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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission File No. 0-31951
-------
MONROE BANCORP
(Exact name of registrant as specified in its charter)
------------------------------------------------------
Indiana 35-1594017
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
210 East Kirkwood Avenue
Bloomington, IN 47408
---------------------
(Address of principal executive offices)
(Zip Code)
(812) 336-0201
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Outstanding Shares of Common Stock on April 30, 2005: 6,036,284
MONROE BANCORP AND SUBSIDIARY
FORM 10-Q
INDEX
Page No.
--------
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets........................3
Consolidated Condensed Statements of Income - Three Months...4
Consolidated Condensed Statement of Shareholders' Equity.....5
Consolidated Condensed Statements of Cash Flows..............6
Notes to Consolidated Condensed Financial Statements.........7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk.....17
Item 4. Controls and Procedures........................................19
Part II. Other Information:
Item 1. Legal Proceedings..............................................20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....20
Item 3. Defaults Upon Senior Securities................................20
Item 4. Submission of Matters to a Vote of Security Holders............20
Item 5. Other Information..............................................20
Item 6. Exhibits.......................................................20
Signatures....................................................................22
Exhibit Index.................................................................23
2
Part I. Financial Information
Item 1. Financial Statements
MONROE BANCORP AND SUBSIDIARY
Consolidated Condensed Balance Sheets
(Dollars in thousands, except per share data)
March 31, December 31,
2005 2004
(Unaudited)
--------- ---------
Assets
Cash and due from banks .............................. $ 19,185 $ 20,961
Interest-earning deposits ............................ 614 435
--------- ---------
Total cash and cash equivalents ................ 19,799 21,396
Trading securities, at fair value .................... 3,134 3,223
Investment securities:
Available for sale .............................. 97,929 95,997
Held to maturity ................................ 7,807 10,492
--------- ---------
Total investment securities ................ 105,736 106,489
Loans ................................................ 486,418 474,345
Allowance for loan losses ............................ (5,450) (5,194)
--------- ---------
Net loans ....................................... 480,968 469,151
Loans held for sale .................................. 2,661 2,740
Premises and equipment ............................... 11,610 11,575
Federal Home Loan Bank of Indianapolis stock, at cost 2,464 2,439
Other assets ......................................... 18,443 16,957
--------- ---------
Total assets ............................. $ 644,815 $ 633,970
========= =========
Liabilities
Deposits:
Noninterest-bearing ............................. $ 83,287 $ 71,142
Interest-bearing ................................ 430,539 412,392
--------- ---------
Total deposits ............................. 513,826 483,534
Borrowings ........................................... 77,243 97,378
Other liabilities .................................... 6,291 5,674
--------- ---------
Total liabilities ........................ 597,360 586,586
Commitments and Contingent Liabilities
Shareholders' Equity
Common stock, no-par value
Authorized, 18,000,000 shares
Issued and outstanding - 6,036,284 and 6,035,110
shares, respectively ....................... 137 137
Additional paid-in capital ........................... 1,595 1,592
Retained earnings .................................... 47,130 46,267
Accumulated other comprehensive income ............... (993) (198)
Unearned ESOT shares ................................. (414) (414)
--------- ---------
Total shareholders' equity ............... 47,455 47,384
--------- ---------
Total liabilities and shareholders' equity $ 644,815 $ 633,970
========= =========
See notes to consolidated condensed financial statements.
3
MONROE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
March 31,
-------------------
2005 2004
------- -------
Interest Income
Loans, including fees ......................................... $ 6,884 $ 5,917
Trading securities ............................................ 15 17
Investment securities
Taxable .................................................. 761 775
Tax exempt ............................................... 113 181
Federal funds sold ............................................ 6 2
Other interest income ......................................... 9 11
------- -------
Total interest income ............................. 7,788 6,903
------- -------
Interest Expense
Deposits ...................................................... 2,124 1,470
Short-term borrowings ......................................... 245 77
Other borrowings .............................................. 393 484
------- -------
Total interest expense ............................ 2,762 2,031
------- -------
Net interest income ............................... 5,026 4,872
Provision for loan losses ..................................... 330 330
------- -------
Net interest income after provision for loan losses 4,696 4,542
------- -------
Noninterest Income
Fiduciary activities .......................................... 376 335
Service charges on deposit accounts ........................... 756 707
Commission income ............................................. 225 228
Securities gains ........ ..................................... 66 132
Unrealized gains (losses) on trading securities ............... (46) 66
Net gains on loans sales ...................................... 237 192
Debit card interchange fees ................................... 150 107
Other operating income ........................................ 270 284
------- -------
Total other income ................................ 2,034 2,051
------- -------
Noninterest Expenses
Salaries and employee benefits ................................ 2,579 2,553
Net occupancy and equipment expense ........................... 644 627
Advertising ................................................... 119 149
Legal fees .................................................... 180 127
Appreciation (depreciation) in directors' and executives'
deferred compensation plans .............................. (32) 74
Other operating expense ....................................... 779 649
------- -------
Total other expenses .............................. 4,269 4,179
------- -------
Income before income tax .......................... 2,461 2,414
Income tax expense ................................ 818 761
------- -------
Net income ............................. $ 1,643 $ 1,653
======= =======
Basic and diluted earnings per share........................... $ 0.27 $ 0.27
See notes to consolidated condensed financial statements.
4
MONROE BANCORP AND SUBSIDIARY
Consolidated Condensed Statement of Shareholders' Equity
For the Three Months Ended
March 31, 2005
(Unaudited)
(Dollars in thousands)
Unearned
Common Stock Accumulated Employee
------------------- Additional Other Stock
Shares Paid in Comprehensive Retained Comprehensive Ownership
Outstanding Amount Capital Income Earnings Loss Trust Shares Total
-------------------------------------------------------------------------------------------
Balances January 1, 2005.............. 6,035,110 $ 137 $ 1,592 $ 46,267 $ (198) $ (414) $ 47,384
Comprehensive Income:
Net income for the period........... $ 1,643 1,643 1,643
Other comprehensive income
-unrealized loss on securities
net of tax benefit of $409
(net of reclassification
adjustment of $22 for
realized gains included in (795) (795) (795)
income).......................
