March 8, 2017
Via EDGAR and email
Stephanie L. Sullivan
Senior Technical and Policy Advisor
Office of Financial Services
Division of Corporate Finance
Securities and Exchange Commission
Mail Stop 4720
100 F Street, N.E.
Washington, DC 20549
| Re: | Glen Burnie Bancorp |
Form 10-K for the Fiscal Year ended December 31, 2015
Filed March 10, 2016
Response Dated July 11, 2016
File No. 000-24047
Dear Ms. Sullivan,
In response to your letter dated February 22, 2017, Glen Burnie Bancorp (the “Company”) provides the following information:
Form 10-K for the Fiscal Year Ended December 31, 2015
Item 8. Financial Statements and Supplementary Data, page 33
Note 4. Loans and Allowances, page F-18
| 1. | Our bulleted responses below correspond to the sequence of bullets in this comment. We will revise future filings to address any deficiencies: |
| · | Our policy is to evaluate the following loans individually for impairment; all other loans are evaluated collectively: |
(1) Loans in a non-accrual status
(2) Loans risk rated substandard not paying according to contractual terms
(3) Loans risk rated substandard in default of loan agreement
(4) Loans risk rated doubtful
(5) Loans classified as TDR
| · | Based on the above criteria, those loans individually evaluated for impairment are assessed in accordance with ASC Topic 310, Accounting by Creditors for Impairment of a Loan. Loans that are identified to be individually evaluated for impairment where the allowance measure is zero would continue to be disclosed as a loan individually evaluated for impairment. The specific credit allocations made to loans individually evaluated for impairment are based on regular analysis of all loans over a fixed-dollar amount where the internal credit rating is at or below a predetermined classification. Loans of similar type and purpose, not meeting the criteria of ASC 310, are pooled into homogenous sub portfolios and collectively evaluated for impairment. The Company’s charge off policy (which has been included in the Consolidated Financial Statements) will be included and detailed in future filings. |
| 1 |
| · | The appearance of a revision in the form of disclosure between the September 30, 2016 disclosure and the same disclosure for December 31, 2015 was due to errors. The table below excepted from our September 30, 2016 10-Q highlights the erroneous entries and shows the corrected amounts in italics. This disclosure has been corrected in Note 4 to our financial statements which we intend to include in our upcoming filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. |
| Commercial | Consumer | |||||||||||||||||||||||
| September, 30, 2016 | and | Commercial | and | Residential | ||||||||||||||||||||
| (Thousands of Dollars) | Industrial | Real Estate | Indirect | Real Estate | Unallocated | Total | ||||||||||||||||||
| Balance, beginning of year | $ | 305 | $ | 262 | $ | 804 | $ | 1,631 | $ | 148 | $ | 3,150 | ||||||||||||
| Provision for credit losses | (11 | ) | (13 | ) | 256 | 43 | (42 | ) | 233 | |||||||||||||||
| Recoveries | 4 | - | 270 | 36 | - | 310 | ||||||||||||||||||
| Loans charged off | - | - | (523 | ) | (855 | ) | - | (1,378 | ) | |||||||||||||||
| Balance, end of year | $ | 298 | $ | 249 | $ | 807 | $ | 855 | $ | 106 | $ | 2,315 | ||||||||||||
| Individually evaluated for impairment: | ||||||||||||||||||||||||
| Balance in allowance | $ | 232 | $ | 109 | $ | 753 | $ | 837 | $ | 106 | $ | 2,037 | ||||||||||||
| Related loan balance | 234 | 1,401 | 408 | 1,617 | - | 3,660 | ||||||||||||||||||
| Collectively evaluated for impairment: | ||||||||||||||||||||||||
| Balance in allowance | $ | 66 | $ | 140 | $ | 753 | $ | 18 | $ | 106 | $ | 1,902 | ||||||||||||
| Related loan balance | 4,511 | 63,131 | 79,767 | 110,033 | - | 257,442 | ||||||||||||||||||
| · | There were no material changes made to the specific reserves of $0.4 million (detailed in the disclosure on page 9 of the September 30, 2016 Form 10-Q) from the level of specific reserves detailed in the disclosure of the March 31, 2016 Form 10-Q. The table below details, by loan category, the specific reserves at September 30, 2016 and December 31, 2015. |
| 2 |
| (Thousands of dollars) September 30, 2016 | Recorded Investment | Unpaid Principal Balance | Interest Income Recognized | Specific Reserve | Average Recorded Investment | |||||||||||||||
| Impaired loans with specific reserves: | ||||||||||||||||||||
| Real-estate - mortgage: | ||||||||||||||||||||
| Residential - 1 | $ | 79 | $ | 79 | $ | - | $ | 18 | $ | 111 | ||||||||||
| Commercial - 2 | 290 | 290 | - | 109 | 303 | |||||||||||||||
| Consumer - 3 | 134 | 134 | - | 54 | 167 | |||||||||||||||
| Installment | - | - | - | - | - | |||||||||||||||
| Home Equity | - | - | - | - | - | |||||||||||||||
| Commercial - 4 | 232 | 232 | 8 | 232 | 236 | |||||||||||||||
| Total | $ | 735 | $ | 735 | $ | 8 | $ | 413 | $ | 817 | ||||||||||
