SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



FORM 10-KSB



Annual report under Section 13 or 15(d) of the

Securities Exchange Act of 1934



For the fiscal year ended DECEMBER 31, 2002

Commission File No.:
0-22961



ANNAPOLIS BANCORP, INC.

(Name of small business issuer in its charter)



|MARYLAND                                                      |  | 52-1595772                
|------------------------------------------------------------- |  | --------------------------
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. Employer I.D. No.)
|                                                             
|                                                              |  |                           
|1000 Bestgate Road, Suite 400                                 |  | 21401                     
|ANNAPOLIS, MARYLAND                                           |  | (Zip Code)                
|(Address of principal executive offices)                      |  |                           



Issuers telephone number:    (410) 224-4455



Securities registered pursuant to Section 12(b) of the Act:    NONE

Securities registered pursuant to Section 12(g) of the Act:



COMMON STOCK PAR VALUE $0.01 PER SHARE

(Title of class)



THE NASDAQ SMALLCAP MARKET

(Name of exchange on which registered)



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for past 90 days. Yes: x     No: ̈



Check if there is no disclosure of
delinquent filers pursuant to Item 405 of Regulation S-B contained in this form and no disclosure will be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB Yes: x     No: ̈



Issuers revenues for its fiscal year ended December 31,
2002 were $12,498,675.



The aggregate market value of the voting
stock held by non-affiliates of the registrant, i.e., persons other than directors and executive officers of the registrant is $9,127,068 and is based upon the last sales price as quoted on The NASDAQ Stock Market for March 21, 2003.



The Registrant had 3,013,893 shares of Common Stock outstanding
as of March 21, 2003.



Transitional Small Business Disclosure
Format. YES: ̈No: x



DOCUMENTS INCORPORATED BY REFERENCE



PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER
31, 2002, ARE INCORPORATED BY REFERENCE INTO PART I AND PART II OF THIS FORM 10-KSB.



PORTIONS OF THE PROXY STATEMENT FOR THE 2002 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-KSB.





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INDEX



|                  |  |                                                                                                   |  | PAGE
|----------------- |  | ------------------------------------------------------------------------------------------------- |  | ----
|                 
|PART I            |  |                                                                                                   |  |     
|                 
|Item 1.           |  | Description of Business                                                                           |  | 3   
|                 
|Item 2.           |  | Properties                                                                                        |  | 3   
|                 
|Item 3.           |  | Legal Proceedings                                                                                 |  | 3   
|                 
|Item 4.           |  | Submission of Matters to a Vote of Security Holders                                               |  | 3   
|                 
|Additional Items. |  | Executive Officers of the Registrant                                                              |  | 3   
|                 
|PART II           |  |                                                                                                   |  |     
|                 
|Item 5.           |  | Market for Common Equity andRelated Stockholder Matters                                           |  | 4   
|                 
|Item 6.           |  | Managements Discussion and Analysis                                                              |  | 4   
|                 
|Item 7.           |  | Financial Statements                                                                              |  | 4   
|                 
|Item 8.           |  | Changes In and Disagreements With Accountants onAccounting and Financial Disclosure               |  | 4   
|                 
|PART III          |  |                                                                                                   |  |     
|                 
|Item 9.           |  | Directors, Officers, Promoters and Control Persons;Compliance with Section 16 of the Exchange Act |  | 4   
|                 
|Item 10.          |  | Executive Compensation                                                                            |  | 4   
|                 
|Item 11.          |  | Security Ownership of Certain Beneficial Ownersand Management                                     |  | 4   
|                 
|Item 12.          |  | Certain Relationships and Related Transactions                                                    |  | 4   
|                 
|Item 13.          |  | Exhibits and Reports on Form 8-K                                                                  |  | 5   
|                 
|Item 14.          |  | Controls and Procedures                                                                           |  | 5   
|                 
|SIGNATURES        |  |                                                                                                   |  | 5   



This Report contains
statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements appear in a number of places in this Report and include
all statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) the Companys financing plans; (ii) trends affecting the Companys financial
condition or results of operations; (iii) the Companys growth strategy; and (iv) the declaration and payment of dividends. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors discussed herein and those factors discussed in the Companys filings with the
Securities and Exchange Commission.