ESOT shares earned.................... 3 3
Repurchase of stock, at cost.......... (3,826) (66) (66)
Stock options exercised............... 5,000 66 66
Cash dividend ($.13 per share) (780) (780)
-------------------------------------------------------------------------------------------
Balances March 31, 2005............... 6,036,284 $ 137 $ 1,595 $ 848 $ 47,130 $ (993) $ (414) $ 47,455
===========================================================================================
See notes to consolidated condensed financial statements.
5
MONROE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
---------------------
2005 2004
-------- --------
Operating Activities
Net income ........................................................... $ 1,643 $ 1,653
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses ........................................ 330 330
Depreciation and amortization .................................... 251 209
Deferred income tax .............................................. (73) 63
Investment securities amortization, net .......................... 65 127
Securities gain .................................................. (64) (138)
Origination of loans held for sale ............................... (14,318) (13,089)
Proceeds from sale of loans held for sale ........................ 14,634 12,421
Gain on sale of loans held for sale .............................. (237) (192)
ESOT compensation ................................................ 4 6
Net change in:
Trading securities .......................................... 89 (90)
Interest receivable and other assets ........................ (1,005) (591)
Interest payable and other liabilities ...................... 617 602
-------- --------
Net cash provided by operating activities ......... 1,936 1,311
-------- --------
Investing Activities
Purchase of securities available for sale ............................ (15,369) (16,245)
Proceeds from sales of securities available for sale ................. 7,740 2,252
Proceeds from paydowns and maturities of securities available for sale 4,507 1,601
Purchases of securities held to maturity ............................. -- --
Proceeds from paydowns and maturities of securities held to maturity . 2,670 11,561
Purchase of FHLB stock ............................................... (25) (29)
Net change in loans .................................................. (12,147) (15,916)
Purchase of premises and equipment ................................... (286) (330)
-------- --------
Net cash used by investing activities ............. (12,910) (17,106)
-------- --------
Financing Activities
Net change in:
Noninterest-bearing, interest-bearing demand and savings deposits 21,921 (22,319)
Certificates of deposit .......................................... 8,371 40,124
Borrowings ....................................................... (16,135) (9,573)
Proceeds from Federal Home Loan Bank advances ........................ -- --
Repayments of Federal Home Loan Bank advances ........................ (4,000) (1,892)
Cash dividends paid .................................................. (780) (786)
Stock options exercised .............................................. 66 43
Repurchase of common stock ........................................... (66) (129)
-------- --------
Net cash provided by financing activities ......... 9,377 5,468
-------- --------
Net Change in Cash and Cash Equivalents ..................................... (1,597) (10,327)
Cash and Cash Equivalents, Beginning of Period .............................. 21,396 29,708
-------- --------
Cash and Cash Equivalents, End of Period .................................... $ 19,799 $ 19,381
======== ========
Supplemental cash flow disclosures
Interest paid ........................................................ $ 2,771 $ 2,008
Income tax paid ...................................................... 65 --
See notes to consolidated condensed financial statements.
6
MONROE BANCORP AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
March 31, 2005
(Unaudited)
Note 1: Basis of Presentation
- -----------------------------
The consolidated condensed financial statements include the accounts of Monroe
Bancorp (the "Company") and its wholly owned subsidiary, Monroe Bank, a state
chartered bank (the "Bank") and the Bank's wholly owned subsidiary MB Portfolio
Management, Inc. A summary of significant accounting policies is set forth in
Note 1 of Notes to Financial Statements included in the December 31, 2004,
Annual Report to Shareholders. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The interim consolidated condensed financial statements have been prepared in
accordance with instructions to Form 10-Q, and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
The interim consolidated condensed financial statements at March 31, 2005, and
for the three months ended March 31, 2005 and 2004, have not been audited by
independent accountants, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods.
The consolidated condensed balance sheet of the Company as of December 31, 2004
has been derived from the audited consolidated balance sheet of the Company as
of that date. Certain information and note disclosures normally included in the
Company's annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-K annual report filed with the Securities and
Exchange Commission.
The results of operations for the period are not necessarily indicative of the
results to be expected for the year.
7
Note 2: Earnings Per Share
- --------------------------
The number of shares used to compute basic and diluted earnings per share was as
follows:
Three months ended
------------------
March 31, 2005 March 31, 2004
-------------- --------------
Net income (in thousands) ......... $ 1,643 $ 1,653
=========== ===========
Weighted average shares outstanding 6,036,223 6,093,921
Average unearned ESOT shares ...... (35,109) (40,361)
----------- -----------
Shares used to compute basic
earnings per share ......... 6,001,114 6,053,560
Effect of dilutive securities -
stock options ................. 20,182 14,788
----------- -----------
Shares used to compute diluted
earnings per share ........ 6,021,296 6,068,348
=========== ===========
Earnings per share, basic.......... $ 0.27 $ 0.27
Earnings per share, diluted........ 0.27 0.27
Note 3: Stock Options
- ---------------------
The Company has a stock-based employee compensation plan, which is described
more fully in the Notes to Financial Statements included in the December 31,
2004 Annual Report to Shareholders. The Company accounts for this plan under the
recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under the
plan had an exercise price equal to the market value of the underlying common
stock on the grant date. The table on the following page illustrates the effect
on net income and earnings per share if the Company had applied the fair value
provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.
Table dollar amounts are in thousands except per share data.
8
Three Months Ended Three Months Ended
March 31, 2005 March 31, 2004
------------------ ------------------
Net income, as reported..................................... $ 1,643 $ 1,653
Less: Total stock-based employee compensation cost
determined under the fair value based method, net of
income taxes............................................ 2 3
------------------ ------------------
Pro forma net income........................................ $ 1,641 $ 1,650
================== ==================
Earnings per share:
Basic - as reported.................................... $ 0.27 $ 0.27
Basic - pro forma...................................... 0.27 0.27
Diluted - as reported.................................. 0.27 0.27
Diluted - pro forma.................................... 0.27 0.27
Note 4: Reclassifications
- --------------------------
Reclassifications of certain amounts in the 2004 consolidated condensed
financial statements have been made to conform to the 2005 presentation.
Note 5: Contingencies
- ----------------------
The Bank is a plaintiff in an action to recover amounts due on mortgage loans to
a real estate developer and related entities. The borrower is in bankruptcy
proceedings and has recently been indicted by a federal grand jury. The trustee
in the borrower's bankruptcy petition has filed an action against the Bank and
other defendants for damages from fraudulent transfer and preference payments,
and to set aside certain mortgages granted to the Bank by the borrower.
