================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2004
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-24047
GLEN BURNIE BANCORP
(Exact name of registrant as specified in its charter)
Maryland 52-1782444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Crain Highway, S.E.
Glen Burnie, Maryland 21061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 766-3300
Inapplicable
(Former name, former address and former fiscal year
if changed from last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act. Yes No X
--- ---
At April 23, 2004, the number of shares outstanding of the registrant's common
stock was 2,030,461.
TABLE OF CONTENTS
Part I - Financial Information Page
----
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheets,
March 31, 2004 (unaudited) and
December 31, 2003 (audited) 3
Condensed Consolidated Statements of
Income for the Three Months Ended
March 31, 2004 and 2003 (unaudited) 4
Condensed Consolidated Statements of
Comprehensive Income for the Three Months
Ended March 31, 2004 and 2003 (unaudited) 5
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 2004 and 2003 (unaudited) 6
Notes to Unaudited Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
------- Financial Condition and Results of Operations 8
Item 3. Quantitative And Qualitative Disclosure 13
------- About Market Risk
Item 4. Controls and Procedures 13
-------
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 14
-------
Signatures 15
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, 2004 December 31, 2003
-------------- -----------------
ASSETS (unaudited) (audited)
----
Cash and due from banks $11,855 $11,120
Interest-bearing deposits in other financial institutions 411 57
Federal funds sold 4,872 1,718
------- -------
Cash and cash equivalents 17,138 12,895
Investment securities available for sale, at fair value 91,602 99,602
Investment securities held to maturity, at cost
(fair value March 31: $3,631; December 31: $3,816) 3,403 3,579
Federal Home Loan Bank stock, at cost 973 896
Maryland Financial Bank stock, at cost 100 -
Common Stock in the Glen Burnie Statutory Trust I 155 155
Loans, less allowance for credit losses
(March 31: $2,279; December 31: $2,247) 173,128 172,819
Premises and equipment, at cost, less accumulated depreciation 4,114 4,220
Other real estate owned 170 172
Cash value of life insurance 4,833 4,782
Other assets 2,746 3,132
-------- --------
Total assets $298,362 $302,252
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $258,817 $256,908
Short-term borrowings 196 6,602
Long-term borrowings 7,220 7,227
Junior subordinated debentures owed to unconsolidated subsidiary trust 5,155 5,155
Other liabilities 2,117 2,413
-------- --------
Total liabilities 273,505 278,305
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $1, authorized 15,000,000 shares;
Issued and outstanding: March 31: 2,030,459 shares;
December 31: 1,689,281 shares 2,030 1,689
Surplus 10,966 10,862
Retained earnings 10,293 10,115
Accumulated other comprehensive income, net of tax 1,568 1,281
-------- --------
Total stockholders' equity 24,857 23,947
-------- --------
Total liabilities and stockholders' equity $298,362 $302,252
======== ========
See accompanying notes to condensed consolidated financial statements.
3
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended March 31,
2004 2003
---- ----
Interest income on:
Loans, including fees $2,741 $2,819
U.S. Treasury and U.S. Government agency securities 555 487
State and municipal securities 465 375
Other 120 131
------ ------
Total interest income 3,881 3,812
------ ------
Interest expense on:
Deposits 669 899
Short-term borrowings 25 1
Long-term borrowings 108 108
Junior subordinated debentures 136 136
------ ------
Total interest expense 938 1,144
------ ------
Net interest income 2,943 2,668
Provision for credit losses 140 0
------ ------
Net interest income after provision for credit losses 2,803 2,668
------ ------
Other income:
Service charges on deposit accounts 258 258
Other fees and commissions 151 142
Other non-interest income 3 2
Income on life insurance 51 66
Gains on investment securities 230 92
------ ------
Total other income 693 560
------ ------
Other expenses:
Salaries and employee benefits 1,514 1,465
Occupancy 174 212
Other expenses 896 798
------ ------
Total other expenses 2,584 2,475
------ ------
Income before income taxes 912 753
Income tax expense 171 97
------ ------
Net income $741 $656
===== =====
Basic and diluted earnings per share of common stock $0.37 $0.33
===== =====
Weighted average shares of common stock outstanding 2,027,464 2,014,608
========= =========
Dividends declared per share of common stock $0.11 $0.08
===== =====
See accompanying notes to condensed consolidated financial statements.