2



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PART I



ITEM 1.    
DESCRIPTION OF BUSINESS



The
information relating to the description of business of the Registrant is incorporated herein by reference on page 30 as part of the Registrants Annual Report to Shareholders.



ITEM 2.    
PROPERTIES



The executive offices of
the Company and the Bank are located at 1000 Bestgate Drive, Suite 400, Annapolis, Maryland 21401.



The following table sets forth the location of and certain additional information regarding the offices of the Company and the Bank at December 31, 2002.



|                |  | LEASED/ OWNED |  | ORIGINAL YEAR LEASED OR LOCATION ACQUIRED |  | YEAR OF LEASE EXPIRATION |     |  | NET BOOK VALUE OF PROPERTY OR LEASEHOLD IMPROVEMENTS AT
DECEMBER 31, 2002 ($000)
|--------------- |  | ------------- |  | ----------------------------------------- |  | ------------------------ | --- |  | --------------------------------------------------------------------------------
|Administration  |  | Owned         |  | 2001                                      |  | N/A                      |     |  | $                                                                               
|Bestgate        |  | Owned         |  | 2001                                      |  | N/A                      |     |  |                                                                                 
|Edgewater       |  | Land Leased   |  | 1996                                      |  | 2006                     | (1) |  |                                                                                 
|Cape St. Claire |  | Leased        |  | 1995                                      |  | 2003                     | (1) |  |                                                                                 
|Kent Island     |  | Leased        |  | 1990                                      |  | 2003                     | (1) |  |                                                                                 
|Severna Park    |  | Leased        |  | 1996                                      |  | 2006                     | (1) |  |                                                                                 

---

|(1) |  | These leases may be extended at the option of the Company for periods ranging from one to twenty years.
|--- |  | -------------------------------------------------------------------------------------------------------



Commencing July 1, 2001, the Bank entered into a three year lease for the
second floor space of the Banks headquarters building with Heim and Associates, P.A. now HeimLantz Business and Tax Services, Inc., an accounting firm whose President is a Company and Bank Director. The lease rate of $169 thousand per annum is
based on current market rates as determined by an independent commercial real estate services firm not affiliated with the Company or Bank. The lease has an initial term of 3 years expiring June 30, 2004 with 2 renewal options of 2 years each and
one final option of 1 year.



ITEM 3.    
LEGAL PROCEEDINGS



The Company is not
involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the Companys
financial condition or results of operations.



ITEM
4.    
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



None.



ADDITIONAL ITEMS.



Executive Officers of the Registrant



The information relating to directors and named executive officers of the Registrant is incorporated herein by reference to the Registrants Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2003 at
pages 4 through 7. In addition, information concerning Executive Officers who are not directors is set forth below:





|NAME                   |  | AGE AT 12/31/02 |  | POSITION WITH THE COMPANY AND BANKAND PAST FIVE YEARS
EXPERIENCE                                                                                                                                                                                                                                                                                                                                     
|---------------------- |  | --------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Rita D. Demma          |  | 55              |  | Secretary of the Company and the Bank. Ms. Demma has been an officer of the Bank since 2000. Ms. Demma held a similar
position from 1996 through 2000 with the University of Maryland Medical Center prior to joining the Company.                                                                                                                                                                   
|                      
|Margaret Theiss Faison |  | 44              |  | Chief Financial Officer and Treasurer of the Company and Senior Vice President, Chief Financial Officer and Treasurer
of the Bank. Prior to joining the Company in 1999, Ms. Faison was Senior Vice President and Chief Financial Officer of Sterling Bank & Trust Co. of Baltimore from 1997 until 1999. Ms. Faison was previously Vice President and Chief Financial
Officer with Mellon Bank (MD).