Furthermore, on February 17, 2005, the loan officer who made the loans related
to the legal proceedings was indicted by a federal grand jury. Based upon
current facts and circumstances, it is not possible at this time to predict the
effect that these proceedings will have on the financial statements of the
Company.
The Company and Bank are from time-to-time subject to other claims and lawsuits
which arise primarily in the ordinary course of business. It is the opinion of
management that the disposition or ultimate resolution of such claims and
lawsuits will not have a material adverse effect on the consolidated financial
position of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ Results of Operations
---------------------------------------------------------------
General
- -------
Monroe Bancorp (the "Company") is a one-bank holding company formed under
Indiana law in 1984. The Company holds all of the outstanding stock of Monroe
Bank (the "Bank"), which was formed in 1892. Banking is the primary business
activity of the Company.
The Bank, with its primary offices located in Bloomington, Indiana, conducts
business from sixteen locations in Monroe, Jackson, Lawrence, and Hendricks
counties in Indiana. Approximately 75 percent of the Bank's business is in
Monroe County and is concentrated in and around the city of Bloomington.
The Bank is a traditional community bank which provides a variety of financial
services to its customers, including:
9
o accepting deposits;
o making commercial, mortgage and personal loans;
o originating fixed rate residential mortgage loans for sale into the
secondary market;
o providing personal and corporate trust services;
o providing investment advisory and brokerage services; and
o providing annuities and other investment products.
The majority of the Bank's revenue is derived from interest and fees on loans
and investments, and the majority of its expense is interest paid on deposits
and general and administrative expenses related to its business.
Critical Accounting Policies
- ----------------------------
The most significant accounting policies followed by the Company are presented
in Note 1 to the consolidated financial statements on pages 24 to 26 of the
December 31, 2004 Annual Report to Shareholders - Financial Review. Certain of
these policies are important to the portrayal of the Company's financial
condition, since they require management to make difficult, complex or
subjective judgments, some of which may relate to matters that are inherently
uncertain. Management has identified these policies in the Critical Accounting
Policies section of the Management's Discussion and Analysis on pages 6 of the
2004 Annual Report to Shareholders -Financial Review. There have been no changes
in these critical accounting policies to date.
Non-GAAP Financial Measures
- ---------------------------
In January 2003, the United States Securities and Exchange Commission ("SEC")
issued Regulation G, "Conditions for Use of Non-GAAP Financial Measures." A
non-GAAP financial measure is a numerical measure of a company's historical or
future performance, financial position, or cash flow that excludes (includes)
amounts or adjustments that are included (excluded) in the most directly
comparable measure calculated in accordance with generally accepted accounting
principles ("GAAP"). Regulation G requires companies that present non-GAAP
financial measures to disclose a numerical reconciliation to the most directly
comparable measurement using GAAP as well as the reason why the non-GAAP measure
is an important measure.
Management has used two non-GAAP financial measures throughout this quarterly
report on Form 10-Q.
o In the "Net Interest Income / Net Interest Margin" section, the discussion
is focused on tax-equivalent rates and margin. Management believes a
discussion of the changes in tax-equivalent rates and margin is more
relevant because it better explains changes in after-tax net income.
o In the "Noninterest Income / Noninterest Expense" section of this document,
we report other income and other expense without the effect of unrealized
gains and losses on securities in a grantor trust ("rabbi trust") which is
a non-GAAP financial measure. Other income includes realized and unrealized
securities gains and losses on trading securities (mutual funds) held in a
grantor trust ("rabbi trust") in connection with the Company's Directors'
and Executives' Deferred Compensation Plans. These securities are held as
trading securities, and hence, unrealized gains and losses are recognized
on the income statement. Any unrealized or realized loss on securities held
in the rabbi trust net of any dividend or interest income earned on the
securities in the rabbi trust (included in net interest income) are
directly offset by a decrease to directors' fee/deferred executive
compensation expense (included in other expense), and conversely, any net
realized or unrealized gain combined with interest and dividends earned on
the securities in the trust are directly offset by an increase to
directors' fee/deferred executive compensation expense. These offsets are
included in the line item identified on page 4 of the consolidated
financial statements as "Appreciation (depreciation) on directors' and
executives' deferred compensation plans." The activity in the rabbi trust
has no effect on the Company's net income, therefore, management believes a
more accurate comparison of current and prior year other income and other
expense can be made if the rabbi trust realized and unrealized gains and
losses and offsetting appreciation (depreciation) on the deferred
compensation plans are removed.
10
Results of Operations
- ---------------------
Overview
- --------
Net income for the first quarter of 2005 was $1.64 million, a 0.6 percent
decrease from net income of $1.65 million for the same quarter last year. Basic
and diluted earnings per share for the first quarter of 2005 were $0.27,
unchanged from the first quarter of 2004.
Annualized return on average equity (ROE) for the first quarter of 2005
decreased to 13.94 percent compared to 14.46 percent for first quarter of 2004.
The annualized return on average assets (ROA) was 1.05 percent for the first
quarter of 2005 compared to 1.13 percent for the same period of 2004.
Rising interest rates and the Company's continued investments in the Central
Indiana market had an adverse effect on net income growth for the first quarter.
Also contributing to the slight decline in earnings was a decline in realized
gains from the sale of securities, which totaled $66,000 during the first
quarter of 2005 compared to $132,000 during the first quarter of 2004.
Progress continues to be made towards improving asset quality as indicated by
several measures of credit quality. At March 31, 2005, non-performing assets and
90-day past due loans totaled $3.9 million (0.61 percent of total assets)
compared to $4.1 million (0.64 percent) at December 31, 2004 and $6.8 million
(1.13 percent of total assets) at March 31, 2004, a 42.2 percent reduction. The
Company also realized a significant improvement in its net loan charge-offs. Net
charge-offs for the first quarter of 2005 were $74,000 compared to $323,000 for
the first quarter of 2004. The Company's loan delinquency ratio (loan balances
past due 30 days or more as a percent of total loans) was 0.79 percent at March
31, 2005, down from 1.57 percent at March 31 2004.