| December 31, 2015 | Recorded Investment | Unpaid Principal Balance | Interest Income Recognized | Specific Reserve | Average Recorded Investment | |||||||||||||||
| Impaired loans with specific reserves: | ||||||||||||||||||||
| Real-estate - mortgage: | ||||||||||||||||||||
| Residential - 5 | $ | 1,809 | $ | 1,809 | $ | 57 | $ | 697 | $ | 1,820 | ||||||||||
| Commercial - 6 | 300 | 300 | - | 101 | 315 | |||||||||||||||
| Consumer -7 | 146 | 146 | - | 65 | 170 | |||||||||||||||
| Installment | - | - | - | - | - | |||||||||||||||
| Home Equity | - | - | - | - | - | |||||||||||||||
| Commercial - 8 | 241 | 241 | 10 | 241 | 247 | |||||||||||||||
| Total | $ | 2,496 | $ | 2,496 | $ | 67 | $ | 1,104 | $ | 2,552 | ||||||||||
Notes to the above reserves by loan category:
1. A single borrower with 12 residential investment property loans with an aggregated new specific reserve of $6,000 after partial charge off and one restructured residential mortgage loan (TDR) with a specific reserve (PV method) of $12,000.
2. A single borrower with a commercial real estate loan in the final stages of collection with a specific reserve of $109,000, adjusted from December 31, 2015 based on an updated appraisal.
3. Two consumer installment notes with an aggregated specific reserve of $54,000.
4. One unsecured, restructured (TDR) C&I note, fully reserved with a specific reserve of $232,000.
5. A single borrower with 12 residential investment property loans with an aggregated specific reserve of $685,000 and one restructured residential mortgage loan (TDR) with a specific reserve (PV method) of $12,000.
6. A single borrower with a commercial real estate loan in the final stages of collection with a specific reserve of $109,000.
7. Two consumer installment notes with an aggregated specific reserve of $65,000.
8. One unsecured, restructured (TDR) C&I note, fully reserved with a specific reserve of $241,000.
| · | Our policy regarding loans that are identified to be individually evaluated for impairment where the allowance measure is zero but continue to meet the criteria, are considered non-performing, are in a collection status and remain under continuous monitoring for potential impairment. These loans are not returned to the pool of loans collectively evaluated for impairment. We have clarified and amended the language in Note 4 to our financial statements which we intend to include in our upcoming filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. |
| 3 |
| · | The Company has not made any changes to our allowance methodology based on our remarks to paragraph 5 in our July 11, 2016 response letter. The Company noted in the aforementioned correspondence, paragraph 5, that “[We]have significantly decreased the amount of specific reserves over the past few quarters”intending to communicate that in certain distressed loan situations where the process of collection and recovery exceeded historical time periods, the Company began in 2015 to conservatively recognize partial charge offs. In most cases this resulted in the loan(s) moving to individually specially assessed for impairment and the allowance measurement would then be zero. These loans are continuously monitored thereafter for potential impairment and new specific reserves are made as necessary. |
| · | In paragraph 5 of our July 11, 2016 response we stated, “The remaining specific reserves are being evaluated as to whether the borrower continues to have the ability and willingness to repay the loan in order to ensure we are in compliance with ASC 310 as these are deemed to be impaired loans.”To clarify, we advise the Staff the Company regularly monitors and assesses the classified loan borrowers and when the risk rating assessment moves from substandard (possible loss) to doubtful (probable loss) the amount reserved for the impairment is generally charged off. |
| 2. | The previously acknowledged inaccuracies noted in paragraph 1 of the July 11, 2016 response should have been addressed in subsequent filings. We will revise future filings, beginning with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 to correct the disclosures. |
Credit Quality Information, page F-20
| 3. | We note your comment and will revise our future Forms 10-K and 10-Q filings accordingly, beginning with our Form 10-K for the Fiscal Year Ended December 31, 2016. During 2016 loans were returned to an accrual status. The balance of those loans will be detailed as “loans returned to accrual status” in the Form 10-K Note 4 disclosure showing the activity for non-accrual loans during the years 2016,2015, and 2014. |
Please let us know if you need any additional information and please feel free to contact John Long at 410-768-8871 orjlong@bogb.net should you have any questions.
Respectfully submitted,
/s/ John D. Long
John D. Long
President and Chief Executive Officer
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