3



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|NAME                    |  | AGE AT 12/31/02 |  | POSITION WITH THE COMPANY AND BANKAND PAST FIVE YEARS
EXPERIENCE                                                                                                                                                                                                                                   
|----------------------- |  | --------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Robert E. Kendrick, III |  | 57              |  | Senior Vice President and Chief Credit and Business Development Officer of the Bank. Prior to joining the Bank in
1999, Mr. Kendrick held similar positions from 1967 through 1999 with Citizens National Bank of Laurel, Bank of Maryland, Sterling Bank & Trust Co. of Baltimore and NationsBank.
|                       
|Loretta J. Mueller      |  | 39              |  | Senior Vice President, Customer Service and Marketing, of the Bank. Ms. Mueller joined the Bank in 1990 and has held
various management positions since that time.                                                                                                                                 



PART
II



ITEM 5.    
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



Information relating to the market for Registrants common equity and related stockholder matters appears on page 24, part of the Registrants 2002 Annual Report to Stockholders and is incorporated herein by
reference.



ITEM 6.    
MANAGEMENTS DISCUSSION AND ANALYSIS



The above-captioned information appears under Managements Discussion and Analysis of Results of Operations and Financial Condition in the Registrants 2002 Annual Report to Stockholders on pages 10 through 24 and is
incorporated herein by reference.



ITEM
7.    
FINANCIAL STATEMENTS



The Consolidated
Financial Statements of Annapolis Bancorp, Inc. and its subsidiary, together with the report thereon by Stegman & Company for the year ended December 31, 2002 appears in the Registrants 2002 Annual Report to Stockholders on pages 26
through 43 and are incorporated herein by reference.



ITEM
8.    
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None.



PART III



ITEM
9.    
DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT



The information relating to directors, officers, promoters and control persons is incorporated herein by reference to the Registrants Proxy
Statement for the Annual Meeting of Shareholders to be held on May 15, 2003.



ITEM 10.    
EXECUTIVE COMPENSATION



The
information relating to directors and executive compensation is incorporated herein by reference to the Registrants Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2003.



ITEM 11.    
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



The information relating to security ownership of certain beneficial owners and management is incorporated herein by reference to the Registrants Proxy Statement for the Annual Meeting of
Shareholders to be held on May 15, 2003.



ITEM
12.    
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The information relating to certain relationships and related transactions is incorporated herein by reference to the Registrants Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2003.



4



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ITEM
13.    
EXHIBITS AND REPORTS ON FORM 8-K



(a)    The following documents are filed as a part of this report:



(1)    Financial Statements



Consolidated Financial Statements of the Company are incorporated by reference to the following indicated pages of the 2002 Annual Report
to Stockholders:



|                                                                                                                |  | PAGE 
|--------------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                               
|Independent Auditors Report                                                                                    |  | 25   
|                                                                                                               
|Consolidated Balance Sheets as of December 31, 2002, 2001 and 2000                                              |  | 26   
|                                                                                                               
|Consolidated Statements of Income for the Years ended December 31, 2002, 2001 and 2000                          |  | 27   
|                                                                                                               
|Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2002, 2001 and 2000 |  | 28   
|                                                                                                               
|Consolidated Statements of Cash Flows for the Years ended December 31, 2002, 2001 and 2000                      |  | 29   
|                                                                                                               
|Notes to Consolidated Financial Statements                                                                      |  | 30-42



The
remaining information appearing in the Annual Report to Stockholders is not deemed to be filed as part of this report, except as expressly provided herein.