The Company also opened a loan production office in Carmel, Indiana, north of
Indianapolis, at the end of the first quarter, marking the Company's entry into
the rapidly-growing Hamilton County/northern Indianapolis market. The Company
continues to make steady progress on our planned openings of two full service
branches in Hendricks County, the first to open at the end of 2005 and the
second to open early in 2006.
Net Interest Income / Net Interest Margin
- -----------------------------------------
The tables on the following pages present information to assist in analyzing net
interest income. The tables of Average Balance Sheets and Interest Rates present
the major components of interest-earning assets and interest-bearing
liabilities, related interest income and expense and the resulting yield or
cost. Interest income presented in the table has been adjusted to a tax
equivalent basis assuming a 40 percent tax rate. The tax equivalent adjustment
recognizes the income tax savings when comparing taxable and tax-exempt assets.
11
Average Balance Sheets and Interest Rates
----------------------------------------------------------------------
Three Months Ended March 31, 2005 Three Months Ended March 31, 2004
----------------------------------- ---------------------------------
Average Average Rate Average Average Rate
ASSETS Balance Interest (annualized) Balance Interest (annualized)
------- -------- ------------ ------- ---------------------
Interest earning assets
Securities
Taxable ......................................... $ 93,120 $ 796 3.46% $ 83,423 $ 816 3.93%
Tax-exempt (1) .................................. 15,575 188 4.90% 19,417 285 5.90%
--------- --------- --------- ---------
Total securities ........................... 108,695 984 3.67% 102,840 1,101 4.30%
Loans (2) ............................................ 481,315 6,887 5.80% 431,667 5,919 5.51%
FHLB Stock ........................................... 2,458 27 4.45% 2,353 32 5.47%
Federal funds sold ................................... 955 6 2.55% 810 2 0.99%
Interest-earning deposits ............................ 1,855 15 3.28% 7,124 20 1.15%
--------- --------- --------- ---------
Total interest earning assets ............ 595,278 7,918 5.39% 544,794 7,073 5.22%
--------- --------- --------- ---------
Noninterest earning assets
Allowance for loan losses ............................. (5,335) (5,059)
Premises and equipment & other assets ................ 28,939 28,464
Cash and due from banks .............................. 17,759 17,830
--------- ---------
Total assets ............................... $ 636,641 $ 586,029
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Total interest-bearing deposits ...................... $ 425,315 2,124 2.03% $ 372,831 1,470 1.59%
Borrowed funds ....................................... 83,534 638 3.10% 92,292 561 2.44%
--------- --------- --------- ---------
Total interest-bearing liabilities .............. 508,849 2,762 2.20% 465,123 2,031 1.76%
--------- --------- --------- ---------
Noninterest-bearing liabilities
Noninterest-bearing demand deposits .................. 73,767 69,433
Other liabilities .................................... 6,222 5,487
Shareholders' equity ................................. 47,803 45,986
--------- ---------
Total liabilities and shareholders' equity $ 636,641 $ 586,029
========= =========
Interest margin recap
Net interest income and interest rate spread
T/E net interest income margin ....................... $ 5,156 3.19% $ 5,042 3.47%
T/E net interest margin as a percent of
total average earning assets .................... 3.51% 3.72%
Tax equivalent adjustment (1) ............................. 130 170
--------- ---------
Net interest income ....................... $ 5,026 $ 4,872
========= =========
(1) Interest income on tax-exempt securities has been adjusted to a tax
equivalent basis using a marginal income tax rate of 40%.
(2) Nonaccrual loans are included in average loan balances and loan fees are
included in interest income.
12
Net Interest Income / Net Interest Margin (continued)
- -----------------------------------------------------
Net interest income is the primary source of the Company's earnings. It is a
function of the net interest margin and the volume of average earning assets.
The tax-equivalent net interest margin as a percent of average earning assets
was 3.51 percent for the quarter ended March 31, 2005, down from 3.72 percent
for the same quarter last year. Average first quarter 2005 loan yields increased
by 29 basis points (0.29 percent) over first quarter 2004 yields and deposit
yields increased 44 basis points in the same time period. Average first quarter
2005 tax-equivalent securities yields declined by 63 basis points over the first
quarter of 2004, and borrowed funds yields increased 66 basis points. Deposit
yields increased more than loan yields because the Company is liability
sensitive (i.e. deposits reprice more quickly than loans). Securities yields
continued to decline because a significant portion of the securities portfolio
matured during the past year and was reinvested at considerably lower rates.
Tax-equivalent net interest income was $5.16 million for the three months ended
March 31, 2005 compared to $5.04 million for the same period in 2004, an
increase of 2.0 percent. Loan and deposit volume increased in 2005, but this
growth was partially offset by the decrease in the margin.
Noninterest Income / Noninterest Expense
- ----------------------------------------
Total noninterest income decreased $17,000 for the three months ended March 31,
2005 compared to the same period in 2004. Omitting the net realized and
unrealized losses on rabbi trust securities in the amount of $45,000 in the
first quarter of 2005 and gains in the amount of $60,000 in the first quarter of
2004, other income increased $88,000 or 4.4 percent during the first quarter of
2005 compared to the first quarter of 2004.
Significant changes in noninterest income occurred primarily in the following
areas:
o Debit card interchange income totaled $150,000 for the first quarter of
2005 compared to $107,000 for the same period in 2004, an increase of
$43,000 or 40.2 percent, due to an increase in debit card use and an
increase in the interchange fee structure.
o Gains on the sale of mortgage loans were $237,000 for the first quarter of
2005 compared to $192,000 for the same period in 2004.
o Trust fee income totaled $376,000 for the first quarter of 2005 compared to
$335,000 for the first quarter of 2004, an increase of $41,000 or 12.2
percent. The Company's Wealth Management Group, formerly named the
Financial Management Services Division, continued to grow. Trust assets
under management grew from $202.1 million at March 31, 2004 to $226.6
million at March 31, 2005.
o Service charges on deposit accounts were $756,000 during the first quarter
of 2005 compared to $707,000 in the first quarter of 2004, an increase of
$49,000 or 6.9 percent. Growth primarily occurred in fees associated with
overdrawn accounts (NSF fees). The year-over-year increase in NSF fees is
largely the result of a regulatory change affecting how overdrawn checking
accounts are charged off. Effective January 1, 2005, the actual overdraft
amount is charged to the loan loss reserve while accumulated fees are
charged off against fee income. Previously, the full amount was charged off
against fee income.
o Gains were recognized on the sale of securities in the amount of $66,000 in
the first quarter of 2005 compared to $132,000 in the first quarter of
2004, a decrease of $66,000
For the quarter ending March 31, 2005, total noninterest expense increased
$90,000 compared to the same period in 2004. Omitting the depreciation in the
Directors' and Executives' Deferred Compensation Plan of $32,000 in the first
quarter of 2005 (which equals the sum of the interest and dividends earned on
the rabbi trust and the realized and unrealized gains or losses on the
securities in the trust) and appreciation of $74,000 during the first quarter of
2004, noninterest expense increased $196,000 or 4.8 percent.
