in Anne Arundel and Queen Anne's Counties in Maryland.  This year, the Bank will open its eighth office in the Annapolis Towne Centre at Parole.  The Bank’s parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB), trades on the NASDAQ Capital Market under the ticker symbol “ANNB,” and reported total assets of $362 million at December 31, 2007.

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Mark Smith Joins BankAnnapolis As Mortgage Loan Officer

Annapolis, MD, June 8, 2008 – BankAnnapolis announced today the addition of Mark Smith to its staff as a Mortgage Loan Officer.  In this post, Smith will focus on growing the Bank’s residential lending business in Annapolis and the surrounding areas as well as on the Eastern Shore of Maryland. 

Smith comes to BankAnnapolis with extensive experience in the mortgage lending industry.  He joins BankAnnapolis from Equity United Mortgage Corporation in Columbia, Md., where he most recently served as Vice President of Corporate Affairs.  Prior to this, he was a Financial Mortgage Consultant with Empire Equity Group, Inc/1st Metropolitan.  He also worked with Ameriquest Mortgage Company as an Account Executive.  He resides in Chester, Md. 

“In today’s mortgage environment, BankAnnapolis’ personal approach is a big asset and it’s one of the major reasons I came here,” Smith said.  “Because of the nature of residential lending, people want to be able to meet face to face with someone who will walk them through the process.  That’s what they’ll find at BankAnnapolis.” 

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BankAnnapolis Launches "Private Business Banking"
New Personalized Service Gives Every Business Access  to the Most Advanced Financial Tools and Resources

Annapolis, MD, May 8, 2008 – BankAnnapolis recently announced the launch of “Private Business Banking,” a revolutionary new concept in business banking that will provide local businesses with easy access to an exclusive set of financial products and services as well as the professional guidance and support to take advantage of them. 

“Over the past few years, we have witnessed a growing demand among our business customers for a higher level of service and attention—the kind of service that most banks only offer to larger businesses,” said Richard M. Lerner, Chairman and CEO of BankAnnapolis.  “We have responded to that demand by creating Private Business Banking.”

“Private Business Banking also grew out of our recognition that small businesses and their owners need better access to credit and more sophisticated cash management tools,” Lerner added.  “They’re not getting it from other banks, and BankAnnapolis is determined to fill that void.”

As a result, BankAnnapolis has established a new Private Business Banking Division managed by Senior Vice President and Chief Business Development Officer Ronald Voigt and inspired by Senior Vice President Carol Kasper.  Ms. Kasper is a seasoned business banking professional whose relationship with her customers is the model on which Private Business Banking is based.  This new division of BankAnnapolis will help owners and entrepreneurs manage and grow their businesses by giving them the tools and resources they need to thrive. 

At the heart of Private Business Banking is the Private Business Banker, a financial professional who will take the time to understand the unique needs of each business and business owner, recommend how BankAnnapolis can help, and then work proactively to make it happen.  The Private Business Banker will coordinate all the bank’s resources on behalf of the customer, placing banking experts, decision makers, cash management tools and credit within easy reach when needed. 
BankAnnapolis’ customers who experienced Private Business Banking before it became a formal Division, say it has been instrumental to their success. 

“We switched to BankAnnapolis six or seven years ago because we wanted a bank that would give us a hands-on, personal approach…not cookie cutter solutions,” explains Stuart Holbrook, controller of Theriaults, an Annapolis-based antique doll auctioneer that is now known worldwide.  “Because our business is so unusual, we need to have a relationship with a bank that intimately understands what we do.  BankAnnapolis knows our company…we can just sit down and talk to them anytime we want.  They think out of the box…there are no set formulas.  There is no company that would not benefit from a relationship with BankAnnapolis.  It’s eye-opening!”

“Smaller businesses have traditionally turned to community banks like ours because they know they will get more personalized service,” Lerner explained.  “Given the growth of small businesses in our market area in recent years, along with the decline in locally based, community banks, we realized that many local companies were searching for exactly the kind of high-touch banking relationship that we specialize in.  That specialty is now called Private Business Banking.” 

