**U.S. SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-QSB**

 

**ý****QUARTERLY REPORT UNDERSECTION 13 OR 15(d) OF THE**

**SECURITIESEXCHANGE ACT OF 1934**

 

**for the quarterly period ended: March 31,2003**

 

**o****TRANSITION REPORT UNDERSECTION 13 OR 15(d) OF THE**

**EXCHANGEACT**

 

**for the transition period from                to                **

 

**Commission file number: 333-102410**

 

**AMERICAN BANK HOLDINGS, INC.**

(Exact name of small business issuer as specified in its charter)

 

| **Delaware**                                                                        |   | **16-1645705**                        |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction  of incorporation or organization)                     |   | (I.R.S. Employer  Identification No.) |
|                                                                                |   |                                  |
| **12211 Plum Orchard Drive, Suite 300, Silver  Spring, Maryland 20904**             |
| (Address of principal executive offices)                                            |
|                                                                                |   |                                  |
| **301.572.3740**                                                                    |
| (Issuer’s telephone number, including area code)                               |
|                                                                                |   |                                  |
| **Not Applicable**                                                                  |
| (Former Name, Former Address and Former Fiscal Year, if changed since  last report) |

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

State the number of shares outstanding of each of the issuer’s classesof common equity, as of the latest practicable date:

 

**As of May 14, 2003: 1,873,478 shares ofcommon stock, par value $0.001 per share.**

 

 

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PART I - FINANCIAL INFORMATION

**Item1**.

 

AMERICAN BANK HOLDINGS, INC.

AND SUBSIDIARIES

 

**CONSOLIDATED STATEMENTS OF FINANCIALCONDITION**

 
|                                                                                                                                                                       |   | **March 31,  2003** |        | **December  31,  2002** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|-------------|-------------------------|--------|
|                                                                                                                                                                       |   | **(Unaudited)**     |        |                    |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| ASSETS                                                                                                                                                                     |   |                |        |                    |   |
| Cash                                                                                                                                                                       |   | $                   | 2,247,434   |                    | $      | 3,008,288 |   |
| Interest bearing deposits in other banks                                                                                                                                   |   | 15,434,791          |        | 18,799,221              |   |
| Federal funds sold & securities purchased under agreements to  resell                                                                                                  |   | 2,560,000           |        | 1,002,000               |   |
| Investment securities, available for sale                                                                                                                                  |   | 30,808,251          |        | 17,752,901              |   |
| Investment securities, held to maturity                                                                                                                                    |   | 5,228,086           |        | 1,242,036               |   |
| Loans receivable, net                                                                                                                                                      |   | 110,847,739         |        | 109,270,991             |   |
| Loans available for sale                                                                                                                                                   |   | 20,919,390          |        | 19,962,092              |   |
| Foreclosed real estate, net                                                                                                                                                |   | 526,477             |        | 526,478                 |   |
| Accrued interest receivable, net                                                                                                                                           |   | 818,494             |        | 776,358                 |   |
| Premises and equipment, net                                                                                                                                                |   | 1,747,227           |        | 1,739,298               |   |
| Federal Home Loan Bank of Atlanta stock, at cost                                                                                                                           |   | 1,903,800           |        | 1,903,800               |   |
| Income tax refund receivables                                                                                                                                              |   | 51,497              |        | 186,630                 |   |
| Deferred income taxes, net                                                                                                                                                 |   | 573,876             |        | 545,307                 |   |
| Cash surrender value life insurance                                                                                                                                        |   | 2,394,324           |        | 2,365,324               |   |
| Other assets                                                                                                                                                               |   | 985,656             |        | 661,489                 |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| Total assets                                                                                                                                                               |   | $                   | 197,047,012 |                    | $      | 179,742,213 |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                  |   |                |        |                    |   |
| Liabilities                                                                                                                                                                |   |                |        |                    |   |
| Checks outstanding in excess of Bank balances                                                                                                                              |   | $                   | 17,869      |                    | $      | 12,584 |   |
| Deposits                                                                                                                                                                   |   | 134,307,049         |        | 125,476,021             |   |
| Official checks                                                                                                                                                            |   | 8,413,173           |        | 4,965,878               |   |
| Advances from the Federal Home Loan Bank                                                                                                                                   |   | 38,075,000          |        | 33,075,000              |   |
| Advance payments by borrowers for taxes and insurance                                                                                                                      |   | 329,875             |        | 280,076                 |   |
| Accrued expenses and other liabilities                                                                                                                                     |   | 2,145,484           |        | 941,140                 |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| Total liabilities                                                                                                                                                          |   | $                   | 183,288,450 |                    | $      | 164,750,699 |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| Commitments and contingencies                                                                                                                                              |   |                |        |                    |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| Stockholders’ Equity                                                                                                                                                  |   |                |        |                    |   |
| Preferred stock, par value $0.001 per share, authorized 10,000,000  shares,  no shares issued and  outstanding                                                        |   | $                   | —      |                    | $      | — |   |
|                                                                                                                                                                       |   |                |        |                    |   |   |   |
| Common stock, par value $0.001 per share, authorized 10,000,000  shares,  issued and outstanding  1,873,478 (2003) and 2,084,354  shares  at par value $1 (2002) |   | 1,873               |        | 2,084,354               |   |
| Additional paid-in capital                                                                                                                                                 |   | 9,745,127           |        | 9,020,355               |   |
| Retained earnings - substantially restricted                                                                                                                               |   | 3,980,947           |        | 3,858,817               |   |
| Accumulated other comprehensive income                                                                                                                                     |   | 30,615              |        | 27,988                  |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| Total stockholders’ equity                                                                                                                                            |   | 13,758,562          |        | 14,991,514              |   |
|                                                                                                                                                                       |   |                |        |                    |   |
| Total liabilities and stockholders’ equity                                                                                                                            |   | $                   | 197,047,012 |                    | $      | 179,742,213 |   |

 

The accompanying notes to consolidated financial statements are anintegral part of these statements.

 

1

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AMERICAN BANK HOLDINGS, INC.