4
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------
2004 2003
---- ----
Net income $741 $656
Other comprehensive income (loss), net of tax
Unrealized gains (losses) securities:
Unrealized holding gains (losses) arising
during period 428 (124)
Reclassification adjustment for gains
included in net income (141) (56)
---- ----
Comprehensive income $1,028 $476
====== ====
See accompanying notes to condensed consolidated financial statements.
5
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended March 31,
2004 2003
---- ----
Cash flows from operating activities:
Net income $741 $656
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion 290 10
Compensation expense from vested stock options 29 0
Provision for credit losses 140 0
Gains on disposals of assets, net (230) (92)
Income on investment in life insurance (51) (66)
Changes in assets and liabilities:
Decrease in other assets 189 372
Decrease in other liabilities (233) (630)
------- -------
Net cash provided by operating activities 875 250
------- -------
Cash flows from investing activities:
Maturities of available for sale mortgage-backed securities 1,351 7,146
Proceeds from disposals of investment securities 7,397 4,232
Purchases of investment securities 0 (16,458)
Purchases of Federal Home Loan Bank stock (77) (193)
Purchase of MD Financial Bank stock (100) 0
(Increase) decrease in loans, net (449) 437
Purchases of premises and equipment (40) (320)
------- -------
Net cash provided (used) by investing activities 8,082 (5,156)
------- -------
Cash flows from financing activities:
Increase in deposits, net 1,909 11,380
Decrease in short-term borrowings (6,406) (733)
Repayment of long-term borrowings (7) (6)
Dividends paid (288) (279)
Issuance of common stock 29 0
Common stock dividends reinvested 49 43
------- -------
Net cash (used) provided by financing activities (4,714) 10,405
------- -------
Increase in cash and cash equivalents 4,243 5,499
Cash and cash equivalents, beginning of year 12,895 15,742
------- -------
Cash and cash equivalents, end of period $17,138 $21,241
======= =======
See accompanying notes to condensed consolidated financial statements.
6
GLEN BURNIE BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-Q and, therefore, do not
include all information and notes necessary for a complete presentation of
financial position, results of operations, changes in stockholders' equity, and
cash flows in conformity with accounting principles generally accepted in the
United States of America. However, all adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are necessary for a
fair presentation of the unaudited consolidated financial statements have been
included in the results of operations for the three months ended March 31, 2004
and 2003.
Operating results for the three-month period ended March 31, 2004 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2004.
NOTE 2 - EARNINGS PER SHARE
Information for net income per share and weighted average shares
outstanding for prior periods have been restated to reflect 337,267 shares of
common stock issued in a 20% stock dividend paid in January, 2004.
Basic earnings per share of common stock are computed by dividing net
earnings by the weighted average number of common shares outstanding during the
period. Diluted earnings per share are calculated by including the average
dilutive common stock equivalents outstanding during the periods. Dilutive
common equivalent shares consist of stock options, calculated using the treasury
stock method.
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
-------------- --------------
Diluted:
Net income $ 741,000 $ 656,000
Weighted average common shares outstanding 2,027,464 2,014,608
Dilutive effect of stock options 5,398 4,555
---------- ----------
Average common shares outstanding - diluted 2,032,862 2,019,163
Diluted net income per share $0.37 $0.33
NOTE 3 - EMPLOYEE STOCK PURCHASE BENEFIT PLANS
The Company has an employee stock purchase compensation plan. The Bank
applies Accounting Principles Board Opinion ("APB") No. 25 and related
Interpretations in accounting for this plan. Compensation cost of $29,000 has
been recognized in the first quarter of 2004. If compensation cost for the
Company's stock-based compensation plan had been determined based on the fair
value at the grant date for awards under this plan consistent with the methods
outlined in SFAS No. 123 Accounting for Stock-Based Compensation, there would be
no material change in reported net income.
During the first quarter of 2004, the Board of Directors finalized
additional options to be granted under this plan at $20.70 per share for a
period of 11 months, expiring December, 2004. As of March 31, 2004, 7,944
options had been granted under this plan.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
During the first quarter of 2004, the Company had several favorable
operating trends continue. Most significantly, first quarter net income grew
from $656,000 in 2003 to $741,000 in 2004, a 12.95% increase. The primary
reasons for the increase were the continuing rebound in net interest income
which improved from $2,668,000 in the first quarter of 2003 to $2,943,000 in the
first quarter of 2004, combined with an increase in securities gains, which rose
from $92,000 in the first quarter of 2003 to $230,000 in the first quarter of
2004. The proceeds from the 2004 securities sales were primarily used to reduce
the Company's short term borrowings and our interest rate sensitivity in the
expected rising interest rate environment.
