UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 28, 2004
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Bay National Corporation
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(Exact Name of Registrant as Specified in its Charter)
Maryland 333-87781 52-2176710
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
2328 West Joppa Road
Lutherville, Maryland 21093
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(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: 410/494-2580
N/A
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On September 28, 2004, Bay National Corporation. (the Company) entered into a $5
million, three year unsecured non-revolving credit facility with Drovers Bank of
York, Pennsylvania, a division of Fulton Bank. The proceeds from the credit
facility will be used to provide regulatory capital to the Company's wholly
owned subsidiary, Bay National Bank (the Bank). The loan bears interest at the
prime rate as offered by Drovers Bank.
The credit facility will expire on September 28, 2007, at which time all
outstanding amounts under the credit facility, including accrued but unpaid
interest, will be due and payable. The Company may repay interest and principal
under the credit facility at any time without premium or penalty.
The credit facility agreement contains usual and customary covenants for
transactions of this type. In addition, the credit facility provides for the
following additional covenants:
1. The Bank's Total Risk-Based Capital Ratio (as defined for bank
regulatory purposes) will be maintained at a minimum of 10%.
2. The Bank's Tier 1 Risk-Based Capital Ratio (as defined for bank
regulatory purposes) will be maintained at a minimum of 6%.
3. The bank will maintain Loan Loss Reserves at a level required by
federal regulatory agencies, provided that such Loan Loss Reserve also
equals not less than three hundred percent (300.00%) of the sum of the
balances of loans in a non-accrual status, loans more than 90 days
past due, and renegotiated loans.
In the event of a default by the Company under the credit facility, Drovers Bank
may terminate the credit facility, declare the amount outstanding, including all
accrued interest and unpaid fees, payable immediately, and enforce any and all
rights created and existing under the credit facility documents, and other
rights available under applicable law. Upon default, interest on the outstanding
loan balance bears interest at 5% over the prime rate.
Fulton Bank has provided the Bank with a $2 million unsecured borrowing
facility. There were no outstanding balances on this facility as of September
30, 2004. The Company's shareholder records indicate that an an affiliate of
Fulton bank owns 10,000 shares of the Company, and executive officer of Fulton
Bank owns 1,000 shares of the Company. The Company is not aware of any other
material relationship between Drovers Bank nor Fulton Bank and the Company or
the Bank.
The Company has borrowed $500,000 under the credit facility as of the date
hereof.
Item 2.03. Creation of Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information provided in Item 1.01 above is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAY NATIONAL CORPORATION
Date October 1, 2004 By: /s/ Hugh W. Mohler
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Hugh W. Mohler, President