AND SUBSIDIARIES

 

**UNAUDITED CONSOLIDATED STATEMENTS OFOPERATIONS**

 
|                                                |   | **For the  Three Months  Ended March 31,** |      |
|-----------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                |   | **2003**                                   |      | **2002** |   |
| Interest Income                                     |   |                                       |      |   |   |
| Interest and fees on loans                          |   | $                                          | 2,122,120 |   | $ | 1,903,062 |   |
| Interest and dividends on investments               |   | 323,997                                    |      | 397,149 |   |
| Other interest income                               |   | 77,826                                     |      | 49,537 |   |
| Total interest income                               |   | 2,523,943                                  |      | 2,349,748 |   |
|                                                |   |                                       |      |   |   |
| Interest Expense                                    |   |                                       |      |   |   |
| Interest on deposits                                |   | 863,178                                    |      | 926,626 |   |
| Interest on short term borrowings                   |   | 422,475                                    |      | 200,077 |   |
| Interest on long term borrowings                    |   | 28,691                                     |      | 194,505 |   |
| Total interest expense                              |   | 1,314,344                                  |      | 1,321,208 |   |
|                                                |   |                                       |      |   |   |
| Net interest income                                 |   | 1,209,599                                  |      | 1,028,540 |   |
| Provision for loan losses                           |   | 75,000                                     |      | 16,188 |   |
| Net interest income after provision for loan losses |   | 1,134,599                                  |      | 1,012,352 |   |
|                                                |   |                                       |      |   |   |
| Other Income                                        |   |                                       |      |   |   |
| Loan Service charges & late fees                |   | 35,856                                     |      | 16,912 |   |
| Deposit service charges                             |   | 46,981                                     |      | 36,423 |   |
| Gain on sale of securities available for sale       |   | 21,562                                     |      | — |   |
| Gain on sale of loans available for sale            |   | 818,753                                    |      | 499,936 |   |
| Total other income                                  |   | 923,152                                    |      | 553,271 |   |
|                                                |   |                                       |      |   |   |
| Non-Interest Expenses                               |   |                                       |      |   |   |
| Salaries and related expenses                       |   | 1,101,475                                  |      | 755,997 |   |
| Occupancy expense, net                              |   | 193,417                                    |      | 143,926 |   |
| Deposit insurance premiums                          |   | 18,000                                     |      | 12,000 |   |
| Legal and professional expenses                     |   | 47,051                                     |      | 133,940 |   |
| Data processing                                     |   | 135,205                                    |      | 78,648 |   |
| Net cost of operations of foreclosed real estate    |   | 3,216                                      |      | 2,721 |   |
| Other expenses                                      |   | 175,031                                    |      | 204,890 |   |
| Total non-interest expenses                         |   | 1,673,395                                  |      | 1,332,122 |   |
|                                                |   |                                       |      |   |   |
| Income before income taxes                          |   | 384,356                                    |      | 233,501 |   |
|                                                |   |                                       |      |   |   |
| Provision for income taxes                          |   | 136,700                                    |      | 86,700 |   |
|                                                |   |                                       |      |   |   |
| Net income                                          |   | $                                          | 247,656   |   | $ | 146,801 |   |
|                                                |   |                                       |      |   |   |
| Basic Earnings Per Common Share                     |   | $                                          | 0.12      |   | $ | 0.07 |   |
|                                                |   |                                       |      |   |   |
| Diluted Earnings Per Common Share                   |   | $                                          | 0.11      |   | $ | 0.07 |   |

 

The accompanying notes to consolidated financial statements are anintegral part of these statements.

 

2

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AMERICAN BANK HOLDINGS, INC.

AND SUBSIDIARIES

 

**UNAUDITED CONSOLIDATED STATEMENTS OFSTOCKHOLDERS’ EQUITY**

 
|                                                                                               |   | **Common********Stock** |      | **Additional********Paid-In********Capital** |   | **Retained********Earnings** |   | **Accumulated  Other  Comprehensive  Income** |      | **Total********Stockholders’********Equity** |   |
|----------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|----------------------------------------------|--------|------------------------------|--------|-----------------------------------------------|-----------|---------------------------------------------------|--------|
|                                                                                               |   |                    |      |                                         |   |                         |   |                                          |      |                                              |   |
| Balance - January 1, 2002                                                                          |   | $                       | 1,969,531 |                                         | $      | 8,460,130                    |   | $                                             | 3,758,528 |                                              | $      | 6,487 |   | $ | 14,194,676 |   |
|                                                                                               |   |                    |      |                                         |   |                         |   |                                          |      |                                              |   |
| Net income for 2002                                                                                |   |                    |      |                                         |   | 1,039,198                    |   |                                          |      |                                              |   |
| Net change in unrealized gains (losses) on  available-for-sale securities, net of taxes of $75,337 |   |                    |      |                                         |   |                         |   | 119,735                                       |      |                                              |   |
| Less reclassification of gains recognized,  net of taxes of $61,809                                |   |                    |      |                                         |   |                         |   | (98,234                                       | )         |                                              |   |
| Comprehensive income                                                                               |   |                    |      |                                         |   |                         |   |                                          |      | 1,060,699                                         |   |
| Five percent stock dividend                                                                        |   | 98,400                  |      | 511,680                                      |   | (610,080                     | )      |                                          |      |                                              |   |
| Cash dividend                                                                                      |   |                    |      |                                         |   | (328,829                     | )      |                                          |      | (328,829                                          | )      |
| Exercise of stock options                                                                          |   | 16,423                  |      | 48,545                                       |   |                         |   |                                          |      | 64,968                                            |   |
|                                                                                               |   |                    |      |                                         |   |                         |   |                                          |      |                                              |   |
| Balance - December 31, 2002                                                                        |   | $                       | 2,084,354 |                                         | $      | 9,020,355                    |   | $                                             | 3,858,817 |                                              | $      | 27,988 |   | $ | 14,991,514 |   |
|                                                                                               |   |                    |      |                                         |   |                         |   |                                          |      |                                              |   |
| Net income for Three Months ended March 31,  2003                                                  |   |                    |      |                                         |   | 247,656                      |   |                                          |      |                                              |   |
| Net change in unrealized gains (losses) on  available-for-sale securities, net of taxes of $9,980  |   |                    |      |                                         |   |                         |   | 15,862                                        |      |                                              |   |
| Less reclassification of gains recognized,  net of taxes of $8,327                                 |   |                    |      |                                         |   |                         |   | (13,235                                       | )         |                                              |   |
| Comprehensive income                                                                               |   |                    |      |                                         |   |                         |   |                                          |      | 250,283                                           |   |
| Reorganization to holding company structure                                                        |   | (1,871,605              | )         | 1,871,605                                    |   |                         |   |                                          |      |                                              |   |
| Dissenters shares to repurchase                                                                    |   | (210,876                | )         | (1,146,833                                   | )      |                         |   |                                          |      | (1,357,709                                        | )      |
| Cash dividend                                                                                      |   |                    |      |                                         |   | (125,526                     | )      |                                          |      | (125,526                                          | )      |
|                                                                                               |   |                    |      |                                         |   |                         |   |                                          |      |                                              |   |
| Balance - March 31, 2003                                                                           |   | $                       | 1,873     |                                         | $      | 9,745,127                    |   | $                                             | 3,980,947 |                                              | $      | 30,615 |   | $ | 13,758,562 |   |

 

The accompanying notes toconsolidated financial statements are an integral part of these statements.

 

3

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AMERICAN BANK HOLDINGS, INC.