According to statistics from the Anne Arundel Economic Development Corporation, the number of small businesses in Anne Arundel County grew by approximately 18% between 2000 and 2005.  At the same time, many local banks merged with regional or national financial institutions.  In fact, of the 31 banks with operations in Anne Arundel County, only four are now locally owned, and BankAnnapolis is the second largest in terms of assets.

In addition to having a dedicated Private Business Banker, Private Business Banking customers will be offered a variety of products and services that are rarely available to smaller companies.  This includes CashSuite™, a custom set of cash management products that make the most efficient use of a business’s available cash, including:

• Cash Flow Maximizer – an automatic system that manages the timing and transfer of funds between deposit and loan accounts to minimize interest costs and maximize earnings.
• Remote Deposit Express – for depositing checks without ever leaving the office.
• Lock Box Express – lock box service for the direct collection and deposit of incoming payments.
• Lion’s Share Money Market Account – an indexed business money market account that offers one of the highest market interest rates in the area. 
• Private Business Banking customers can also take advantage of CreditSuite™, a variety of credit products and services that include:
• Business Loan Express – an online loan application for term loans and lines of credit up to $100,000 that offers the convenience of applying online without submitting detailed financial information.
• Cash Flow Maximizer - which automatically manages the timing and transfer of funds between loan and deposit accounts to minimize interest costs, cover overdrafts and maximize interest earnings.
• Government Guaranteed Loan Programs – to help the business owner wade through the multitude of government loan programs and select the loan product that best suits the business’s needs.

“I always wanted to own a marina but never got the opportunity to pursue it,” said Al Towle, current owner of Ferry Point Marina in Arnold.  “When the marina became available, we knew we needed a bank that knew the area, was creative and could make a decision right away, not two months from now.  We talked to a few banks and BankAnnapolis was the best.  Doing our loan as quickly as they did was tremendous. They helped us structure our own financing package, too.  We got the cash we needed and great advice.  We’ve got a lot of plans.  We’re looking to have BankAnnapolis help us grow.”

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Annapolis Bancorp Announces Successful Completion of Stock Repurchase Program

Annapolis, June 16, 2008 -- Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, today announced that it has completed the repurchase of 300,000 shares of its outstanding common stock at an average price per share of $7.79.

The Company’s stock repurchase program was initiated on February 21, 2007, at which time the Board of Directors authorized the acquisition of up to 5% of the outstanding common stock, or approximately 200,000 shares.

On February 15, 2008, the program was expanded to include an additional 100,000 shares.  At that time, a stock repurchase plan under Rule 10b5-1 of the Securities and Exchange Act of 1934 was also adopted.  Since then, all repurchases under the stock repurchase program have been made pursuant to the terms and conditions of this plan.

“We believe that the stock repurchase program has been an effective use of the Company’s capital,” said Annapolis Bancorp Chairman and CEO Richard M. Lerner, “and will ultimately prove to be accretive to return on equity for Annapolis Bancorp shareholders.”

The stock repurchase program has now been terminated.  All shares repurchased under the program were cancelled and retired by the Company.

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Annapolis Bancorp Reports Stable Asset Quality, Net Interest Margin
Higher Operating Expense Leads to 12.9% Decline in First Quarter Earnings

Annapolis, MD, May 8, 2008 – Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, today announced net income of $525,000 ($0.13 per basic and diluted share) for the first quarter of 2008, down 12.9% from $603,000 ($0.15 per basic and $0.14 per diluted share) for the same period last year.

The Company’s total assets grew to $382.7 million from $361.9 million at December 31, 2007.  $8.0 million of high-cost brokered certificates of deposit were replaced in the first quarter with lower priced Federal Home Loan Bank callable advances, as the level of FHLB borrowings increased from $20.0 million at December 31, 2007 to $45.0 million at March 31, 2008.  The excess funding was invested at a positive spread in interest bearing deposits of other banks.

The Bank’s loan portfolio contracted during the quarter as new loan production was overshadowed by payoffs of several large loans that had been classified as criticized or watch assets.  Total gross loans declined to $244.5 million at March 31, 2008 from $246.2 million at December 31, 2007, a drop of $1.6 million or 0.67%.