FORWARD-LOOKING STATEMENTS
When used in this discussion and elsewhere in this Form 10-Q, the
words or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company cautions readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made, and readers are advised that various factors, including
regional and national economic conditions, unfavorable judicial decisions,
substantial changes in levels of market interest rates, credit and other risks
of lending and investment activities and competitive and regulatory factors
could affect the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from those anticipated or
projected.
The Company does not undertake and specifically disclaims any
obligation to update any forward-looking statements to reflect occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.
RESULTS OF OPERATIONS
General. Glen Burnie Bancorp, a Maryland corporation (the "Company"),
and its subsidiaries, The Bank of Glen Burnie (the "Bank") and GBB Properties,
Inc., both Maryland corporations, and Glen Burnie Statutory Trust I, a
Connecticut business trust, had consolidated net income of $741,000 ($0.37 basic
and diluted earnings per share) for the first quarter of 2004, compared to first
quarter 2003 consolidated net income of $656,000 ($0.33 basic and diluted
earnings per share). All historic earnings per share figures have been adjusted
to reflect the Company's stock dividend paid on January 16, 2004.
Net Interest Income. The Company's consolidated net interest income
prior to provision for credit losses for the three months ended March 31, 2004
was $2,943,000 compared to $2,668,000 for the same period in 2003, an increase
of $275,000 (10.30%) for the three-month period. This increase was primarily
attributable to an increase in investment income on U.S. Government Agency
securities and state and municipal securities and a decrease in the interest
paid on deposits, partially offset by a decrease in interest income on loans.
Interest income increased $69,000 (1.81%) for the three months ended
March 31, 2004, compared to the same period in 2003, primarily due to an
increase in interest income on U.S. Government Agency securities and state and
municipal securities, partially offset by a decline in interest income on loans.
Interest expense declined $206,000 (18.0%) for the three months ended
March 31, 2004 compared to the 2003 period, principally due to a decline in the
interest paid on deposits and partially offset by an increase in the interest
paid on short term borrowings.
Net interest margins for the three months ended March 31, 2004 was
4.65%, compared to tax equivalent net interest margins of 4.53% for the three
months ended March 31, 2003. The increase in net interest margins for the three
months ended March 31, 2004 was primarily due to a decline on interest rates
paid on deposits.
Provision For Credit Losses. The Company made an additional provision
of $140,000 during the three month period ended March 31, 2004 and no additional
provision for credit losses during the three month period ended March 31, 2003.
As of March 31, 2004, the allowance for credit losses equaled 375.45% of
8
non-accrual and past due loans compared to 385.42% at December 31, 2003 and
309.90% at March 31, 2003. During the three month period ended March 31, 2004,
the Company recorded net charge-offs of $108,000, compared to net charge-offs of
$135,000 during the corresponding period of the prior year. On an annualized
basis, net charge-offs for the 2004 period represent 0.25% of the average loan
portfolio.
Other Income. Other income increased from $560,000 for the three month
period ended March 31, 2003, to $693,000 for the corresponding 2004 period, a
$133,000 (23.75%) increase. The increase in other income for the 2004 period was
primarily due to the additional gains realized on investment securities combined
with an increase in other fees and commissions, partially offset by a decline in
income on bank owned life insurance.
Other Expense. Other expense increased from $2,475,000 for the three
month period ended March 31, 2003, to $2,584,000 for the corresponding 2004
period, a $109,000 (4.40%) increase. The increase was due to an increase in
salaries and employee benefits and other expenses, partially offset by a decline
in occupancy expenses.
Income Taxes. During the three months ended March 31, 2004, the
Company recorded income tax expense of $171,000, compared to an income tax
expense of $97,000 for the corresponding period of the prior year. The increase
in income tax expenses is primarily due to additional gains realized on
investment securities. The Company's effective tax rate for the three month
period in 2004 was 19%, compared to 13% for the prior year period.
FINANCIAL CONDITION
General. The Company's assets declined to $298,362,000 at March 31,
2004 from $302,252,000 at December 31, 2003, primarily due to sales and
maturities of investment securities and applying the proceeds to reduce
outstanding borrowings and increase cash and cash equivalents. Management
believes that this move will improve our ability to respond to changes in the
interest rate environment. The Bank's net loans totaled $173,128,000 at March
31, 2004, compared to $172,819,000 at December 31, 2003, an increase of $309,000
(0.18%), primarily attributable to an increase in mortgage and indirect loans,
offset by a decrease in mortgage participation loans.
