<PAGE>
1
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 September 30, 2000
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
--- ---
At November 7, 2000, the number of shares outstanding of the registrant's common
stock was 1,104,956.
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2
TABLE OF CONTENTS
Part I - Financial Information Page
----
Item 1. Financial Statements:
-------
Condensed Consolidated Balance Sheets,
September 30, 2000 (unaudited) and December 31, 1999 (audited) 3
Condensed Consolidated Statements of Income for the Three
And Nine Months Ended September 30, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Comprehensive Income
for the Three and Nine Months Ended September 30, 2000 and
1999 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and 1999 (unaudited) 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
------- and Results of Operations 9
Item 3. Quantitative And Qualitative Disclosure About Market Risk 13
-------
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 14
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3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
<TABLE>
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
---- ----
(unaudited)
<S> <C> <C>
Cash and due from banks $7,937 $ 8,317
Interest-bearing deposits in other financial institutions 41 10
Federal funds sold 3,887 556
------ --------
Cash and cash equivalents 11,865 8,883
Investment securities available for sale, at fair value 16,772 15,317
Investment securities held to maturity, at cost
(fair value September 30: $31,542 December 31: $27,042) 32,855 28,657
Loans, less allowance for credit losses
(September 30: $3,456; December 31: $2,922) 163,281 151,107
Premises and equipment at cost, less accumulated depreciation 4,013 4,253
Other real estate owned 487 559
Other assets 4,267 4,663
-------- --------
Total assets $233,540 $213,439
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $201,857 $194,090
Short-term borrowings 785 2,465
Long-term borrowings 7,000 0
Other liabilities 2,364 1,782
-------- --------
Total liabilities 212,006 198,337
-------- --------
Guaranteed preferred beneficial interests in Glen Burnie Bancorp junior
subordinated debentures 5,000 0
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, par value $1,authorized 15,000,000 shares; issued and outstanding:
September 30: 1,104,956 shares; December 31: 1,093,496 shares $ 1,105 $ 1,093
Surplus 10,327 10,149
Retained earnings 5,209 4,013
Accumulated other comprehensive loss (107) (153)
-------- ---------
Total stockholders' equity 16,534 15,102
-------- ---------
Total liabilities and stockholders' equity $233,540 $ 213,439
======== =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
4
<TABLE>
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Interest income on:
<S> <C> <C> <C> <C>
Loans, including fees $3,363 $3,038 $10,054 $8,758
U.S. Treasury and U.S. Government agency securities 677 790 2,017 2,463
State and Municipal securities 32 0 45 0
Other 69 129 172 433
------ ----- ----- ------
Total interest income 4,141 3,957 12,288 11,654
------ ----- ------ ------
Interest expense on:
Deposits 1,422 1,388 4,124 4,152
Short-term borrowings 56 22 90 43
----- ----- ----- -----
Total interest expense 1,478 1,410 4,214 4,195
----- ----- ----- -----
Net interest income 2,663 2,547 8,074 7,459
Provision for credit losses 0 0 0 0
----- ----- ----- -----
Net interest income after provision for credit losses 2,663 2,547 8,074 7,459
----- ----- ----- -----
Other income:
Service charges on deposit accounts 237 293 724 834
Other fees and commissions 148 74 464 207
Other non-interest income 1 24 60 118
Gains (loss) on investment securities (26) 2 (26) 29
Gain on sale of real estate 0 0 447 0
- - --- -----
Total other income 360 393 1,669 1,188
----- --- ----- -----
Other expenses:
Salaries and employee benefits 1,368 1,365 4,141 3,960
Occupancy 155 150 468 415
Other expenses 815 799 2,580 2,797
----- ----- ----- -----
Total other expenses 2,338 2,314 7,189 7,172
----- ----- ----- -----
Income before income taxes 685 626 2,554 1,475
Income tax expense 219 223 891 512
----- ----- ------ -----
Net income $466 $403 $1,663 $ 963
==== ==== ====== =====
Basic and diluted earnings per share of common stock .42 .37 1.51 .88
==== ==== ====== =====
Weighted average shares of common stock outstanding 1,102,518 1,088,404 1,099,427 1,084,318
========= ========= ========= =========
Dividends declared per share of common stock 0.15 .083 0.425 .249
==== ==== ===== ====
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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5
<TABLE>
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
------------------- -----------------
September 30 September 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $466 $403 $1,663 $963
Other comprehensive income (loss), net of tax
Unrealized gains (losses) securities:
Unrealized holding gains (losses) 82 (277) 46 (514)
arising during period
Reclassification adjustment for (gains) 16 (2) 16 (21)
losses included in net income ---- ---- ------ ----
Comprehensive income $564 $124 $1,725 $428
==== ==== ====== ====
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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6
<TABLE>
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Nine Months Ended September 30,
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $1,663 $963
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion 881 507
Provision for credit losses 0 0
Changes in assets and liabilities:
Decrease in other assets 320 100
Increase in other liabilities 590 582
----- -----
Net cash provided by operating activities 3,454 2,152
----- -----
Cash flows from investing activities:
Maturities of available for sale mortgage-backed securities 6,700 0
Proceeds from disposals of investment securities 1,000 20,011
Purchases of investment securities (13,595) (11,856)
Increase in loans, net (12,174) (21,399)
Purchases of premises and equipment (277) (211)
Purchases of other real estate 0 (130)
Proceeds from sale of other real estate 72 584
------- -------
Net cash used by investing activities (18,274) (13,001)
------- -------
Cash flows from financing activities:
Increase (decrease) in deposits, net 7,767 (2,347)
Increase (decrease) in short-term borrowings (1,680) 7,691
Proceeds from long-term borrowings 7,000 0
Dividends paid (475) (243)
Common stock dividends reinvested 140 0
Issuance of guaranteed preferred beneficial interests in
Glen Burnie Bancorp junior subordinated debentures 5,000 0
Issuance of common stock 50 205
------ -------
Net cash provided by financing activities 17,802 5,306
------ -------
Increase (decrease) in cash and cash equivalents 2,982 (5,543)
Cash and cash equivalents, beginning of year 8,883 16,020
------- -------
Cash and cash equivalents, end of period $11,865 $10,477
======= =======
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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7
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 generally accepted accounting principles. 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 and nine months ended September 30, 2000 and 1999.
Operating results for the three and nine month periods ended September
30, 2000 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2000.
NOTE 2 - EARNINGS PER SHARE
Information for net income per share and weighted average shares
outstanding for prior periods have been restated to reflect a 20% stock dividend
paid in January 2000.
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.
NOTE 3 - CONTINGENCIES
On February 15, 2000, the Bank sold its credit card portfolio to
another financial institution. The outstanding balance of the portfolio as of
the date of settlement was $1,064,857.
As a result of the sale, the Bank was required to maintain a loan loss
reserve for all non-business accounts with the financial institution of
approximately $48,000, that was funded with part of the settlement proceeds.
This reserve is for a one year period, with any remaining reserve returned to
the Bank. The Bank has no additional responsibilities for any loan losses in
excess of the initial reserves. As of September 30, 2000, approximately $23,000
remained in the loan loss reserve. In addition to the loan loss reserve for
non-business accounts, the Bank is also required to guarantee all business
accounts for a one year period. Total Bank exposure for business accounts is
approximately $400,000, with a total outstanding balance of approximately
$73,111 as of September 30, 2000.
NOTE 4 - JUNIOR SUBORDINATED DEBENTURES
On September 7, 2000, Glen Burnie Statutory Trust I, a Connecticut
business trust newly formed and wholly owned by Glen Burnie Bancorp, issued $5
million of capital securities at 10.6% to institutional investors. The proceeds
were upstreamed to Glen Burnie Bancorp as junior subordinated debt under the
same terms and conditions. Glen Burnie Bancorp has, through various contractual
arrangements, fully and unconditionally guaranteed all of Statutory Trust I's
obligations with respect to the capital securities. These capital securities
qualify as Tier I capital and are presented in the Consolidated Statements of
Condition as "Guaranteed Preferred Beneficial Interests in Glen Burnie Bancorp's
Junior Subordinated Debentures." The sole asset of the Statutory Trust I is $5
million of junior subordinated debentures issued by Glen Burnie Bancorp. These
junior subordinated debentures also carry an interest rate of 10.6 percent. Both
the capital securities of Statutory Trust I and the junior subordinated
debentures of Glen Burnie Bancorp will mature on September 7, 2030; however,
under certain circumstances, the maturity of both may be shortened to a date not
earlier than September 7, 2010.