AND SUBSIDIARIES

 

**UNAUDITED CONSOLIDATED STATEMENTS OF CASHFLOWS**

 
|                                                                                             |   | **Three  Months Ended March 31,** |        |
|--------------------------------------------------------------------------------------------------|--------|-----------------------------------|-------------|
|                                                                                             |   | **2003**                          |        | **2002** |   |
| Operating Activities                                                                             |   |                              |        |   |   |
| Net income                                                                                       |   | $                                 | 247,656     |   | $ | 146,801 |   |
| Adjustments to Reconcile Net Income to Net Cash  Provided By (Used In) Operating Activities |   |                              |        |   |   |
| Net accretion of discounts and amortization of premiums                                          |   | 18,242                            |        | (6,035 | ) |
| Gain on sale of investment securities - AFS                                                      |   | (21,562                           | )           | — |   |
| Provision for loan losses                                                                        |   | 75,000                            |        | 16,188 |   |
| Loan fees deferred                                                                               |   | 14,568                            |        | 523 |   |
| Amortization of deferred loan fees                                                               |   | (92,323                           | )           | (42,266 | ) |
| Loans originated for resale                                                                      |   | (41,151,445                       | )           | (17,120,359 | ) |
| Gain on sale of loans                                                                            |   | (818,753                          | )           | (499,936 | ) |
| Proceeds from sales of loans originated for resale                                               |   | 41,012,900                        |        | 23,444,745 |   |
| Increase in interest receivable                                                                  |   | (42,136                           | )           | (229,587 | ) |
| Depreciation and amortization                                                                    |   | 80,550                            |        | 45,000 |   |
| Decrease (increase) in income tax refund receivable                                              |   | 135,163                           |        | (40,668 | ) |
| (Increase) decrease in deferred income taxes                                                     |   | (30,222                           | )           | 24,267 |   |
| Increase in other assets                                                                         |   | (324,167                          | )           | (7,676 | ) |
| Decrease in other liabilities                                                                    |   | (153,365                          | )           | (1,193,237 | ) |
| Net cash (used) provided by operating  activities                                                |   | $                                 | (1,049,894  | ) | $ | 4,537,760 |   |
|                                                                                             |   |                              |        |   |   |
| Investing Activities                                                                             |   |                              |        |   |   |
| Proceeds from sales and maturing investment  securities - AFS                                    |   | 2,009,375                         |        | — |   |
| Purchase of investment securities - AFS                                                          |   | (17,440,417                       | )           | (4,944,676 | ) |
| Proceeds from maturing investment securities - HTM                                               |   | 1,000,000                         |        | — |   |
| Purchase of investment securities - HTM                                                          |   | (5,000,000                        | )           | (5,046,450 | ) |
| Principal collected on mortgage backed securities                                                |   | 2,397,242                         |        | 2,029,067 |   |
| Principal collected on loans                                                                     |   | 21,101,276                        |        | 23,113,233 |   |
| Loans originated or acquired                                                                     |   | (22,731,342                       | )           | (20,464,994 | ) |
| Funds advanced on foreclosed real estate                                                         |   | —                            |        | (38,341 | ) |
| Proceeds from the sale of foreclosed real estate                                                 |   | 56,074                            |        | — |   |
| Purchases of premises and equipment                                                              |   | (88,479                           | )           | (194,341 | ) |
| Investment in life insurance policies                                                            |   | (29,000                           | )           | (20,700 | ) |
| Net cash used by investing activities                                                            |   | $                                 | (18,725,271 | ) | $ | (5,567,202 | ) |

 

4

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AMERICAN BANK HOLDINGS, INC.

AND SUBSIDIARIES

 

**UNAUDITED CONSOLIDATED STATEMENTS OF CASHFLOWS**

 
|                                                                                                                             |   | **Three  Months Ended March 31,** |       |
|----------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                                                                             |   | **2003**                          |       | **2002** |   |
| Financing Activities                                                                                                             |   |                              |       |   |   |
| Increase (decrease) in checks outstanding  in excess of bank  balances                                                      |   | $                                 | 5,285      |   | $ | (2,684 | ) |
| Increase in demand deposits, NOW accounts,  savings accounts, official checks and advances by borrowers for taxes and  insurance |   | 9,570,199                         |       | 2,768,100 |   |
| Net increase (decrease) in certificates of  deposit                                                                              |   | 2,757,923                         |       | (13,016,218 | ) |
| Net proceeds from borrowings                                                                                                     |   | 5,000,000                         |       | — |   |
| Cash dividends paid                                                                                                              |   | (125,526                          | )          | (78,781 | ) |
| Net cash (used) provided by financing  activities                                                                                |   | 17,207,881                        |       | (10,329,583 | ) |
| Decrease in cash equivalents                                                                                                     |   | (2,567,284                        | )          | (11,359,025 | ) |
| Cash and cash equivalents at beginning of  year                                                                                  |   | 22,809,509                        |       | 15,291,936 |   |
|                                                                                                                             |   |                              |       |   |   |
| Cash and cash equivalents at end of period                                                                                       |   | $                                 | 20,242,225 |   | $ | 3,932,911 |   |
|                                                                                                                             |   |                              |       |   |   |
| Reconciliation of Cash and Cash Equivalents  at End of Period                                                                    |   |                              |       |   |   |
| Cash                                                                                                                             |   | $                                 | 2,247,434  |   | $ | 1,180,599 |   |
| Interest bearing deposits in other banks                                                                                         |   | 15,434,791                        |       | 2,089,312 |   |
| Federal funds                                                                                                                    |   | 2,560,000                         |       | 663,000 |   |
| Cash and cash equivalents at end of period                                                                                       |   | $                                 | 20,242,225 |   | $ | 3,932,911 |   |
|                                                                                                                             |   |                              |       |   |   |
| Other Cash Flow Information                                                                                                      |   |                              |       |   |   |
| Interest paid                                                                                                                    |   | $                                 | 1,231,674  |   | $ | 1,299,456 |   |
| Income taxes paid                                                                                                                |   | —                            |       | 127,400 |   |
| Stock dividend                                                                                                                   |   | —                            |       | 610,080 |   |
| Capital tranferred to other liabilities                                                                                          |   | 1,357,709                         |       | — |   |

 

The accompanying notes to consolidatedfinancial statements are an integral part of these statements.

 

5

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**AMERICAN BANK HOLDINGS, INC. AND SUBSIDIARIES**

 

Notesto Unaudited Consolidated Financial Statements

Asof and for the Three Months Ended March 31, 2003 and 2002

 

1) Basis of Presentation

 

American Bank Holdings, Inc.(the “Company”) is a corporation formed under the laws of Delaware to serve asthe savings and loan holding company of American Bank (the “Bank”).  American Bank is a federally chartered stocksavings bank.  The Bank’s shareholdersapproved a reorganization into a holding company structure at a meeting held onMarch 17, 2003.  As a result of thereorganization, stockholders of the Bank are now stockholders of American BankHoldings, Inc. and the Bank is a direct subsidiary of the Company.  Each outstanding share of American Bankcommon stock (other than dissenting shares) has been converted into one shareof the Company’s common stock; the par value of the Company’s common stock is$0.001 while the Bank’s common stock had a par value of $1.00.  The consolidated financial statementsinclude the accounts of the Company and its wholly owned subsidiaries.