The Bank reported continued success with its Superior Savings Account as balances increased by $9.7 million or 28.8% in the first quarter.  Since the inception of this product in April 2007, the Bank has generated $43.2 million in core balances.  Deposits, exclusive of the $8.0 million runoff in brokered certificates of deposit, increased by $4.2 million or 1.43% in the quarter ended March 31, 2008.

Total stockholders’ equity at period-end rose to $27.4 million, up 2.2% from $26.9 million at December 31, 2007.  Book value per share at March 31, 2008 was $6.88.  In February of this year, the Company supplemented its ongoing stock repurchase program and instituted a 10b5-1 Stock Repurchase Plan.  28,500 shares were subsequently acquired, bringing the total number of shares repurchased as of March 31, 2008 to 127,672.

Net interest income for the quarter ended March 31, 2008 rose by $197,000 or 6.7% over the same period in 2007.  Although the net interest margin contracted to 3.59% from 3.75% in the first quarter of last year, on a sequential quarter basis it remained unchanged, offering further indication that the Company’s net interest margin has stabilized after an extended period of contraction.

Average interest earning assets in the period just ended improved by $33.3 million or 10.5% compared to the first quarter of 2007, but due to aggressive rate cutting by the Federal Reserve, the yield on interest earning assets fell to 6.47% from 6.86% in the comparable period.  Total interest income grew by $276,000 or 5.2% in the first quarter, with interest from the loan portfolio increasing by $182,000 and interest income on the securities portfolio, overnight investments, and deposits in other institutions improving by $94,000.

Total interest expense for the quarter rose by $79,000 or 3.3%.  The Company’s overall cost of funds fell, however, to 2.96% from 3.17% in the first three months of 2007, due to lower market rates, the success of the Superior Savings Account and other favorable changes in the Company’s deposit and borrowing mix.

During the first quarter the Company proactively adjusted the qualitative factors it uses to determine an appropriate allowance for credit losses.  This was done to reflect deteriorating local economic and market conditions, and resulted in provision for credit losses expense for the quarter of $121,000 compared to $10,000 in the same period last year.

The allowance for credit losses at March 31, 2008 stood at $2,404,000 or 0.98% of total gross loans compared to $2,283,000 or 0.93% of total gross loans at December 31, 2007.  Nonperforming assets of $1,731,000 accounted for 0.71% of total gross loans at quarter-end, and the allowance for credit losses provided 139% coverage of nonperforming assets.

The Company continued to maintain sound asset quality, despite reported increases in delinquencies and nonperforming assets industry-wide.  While nonperforming assets increased from December 31, 2007 levels, the amount reported at quarter-end includes a $595,000 participation in a loan administered by another bank.  This loan matured on December 30, 2007, and at the end of the first quarter was technically over 90 days past due.  Payments on the loan were current through March 31, 2008, however, delays in obtaining executed renewal documents from the lead bank resulted in the loan being classified as nonperforming.  Fully executed renewal documents were received on April 1, 2008, and the loan was restored to performing status.  Excluding the past due participation loan, the Company’s nonperforming assets would have amounted to $1.1 million or 0.46% of total gross loans at March 31, 2008 compared to $1.1 million or 0.44% of total gross loans at December 31, 2007.  The Company recorded no charge-offs in the first quarter.

Noninterest income rose in the first quarter to $434,000 from $405,000 in the comparable period, as transaction-based fee income improved by $29,000 or 7.2%.

Noninterest expense increased by $235,000 or 9.9% in the first three months of 2008 compared to the same period last year, as the Company hired several highly experienced business development officers and related support staff.  “We seized the opportunity to improve the quality and expertise of our sales staff, and brought these talented individuals on knowing that in the short term we would incur additional expense,” said Chairman and CEO Richard M. Lerner.  “These additions are fundamental to the success of our newly introduced Private Business Banking program, which interested parties can learn more about at www.bankannapolis.com/pbb.”

Annapolis Bancorp’s annualized return on average assets was 0.57% for the first quarter of 2008 compared to 0.72% for the same period in the prior year.  The first quarter annualized return on average equity was 7.70% compared to 9.94% for the first quarter of 2007.
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.  This fall, the Bank will open its eighth office in the Annapolis Towne Centre at Parole.  The Bank’s headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Westfield Annapolis Mall.