Significant changes in noninterest expense occurred primarily in the following
area:
o Legal fees increased $53,000 or 41.2 percent due to an increase in legal
fees associated with legal actions related to loans made to a certain real
estate developer who filed bankruptcy in 2002.
13
Occupancy expense and salaries and employee benefit expenses experienced very
modest increases in the first quarter of 2005 compared to the same period in
2004. Occupancy expense increased by $17,000 or 2.7 percent while salaries and
employee benefit expense increased by $26,000 or 1.0 percent.
Income Taxes
- ------------
The Company records a provision for income taxes currently payable, along with a
provision for those taxes payable in the future. Such deferred taxes arise from
differences in timing of certain items for financial statement reporting rather
than income tax reporting. The major difference between the effective tax rate
applied to the Company's financial statement income and the federal and state
statutory rate of approximately 40 percent is interest on tax-exempt securities.
The Company's effective tax rate was 33.2 percent for the three months ended
March 31, 2005 compared to 31.5 percent for the same period in 2004. The tax
rate increased primarily because municipal bond (tax-exempt) income represented
a lower percentage of total income in the first quarter of 2005.
Financial Condition
- -------------------
Assets and Liabilities
- ----------------------
Total assets of the Company at March 31, 2005 were $644.8 million an increase of
1.7 percent or $10.8 million compared to $634.0 million at December 31, 2004.
Loans (including loans held for sale) grew to $489.1 million at March 31, 2005
compared to $477.1 million at December 31, 2004, an increase of 2.5 percent. The
Company's Central Indiana operations provided 51.8 percent of the year-to-date
loan growth, with the remainder occurring in the Company's core market of Monroe
County and the surrounding counties. Growth primarily occurred in commercial
real estate loans. Deposits increased to $513.8 at March 31, 2005 compared to
$483.5 at December 31, 2004, an increase of 6.3 percent. The increase in
deposits resulted primarily from an increase in interest-bearing demand deposit
accounts of $14.5 million and an increase in noninterest-bearing demand deposits
of $12.1 million. Cash and cash equivalents declined by $1.6 million at March
31, 2005 compared to December 31, 2004. Borrowings declined to $77.2 million at
March 31, 2005 compared to $97.4 million at December 31, 2004, a 20.7 percent
decrease. The decline in borrowings was primarily due to a decline in federal
funds purchased of $11.9 million. Federal Home Loan Bank advances also declined
by $4.0 million.
Capital
- -------
Shareholders' equity increased $71,000 at March 31, 2005 compared to December
31, 2004. This increase was a result of year-to-date net income of $1.6 million,
dividends paid of $780,000, other comprehensive income, consisting solely of the
change (decrease) in net unrecognized gains in the Company's available-for-sale
securities portfolio of $795,000, treasury stock purchased of $66,000, options
issued of $66,000 (exercise price) and ESOP shares earned of $4,000.
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies and are assigned to a capital
category. The assigned capital category is largely determined by three ratios
that are calculated according to the regulations: total risk adjusted capital,
Tier 1 capital, and Tier 1 leverage ratios. The ratios are intended to measure
capital relative to assets and credit risk associated with those assets and
off-balance sheet exposures of the entity. The capital category assigned to an
entity can also be affected by qualitative judgments made by regulatory agencies
about the risk inherent in the entity's activities that are not part of the
calculated ratios.
There are five capital categories defined in the regulations ranging from well
capitalized to critically undercapitalized. Classification of a bank in any of
the undercapitalized categories can result in actions by regulators that could
have a material effect on a bank's operations. At March 31, 2005 and December
31, 2004, the Company and the Bank were categorized as well capitalized and met
all subject capital adequacy requirements. There are no conditions or events
since March 31, 2005 that management believes have changed the Company's or
Bank's classification.
14
The actual and required capital amounts and ratios are as follows:
Required for Adequate To Be Well
Actual Capital(1) Capitalized(1)
-----------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
-----------------------------------------------------------
As of March 31, 2005
--------------------
Total capital(1)(to risk-weighted
assets)
Consolidated $53,898 11.41% $37,781 8.0% N/A N/A
Bank 53,773 11.46 37,544 8.0 $46,930 10.0%
Tier I capital(1)(to risk-weighted
assets)
Consolidated 48,448 10.26 18,890 4.0 N/A N/A
Bank 48,323 10.30 18,772 4.0 28,158 6.0
Tier I capital(1)(to average
assets)
Consolidated 48,448 7.61 25,466 4.0 N/A N/A
Bank 48,323 7.63 25,342 4.0 31,678 5.0
As of December 31, 2004
-----------------------
Total capital(1)(to risk-weighted
assets)
Consolidated $52,776 11.46% $36,852 8.0% N/A N/A
Bank 52,565 11.49 36,606 8.0 $45,758 10.0%
Tier I capital(1)(to risk-weighted
assets)
Consolidated 47,582 10.33 18,426 4.0 N/A N/A
Bank 47,371 10.35 18,303 4.0 27,455 6.0
Tier I capital(1)(to average
assets)
Consolidated 47,582 7.58 25,107 4.0 N/A N/A
Bank 47,371 7.59 24,969 4.0 31,211 5.0
(1) As defined by regulatory agencies
Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans
- ----------------------------------------------------------------------------
One of management's top priorities has been improving credit quality. Management
is pleased by the progress made in terms of credit quality over the past year.
