Four months after shelving plans to start his own bank, John W. Marhefka Jr. is taking his new employer to the equity market.

Mr. Marhefka, chief executive officer of $98 million-asset Annapolis National Bancorp, is leading plans to raise $5 million in an initial public offering, according to a Securities and Exchange Commission filing.

The stock sale is the linchpin of a plan to improve the financial performance of an undercapitalized bank saddled with excessive expenses. The company, which has a capital-to-assets ratio of less than 6%, reported a staggering 135.69% efficiency ratio for the first quarter.

"It takes them $1.36 to earn a dollar," said Lewis Sosnowik, vice president of Koonce Securities, a Bethesda, Md., investment firm. "Therein lies the problem."

But Mr. Sosnowik, who follows Maryland community banks, said the stock sale-and Mr. Marhefka's leadership-is likely to turn the bank around. The company said it plans to close branches, cut overhead expenses, and reduce the number of nonperforming loans.

"Mr. Marhefka is not only a very, very able runner of the bank," said Mr. Sosnowik. "He also knows the Annapolis market extremely well."

Mr. Marhefka joined Annapolis National in February, just weeks before he had been planning to come to market with an initial public offering for a proposed start-up bank. He said in an interview that he decided instead to join an already established bank.

Nine-year-old Annapolis National Bancorp, parent of Annapolis National Bank, operates six branches. It's the last remaining hometown bank in its affluent waterfront city, Maryland's capital.

"As the only independent bank, we think we have a tremendous opportunity to grow the company here and gain market share," Mr. Marhefka said.

His background includes founding the Bank of Annapolis, in 1989; it was sold last year to Sandy Spring Bancorp, an Olney, Md., company that wanted to establish a toehold in Annapolis.

If things don't work out with Annapolis National, Mr. Marhefka would begin an enforced absence from the Annapolis banking scene.

Mr. Marhefka has agreed not to work for any competing financial institution with offices in Anne Arundel County for the remainder of his five-year contract. Even if he's fired without cause, he must wait eight months before getting another job with a local institution.

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