(2)    Exhibits



The following exhibits are filed as part of this report.



|    
|----
|3.1 
|    
|3.2 
|    
|3.3 
|    
|3.4 
|    
|4.0 
|    
|10.2
|    
|11.0
|    
|13.0
|    
|21.0
|    
|23.0
|    
|99.0
|    
|99.1
|    
|99.2

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|* |  | Incorporated herein by reference to the Exhibits to Form SB-2, Registration Statement, filed on June 23, 1997 and any Amendments thereto, Registration No. 333-29841.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** |  | Incorporated herein by reference to the Companys Proxy Statement for its Annual Meeting of Stockholders, which will be filed with the Commission Within 120
days of the end of the Companys fiscal year.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** |  | Incorporated herein by reference to the Exhibits to Form 10-KSB Annual Report for the fiscal year ended December 31, 2000, Commission File Number 0-22961, filed with
the Securities and Exchange Commission on March 28, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K:



None



5



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ITEM
14.    
CONTROLS AND PROCEDURES



As of March
17, 2003, a date within 90 days of the filing date of this report, based on an evaluation of the Companys disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) each of the
chief executive officer and the chief financial officer of the Company has concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its Exchange Act
reports is recorded, processed, summarized and reported within the applicable time periods specified by the SECs rules and forms.



There were no significant changes in the Companys internal controls or in any other factors which could significantly affect those controls
subsequent to the date of the most recent evaluation of the Companys internal controls by the Company, including any corrective actions with regard to any significant deficiencies or material weaknesses.



CONFORMED
SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.



ANNAPOLIS BANCORP, INC.



By:

/s/ Richard M. LernerRichard M. LernerChairman and CEO




Date: March 21, 2003



By:

/s/ Margaret Theiss FaisonMargaret Theiss FaisonChief Financial Officer




Date: March 21, 2003



Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates stated.



|NAME                                             |  | Title                                                                              |  | Dage          
|------------------------------------------------ |  | ---------------------------------------------------------------------------------- |  | --------------
|                                                
|/s/ Richard M. LernerRichard M. Lerner           |  | Chairman, Chief Executive Officer andDirector (principal executive
officer)        |  | March 21, 2003
|                                                
|/s/ Margaret Theiss FaisonMargaret Theiss Faison |  | Treasurer and Chief Financial Officer (principal accounting and financial
officer) |  | March 21, 2003
|                                                
|/s/ F. Carter HeimF. Carter Heim                 |  | Director                                                                           |  | March 21, 2003
|                                                
|/s/ Stanley J. Klos, Jr.Stanley J. Klos, Jr.     |  | Director                                                                           |  | March 21, 2003
|                                                
|/s/ Lawrence E. LernerLawrence E. Lerner         |  | Director                                                                           |  | March 21, 2003
|                                                
|/s/ Lawrence W. SchwartzLawrence W. Schwartz     |  | Director                                                                           |  | March 21, 2003
|                                                
|/s/ Maria C. ScottMaria C. Scott                 |  | Director                                                                           |  | March 21, 2003
|                                                
|/s/ Ermis SfakiyanudisErmis Sfakiyanudis         |  | Director                                                                           |  | March 21, 2003







6



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CERTIFICATIONS



I, Richard M. Lerner,
certify that:



1.    I have reviewed this
annual report on Form 10-KSB of Annapolis Bancorp, Inc.;



2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;



3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4.    The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this annual report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date);
and



c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5.    The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent functions):



a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls.



6.    The registrants other certifying officers and I have indicated in this annual report whether
or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.



Date: March 21, 2003

|
|
|
|





7



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I, Margaret Theiss Faison,
certify that:



1.    I have reviewed this
annual report on Form 10-KSB of Annapolis Bancorp, Inc.;



2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;



3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4.    The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this annual report is being prepared;



b)    evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the
Evaluation Date); and



c)    presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5.    The registrants other certifying officers and
I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):



a)    all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls;
and



b)    any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrants internal controls.



6.    The registrants other certifying officers and I have indicated in this annual report whether or not there were significant
changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.



Date: March 21, 2003



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8