The Bank currently classifies loans internally to assist management in
addressing collection and other risks. These classified loans represent credits
characterized by the distinct possibility that some loss will be sustained if
deficiencies are not corrected. As of March 31, 2005, the Bank had $8.4 million
of loans internally classified compared to $9.5 million at December 31, 2004, a
13.1 percent reduction. Loans internally classified have significantly decreased
compared to March 31, 2004, when the Bank had $14.7 million of loans internally
classified. The allowance for loan losses was $5.5 million, or 1.11 percent of
portfolio loans (excluding loans held for sale) at March 31, 2005 compared to
$5.2 million, or 1.09 percent, of portfolio loans at December 31, 2004. A
portion of classified loans are nonaccrual loans. The Bank had nonperforming
loans (nonaccrual loans, restructured loans and ninety days past due loans still
accruing) totaling $3.5 million, or .72 percent of total loans at March 31, 2005
compared to $3.7 million or .77 percent of total loans at December 31, 2004.
March 31, 2005 nonperforming loans significantly decreased compared to March 31,
2004, when nonperforming loans were $5.7 million, or 1.29 percent of total
loans.
During the first quarter of 2005, the Bank had net loan charge offs totaling
$74,000 compared to $323,000 charged off for the same period in 2004. Past due
loans (30 days or more) were .79 percent of total loans at March 31, 2005
compared to 1.57 percent of total loans at March 31, 2004.
15
Liquidity
- ---------
Liquidity refers to the ability of a financial institution to generate
sufficient cash to fund current loan demand, meet savings deposit withdrawals
and pay operating expenses. The primary sources of liquidity are cash,
interest-bearing deposits in other financial institutions, marketable
securities, loan repayments, increased deposits and total institutional
borrowing capacity.
Cash Requirements
Management believes that the Company has adequate liquidity and adequate sources
for obtaining additional liquidity if needed. Short-term liquidity needs
resulting from normal deposit/withdrawal functions are provided by the Company
retaining a portion of cash generated from operations and through utilizing
federal funds and repurchase agreements. Long-term liquidity and other liquidity
needs are provided by the ability of the Company to borrow from the Federal Home
Loan Bank of Indianapolis (FHLB). FHLB advances were $34.0 million at March 31,
2005 compared to $38.0 million at December 31, 2004. At March 31, 2005, the
Company had excess borrowing capacity at the FHLB of $22.0 million as limited by
the Company's board resolution in effect at that date. If the Company's
borrowing capacity were not limited by the board resolution, the Company would
have excess borrowing capacity of $54.3 million based on collateral. In terms of
managing the Company's liquidity, management's primary focus is on increasing
deposits to fund future growth. However, the Board may increase its resolution
limit on FHLB advances if the Company needs additional liquidity. The Company's
internal Asset/Liability Committee (ALCO) meets regularly to review projected
loan demand and discuss appropriate funding sources to adequately manage the
Company's gap position and minimize interest rate risk.
At March 31, 2005, the Bank's primary liquidity ratio (net cash, short-term and
marketable assets divided by net deposits and short-term liabilities) was 17.4
percent, compared to 16.6 percent at December 31, 2004. Management considers
this ratio to be adequate.
At the bank holding company level, the Company primarily uses cash to pay
dividends to shareholders. The main source of funding for the holding company is
dividends from its subsidiary (the Bank). During the first quarter of 2004, the
Bank declared dividends to the holding company of $700,000. As of April 1, 2005,
the amount of dividends the Bank can pay to the parent company without prior
regulatory approval was $5.0 million, versus $4.0 million at January 1, 2005. As
discussed in Note 10 to the Consolidated Financial Statements (page 32 of the
2004 Annual Report to Shareholders-Financial Review) and Item 1 of the December
31, 2004 Form 10-K, the Bank is subject to many regulations and, among other
things, may be limited in its ability to pay dividends or transfer funds to the
holding company. Accordingly, consolidated cash flows as presented in the
Consolidated Statements of Cash Flows on page 6 may not represent cash
immediately available to the holding company.
Sources and Uses of Cash
The following discussion relates to the Consolidated Statements of Cash Flows
(page 6 of the consolidated condensed financial statements). During the three
months ended March 31, 2005, $1.9 million of cash was provided by operating
activities, compared to $1.3 million during the same period in 2004. The
increase in this area was primarily a result of more mortgages sold in the
secondary market in 2005. During the first three months of 2005, $12.9 million
was used for investing activities, compared to $17.1 million in the same period
of 2004. The decrease in the use of funds in this category occurred primarily
because the Company had a $15.9 million increase in loans in the first three
months of 2004 compared to a $12.1 million increase in the same period of 2005.
In the first three months of 2005, $9.4 million of cash was provided by
financing activities, primarily from growth in noninterest-bearing demand and
savings deposits, compared to $5.5 million provided by financing activities
during the same period in 2004 with growth occurring primarily in certificates
of deposit. Overall, net cash and cash equivalents decreased $1.6 million during
the three months ended March 31, 2005 compared to a decrease of $10.3 million in
the same period of 2004.
Impact of Inflation and Changing Prices
- ---------------------------------------
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles. These principles
require the measurement of financial position and operating
16
results in terms of historical dollars, without considering changes in the
relative purchasing power of money over time due to inflation.
The primary assets and liabilities of the Company are monetary in nature.
Consequently, interest rates generally have a more significant impact on
performance than the effects of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services. In a period of rapidly rising interest rates, the
liquidity and the maturity structure of the Company's assets and liabilities are
critical to the maintenance of acceptable performance levels. The Company
constantly monitors the liquidity and maturity structure of its assets and
liabilities, and believes active asset/liability management has been an
important factor in its ability to record consistent earnings growth through
periods of interest rate volatility.
Other
- -----
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy information statements, and other information regarding
registrants that file electronically with the Commission, including Monroe
Bancorp (ticker symbol MROE). The address is http://www.sec.gov.