The Company's total investment securities portfolio (including both
investment securities available for sale and investment securities held to
maturity) totaled $95,005,000 at March 31, 2004, a $8,176,000 (7.92%) decrease
from $103,181,000 at December 31, 2003. The Bank's cash and cash equivalents
(cash due from banks, interest-bearing deposits in other financial institutions,
and federal funds sold), as of March 31, 2004, totaled $17,138,000, an increase
of $4,243,000 (32.90%) from the December 31, 2003 total of $12,895,000. The
aggregate market value of investment securities held by the Bank as of March 31,
2004 was $95,233,000 compared to $103,418,000 as of December 31, 2003, a
$8,185,000 (7.91%) decrease.
Deposits as of March 31, 2004 totaled $258,817,000, which is an
increase of $1,909,000 (0.74%) from $256,908,000 at December 31, 2003. Demand
deposits as of March 31, 2004 totaled $72,191,000 which is an increase of
$2,542,000 (3.65%) from $69,649,000 at December 31, 2003. NOW accounts as of
March 31, 2004 totaled $25,390,000 which is a decrease of $3,011,000 (10.60%)
from $28,401,000 at December 31, 2003. Money market accounts as of March 31,
2004 totaled $21,873,000 which is an increase of $1,729,000 (8.58%), from
$20,144,000 at December 31, 2003. Savings deposits as of March 31, 2004 totaled
$55,381,000 an increase of $2,002,000 (3.75%) from $53,379,000 at December 31,
2003. Certificates of deposit over $100,000 totaled $15,590,000 on March 31,
2004, a decrease of $60,000 (0.38%) from $15,650,000 at December 31, 2003. Other
time deposits (made up of certificates of deposit less than $100,000 and
individual retirement accounts) totaled $67,933,000 on March 31, 2004, a
$1,753,000 (2.52%) decrease from the $69,686,000 total at December 31, 2003.
Asset Quality. The following table sets forth the amount of the Bank's
restructured loans, non-accrual loans and accruing loans 90 days or more past
due at the dates indicated.
9
At March 31, At December 31,
2004 2003
---- ----
(Dollars in Thousands)
Restructured loans $ 97 $ 0
==== ====
Non-accrual loans:
Real estate - mortgage:
Residential $131 $ 34
Commercial 263 265
Real estate - construction 0 0
Installment 163 250
Credit card & related 0 0
Commercial 46 23
---- ----
Total non-accrual loans 603 572
---- ----
Accruing loans past due 90 days or more: Real estate - mortgage:
Residential 1 5
Commercial 0 0
Real estate - construction 3 6
Installment 0 0
Credit card & related 0 0
Commercial 0 0
Other 0 0
---- ----
Total accruing loans past due 90 days or more 4 11
---- ----
Total non-accrual and past due loans $607 $583
==== ====
Non-accrual and past due loans to gross loans 0.35% 0.33%
===== =====
Allowance for credit losses to non-accrual and past due loans 375.45% 385.42%
====== ======
At March 31, 2004, there were no loans outstanding, other than those
reflected in the above table, as to which known information about possible
credit problems of borrowers caused management to have serious doubts as to the
ability of such borrowers to comply with present loan repayment terms. Such
loans consist of loans which were not 90 days or more past due but where the
borrower is in bankruptcy or has a history of delinquency, or the loan to value
ratio is considered excessive due to deterioration of the collateral or other
factors.
Allowance For Credit Losses. The allowance for credit losses is
established through a provision for credit losses charged to expense. Loans are
charged against the allowance for credit losses when management believes that
the collectibility of the principal is unlikely. The allowance, based on
evaluations of the collectibility of loans and prior loan loss experience, is an
amount that management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible. The evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans, and
current economic conditions and trends that may affect the borrowers' ability to
pay.
10
Transactions in the allowance for credit losses for the three months
ended March 31, 2004 and 2003 were as follows:
Three Months Ended
March 31,
2004 2003
---- ----
(Dollars in Thousands)
Beginning balance $2,247 $2,515
Charge-offs (214) (223)
Recoveries 106 88
------ ------
Net charge-offs
(108) (135)
Provisions charged to operations 140 0
------ ------
Ending balance $2,279 $2,380
====== ======
Average loans $173,107 $157,764
Net charge offs to average loans (annualized) 0.25% 0.34%
Reserve for Unfunded Commitments. As of March 31, 2004, the Bank had
outstanding commitments totaling $16,462,000. These outstanding commitments
consisted of letters of credit, undrawn lines of credit, and other loan
commitments. The following table shows the Bank's reserve for unfunded
commitments arising from these transactions:
Three Months Ended
March 31,
2004 2003
---- ----
(Dollars in Thousands)
Beginning balance $150 $150
Provisions charged to operations 0 0
---- ----
Ending balance $150 $150
==== ====
Off-Balance Sheet Arrangements. The Bank is a party to financial
instruments in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit and
standby letters of credit, which involve, to varying degrees, elements of credit
and interest rate risk in excess of the amounts recognized in the consolidated
financial statements.