 

The consolidated financial statements as of March 31, 2003 and for thethree months ended March 31, 2003 and 2002 are unaudited and have been preparedin conformity with accounting principles generally accepted in the UnitedStates of America for interim financial information and with the instructionsto Form 10-Q and Rule 10-01 of Regulation S-X, but, in the opinion ofmanagement of the Company, contain all adjustments, consisting solely of normalrecurring entries, necessary to present fairly the consolidated financialcondition as of March 31, 2003 and the results of consolidated operations forthe three months ended March 31, 2003 and 2002 and consolidated cash flows forthe three months ended March 31, 2003 and 2002.  The consolidated statement of financial condition of December 31,2002 is derived from the Bank’s audited financial statements.

 

The results of consolidated operations for the three months ended March31, 2003 are not necessarily indicative of results that may be expected for theentire year ending December 31, 2003. Moreover, in preparing the consolidated financial statements, managementis required to make estimates and assumptions that effect the reported amountsof assets and liabilities as of the date of the balance sheets and incomestatements for the period.  Actualresults could differ significantly from those estimates.  Material estimates that are particularlysusceptible to significant change in the near term include the determination ofthe allowance for loan losses and the valuation of foreclosed real estate.  These condensed financial statements shouldbe read in conjunction with the audited financial statements and notes includedin the 2002 annual report of American Bank on Form 10-KSB as filed with theOffice of Thrift Supervision and as an exhibit to the Company’s Form 8-K filedwith the SEC.

 

2) Earnings Per Share

 

Basic earnings per share for the three months ended March 31, 2003 wasdetermined by dividing net income by 2,084,354, the weighted average number ofshares of common stock outstanding during the period.  Basic earnings per share for the three months ended March 31,2002 was determined by dividing net income by 2,067,931, the weighted averagenumber of shares of common stock outstanding during the period.  Diluted earnings per share for the threemonths ended March 31, 2003 was determined by dividing

 

6

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net income by 2,163,005, theweighted average number of shares of common stock and common stock equivalentsoutstanding during the period.  Dilutedearnings per share for the three months ended March 31, 2002 was determined bydividing net income by 2,126,679, the weighted average number of shares ofcommon stock and common stock equivalents outstanding during the period.  Common stock equivalents consist ofoutstanding stock options, if such options are dilutive.

 

3) Subsequent Event

 

On April 22, 2003, the Company formed a subsidiary, American BankHoldings Statutory Trust I, for the purpose of participating in a trustpreferred pooled offering to issue trust preferred securities which have a 30year term, with no principal amortization and a 5 year call option and areguaranteed by the Company.  These securitiespay interest at the rate of 3 month LIBOR plus 3.30% with a 12.5% interest ratecap for the first 5 years and adjusts on a quarterly basis.  The initial rate on these securities was4.62%.  The net proceeds raised by theTrust were lent to American Bank Holdings, Inc., which debt is the sole assetof the Trust.

 

7

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**Item 2**.

 

**AMERICAN BANK HOLDINGS, INC. AND SUBSIDIARIES**

 

**Management’s Discussion and Analysis of Financial Conditionand**

**Results of Operations**

 

This discussion and analysis includes a description of material changesthat have affected the Company’s consolidated financial condition andconsolidated results of operations during the periods included in theconsolidated financial statements.

 

General

 

American Bank Holdings, Inc. is a corporation formed under the laws ofDelaware to serve as the holding company for American Bank. The business of theCompany is conducted through the Bank. American Bank is a federally chartered savings bank with six offices.  The Bank’s corporate headquarters is locatedin Silver Spring, Maryland and the Bank has four full-service offices locatedat 1700 Rockville Pike, Rockville, Maryland, 5600 Connecticut Avenue,Washington D.C., in the SuperFresh market at 12028 Cherry Hill Road, SilverSpring, Maryland and in the SuperFresh market at 3301 North Ridge Road,Ellicott City, Maryland and a loan production/leasing office in Charlotte,North Carolina.  Deposits in the Bankare insured to applicable limits by the Federal Deposit InsuranceCorporation.   All references to theCompany prior to March 17, 2003, except where otherwise indicated, are to theBank.   As of March 31, 2003, the Bankhad 54 employees, 49 of whom work full time.

 

The Company recorded net income of $247,656, or $.11 per diluted share,for the quarter ended March 31, 2003 as compared to net income of $146,801, or$.07 per diluted share, for the quarter ended March 31, 2002.  The increase in net income for the threemonth period ended March 31, 2003 was attributable primarily to the increase innet interest income and gains recognized on the sale of mortgage loansoriginated for sale by the mortgage division offset by the increase inoperating expenses.

 

8

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**FinancialCondition**  (March 31, 2003 compared to December 31,2002)

 

Total assets increased by $17.3 million, or 9.6%, to $197.0 million atMarch 31, 2003 compared to December 31, 2002. Such increase was primarily due to an increase in the investment securitiesavailable-for-sale.  Total loansoutstanding increased by $2.5 million from $129.2 million at December 31, 2002to $131.7 million at March 31, 2003. The Company originated $63.9 million of loans during the three monthsended March 31, 2003 as compared to $37.6 million during the same period in2002.  The increase in loan productionwas primarily due to the increase in mortgage refinances originated andsubsequently sold by the mortgage division. Investment securities held-to-maturity increased by $4.0 million andinvestment securities available-for-sale increased by $13.1 million from yearend 2002 to March 31, 2003.  Cash andcash equivalents decreased by $2.6 million during the three months ended March31, 2003.  The decrease in cash and cashequivalents is due to cash being invested in investment securities.

 

Nonperforming assets, net (including nonaccrual loans, real estateowned and repossessed assets) remained stable at $1.9 million at March 31, 2003compared to $2.0 million at December 31, 2002. The mix of the nonperforming assets changed due to the repossession ofcollateral on a corporate loan, which was previously in non-accrual loans,during the first quarter of 2003.  AtMarch 31, 2003, the book balance for the repossessed assets was $343,137 andwas classified as other assets on the balance sheet.  Total nonperforming assets, net, as a percentage of total assetswere 1.0% at March 31, 2003 and 1.1% at December 31, 2002.