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Turn Your Coins Into Cash For Free During BankAnnapolis’ Community Change Day On April 18
Event To Benefit The Chesterwye Center, Inc. 

Kent Island, MD, March 28, 2008— The Kent Island Branch of BankAnnapolis invites area residents to exchange their coins for cash for free during its fifth Community Change Day being held on Friday, April 18, 2008 to benefit the Chesterwye Center, Inc.

The free coin counting machine located in the bank’s lobby will be available to anyone wanting to turn their loose change into cash between the hours of 8:30 a.m. and 6:00 p.m.  At the end of the day, the dollar amount of change counted, up to $650.00, will be matched by BankAnnapolis and donated to the Chesterwye Center, Inc.  - you keep your cash and BankAnnapolis makes the donation. 

The Chesterwye Center, Inc., headquartered in Grasonville, is a nonprofit organization dedicated to helping adults with developmental disabilities explore their possibilities through vocational, residential and day programs. 

This will be BankAnnapolis’ fifth Community Change Day.  Past events have benefited the Kent Island Federation of Arts, the Foundation for Community Partnerships, the United Way of Queen Anne’s County and the Chesapeake Bay Environmental Center.

BankAnnapolis is located at Kent Island Shopping Center, 1245 Shopping Center Road, Stevensville, MD. For more information, call 410-643-4191.

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Joe McNally Joins BankAnnapolis as Vice President, Mortgage Sales Manager 

Annapolis, MD, Feb 19, 2008 – Richard M. Lerner, Chairman and CEO of BankAnnapolis, announced today that Joe McNally, a seasoned industry executive, has joined the bank as Vice President, Mortgage Sales Manager.  In this position, McNally will have primary responsibility for growing BankAnnapolis’ mortgage lending business.

McNally brings more than 30 year of experience in the banking industry to his new post.  He comes to BankAnnapolis from First Horizon Home Loan where he was District/Area Manager for the Mid-Atlantic Region.  Prior to this, he spent 25 years with Bank of America and its predecessor institutions, where he held a variety of mortgage lending management positions, most recently serving as Consumer Real Estate Executive for its Atlantic North region.  He also served as Regional Sales Manager for the Mid-Atlantic region, which under his leadership, ranked number one in volume for six consecutive years and consistently finished among the top in customer satisfaction.  

“Joe’s experience in the mortgage lending field, combined with his relationship-based approach to banking, makes him ideally suited for this position at BankAnnapolis,” said Lerner.  “He has exceptional leadership skills and knows how to promote the kind of teamwork and enthusiasm that generates results.  And at a time when home owners and buyers are increasingly turning to their community banks as trusted and reliable sources for safe, affordable and understandable mortgages, Joe will be a real asset to BankAnnapolis and its customers.”

“There is a lot that appeals to me about BankAnnapolis,” said McNally.  “I built my career on building relationships, and I see that same focus at BankAnnapolis. It’s an organization built on relationships and relationships lead to trust.  If you have those two things you can create a strong position in the community…that’s what community banking is all about.” 

“From a lender’s perspective, the times are ripe with opportunities for community banks because they can be much more flexible in responding to customer needs than larger banks,” McNally added. “You get to know your customers face to face and they know that you will take care of their needs. I like the fact that that BankAnnapolis wants to be the bank of choice in the community and look forward to contributing to its ongoing success.” 

BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through seven community banking offices in Anne Arundel and Queen Anne's Counties in Maryland.  This year, the Bank will open its eighth office in the Annapolis Towne Centre at Parole.  The Bank’s parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB), trades on the NASDAQ Capital Market under the ticker symbol “ANNB,” and reported total assets of $362 million at December 31, 2007.

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Annapolis Bancorp Expands Stock Repurchase Program

Annapolis, MD, February 15, 2008 – Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, today announced that its Board of Directors has authorized the repurchase of an additional 100,000 shares of the Company’s issued and outstanding common stock.  This authorization is in addition to the repurchase of up to 200,000 shares, or approximately 5% of the Company’s outstanding stock, authorized by the Board of Directors in February of 2007.