Loan commitments and lines of credit are agreements to lend to
customers as long as there is no violation of any conditions of the contracts.
Loan commitments generally have interest rates fixed at current market amounts,
fixed expiration dates, and may require payment of a fee. Lines of credit
generally have variable interest rates. Many of the loan commitments and lines
of credit are expected to expire without being drawn upon; accordingly, the
total commitment amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral or other security obtained, if deemed necessary by the Bank
upon extension of credit, is based on management's credit evaluation. Collateral
held varies but may include deposits held in financial institutions, U.S.
Treasury securities, other marketable securities, accounts receivable,
inventory, property and equipment, personal residences, income-producing
commercial properties, and land under development. Personal guarantees are also
obtained to provide added security for certain commitments.
Letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to guarantee the installation of real property improvements and
similar transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Bank holds collateral and obtains personal guarantees supporting those
commitments for which collateral or other securities is deemed necessary.
The Bank's exposure to credit loss in the event of nonperformance by
the customer is the contractual amount of the commitment. Loan commitments,
lines of credit, and letters of credit are made on the same terms, including
11
collateral, as outstanding loans. As of March 31, 2004, the Bank has accrued
$150,000 for unfunded commitments related to these financial instruments with
off balance sheet risk, which is included in other liabilities.
Contractual Obligations and Commitments. No material changes, outside
the normal course of business, have been made during the first quarter of 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no business other than that of the Bank and
does not currently have any material funding commitments. The Company's
principal sources of liquidity are cash on hand and dividends received from the
Bank. The Bank is subject to various regulatory restrictions on the payment of
dividends.
The Bank's principal sources of funds for investments and operations
are net income, deposits from its primary market area, principal and interest
payments on loans, interest received on investment securities and proceeds from
maturing investment securities. Its principal funding commitments are for the
origination or purchase of loans and the payment of maturing deposits. Deposits
are considered a primary source of funds supporting the Bank's lending and
investment activities.
The Bank's most liquid assets are cash and cash equivalents, which are
cash on hand, amounts due from financial institutions, federal funds sold,
certificates of deposit with other financial institutions that have an original
maturity of three months or less and money market mutual funds. The levels of
such assets are dependent on the Bank's operating financing and investment
activities at any given time. The variations in levels of cash and cash
equivalents are influenced by deposit flows and anticipated future deposit
flows. The Bank's cash and cash equivalents (cash due from banks,
interest-bearing deposits in other financial institutions, and federal funds
sold), as of March 31, 2004, totaled $17,138,000, an increase of $4,243,000
(32.9%) from the December 31, 2003 total of $12,895,000.
As of March 31, 2004, the Bank was permitted to draw on a $36,500,000
line of credit from the FHLB of Atlanta. Borrowings under the line are secured
by a floating lien on the Bank's residential mortgage loans. As of March 31,
2004, a $7.0 million long-term convertible advance was outstanding under this
line. In addition the Bank has an unsecured line of credit in the amount of $5.0
million from another commercial bank on which it has not drawn. Furthermore, as
of March 31, 2004, the Company had outstanding $5,155,000 of its 10.6% Junior
Subordinated Deferrable Interest Debentures issued to Glen Burnie Statutory
Trust I, a Connecticut statutory trust subsidiary of the Company.
The Company's stockholders' equity increased $910,000 (3.80%) during
the three months ended March 31, 2004, due to earnings and an increase in
accumulated other comprehensive income, offset by a dividend distribution. The
Company's accumulated other comprehensive income, net of tax increased by
$287,000 (22.40%) from $1,281,000 at December 31, 2003 to $1,568,000 at March
31, 2004, as a result of an increase in unrealized holding gains on available
for sale investment securities. Retained earnings increased by $178,000 (1.76%)
as the result of the Company's earnings for the quarter offset by dividends and
a 6 for 5 stock dividend in January 2004. In addition, $49,000 was transferred
to stockholders' equity in consideration for shares to be issued under the
Company's dividend reinvestment plan in lieu of cash dividends.