 

The following table sets forth the composition of the Company’s nonperformingassets at the dates indicated.

 
|                                          |   | **March 31,  2003** |      | **December  31, 2002** |   |
|-----------------------------------------------|--------|---------------------|-----------|------------------------|--------|
|                                          |   |                |      |                   |   |
| Non-accrual loans:                            |   |                |      |                   |   |
|                                          |   |                |      |                   |   |
| One to four family residential mortgage loans |   | $                   | 939,540   |                   | $      | 1,053,424 |   |
|                                          |   |                |      |                   |   |
| Commercial real estate loans                  |   | 47,742              |      | 49,029                 |   |
|                                          |   |                |      |                   |   |
| Corporate loans                               |   | —              |      | 399,210                |   |
|                                          |   |                |      |                   |   |
| Consumer loans                                |   | 34,823              |      | 20,448                 |   |
|                                          |   |                |      |                   |   |
| Total non-accrual loans                       |   | 1,022,105           |      | 1,522,111              |   |
|                                          |   |                |      |                   |   |
| Real estate owned                             |   | 526,478             |      | 526,478                |   |
|                                          |   |                |      |                   |   |
| Repossessed assets                            |   | 343,137             |      | —                 |   |
|                                          |   |                |      |                   |   |
| Total nonperforming assets                    |   | $                   | 1,926,520 |                   | $      | 2,048,589 |   |

 

The allowance for losses onloans is established through a provision for loan losses based uponmanagement’s evaluation of the risk inherent in the loan portfolio and changesin the nature and volume of loan activity. Management considers, among other factors, the estimated fair value ofthe underlying collateral, current economic conditions and historical loan lossexperience.  While management usesavailable information in establishing the allowance for possible loan losses,future adjustments to the allowance may be necessary if economic conditionsdiffer substantially from the assumptions used in making the evaluations.  Additions to the allowance are charged tooperations; realized losses, net of recoveries, are charged to theallowance.  In addition, variousregulatory agencies, as part of their examination process, periodically reviewthe Company’s allowance for possible loan losses.  Management will continue to monitor and modify allowancesfor loan losses as conditions dictate. Although management maintains allowances at 

 

9

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levels that it considers adequate to provide for potential losses,there can be no assurances that such losses will not exceed the estimatedamounts or that higher provisions will not be necessary in the future.

 

The Company has thirty-one loans, amounting to $1,022,105, as of March31, 2003 which are considered to be potential problem loans.  All of these loans are classified asnon-accrual loans because the borrowers are over 90 days delinquent andmanagement feels it may have difficulty in collecting the principal balance onthese loans.  The Company had allowancefor loan losses of $1,091,772, or 0.83% of total loans outstanding, at March31, 2003 and $1,016,951, or 0.79% of total loans outstanding, at December 31,2002.

 

The Company also establishes allowances for losses on real estate ownedbased upon its fair value less the cost of disposal.  The valuations of real estate owned properties are reviewed atleast quarterly and updated as necessary based on the Company’s expectations ofholding periods, sales activity and other changes in market conditions.  Based on available information, managementbelieves that current loss reserves are adequate at this time to coverpotential losses in the portfolio. There can be no assurance, however, that additional loss provisions willnot be necessary in the future if market conditions deteriorate.  The Company had allowance for losses of$34,801, or 3.8% of  real estate owned,at March 31, 2003 and $34,801, or 6.2% of real estate owned, at December 31, 2002.

 

The Company had unrealized gains of $49,878 on its investmentsecurities available-for-sale portfolio at March 31, 2003.  The amortized cost of this portfolio was$30.8 million at that date.  There werenet unrealized gains of $16,694 on its investment securities held-to-maturityportfolio at March 31, 2003, with an amortized cost of $5.2 million.  The Company’s investment securitiesportfolio includes agency obligations, mortgage-backed securities andcollateralized mortgage obligations. The Company’s investment securities available-for-sale portfolioincreased by $13.1 million from year end 2002 to March 31, 2003 due to thepurchase of collateralized mortgage obligations and agency securities offsetslightly by the repayment of principal on mortgage-backed securities andcollateralized mortgage obligations and sale of investment securitiesavailable-for-sale.  The Company’sinvestment securities held-to-maturity portfolio increased by $4.0 millionduring the period due to the purchase of agency securities offset slightly bythe maturity of an agency security and the repayment of principal onmortgage-backed securities.

 

Deposits increased by $8.8 million during the three months ended March31, 2003. Core deposits (money market, checking and statement savings accounts)increased by $6.1 million while certificates of deposits increased by $2.7million during the first three months of 2003. The deposits at March 31, 2003 had an average interest rate of2.58%.  Advances from the Federal HomeLoan Bank increased by $5.0 million during the first three months of 2003.  The advances from the Federal Home Loan Bankat March 31, 2003 had an average interest rate of 5.00%

 

The Company’s stockholders’equity decreased by $1,233,000 to $13.8 million at March 31, 2003 compared to$15.0 million at December 31, 2002.  Thedecrease was due to the purchase of shares from the dissenting shareholders andpayment of cash dividends offset by current period earnings and the increase innet unrealized holding gains on investments available for sale.  At March 31, 2003, the Company wasconsidered “well capitalized” under regulatory definitions.

 

**RESULTS OFOPERATIONS**

 

The Company’s operating results depend primarily on its net interestincome, which is the difference between interest income on interest-earningassets (primarily loans and investment securities) and interest expense oninterest-bearing liabilities (primarily deposits and borrowings).  The Company’s operating results

 

10

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are also affected by its otherincome (primarily gain on sale of loans, collection of late fees and servicecharges) and its operating expenses (primarily salaries and administrativecosts).

 

The following table setsforth certain information relating to the Company’s average interest-bearingassets and interest-bearing liabilities and reflects the average yield onassets and the average cost of liabilities for the periods indicated.  During the periods indicated, non-accrualloans are included in the loans category.

 

**American Bank Holdings, Inc.**

**Rate Spread Analysis**

**(in thousands, except rates)**

 
|                                      |   | **3 Months  ended March 31, 2003** |    | **3 months  ended March 31, 2002** |   |
|-------------------------------------------|--------|------------------------------------|---------|------------------------------------|--------|
|                                      |   | **Average  Balance**               |    | **Interest**                       |   | **Interest  Rate** |   | **Average  Balance** |   | **Interest** |   | **Interest  Rate** |   |
| Interest-bearing assets:                  |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
|                                      |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
| Loans                                     |   | $                                  | 128,314 |                               | $      | 2,122 |   | 6.62 | % | $ | 103,203 |   | $ | 1,903 |   | 7.38 | % |
| Investment and mortgage-backed securities |   | 28,566                             |    | 324                                |   | 4.54 |   | 25,211 |   | 397 |   | 6.30 |   |
| Other                                     |   | 21,667                             |    | 78                                 |   | 1.44 |   | 13,411 |   | 50 |   | 1.48 |   |
|                                      |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
| Total interest-bearing assets             |   | 178,547                            |    | 2,524                              |   | 5.65 |   | 141,825 |   | 2,350 |   | 6.63 |   |
|                                      |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:             |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
|                                      |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
| Deposits                                  |   | 129,545                            |    | 863                                |   | 3.30 |   | 101,886 |   | 927 |   | 3.64 |   |
| FHLB advances & other borrowings      |   | 36,462                             |    | 451                                |   | 4.95 |   | 29,090 |   | 394 |   | 5.43 |   |
|                                      |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities        |   | 166,007                            |    | 1,314                              |   | 3.17 |   | 130,976 |   | 1,321 |   | 4.03 |   |
|                                      |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
| Average interest rate spread              |   |                               |    |                               |   | 2.49 |   |   |   |   |   | 2.59 |   |
|                                      |   |                               |    |                               |   |   |   |   |   |   |   |   |   |
| Net interest margin                       |   |                               |    |                               |   | 2.71 | % |   |   |   |   | 2.90 | % |
|                                           |        |                                    |         |                                    |        |  |  |  |  |  |  |  |  |  |  |  |  |

 

**RESULTS OFOPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002**

 

General.  TheCompany recorded net income of $247,656, or $.11 per diluted share, for thethree months ended March 31, 2003 as compared to net income of $146,801, or$.07 per diluted share, for the three months ended March 31, 2002.    The increase in net income for the threemonth period was attributable primarily to the increase in net interest incomeand gains recognized on the sale of loans offset by an increase in operatingexpenses.