According to Annapolis Bancorp Chairman and CEO Richard M. Lerner, 99,172 shares have been repurchased to date under the repurchase program announced early last year.

“The Board considers the Company’s common stock to be an attractive investment, given the price range in which it has traded recently,” said Lerner.  “Expanding the repurchase program is consistent with Annapolis Bancorp’s ongoing efforts to enhance shareholder value and invest the Company’s resources in the most efficient manner possible.”

Annapolis Bancorp's common stock trades on the NASDAQ Capital Market under the ticker symbol "ANNB."  The Company's share price closed at $7.08 on February 14, 2008; book value per share as of December 31, 2007 was $6.69.  The Company reported earnings per share of $0.69 in 2007 and total assets of $361.9 million at year-end.

The Board of Directors today also adopted a stock repurchase plan under Rule 10b5-1 of the Securities and Exchange Act of 1934, as amended, and all future repurchases under the stock repurchase program will be made pursuant to the terms and conditions of this plan.

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.  In 2008, the Bank will open its eighth office in the Annapolis Towne Centre at Parole.  The bank’s headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Westfield 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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Annapolis Bancorp Reports Fourth Quarter, Year-End Earnings

Annapolis, MD, February 12, 2008 – Annapolis Bancorp, Inc. (NASDAQ: ANNB), parent company of BankAnnapolis, today announced net income of $531,000 ($0.13 per basic and diluted share) for the fourth quarter of 2007, a 35.8% decrease from fourth quarter 2006 net income of $827,000 ($0.20 per basic and diluted share).

Higher provision expense in the fourth quarter led to the decline in earnings, as the Company increased its allowance for credit losses to reflect growth in the loan portfolio and to further reserve against a small number of specifically identified deteriorating credits whose principal balances total less than $1 million.

The Company recorded a $295,000 provision for credit losses in the fourth quarter, which also helped to replenish same period net charge-offs of $141,000 in the consumer loan portfolio.  By comparison, the Company made no provision for credit losses in the fourth quarter of 2006.

Most of the fourth quarter charge-offs resulted from the repossession of collateral securing five consumer boat loans with aggregate balances of $225,000 (1.3% of the Bank’s $16.8 million boat loan portfolio at December 31, 2007).  The repossessed boats were written down by $89,000 to reflect the Bank’s estimate of net realizable value and then transferred to Other Assets on the Company’s balance sheet pending final disposition.

“We don’t believe that these isolated credit quality issues are indicative of a broader or burgeoning problem in our loan portfolio,” said Chairman and CEO Richard M. Lerner.  “In all likelihood, what we are seeing is a return to historically normal credit metrics.  The outstanding asset quality that we have maintained in recent years will be increasingly hard to sustain in an economic downturn.”

Aside from the increased allowance for credit losses, the Company’s asset quality metrics at December 31, 2007 remained largely unchanged from year-end 2006.  Nonperforming assets held steady at $1.1 million, accounting for 0.44% of total gross loans compared to 0.49% at December 31, 2006.  The allowance for credit losses at year-end stood at $2,283,000 (0.93% of total gross loans) and provided 208% coverage of nonperforming assets, compared to $1,976,000 (0.89% of total gross loans) and 183% coverage at December 31, 2006.

While total assets increased by only $10.0 million or 2.8% in 2007, total gross loans grew by $24.4 million or 11.0%, as the Bank successfully shifted its asset mix away from overnight investments toward higher-yielding commercial and real estate loans.

To fund loan growth, the Company reduced cash and investment balances by $14.1 million or 12.2% from their levels at December 31, 2006.  Additional funding came from an increase of $21.5 million or 9.3% in interest-bearing deposits, offset by reductions of $10.2 million or 19.4% in repurchase agreement balances and other borrowed funds and $4.1 million or 9.7% in demand deposit accounts.

Total stockholders’ equity at year-end 2007 amounted to $26.9 million, up 11.6% from $24.1 million at December 31, 2006.  Book value per share at December 31, 2007 was $6.69.  At year-end, the Company had successfully repurchased 99,172 shares of its common stock on the open market.  Annapolis Bancorp’s Board of Directors authorized the repurchase of up to 5% or 200,000 shares in February of 2007.