<PAGE>
8
NOTE 5 - LONG-TERM BORROWINGS
Term borrowings consist of a $7,000,000 convertible advance from the
Federal Home Loan Bank of Atlanta. The borrowing has a final maturity of
September 29, 2010 and an interest rate of 5.84%, which is fixed for two years
through September 2002. At that time, the Federal Home Loan Bank of Atlanta has
the option of converting the rate to 3 month LIBOR, however, if converted the
borrowing can be prepaid without penalty. This borrowing is secured by a blanket
lien on the bank's mortgage loan portfolio.
NOTE 6 - SUBSEQUENT EVENT
In October 2000, the Bank settled the net assets of its terminated
defined benefit plan. Net proceeds from the settlement were $2,902,906, of which
the Bank will recognize a settlement gain of $1,591,000 in the 4th quarter 2000.
The Bank will also accrue a 25% safe harbor retirement plan contribution of
$397,700, that will be included in employee benefit expenses, and excise taxes
of $238,600, payable on settlement gains recognized, included in Federal and
state income tax expense.
<PAGE>
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
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 $466,000 ($.42 basic
and diluted earnings per share) for the third quarter of 2000, compared to third
quarter 1999 consolidated net income of $403,000 ($0.37 basic and diluted
earnings per share). Year-to-date consolidated net income for the nine months
ended September 30, 2000 was $1,663,000 ($1.51 basic and diluted earnings per
share), compared to $963,000 ($.88 basic and diluted earnings per share) for the
nine months ended September 30, 1999. The increase in consolidated net income
was primarily due to an increase in both net interest income and other
non-interest income.
Net Interest Income. The Company's consolidated net interest income
prior to provision for credit losses for the three and nine months ended
September 30, 2000 was $2,663,000 and $8,074,000, respectively, compared to
$2,547,000 and $7,549,000, respectively, for the same periods in 1999, an
increase of $116,000 or 4.6% for the three month period, and an increase of
$525,000, or 7% for the nine month period. The increase in net interest income
for both the three and nine month periods were primarily attributable to an
increase in total interest income.
Interest income increased $184,000 (4.6%) for the three months ended
September 30, 2000 and increased $634,000 (5.4%) for the nine months ended
September 30, 2000, compared to the same periods in 1999. The increases in
interest income were attributable to increasing yields on the loan portfolio net
of decreases in investments and other interest income. Interest income on loans
increased $325,000 (10.7%) for the three months ended September 30, 2000, and
increased $1,296,000 (14.8%) for the nine months ended September 30, 2000,
compared to the same periods in 1999. These increases were due to growth in the
Bank's loan portfolio.
Interest expense increased $68,000 (4.8%) for the three months ended
September 30, 2000 compared to the 1999 period, due to an increase in
certificates of deposit, and increased $19,000 (0.5%) for the nine months ended
September 30, 2000, compared to the 1999 period, due to an increase in federal
fund borrowings and certificates of deposit, which more than offset a decline in
the interest paid on money market demand account deposits.
Net interest margins for the three and nine months ended September 30,
2000 were 5.19% and 5.42%, respectively, compared to tax equivalent net interest
margins of 5.03% and 5.03% for the three and nine months ended September 30,
1999, respectively. The increase in net interest margins for the three and nine
months ended September 30, 2000 were primarily due to increases in interest
rates on earning assets, and the recovery of non-accrual interest.
Provision For Credit Losses. The Company made no additional provision
for credit losses during the three and nine month periods ended September 30,
2000 and 1999. As of September 30, 2000, the allowance for credit losses equaled
771.2% of non-accrual and past due loans compared to 276.97% at December 31,
1999 and 260.6% at September 30, 1999. During the three and nine month periods
ended September 30, 2000, the Company recorded net recoveries of $71,000 and
$534,000, respectively, compared to $159,000 and $157,000, respectively, in net
charge-offs during the corresponding periods of the prior year. On an annualized
basis, net recoveries for the 2000 period represent .45% of the average loan
portfolio.