Forward-Looking Statements
- --------------------------
Portions of information in this Form 10-Q contain forward-looking statements
about the Company which we believe are within the meaning of the Private
Securities Litigation Reform Act of 1995. This Form 10-Q contains certain
forward-looking statements with respect to the financial condition, results of
operations, plans, objectives, future performance and business of the Company.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include the words "believe,"
"expect," "anticipate," "intend," "plan," "estimate" or words of similar
meaning, or future or conditional verbs such as "will," "would," "should,"
"could" or "may" or words of similar meaning. These forward-looking statements,
by their nature, are subject to risks and uncertainties. There are a number of
important factors that could cause future results to differ materially from
historical performance and these forward-looking statements. Factors that might
cause such a difference include, but are not limited to: (1) competitive
pressures among depository institutions; (2) changes in the interest rate
environment; (3) prepayment speeds, charge-offs and loan loss provisions; (4)
general economic conditions, either national or in the markets in which the
Company does business; (5) legislative or regulatory changes adversely affect
the business of the Company; and (6) changes in real estate values or the real
estate markets. Further information on other factors which could affect the
financial results of the Company are included in the Company's Form 10-K for the
year ended December 31, 2004 as filed with the Securities and Exchange
Commission.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- ------- ----------------------------------------------------------
Market risk of the Company encompasses exposure to both liquidity risk and
interest rate risk and is reviewed on an ongoing basis by management and
quarterly by the Asset/Liability Committee ("ALCO") and the Board of Directors.
Liquidity was addressed as part of the discussion entitled "Liquidity."
The Company's interest sensitivity position at March 31, 2005 remained
consistent with the Company's primary goal of maximizing interest margin while
maintaining a low exposure to interest rate risk.
Management uses several techniques to measure interest rate risk. Interest rate
risk exposure is measured using an interest rate sensitivity analysis to
determine the change in the net portfolio value ("NPV") of its cash flows from
assets and liabilities in the event of hypothetical changes in interest rates.
Management also forecasts the net interest income that the Bank's current
balance sheet would yield over the next twelve months assuming the same
hypothetical changes in interest rates. A third method used by the Bank to
measure interest rate risk is an interest rate sensitivity gap analysis. The gap
analysis is utilized to quantify the repricing characteristics of the Bank's
assets and liabilities.
Management believes that its forecast of changes in net interest income under
various rate shocks is the more valuable and easiest to interpret interest rate
risk measurement technique. Management believes that interested parties will
derive a better understanding of how the Company's intermediation activities
will perform under
17
different rate scenarios from its presentation of projected net interest income
under various rate shocks. This should help users of the information form
clearer opinions of the Company's interest rate sensitivity.
The Company's Board of Directors adopted an interest rate risk policy which
established a 20 percent maximum increase or decrease in net interest income in
the event of a sudden and sustained 2 percent (200 basis point) increase or
decrease in interest rates.
The following table summarizes the results of management's forecast of net
interest income that would be generated by the Bank's March 31, 2005 balance
sheet under various rate shocks:
Projected Net Interest
Income Over the $ Change in % Change in
Change in Interest Rate Next Twelve Months Net Interest Net Interest
(Basis Points) (in thousands) Income Income
- -----------------------------------------------------------------------------
+300 $22,085 $ (284) (1.3) %
+200 22,210 (159) (0.7)
+100 22,324 (45) (0.2)
0 22,369 0 --
-100 22,203 (166) (0.7)
-200 21,712 (657) (2.9)
The following table summarizes the results of management's forecast of net
interest income that would be generated by the Bank's December 31, 2004 balance
sheet under various rate shocks:
Projected Net Interest
Income Over the $ Change in % Change in
Change in Interest Rate Next Twelve Months Net Interest Net Interest
(Basis Points) (in thousands) Income Income
- -----------------------------------------------------------------------------
+300 $19,977 $ (118) (0.6) %
+200 20,044 (51) (0.3)
+100 20,084 (11) (0.1)
0 20,095 -- --
-100 19,835 (260) (1.3)
-200 19,281 (814) (4.1)
Management believes a 200 basis point (two percent) decrease in rates is highly
unlikely. Management also believes an increase in rates is more probable;
therefore, we will focus our discussion on the effects of a 100 basis point (one
percent) decrease in rates and an increase of 300 basis points (three percent).
The March 31, 2005 table above indicates that the Bank's projected net interest
income for the next twelve months would decline by 1.3 percent in the event of a
sudden and sustained 300 basis point increase in interest rates and decrease 0.7
percent in the event of an immediate 100 basis point decrease in interest rates.
While there has been a modest change, these results are very similar to the rate
shock forecast that was made at December 31, 2004. The forecasts from both time
periods indicate that the interest rate sensitivities of Bank's assets and
liabilities are relatively well matched over the rate shock ranges between a
drop of 100 basis points and an increase of 300 basis points. The estimated
changes in net interest income calculated as of March 31, 2005, are within the
approved guidelines established by the Board of Directors.
18
Computations of prospective effects of hypothetical interest rate changes are
based on a number of assumptions, including relative levels of market interest
rates, loan prepayments and deposit run-off rates, and should not be relied upon
as indicative of actual results. These computations do not contemplate actions
management may undertake in response to changes in interest rates. The NPV
calculation is based on the net present value of discounted cash flows utilizing
certain prepayment assumptions and market interest rates.
Certain shortcomings are inherent in the method of computing the estimated net
interest income under hypothetical rate shocks. Actual results may differ from
that information presented in the table above should market conditions vary from
the assumptions used in preparation of the table information. If interest rates
remain or decrease below current levels, the proportion of adjustable rate loans
in the loan portfolio could decrease in future periods due to refinancing
activity. Also, in the event of an interest rate change, prepayment and early
withdrawal levels would likely be different from those assumed in the table.
Lastly, the ability of many borrowers to repay their adjustable rate debt may
decline during a rising interest rate environment.
Item 4. Controls and Procedures.
- ------ -----------------------
Monroe Bancorp's management is responsible for establishing and maintaining
effective disclosure controls and procedures, as defined under Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934. As of March 31, 2005, an
evaluation was performed under the supervision and with the participation of
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as of March 31, 2005 were effective in ensuring material information
required to be disclosed in this Quarterly Report on Form 10-Q was recorded,
processed, summarized, and reported on a timely basis. Additionally, there were
no changes in the Company's internal control over financial reporting that
occurred during the quarter ended March 31, 2005 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
19
Part II - Other Information
Item 1. Legal Proceedings.
- ------- ------------------
None.
Item 2c. Unregistered Sales of Equity Securities and Use of Proceeds.
- -------- ------------------------------------------------------------
(d) Maximum Number
(or Approximate
Dollar Value) of
(c) Total Number of Shares that May
(a) Total Shares Purchased as Yet Be Purchased
Number of (b) Average Part of Publicly Under the Plans
Shares Price Paid Announced Programs or Programs (dollar
Period Purchased per Share or Plans amount in thousands)
- ---------------------------------------------------------------------------------------------------
January 1-31, 2005
February 1-28, 2005
March 1-31, 2005 3,826 $17.32 -- N/A
On March 2, 2005, the Company repurchased 3,826 shares of stock from David Baer,
a Director of the Company and the Bank. Mr. Baer exchanged existing shares to
pay for option shares.