 

Net interest income, afterprovision for loan losses, increased by $122,247 for the three months endedMarch 31, 2003 when compared to the same period in 2002.  Other income increased by $369,881 andoperating expenses increased by $341,273 during the three months ended March31, 2003 compared to the same period in 2002.  The increase in other income was primarily due to an increase ingains on sale of loans.  The increase inoperating expenses was primarily due to additional compensation & employeebenefit expenses, occupancy expenses and data processing expenses.

 

NetInterest Income.  The Company’s net interest income increasedby $181,059 during the three months ended March 31, 2003 as compared to thesame period in 2002.  The increase wasprimarily due to the increase in average volume of interest-earning assets.

 

Provisionfor Loan Losses.  The Company’s provision for loan lossesincreased by $58,812 to $75,000 during the three months ended March 31, 2003compared to the same period in 2002. The increase

 

11

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was due to the Companyproviding more reserves in the current quarter based on the periodic reviews ofthe underlying collateral securing the loans.

 

OtherIncome.  The Company’s other non-interest incomeincreased by $369,881 to $923,152 during the three months ended March 31, 2003compared to the same period in 2002. The increase was due to additional loan service charges, deposit servicecharges and gains recognized on the sale of loans available-for-sale from themortgage division.  The Company’s coredeposit base has increased due to the expansion of the branch locations whichis creating more opportunities to collect deposit related service charges.  The originating and subsequent sale of loansis the primary function of the mortgage division.

 

OperatingExpense.  The Company’s operating expenses increasedby $341,273 to $1,673,395 during the three months ended March 31, 2003 comparedto the same period in 2002.  Theincrease in operating expenses was primarily due to the increase incompensation & employee benefit expenses, occupancy expenses and dataprocessing expenses.  The increase incompensation & employee benefit expenses was primarily due to additionalstaff hired in the lending area and branch network.  Occupancy expenses increased primarily due to additional branchlocation, loan production office and new headquarters for the Company.  Data processing expenses increased due toadditional volume.  Subsequent to thereorganization and quarter end, the Bank repurchased 210,876 shares of itscommon stock for an aggregate of $1,357,709 and is aware that approximately314,950 shares of common stock held by dissenters to the reorganization weresold to third party investors.  Inaddition, the Company and the Bank entered into a two year Standstill Agreementwith Mr. and Mrs. Barrett Rochman on April 25, 2003.

 

**COMMITMENTS,CONTINGENCIES AND OFF-BALANCE SHEET RISK**

 

The Company is a party to financial instruments with off-balance sheetrisk including commitments to extend credit under existing lines of credit and commitmentsto sell loans.  These instrumentsinvolve, to varying degrees, elements of credit and interest rate risk inexcess of the amount recognized in the consolidated balance sheets.

 

Off-balance sheet financialinstruments whose contract amounts represent credit and interest rate risk aresummarized as follows (dollars in thousands):

 
|                                                                                             |   | **March 31,  2003** |   | **December  31, 2002** |   |
|--------------------------------------------------------------------------------------------------|--------|---------------------|--------|------------------------|--------|
|                                                                                             |   |                |   |                   |   |
| Commitments to originate new loans                                                               |   | 3,533               |   | 2,560                  |   |
|                                                                                             |   |                |   |                   |   |
| Commitments to originate new loans held for sale                                                 |   | —              |   | —                 |   |
|                                                                                             |   |                |   |                   |   |
| Unfunded commitments to extend credit under existing equity line and  commercial lines of credit |   | 8,559               |   | 7,361                  |   |
|                                                                                             |   |                |   |                   |   |
| Commercial letters of credit                                                                     |   | 468                 |   | 468                    |   |
|                                                                                             |   |                |   |                   |   |
| Commitments to sell loans held for sale                                                          |   | 16,233              |   | 18,156                 |   |

 

The Company does not haveany special purpose entities or other similar forms of off-balance sheetfinancing arrangements.

 

Commitments to originate newloans or extend credit are agreements to lend to a customer as long as there isno violation of any condition established in the contract.  Loan commitments generally expire within 30to 45 days.  Most equity linecommitments for the unfunded portion of equity lines are for a term of 10years, and commercial lines of credit are generally renewable on an annualbasis.  Commitments generally have fixedexpiration dates or other termination clauses and may require payment of afee.  Since many of the commitments areexpected to expire without being drawn upon, the total commitment amounts do notnecessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on acase-by-case basis.  The amounts ofcollateral obtained, if deemed necessary by the Company upon

 

12

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extension of credit, is basedon management’s credit evaluation of the borrower.

 

Commitments to sell loans held for sale are agreements to sell loans toa third party at an agreed upon price. At March 31, 2003, the aggregate fair value of these commitmentsexceeded the book value of the loans to be sold.

 

**CRITICALACCOUNTING POLICIES**

 

The Company’s significant accounting policies are set forth in note 1of the consolidated financial statements as of December 31, 2002 which wasfiled on Form 10-KSB with the Office of Thrift Supervision and as an exhibit tothe Company’s Form 8-K filed with the SEC. Of these significant accounting policies, the Company considers itspolicy regarding the allowance for loan losses to be its most criticalaccounting policy, because it requires management’s most subjective and complexjudgments.  In addition, changes ineconomic conditions can have a significant impact on the allowance for loanlosses and therefore the provision for loan losses and results of operations.  The Company has developed appropriate policiesand procedures for assessing the adequacy of the allowance for loan losses,recognizing that this process requires a number of assumptions and estimateswith respect to its loan portfolio.  TheCompany’s assessments may be impacted in future periods by changes in economicconditions, the impact of regulatory examinations, and the discovery ofinformation with respect to borrowers that is not known to management at thetime of the issuance of the consolidated financial statements.

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

The Company’s main sources of liquidity, as a holding company, aredividends from the Bank, investment income and net proceeds from borrowings andcapital securities offerings.  As a neworganization, the Company expects its main uses of liquidity initially will bethe payment of dividends to shareholders, and the payment of interest to theissuer of trust preferred securities. The ability of the Bank to pay dividends is subject to variousregulatory limitations.  As part of thereorganization of the Company, the Company received a capital contribution of$400,000 from the Bank.

 

Subsequent to quarter end, the Bank purchased 210,876 shares ofAmerican Bank common stock in April 2003 from dissenters to the reorganizationfor an aggregate of $1,357,709.