Other Income. Other income decreased $33,000 (8.4%) and increased
$481,000 (40.5%), respectively, during the three and nine months ended September
30, 2000 compared to the prior year periods. The increase was primarily due to
an increase in interchange fees from the Bank's debit card and ATM charges to
non-customers included in other fees and commissions, a $59,000 gain recognized
on the sale of the Bank's credit card portfolio which is included in "Other
non-interest income", and a gain of $447,000 on the sale of other real estate
owned. The Company also recorded increases in service charges on deposit
accounts and other fees and commissions, which the Company attributes to the
increases in deposits and in the loan portfolio between the periods.
Other Expense. Other expense increased by $24,000 (or 1.0%) and $17,000
(or 0.2%), respectively, during the three and nine months ended September 30,
<PAGE>
10
2000 compared to the prior year periods. Included in other expense for the 1999
period was a $150,000 payment made to First Mariner Bancorp in January 1999
pursuant to a standstill agreement compared to a $131,378 payment in the current
year. The Company will make three additional payments of $131,378 each over the
next three years, provided First Mariner Bancorp complies with the standstill
agreement. The increase in other expense for the nine month period was primarily
due to an increase in employee salaries and employee benefits.
Income Taxes. During the three and nine months ended September 30,
2000, the Company recorded income tax expense of $219,000 and $891,000,
respectively, compared to an income tax expense of $223,000 and $512,000,
respectively, for the corresponding periods of the prior year. The Company's
effective tax rate for the three and nine month periods in 2000 were 32.0% and
34.9%, respectively, compared to 35.6% and 34.7%, respectively, for the prior
year periods.
FINANCIAL CONDITION
General. The Company's assets increased to $233,539,000 at September
30, 2000 from $213,439,456 at December 31, 1999 primarily due to an increase in
the size of the loan portfolio. The Bank's net loans totaled $163,280,685 at
September 30, 2000, compared to $151,106,560 on December 31, 1999, an increase
of $12,174,125 (8.1%). The increase in loans was primarily attributable to an
increase in the indirect loan portfolio. At September 30, 2000, indirect loans
totaled $61,766,561 compared to $50,966,968 at December 31, 1999. The Bank's
other loan portfolios have held steady or declined during the year.
The Company's total investment securities portfolio (including both
investment securities available for sale and investment securities held to
maturity) totaled $49,626,948 at September 30, 2000, a $5,652,453 or 12.9%
increase from $43,974,495 at December 31, 1999. The increase was primarily the
result of investing the proceeds from the Trust Preferred issuance. The Bank's
cash and cash equivalents (cash due from banks, interest-bearing deposits in
other financial institutions, and federal funds sold), as of September 30, 2000,
totaled $11,865,648, an increase of $2,982,326 (33.6%) from the December 31,
1999 total of $8,883,322. The aggregate market value of investment securities
held by the Bank as of September 30, 2000 was $48,314,000 compared to
$42,359,000 as of December 31, 1999, a $5,955,000 (14.1%) increase.
Deposits as of September 30, 2000 totaled $201,857,000, an increase of
$7,767,000 (4.0%) for the year to date. Demand deposits as of September 30, 2000
totaled $48,486,893, which is an increase of $3,342,600 (7.4%) from $45,144,293
at December 31, 1999. NOW accounts as of September 30, 2000 totaled $19,431,929
which is an increase of $869,151 (4.7%) from $18,562,778 at December 31, 1999.
Money market accounts decreased by $1,320,614 (or 7.5%), from $17,628,664 at
December 31, 1999, to $16,308,050 at September 30, 2000. Savings deposits
increased by $1,949,167 (or 4.8%) from $40,925,287 at December 31, 1999, to
$42,874,454 on September 30, 2000. Certificates of deposit $100,000 and over
totaled $10,574,053 on September 30, 2000, an increase of $4,228,874 (66.6%)
from the December 31, 1999 total of $6,345,179. Other time deposits (made up of
certificates of deposit less than $100,000 and individual retirement accounts)
totaled $64,062,825 on September 30, 2000, a $1,229,479 (1.9%) decrease from the
$65,292,304 total on December 31, 1999. The Company attributes the increase in
deposits to the general increase in market rates during the period, which have
made deposits more competitive. In addition, the Bank promoted 13-month and
25-month certificate accounts during the period.
As a result of the growth in deposits, the Company reduced its
short-term borrowings from $2,464,936 at December 31, 1999 to $785,265 at
September 30, 2000. The Company's remaining short-term borrowings consist of
amounts payable to the U.S. Treasury on treasury tax and loan accounts.