The Federal Reserve Board and the FDIC have established guidelines
with respect to the maintenance of appropriate levels of capital by bank holding
companies and state non-member banks, respectively. The regulations impose two
sets of capital adequacy requirements: minimum leverage rules, which require
bank holding companies and banks to maintain a specified minimum ratio of
capital to total assets, and risk-based capital rules, which require the
maintenance of specified minimum ratios of capital to "risk-weighted" assets. At
March 31, 2004, the Bank was in full compliance with these guidelines with a
Tier 1 leverage ratio of 9.16%, a Tier 1 risk-based capital ratio of 14.60% and
a total risk-based capital ratio of 15.85%.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's accounting policies are more fully described in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and are
essential to understanding Management's Discussion and Analysis of Financial
Condition and Results of Operations. As discussed there, the preparation of
financial statements in conformity with accounting principles generally accepted
in the U.S. requires management to make estimates and assumptions about future
events that affect the amounts reported in the financial statements and
12
accompanying notes. Since future events and their effects cannot be determined
with absolute certainty, the determination of estimates requires the exercise of
judgment. Management has used the best information available to make the
estimations necessary to value the related assets and liabilities based on
historical experience and on various assumptions which are believed to be
reasonable under the circumstances. Actual results could differ from those
estimates, and such differences may be material to the financial statements. The
Company reevaluates these variables as facts and circumstances change.
Historically, actual results have not differed significantly from the Company's
estimates. The following is a summary of the more judgmental accounting
estimates and principles involved in the preparation of the Company's financial
statements, including the identification of the variables most important in the
estimation process:
Allowance for Credit Losses. The Bank's allowance for credit losses is
determined based upon estimates that can and do change when the actual events
occur, including historical losses as an indicator of future losses, fair market
value of collateral, and various general or industry or geographic specific
economic events. The use of these estimates and values is inherently subjective
and the actual losses could be greater or less than the estimates. For further
information regarding the Bank's allowance for credit losses, see "Allowance for
Credit Losses", above.
Accrued Taxes. Management estimates income tax expense based on the
amount it expects to owe various tax authorities. Accrued taxes represent the
net estimated amount due or to be received from taxing authorities. In
estimating accrued taxes, management assesses the relative merits and risks of
the appropriate tax treatment of transactions taking into account statutory,
judicial and regulatory guidance in the context of the Company's tax position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures
that is designed to provide reasonable assurance that information, which is
required to be disclosed by the Company in the reports that it files or submits
under the Securities and Exchange Act of 1934, as amended, is accumulated and
communicated to management in a timely manner. The Company's Chief Executive
Officer and Chief Financial Officer have evaluated this system of disclosure
controls and procedures as of the end of the period covered by this quarterly
report, and believe that the system is operating effectively to ensure
appropriate disclosure. There have been no changes in the Company's internal
control over financial reporting during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No.
- -----------
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
Amendment No. 1 to the Registrant's Form 8-A filed December 27, 1999,
File No. 0-24047)
3.2 Articles of Amendment, dated October 8, 2003 (incorporated by
reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended September 30, 2003, File No. 0-24047)
3.3 Articles Supplementary, dated November 16, 1999 (incorporated by
reference to Exhibit 3.3 to the Registrant's Current Report on Form
8-K filed December 8, 1999, File No. 0-24047)
3.4 By-Laws (incorporated by reference to Exhibit 3.4 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter ended September 30,
2003, File No. 0-24047)
4.1 Rights Agreement, dated as of February 13, 1998, between Glen Burnie
Bancorp and The Bank of Glen Burnie, as Rights Agent, as amended and
restated as of December 27, 1999 (incorporated by reference to Exhibit
4.1 to Amendment No. 1 to the Registrant's Form 8-A filed December 27,
1999, File No. 0-24047)
10.1 Glen Burnie Bancorp Director Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-8, File No.33-62280)
10.2 The Bank of Glen Burnie Employee Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-8, File No. 333-46943)
10.3 Amended and Restated Change-in-Control Severance Plan (incorporated by
reference to Exhibit 3.2 to the Registrant's Annual Report on Form
10-K for the Fiscal Year Ended December 31, 2001, File No. 0-24047)
10.4 The Bank of Glen Burnie Executive and Director Deferred Compensation
Plan (incorporated by reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1999, File No. 0-24047)
31.1 Rule 15d-14(a) Certification of Chief Executive Officer
31.2 Rule 15d-14(a) Certification of Chief Financial Officer
32 Section 1350 Certifications
99 Press Release issued April 29, 2004
(b) Reports on Form 8-K:
On January 28, 2004, the Registrant filed a Current Report of Form 8-K
furnishing, under Item 12, the Registrant's January 26, 2004 earnings release
with respect to the Registrant's fiscal year and quarter ended December 31,
2003.