In the quarter just ended, average interest-earning assets expanded to $331.8 million from $327.4 million in the fourth quarter of 2006.  Average loan balances rose to $240.7 million from $218.1 million, resulting in a more effective deployment of interest-earning assets.  Consequently, the overall yield on loans and investments improved to 6.79% in the fourth quarter compared to 6.50% in the same period last year, and total interest income increased by $319,000 or 6.0%.

Total interest expense increased by $333,000 or 14.2% as average interest-bearing liabilities grew to $287.7 million from $280.6 million in the quarter ended December 31, 2006.  The mix of interest-bearing liabilities also changed significantly between the fourth quarters of 2006 and 2007, as higher average balances in savings and money market accounts countered reductions in average NOW account balances and Federal Home Loan Bank debt.  Overall, the cost of interest-bearing liabilities increased to 3.69% in the fourth quarter from 3.32% in the final three months of 2006.

As previously reported, the Bank generated significant core deposit growth after introducing its new, high-yield Superior Savings Account in the second quarter of 2007.  By year-end, total Superior Savings Account balances had climbed to $33.6 million, with 2,100 new accounts opened.  The average balance per account was over $15,000.

The initial influx of new savings account deposits enabled the Bank to pay off $25.0 million of Federal Home Loan Bank debt that either was called or matured in the second quarter.  The blended cost of the repaid Federal Home Loan Bank advances was 4.44%.  Late in the fourth quarter of 2007, the Bank borrowed again from the Federal Home Loan Bank, securing $15.0 million in laddered-maturity convertible advances at a blended cost of 3.22%.

Net interest income in the fourth quarter declined by $14,000 or 0.5%, as the net interest margin contracted to 3.59% from 3.66% in the same period of 2006.  “On a sequential quarter basis, the net interest margin actually improved by 8 basis points,” noted Lerner, “offering further indication that margins have begun to stabilize after an extended period of contraction that began two years ago when the yield curve first flattened and then inverted.”

Comparing the final three months of 2007 to the same quarter a year ago, noninterest income fell by $40,000 or 8.1% and noninterest expense increased by $111,000 or 5.0%.

Net income for fiscal year 2007 totaled $2.42 million ($0.60 per basic and $0.58 per diluted share), down 17.9% from $2.95 million ($0.72 per basic and $0.70 per diluted share) in 2006.  Net interest income improved by $38,000 or 0.3% despite a drop in the net interest margin to 3.59% from 3.96% in the previous year.  After a $436,000 year-over-year increase in the provision for credit losses, net interest income after provision fell by $398,000 or 3.4%.  Noninterest income declined by $19,000 or 1.0% and noninterest expense rose by $531,000 or 5.9%.

Due to lower annual earnings, Annapolis Bancorp’s return on average assets for 2007 dropped to 0.69% from 0.93% in 2006, and its return on average equity fell to 9.51% from 13.21%.  The Company’s efficiency ratio rose to 69.37% in 2007 from 65.58% in 2006.
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.  This year, the Bank will open its eighth office in the Annapolis Towne Centre at Parole.  The Bank’s headquarters building and main branch are located at 1000 Bestgate Road, directly across from the Westfield 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 Pledges $20,000 To Providence Center
Contribution Will Support Capital Campaign

Annapolis, MD, February 1, 2008 – BankAnnapolis has pledged $20,000 to help the Providence Center, Inc., a nonprofit organization dedicated to the well-being of adults with developmental disabilities, make significant improvements to its facilities so it can ultimately offer a wider range of programs and services. 

"On behalf of all we serve, I want to thank BankAnnapolis for this generous donation,” said Bob O’Keefe, Director of Development for the Providence Center.  “BankAnnapolis has been a great partner and supporter of the Providence Center for many years as a major sponsor of our golf tournament.  This contribution to our Capital Campaign shows that BankAnnapolis truly understands and believes in the importance of what we do.  We look forward to working more closely with BankAnnapolis in the future.”  

Founded in 1961, the mission of the Providence Center is to provide opportunities that allow adults with disabilities to lead more independent, valuable, and functioning roles in society.  Programs and services offered by the Center include vocational training, instruction in the arts, sheltered and supported employment, job development and placement services, adult day care, leisure and recreational programs, senior retirement support, and in-home and job support. 