Item 3. Defaults upon Senior Securities.
- ------- --------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
None
Item 5. Other Information.
- ------- ------------------
Not applicable.
Item 6. Exhibits.
- ------- ---------
Exhibit No: Description of Exhibit:
- ----------- -----------------------
3 (i) Monroe Bancorp Articles of Incorporation are incorporated by
reference to registrant's Form 10 filed November 14, 2000.
3 (ii) Monroe Bancorp Bylaws are incorporated by reference to
registrant's Form 10 filed November 14, 2000.
10 (i) 1999 Directors' Stock Option Plan of Monroe Bancorp is
incorporated by reference to registrant's Form 10 filed November
14, 2000.
10 (ii) 1999 Management Stock Option Plan of Monroe Bancorp is
incorporated by reference to registrant's Form 10 filed November
14, 2000.
10 (iii) Deferred Compensation Trust for Monroe Bancorp is incorporated by
reference to registrant's Form 10 filed November 14, 2000.
20
10 (iv) Monroe County Bank Agreement for Supplemental Death or Retirement
Benefits is incorporated by reference to registrant's Form 10
filed November 14, 2000.
10 (v) Monroe Bancorp Thrift Plan as Amended and Restated January 1,
2001 is incorporated by reference to registrant's Form 10-Q filed
November 13, 2002.
10 (vi) Monroe Bancorp Employee Stock Ownership Plan as Amended and
Restated January 1, 2001 is incorporated by reference to
registrant's Form 10-Q filed November 13, 2002.
10(vii) Third Amendment to the Monroe Bancorp Employees' Stock Ownership
Plan is incorporated by reference to registrant's Form 10-K filed
March 29, 2004.
10(viii) Monroe Bancorp Directors' Deferred Compensation Plan as Amended
and Restated Effective January 1, 1999 and First, Second and
First Amendments are incorporated by reference to registrant's
Form 10-K filed March 29, 2004.
10(ix) Monroe Bancorp Executives' Deferred Compensation Plan as Amended
and Restated Effective January 1, 1999 and First, Second and
First Amendments are incorporated by reference to registrant's
Form 10-K filed March 29, 2004.
10 (x) Form of agreement under the 1999 Management Stock Option Plan of
Monroe Bancorp is incorporated by reference to registrant's Form
10-K filed March 15, 2005.
10 (xi) Schedule of Directors Compensation Arrangements is incorporated
by reference to registrant's Form 10-K filed March 15, 2005.
10 (xii) Schedule of Executive Officers Compensation Arrangements is
incorporated by reference to registrant's Form 10-K filed March
15, 2005.
10(xiii) Fourth Amendment to the Monroe Bancorp Employees' Stock Ownership
Plan is filed as part of this Form 10-Q.
31(i) Certification for Quarterly Report on Form 10-Q by Principal
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31(ii) Certification for Quarterly Report on Form 10-Q by Principal
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32(i) Certification of Principal Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32 (ii) Certification of Principal Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MONROE BANCORP
Date: May 6, 2005 By: /s/ Mark D. Bradford
----------- ---------------------------------
Mark D. Bradford, President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 6, 2005 By: /s/ Gordon M. Dyott
----------- ---------------------------------
Gordon M. Dyott, Exec. Vice
President, Chief Financial Officer
(Principal Financial Officer)
22
Exhibit Index
Exhibit No: Description of Exhibit:
- ----------- -----------------------
3 (i) Monroe Bancorp Articles of Incorporation are incorporated by
reference to registrant's Form 10 filed November 14, 2000.
3 (ii) Monroe Bancorp Bylaws are incorporated by reference to
registrant's Form 10 filed November 14, 2000.
10 (i) 1999 Directors' Stock Option Plan of Monroe Bancorp is
incorporated by reference to registrant's Form 10 filed November
14, 2000.
10 (ii) 1999 Management Stock Option Plan of Monroe Bancorp is
incorporated by reference to registrant's Form 10 filed November
14, 2000.
10 (iii) Deferred Compensation Trust for Monroe Bancorp is incorporated by
reference to registrant's Form 10 filed November 14, 2000.
10 (iv) Monroe County Bank Agreement for Supplemental Death or Retirement
Benefits is incorporated by reference to registrant's Form 10
filed November 14, 2000.
10 (v) Monroe Bancorp Thrift Plan as Amended and Restated January 1,
2001 is incorporated by reference to registrant's Form 10-Q filed
November 13, 2002.
10 (vi) Monroe Bancorp Employee Stock Ownership Plan as Amended and
Restated January 1, 2001 is incorporated by reference to
registrant's Form 10-Q filed November 13, 2002.
10(vii) Third Amendment to the Monroe Bancorp Employees' Stock Ownership
Plan is incorporated by reference to registrant's Form 10-K filed
March 29, 2004
10(viii) Monroe Bancorp Directors' Deferred Compensation Plan as Amended
and Restated Effective January 1, 1999 and First, Second and
First Amendments are incorporated by reference to registrant's
Form 10-K filed March 29, 2004.
10(ix) Monroe Bancorp Executives' Deferred Compensation Plan as Amended
and Restated Effective January 1, 1999 and First, Second and
First Amendments are incorporated by reference to registrant's
Form 10-K filed March 29, 2004.
10(x) Form of agreement under the 1999 Management Stock Option Plan of
Monroe Bancorp is incorporated by reference to registrant's Form
10-K filed March 15, 2005.
10(xi) Schedule of Directors' Compensation Arrangements is incorporated
by reference to registrant's Form 10-K filed March 15, 2005.
10(xii) Schedule of Executive Officers Compensation Arrangements is
incorporated by reference to registrant's form 10-K filed March
15, 2005.
10(xiii) Fourth Amendment to the Monroe Bancorp Employees' Stock Ownership
Plan is filed as part of this Form 10-Q.
31(i) Certification for Quarterly Report on Form 10-Q by Principal
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
23
31(ii) Certification for Quarterly Report on Form 10-Q by Principal
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32(i) Certification of Principal Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32 (ii) Certification of Principal Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
24