14
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 thereunto duly authorized.
GLEN BURNIE BANCORP
(Registrant)
Date: April 30, 2004 By: /s/ F. William Kuethe, Jr.
----------------------------------
F. William Kuethe, Jr.
President, Chief Executive Officer
By: /s/ John E. Porter
----------------------------------
John E. Porter
Chief Financial Officer
15
EXHIBIT 31.1
------------
CERTIFICATION
I, F. William Kuethe, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Glen Burnie
Bancorp;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the
Registrant's most recent fiscal quarter (the Registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial
reporting; and
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the Registrant's auditors and the audit committee of Registrant's
board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal control over financial reporting.
Date: April 30, 2004 /s/ F. William Kuethe, Jr.
------------------------------------
F. William Kuethe, Jr.
Chief Executive Officer
EXHIBIT 31.2
------------
CERTIFICATION
I, John E. Porter, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Glen Burnie
Bancorp;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the
Registrant's most recent fiscal quarter (the Registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial
reporting; and
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the Registrant's auditors and the audit committee of Registrant's
board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal control over financial reporting.
Date: April 30, 2004 /s/ John E. Porter
------------------------------------
John E. Porter
Chief Financial Officer
EXHIBIT 32.1
------------
SECTION 1350 CERTIFICATIONS
In connection with the Quarterly Report of Glen Burnie Bancorp (the
"Company") on Form 10-Q for the period ending March 31, 2004 as filed with the
Securities and Exchange Commission and to which this Certification is an exhibit
(the "Report"), the undersigned hereby certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of
operations of the Company for the periods reflected therein.
Date: April 30, 2004 /s/ F. William Kuethe, Jr.
------------------------------------
F. William Kuethe, Jr.
President, Chief Executive Officer
/s/ John E. Porter
------------------------------------
John E. Porter
Chief Financial Officer
EXHIBIT 99
----------
FOR IMMEDIATE RELEASE
- ---------------------
Contact: Alison Tavik
410-768-8857 (office)
410-608-5581 (cell)
adtavik@bogb.net
GLEN BURNIE BANCORP RELEASES 1Q EARNINGS
Bancorp reports $741,000 net income for first quarter
Highlights
o 12.95% increase in net income
o 12.12% increase in basic earnings per share
o 18% decline in interest expense
o 4.65% net interest margin
GLEN BURNIE, MD (April 29, 2004) - Glen Burnie Bancorp (NASDAQ: GLBZ), parent
company of The Bank of Glen Burnie, today announced results for the first
quarter.
The company realized net income of $741,000 (+12.95%) or $.37 (+12.12%) basic
earnings per share in the quarter ended March 31, 2004. The company reported net
income of $656,000 or $.33 basic earnings per share for the same three-month
period in 2003. The 2003 basic earnings per share figure has been adjusted to
reflect the 20% stock dividend paid on January 16, 2004.
"We are off to a strong start," said President & CEO F. William Kuethe, Jr.
"Interest income rose slightly while interest expense declined by $206,000, an
18% decrease from the same period last year. Our 2004 first quarter net interest
margin rose to 4.65% compared with 4.53% for the same period in 2003."
The company had an increase in securities gains which rose from $92,000 in the
first quarter of 2003 to $203,000 for the same period in 2004. "Indications
strongly point to a rising interest rate environment," Kuethe stated. "Proceeds
from securities sales were primarily used to reduce short-term borrowing and
interest rate sensitivity."
In March 2004, The Bank of Glen Burnie enhanced its Internet banking service to
include Internet bill payment. Registered users can make individual or recurring
payments to any business or vendor in the United States through the bank's third
party vendor, iPay, LLC. Payments are made electronically or by check, with no
additional fee charged for payments made by check. Special features include the
ability to send money to friends or family and the ability to access more than
one funding account.
"Our customers are really pleased with this product," said Senior Vice President
of Operations Thomas Cooper. "Its versatility has great appeal to users at all
skill levels."