“The work that the Providence Center does is not only inspirational…it makes a tangible difference in the lives of individuals who have often faced a host of challenges over the years,” said Richard M. Lerner, Chairman and CEO of BankAnnapolis.  “We are confident that our contribution to the Capital Campaign will help the Center continue to thrive and grow so that more individuals can benefit from its services and contribute to society.  BankAnnapolis is proud to support its mission in the community.”

The Providence Center currently serves more than 470 adults out of seven locations throughout Anne Arundel County.  The organization is conducting a Capital Campaign to raise funds to update and expand several of these locations in order to consolidate into fewer locations. This will enable the Center to offer more programs and services, provide greater access to all its programs, lower its utility and transportation costs, and deliver its services more effectively and efficiently.  The Center’s goal is to reduce the number of locations from seven to three by 2012. 

 “This project is a major undertaking that will take some time to complete and will require ongoing renovations and department relocations,” O’Keefe said.  “But the end result will be a new Providence Center, which is better positioned to help the region’s developmentally disabled adults.  It’s a goal we could not achieve without the support of organizations such as BankAnnapolis that recognize the value of helping people in the community live better, more productive lives.”   For more information about the Providence Center, go to www.providencecenter.com.

BankAnnapolis contributes financial, in-kind and volunteer assistance to numerous nonprofit institutions and organizations that assist people in need and enhance the quality of life in the communities where it does business.  BankAnnapolis serves the banking needs of small businesses, professional concerns, and individuals through seven community banking offices in Anne Arundel and Queen Anne's Counties in Maryland.  In 2008, the Bank will open its eighth office in the Annapolis Towne Centre at Parole, a new two-million-square-foot mixed-use development now under construction.  The Bank’s parent company, Annapolis Bancorp, Inc. (NASDAQ: ANNB), trades on the NASDAQ Capital Market under the ticker symbol “ANNB,” and reported total assets of $357.5 million at September 30, 2007.

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Jay Baldwin Named to BankAnnapolis Board Of Directors

Annapolis, MD - January 18, 2008 – BankAnnapolis today announced the election of Joseph G. (Jay) Baldwin, President and CEO of Millersville, Maryland-based Reliable Contracting Company, to its Board of Directors.

Baldwin, known for his leadership in the building and contracting industries, heads one of Maryland’s largest and most successful site work, road and highway construction companies.  He was recently recognized with the 2007 Ernst & Young Entrepreneur of the Year® Award in the Construction and Contracting Services category in Maryland, an honor bestowed annually upon “outstanding entrepreneurs who are building and leading dynamic, growing businesses.” 

“We are extremely pleased to welcome Jay Baldwin to the BankAnnapolis Board of Directors,” said Richard M. Lerner, Chairman and CEO of BankAnnapolis.  “In addition to bringing strong leadership skills and extensive business expertise to the board, Jay truly understands and cares about the communities we serve.  He and BankAnnapolis share the same business principles and values, as well as a commitment to strengthening the community through public service and giving back.  Jay will be a real asset to BankAnnapolis and we’re fortunate to have him on our board.”

“It is an honor and privilege to be asked to serve on the BankAnnapolis board,” Baldwin said.  “BankAnnapolis is unique in this marketplace.  It offers a level of service and financial expertise that is unparalleled for a community bank, yet it maintains its community bank feel and dedication to community service.  I am proud to be associated with such a fine institution.”

No stranger to the banking industry, Baldwin previously served on the boards of the Community Bank of Maryland, based in Bowie, and F&M Bank of Maryland, headquartered in Bethesda. 

An Anne Arundel County native, Baldwin also manages several residential and commercial real estate development companies and has been involved in some of the area’s most successful projects including the Quarterfield Crossing Shopping Center on Route 97 and Quarterfield Road.  New projects on the way include Waugh Chapel II, the Odenton Marc Station Public/Private Venture, Ellendale (a residential community on Kent Island) and Kaufmann Park. 

Baldwin is active in several industry groups.  He is currently President of the Maryland Highway Contractors Association and is on the board of the Maryland Asphalt Association.  In