 

The Bank is required tomaintain sufficient liquidity to ensure its safe and sound operation.  As required by recent legislation, the OTSrecently deleted its requirement that federal savings associations maintain acertain minimum level of liquid assets. Instead, adequate liquidity is assessed by the OTS on a case-by-casebasis by reviewing such factors as the institution’s overall asset/liabilitystructure, market conditions, competition and the nature of the institution’sactivities.  The OTS considers both aninstitution’s liquidity ratio as well as safety and soundness issues inassessing whether an institution has sufficient liquidity.  The Bank has ample liquidity to meet itsoutstanding loan commitments.  At March31, 2003, the Bank had outstanding loan commitments totaling $3,533,000.

 

Quantitative measuresestablished by bank regulations to ensure capital adequacy require the Bank tomaintain minimum amounts and ratios (set forth in the table below) of total andTier I capital (as defined in the regulations) and risk-weighted assets (asdefined), and of Tier I capital (as defined) to average assets (asdefined).  As of March 31, 2003, theBank meets all capital adequacy requirements to which it is subject.

 

As of March 31, 2003, themost recent notification from the Office of Thrift Supervision (“OTS”)categorized the Bank as “well capitalized” under the regulatory framework forprompt corrective action.  To becategorized as “well capitalized” the Bank must maintain minimum total risk-based,Tier I risk-based, and Tier I leverage ratios as set forth in the table.  There have been no conditions or eventssince that notification that management believes have changed the Bank’scategory.  The Bank’s actual capitalamounts and ratios are as follows:

 

13

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|       |   | **ACTUAL** |   | **ACTUAL%** |   | **REQUIRED** |   | **REQ’D%** |   | **EXCESS** |   |
|------------|--------|------------|--------|-------------|--------|--------------|--------|-----------------|--------|------------|--------|
|       |   |       |   |        |   |         |   |            |   |       |   |
| Core       |   | $          | 13,328 |        | 6.76   | %            | $      | 7,882           |   | 4.0        | %      | $ | 5,446 |   |
| Tangible   |   | 13,328     |   | 6.76        |   | 2,956        |   | 1.5             |   | 10,372     |   |
| Risk-based |   | 14,280     |   | 11.79       |   | 9,691        |   | 8.0             |   | 4,589      |   |
|            |        |            |        |             |        |              |        |                 |        |            |        |  |  |  |

 

**QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The following table sets forth the amount ofinterest-earning assets and interest-bearing liabilities outstanding at March31, 2003, which are expected to mature or reprice in each of the time periodsshown.

 

AMERICANBANK HOLDINGS, INC.

RepricingSchedule as of March 31, 2003

(inthousands)

 
|                               |   | **Less than  One Year** |   | **One Year  to  Five Years** |   | **Five Years  to Ten  Years** |   | **More than  Ten Years** |   | **Totals** |   |
|------------------------------------|--------|-------------------------|--------|------------------------------|--------|-------------------------------|--------|--------------------------|--------|------------|--------|
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Interest-earning assets            |   |                    |   |                         |   |                          |   |                     |   |       |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Loans                              |   | $                       | 62,348 |                         | $      | 11,824                        |   | $                        | 2,460  |       | $      | 34,216 |   | $ | 110,848 |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Investment securities              |   | 4,086                   |   | —                       |   | 5,000                         |   | 26,950                   |   | 36,036     |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Other interest-earning assets      |   | 19,899                  |   | —                       |   | —                        |   | —                   |   | 19,899     |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Total interest-earning assets      |   | 86,333                  |   | 11,824                       |   | 7,460                         |   | 61,166                   |   | 166,783    |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Interest-bearing liabilities       |   |                    |   |                         |   |                          |   |                     |   |       |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Certificates of Deposit            |   | 65,614                  |   | 19,426                       |   | —                        |   | —                   |   | 85,040     |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Money market deposits              |   | 10,322                  |   | 17,600                       |   | 5,032                         |   | —                   |   | 32,954     |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| NOW & Statement accounts       |   | 2,792                   |   | 7,122                        |   | 6,400                         |   | —                   |   | 16,314     |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Borrowings                         |   | 31,575                  |   | 6,500                        |   | —                        |   | —                   |   | 38,075     |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Total interest-bearing liabilities |   | 110,303                 |   | 50,648                       |   | 11,432                        |   | —                   |   | 172,383    |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| GAP                                |   | (23,970                 | )      | (38,824                      | )      | (3,972                        | )      | 61,166                   |   |       |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Cumulative GAP                     |   | (23,970                 | )      | (62,793                      | )      | (66,765                       | )      | (5,599                   | )      |       |   |
|                               |   |                    |   |                         |   |                          |   |                     |   |       |   |
| Cum. GAP/total assets              |   | -14.4                   | %      | -37.7                        | %      | -40.0                         | %      | -3.4                     | %      |       |   |
|                                    |        |                         |        |                              |        |                               |        |                          |        |            |        |  |  |  |  |  |

 

The following assumptionswere used by the Company’s management in order to prepare the Company’s GAP(repricing schedule) table set forth above. Loans are shown based on contractual maturity and scheduled repricingfor fixed-rate and adjustable-rate mortgages, respectively.  The mortgage-backed

 

14

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securities and collateralizedmortgage obligations portion of the investment securities portfolio are shownbased on contractual maturity as scheduled repricing for fixed-rate andadjustable-rate securities, respectively. Agency securities are shown in the period in which they contractuallymature.  No prepayment assumptions orcall assumptions are reflected for any interest-earning asset.  Deposits without contractual maturities areshown based on OTS decay rates.

 

The interest ratesensitivity of the Company’s assets and liabilities could vary substantially ifdifferent assumptions are used. Moreover, certain shortcomings are inherent in the method of analysispresented in the above GAP table.  Althoughcertain assets and liabilities may have similar maturities or periods ofrepricing, they may react in different degrees to changes in market interestrates.  The interest rates on certaintypes of assets and liabilities may fluctuate in advance of changes in marketinterest rates, whereas interest rates on other types of assets and liabilitiesmay lag behind changes in market interest rates.  Certain assets, such as adjustable-rate mortgages, have featuresthat restrict changes in interest rates on a short-term basis and over the lifeof the assets.  In the event of a changein interest rates, prepayment and early withdrawal levels would likely deviatesignificantly from those assumed in calculating the table.  The ability of many borrowers to servicetheir debt may decrease in the event of an interest rate increase.

 

The Company’s results ofoperations depend to a large extent on the level of the Company’s net interestincome.  If interest-rate fluctuationscause the Company’s cost of funds to increase faster than the yield of itsinterest-bearing assets, then its net interest income will be reduced.  At March 31, 2003, the Company’s one-yearinterest sensitivity “gap” (the percentage by which its interest sensitiveassets in a given period exceed its interest sensitive liabilities for the sameperiod) was negative 14.4%.  The Companyhas emphasized shorter term deposits which tend to reprice on a basis moreconsistent with the short-term duration of the Company’s typical loanproducts.  In addition, the Company’smanagement classifies certain securities as available-for-sale to provideflexibility for liquidity purposes.  Ifthe need to sell an asset for liquidity or other purposes arises, managementbelieves that there are adequate securities classified as available-for-salewith a positive mark-to-market and that such sale would not have a materialimpact on results of operations.