In September 2000, a newly formed trust subsidiary of the Company
issued $5,000,000 of trust preferred capital securities, the proceeds of which
were paid to the Company in payment for the Company's junior subordinated
debentures issued to the trust. These proceeds are considered tier 1 capital for
regulatory purposes. On September 29, 2000, the company obtained a $7,000,000
advance from the FHLB of Atlanta. The purpose of the advance was to fund an
arbitrage to partially offset the interest cost of the Trust Preferred
transaction.
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.
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11
<TABLE>
<CAPTION>
At September 30 At December 31,
2000 1999
---- ----
(Dollars in Thousands)
<S> <C> <C>
Restructured loans $306 $243
==== ====
Non-accrual loans:
Real estate -- mortgage:
Residential $123 237
Commercial 76 135
Real estate - construction 0 280
Installment 136 315
Credit card & related 0 0
Commercial 100 45
---- -----
Total nonaccrual loans 435 1,012
---- -----
Accruing loans past due 90 days or more: Real estate - mortgage:
Residential 10 43
Commercial 0 0
Real estate - construction 0 0
Installment 0 0
Credit card & related 1 0
Commercial 0 0
Other 2 0
---- ----
Total accruing loans past due 90 days or more 13 43
---- ----
Total non-accrual and past due loans $448 $1,055
==== ======
Non-accrual and past due loans to gross loans 0.27% 0.68%
==== ====
Allowance for credit losses to non-accrual and past due loans 771.2% 276.97%
===== ======
</TABLE>
At September 30, 2000, there were $151,000 in loans outstanding not
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.
Transactions in the allowance for credit losses for the nine months
ended September 30, 2000 and 1999 were as follows:
<PAGE>
12
<TABLE>
<CAPTION>
Nine Months Ended
September 30
2000 1999
---- ----
(Dollars in Thousands)
<S> <C> <C>
Beginning balance $2,922 $2,841
Charge-offs (511) (523)
Recoveries 1,045 366
----- ------
Net recoveries (charge-offs) 534 (157)
Provisions charged to operations 0 0
----- ------
Ending balance $3,456 $2,684
====== ======
Average loans $156,927 $137,569
Net recoveries to average loans (annualized) 0.45% 0.11%
</TABLE>
During the nine months ended September 30, 2000, the Company had net
recoveries of $534,000 compared to net charge-offs of $157,000 during the
comparable period in 1999. The Company attributes these results to (i) continued
recoveries of previously charged-off loans and (ii) a reduction in nonperforming
assets (both in dollar volume and as a percentage of the loan portfolio) as the
Bank continues to improve the quality of its assets.
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 September 30, 2000, totaled $11,865,000, an increase of $2,982,000
(33.6%) from the December 31, 1999 total of $8,883,000.
The Bank may draw on a $25.5 million line of credit from the Federal
Home Loan Bank of Atlanta. Borrowings under the line are secured by a lien on
the Bank's residential mortgage loans. As of September 30, 2000, $7,000,000 was
outstanding under this line as detailed in Note 5. The Bank also has a secured
$5.0 million of credit from another commercial bank on which no amounts were
outstanding on September 30, 2000.
The Company's stockholders' equity increased $1,432,000 or 9.5%, during
the nine months ended September 30, 2000, as earnings offset decreases in the
equity account attributable to accrued dividends. The Company's accumulated
other comprehensive losses decreased by $46,000 to $107,000 at September 30,
2000 from $153,000 at December 31, 1999 as a result of unrealized holding gains
arising during the period due to decreases in interest rates. Retained earnings
increased by $1,196,000 as the result of the Company's earnings during the nine
months ended September 30, 2000, which were partially offset by accrued
<PAGE>
13
dividends. In addition, $140,000 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
September 30, 2000, the Bank was in full compliance with these guidelines with a
Tier 1 leverage ratio of 9.55%, a Tier 1 risk-based capital ratio of 12.37% and
a total risk-based capital ratio of 13.63%.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
<PAGE>
14
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 By-Laws (incorporated by reference to Exhibit 3.2 to the Registrant's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1998, 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)
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 Change-in-Control Severance Plan (incorporated by reference to Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 1997, 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)
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
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15
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: November 13, 2000 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
