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.
Annapolis Bancorp’s 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.
The company’s net income for fiscal year 2007 totaled $2.42 million or $0.60 per basic and $0.58 per diluted share, down 17.9% from $2.95 million or $0.72 per basic and $0.70 per diluted share in 2006. The 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 2006.
Richard Lerner, chairman and CEO of Annapolis Bancorp, said: We don’t believe that these isolated credit quality issues are indicative of a broader or burgeoning problem in our loan portfolio. 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.