 

The Company’s managementbelieves that the Company’s interest rate risk position at March 31, 2003represents a reasonable amount of interest rate risk.

 

**FORWARD-LOOKINGSTATEMENTS**

 

Certain statements in Management’s Discussion and Analysis areforward-looking statements within the meaning of the Securities Act of 1934, asamended.  Actual results, performance ordevelopments may differ materially from those expressed or implied by suchforward-looking statements as a result of market uncertainties and otherfactors related to the Company’s businesses. The financial services market generally, and the market for the Company’sproducts and services specifically, is characterized by a high degree ofcompetition and rapidly changing local, national and global market, financialand economic conditions, and interest rate fluctuations/market conditions.  Such developments, as well as unforeseendevelopments in the financial services industry, could have an adverse impacton the Company’s financial position and results of operations.

 

**SUBSEQUENTEVENTS**

 

On April 22, 2003, the Company formed a subsidiary, American BankHoldings Statutory Trust I, for the purpose of participating in a trustpreferred pooled offering to issue trust preferred securities which have a 30year term, with no principal amortization and a 5 year call option and areguaranteed by the Company.  Thesesecurities pay interest at the rate of 3 month LIBOR plus 3.30% with a 12.5%interest rate cap for the first 5 years and adjusts on a quarterly basis.  The initial rate on these securities was4.62%.  The net proceeds raised by theTrust were lent to American Bank Holdings, Inc., which debt is the sole assetof the Trust.

 

**Item3.   CONTROLS AND PROCEDURES**

 

(a)  The Company’s management,including the Chief Executive Officer and Chief Financial Officer evaluated theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures

 

15

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(as defined in Rule 13a-14(c) under theSecurities Exchange Act of 1934, as amended) (the “Exchange Act”) as ofa date (the “Evaluation Date”) within 90 days prior to the filing date of thisreport.  Based upon that evaluation, theCompany’s management, including the Chief Executive Officer and Chief FinancialOfficer concluded that, as of the Evaluation Date, the Company’s disclosurecontrols and procedures were effective in timely alerting them to any materialinformation relating to the Company and its subsidiaries required to beincluded in the Company’s Exchange Act filings.

 

(b)  There were no significant changes made in the Company’s internalcontrols or in other factors that could significantly affect these internalcontrols subsequent to the date of the evaluation performed by the Company’sChief Executive Officer and Chief Financial Officer.

 

**PART II -OTHER INFORMATION**

 

**Item1.  Legal Proceedings**

 

Other than ordinary and routine litigation incidental to the businessof the Company, the Company or its subsidiaries is not a party to, nor is itsproperty the subject of any material pending legal proceedings.

 

**Item2.  Changes in Securities and Use ofProceeds**

 

Not applicable.

 

 

**Item3.  Defaults Upon Senior Securities**

 

Not applicable.

 

 

**Item4.  Submission of Matters to a Vote ofSecurity Holders**

 

(a)                                  On March 17, 2003, the Bank held a SpecialMeeting of Shareholders (the “Special Meeting”) in Silver Spring, Maryland.

 

(b)                                 At the Special Meeting, the shareholdersapproved the proposal to approve and adopt the Plan of Merger andReorganization by and among American Bank, American Interim Bank and AmericanBank Holdings, Inc., dated January 6, 2003, the merger provided for therein,pursuant to which American Bank Holdings, Inc will become the savings and loanholding company for American Bank, and the other transactions contemplated bythe Plan of Merger and Reorganization.

 

(c)                                  The following is a brief description of theresults of the voting:

 

1,234,868 votes (59.0% ofthe votes represented) were cast FOR the proposal.

 

648,280 votes (31.0% of thevotes represented) were cast AGAINST the proposal.

 

No votes were WITHHELD.

 

No broker non-votes werecast.

 

**Item 5.  Other Information**

 

Not applicable.

 

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**Item6.  Exhibits and Reports on Form 8-K**

 
| (a)    |   | Exhibits.                                                                                                |   | 10     | Standstill Agreement, by  and among American Bank of Rockville, Maryland, American Bank Holdings, Inc.  And Marilyn L. and Barrett R. Rochman, dated April 25, 2003. |
|--------|--------|----------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                     |   |   |                                                                                                                                                                 |
|   |   |                                                                                                     |   | 99.1   | Additional Exhibit - 906  Certifications of Chief Executive Officer.                                                                                                 |
|   |   |                                                                                                     |   |   |                                                                                                                                                                 |
|   |   |                                                                                                     |   | 99.2   | Additional Exhibit - 906  Certifications of Chief Financial Officer.                                                                                                 |
|   |   |                                                                                                     |   |   |                                                                                                                                                                 |
| (b)    |   | Reports on Form 8-K.   No reports on Form 8-K were filed during the quarter ending March 31,  2003. |

 

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**SIGNATURES**

 

In accordance with the requirements of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|   | AMERICAN BANK HOLDINGS,  INC.                      |
|--------|----------------------------------------------------|
|   | (Registrant)                                       |
|   |                                               |
|   | Date: May 14, 2003                                 |
|   |                                               |
|   |                                               |
|   | /s/ Phillip C. Bowman                              |   |
|   | Phillip C. Bowman                                  |
|   | President and Chief  Executive Officer             |
|   |                                               |
|   |                                               |
|   | /s/ John M. Wright                                 |   |
|   | John M. Wright                                     |
|   | Senior Vice President and  Chief Financial Officer |

 

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**CERTIFICATIONS**

 

I, Phillip C. Bowman, certifythat:

 

1.  I have reviewed this quarterly report onForm 10-Q of American Bank Holdings, Inc.

 

2.  Based on my knowledge, this quarterly reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.  Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this quarterly report;

 

4.  The registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

 

a)  designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)  evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c) presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.  The registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)  all significant deficiencies in the designor operations of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)  any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.  The registrant’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 

Date: May 14, 2003

 

 
| By:    | /s/ Phillip C. Bowman                  |   |
|--------|----------------------------------------|--------|
|   | President  and Chief Executive Officer |

 

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**CERTIFICATIONS**

 

I, John M. Wright, certifythat:

 

1.  I have reviewed this quarterly report onForm 10-Q of American Bank Holdings, Inc.

 

2.  Based on my knowledge, this quarterly reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstancesunder which such statements were made, not misleading with respect to theperiod covered by this quarterly report;

 

3.  Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this quarterly report;

 

4.  The registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

 

a)  designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)  evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c) presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.  The registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)  all significant deficiencies in the designor operations of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)  any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.  The registrant’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 

Date: May 14, 2003

 

 
| By:    | /s/ John M. Wright       |   |
|--------|--------------------------|--------|
|   | Chief  Financial Officer |

 

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