The Bank of Glen Burnie has received the 5-Star Superior Rating from BAUER
FINANCIAL Reports, Inc., the nation's leading independent bank research firm for
the past six consecutive semi-annual periods. This distinction denotes the
highest level of strength, safety and performance measured by Bauer and is based
on factors such as capitalization, liquidity, loan delinquency rate and
historical performance.
The company paid its 46th consecutive dividend on April 5, 2004 to shareholders
of record at the close of business on March 24, 2004. Glen Burnie Bancorp will
host its Annual Meeting of Stockholders on Thursday, May 13th at La Fontaine
Bleu in Glen Burnie, Maryland. Registration opens at 1:30 p.m. and the meeting
will begin at 2 p.m.
Glen Burnie Bancorp, parent company to The Bank of Glen Burnie,
(www.thebankofglenburnie.com) maintains assets totaling approximately $300
million. The Bank of Glen Burnie is a locally-owned community bank with seven
branches serving Anne Arundel County.
# # # #
Certain information contained in this news release, which does not relate to
historical financial information, may be deemed to constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are subject to certain risks and uncertainties, which
could cause the company's actual results in the future to differ materially from
its historical results and those presently anticipated or projected. For a more
complete discussion of these and other risk factors, please see the company's
reports filed with the Securities and Exchange Commission.
Glen Burnie Bancorp and Subsidiaries
Condensed Consolidated Balance Sheet
(dollars in thousands, except per share amounts)
(unaudited)
March December
31, 2004 31, 2003
-------------------------------
Assets
Cash and due from banks $11,855 $11,120
Interest bearing deposits 411 57
Federal funds sold 4,872 1,718
Investment securities 95,005 103,181
Common Stock in the Glen Burnie Statutory Trust I 155 155
Loans, net of allowance 173,128 172,819
Premises and equipment at cost, net of accumulated depreciation 4,114 4,220
Other real estate owned 170 172
Other assets 8,652 8,810
- --------------------------------------------------------------------------------------------------------------------------
Total assets $298,362 $302,252
==========================================================================================================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits $258,817 $256,908
Short-term borrowings 196 6,602
Long-term borrowings 7,220 7,227
Guaranteed preferred beneficial interests in Glen Burnie
Bancorp junior subordinated debentures 5,155 5,155
Other liabilities 2,117 2,413
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities $273,505 $278,305
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, par value $1, authorized 15,000,000 shares;
issued and outstanding March 31, 2004 2,030,459 shares;
December 31, 2003 1,689,281 shares $2,030 $1,689
Surplus 10,966 10,862
Retained earnings 10,293 10,115
Accumulated other comprehensive income 1,568 1,281
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity $24,857 $23,947
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $298,362 $302,252
==========================================================================================================================
Glen Burnie Bancorp and Subsidiaries
Condensed Consolidated Statements of Income
(dollars in thousands, except per share amounts)
Three Months Ended
March 31,
-------------------------------
2004 2003
-------------------------------
Interest income on
Loans, including fees $2,741 $2,819
U.S. Treasury and U.S. Government agency securities 555 487
State and municipal securities 465 375
Other 120 131
- --------------------------------------------------------------------------------------------------------------------------
Total interest income 3,881 3,812
- --------------------------------------------------------------------------------------------------------------------------
Interest expense on
Deposits 669 899
Junior subordinated debentures 136 136
Long-term borrowings 108 108
Short-term borrowings 25 1
- --------------------------------------------------------------------------------------------------------------------------
Total interest expense 938 1,144
- --------------------------------------------------------------------------------------------------------------------------
Net interest income 2,943 2,668
Provision for credit losses 140 0
- --------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for credit losses 2,803 2,668
- --------------------------------------------------------------------------------------------------------------------------
Other income
Service charges on deposit accounts 224 258
Other fees and commissions 185 142
Other non-interest income 3 2
Income on life insurance 51 66
Gains on investment securities 230 92
- --------------------------------------------------------------------------------------------------------------------------
Total other income 693 560
- --------------------------------------------------------------------------------------------------------------------------
Other expenses
Salaries and employee benefits 1,514 1,465
Occupancy 174 212
Other expenses 896 798
- --------------------------------------------------------------------------------------------------------------------------
Total other expenses 2,584 2,475
- --------------------------------------------------------------------------------------------------------------------------
Income before income taxes 912 753
Income tax expense (benefit) 171 97
- --------------------------------------------------------------------------------------------------------------------------
Net income $741 $656
==========================================================================================================================
Net income per share of common stock $0.37 $0.33
==========================================================================================================================
Weighted-average shares of common stock outstanding 2,027,464 2,014,608
==========================================================================================================================