10-Q/A 1 gbb3310110qa.txt GLEN BURNIE BANCORP 3-31-01 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended March 31, 2001 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 May 3, 2000, the number of shares outstanding of the registrant's common stock was 1,102,634. 2 TABLE OF CONTENTS Part I - Financial Information Page ---- Item 1. Financial Statements: ------- Condensed Consolidated Balance Sheets, March 31, 2001 (unaudited) and December 31, 2000 (audited) 3 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2001 and 2000 (unaudited) 4 Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2001 and 2000 (unaudited) 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (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 ------- About Market Risk 12 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 13 ------- 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- GLEN BURNIE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited)

March 31, 2001 December 31, ASSETS (unaudited) 2000 ---- Cash and due from banks $7,681 $9,559 Interest-bearing deposits in other financial institutions 9,496 51 Federal funds sold 7,038 5,899 ------ ------ Cash and cash equivalents 24,215 15,509 Certificates of deposit in other financial institutions 100 100 Investment securities available for sale, at fair value 24,878 21,309 Investment securities held to maturity, at cost (fair value March 31: $29,441 December 31: $31,019) 29,277 31,286 Federal Home Loan Bank stock, at cost 652 652 Common Stock in the Glen Burnie Statutory Trust I 155 155 Loans, less allowance for credit losses (March 31: $3,331; December 31: $3,385) 158,129 162,374 Premises and equipment, at cost, less accumulated depreciation 4,218 4,268 Other real estate owned 483 484 Other assets 2,864 3,074 -------- -------- Total assets $244,971 $239,211 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits $212,577 $205,968 Short-term borrowings 127 488 Long-term borrowings 7,292 7,297 Other liabilities 2,271 3,122 -------- -------- Total liabilities $222,267 $216,875 -------- -------- Guaranteed preferred beneficial interests in Glen Burnie Bancorp junior subordinated debentures 5,155 5,155 ----- ----- STOCKHOLDERS' EQUITY: Common stock, par value $1,authorized 15,000,000 shares; Issued and outstanding: March 31: 1,104,634 shares; December 31: 1,110,049 shares $1,105 $1,110 Surplus 10,299 10,374 Retained earnings 5,844 5,544 Accumulated other comprehensive income 301 153 -------- -------- Total stockholders' equity 17,549 17,181 -------- -------- Total liabilities and stockholders' equity $244,971 $239,211 ======== ======== See accompanying notes to condensed consolidated financial statements.

4 GLEN BURNIE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts) (Unaudited)

Three Months Ended March 31 --------------------------- 2001 2000 ---- ---- Interest income on: Loans, including fees $3,286 $3,118 U.S. Treasury and U.S. Government agency securities 642 676 State and Municipal securities 124 0 Other 239 35 ----- ----- Total interest income 4,291 3,829 ----- ----- Interest expense on: Deposits 1,488 1,319 Short-term borrowings 7 25 Long-term borrowings 108 0 Junior subordinated debentures 141 0 ----- ----- Total interest expense 1,744 1,344 ----- ----- Net interest income 2,547 2,485 Provision for credit losses 0 0 ----- ----- Net interest income after provision for credit 2,547 2,485 ----- ----- losses Other income: Service charges on deposit accounts 232 247 Other fees and commissions 141 134 Other non-interest income 7 59 Gains on investment securities 18 0 ----- ----- Total other income 398 440 ----- ----- Other expenses: Salaries and employee benefits 1,333 1,373 Occupancy 164 170 Other expenses 791 843 ----- ----- Total other expenses 2,288 2,386 ----- ----- Income before income taxes 657 539 Income tax expense 190 172 ----- ----- Net income $ 467 $367 ===== ==== Basic and diluted earnings per share of common stock $0.42 $ 0.33 ===== ====== Weighted average shares of common stock outstanding 1,105,908 1,096,191 ========= ========= Dividends declared per share of common stock $0.15 $0.125 ===== ====== See accompanying notes to condensed consolidated financial statements.

5 GLEN BURNIE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in Thousands) (Unaudited)

Three Months Ended March 31 --------------------------- 2001 2000 ---- ---- Net income $467 $367 Other comprehensive income (loss), net of tax Unrealized gains (losses) securities: Unrealized holding gains (losses) arising during period 159 (32) Reclassification adjustment for (gains) losses included in net income (11) 0 ---- ---- Comprehensive income $615 $335 ==== ==== See accompanying notes to condensed consolidated financial statements.

6 GLEN BURNIE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)

Three Months Ended March 31, ---------------------------- 2001 2000 ---- ---- Cash flows from operating activities: Net income $467 $367 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and accretion 151 187 Provision for credit losses 0 0 Changes in assets and liabilities: Decrease in other assets 83 469 Decrease in other liabilities (638) (181) ------- ------- Net cash provided by operating activities 63 842 ------- ------- Cash flows from investing activities: Maturities of available for sale mortgage-backed securities 738 891 Proceeds from disposals of investment securities 2,500 0 Purchases of investment securities (4,524) (650) Decrease (increase) in loans, net 4,245 (4,988) Purchases of premises and equipment (100) (38) Proceeds from sale of other real estate 1 23 ------- ------- Net cash provided (used) by investing activities 2,860 (4,762) ------- ------- Cash flows from financing activities: Increase in deposits, net 6,609 7,551 Decrease in short-term borrowings (361) (2,114) Repayment of long-term borrowings (5) 0 Dividends paid (380) (138) Common stock dividends reinvested 39 65 Issuance of common stock 0 29 Repurchase and retirement of common stock (119) 0 ------- ------- Net cash provided by financing activities 5,783 5,393 ------- ------- Increase in cash and cash equivalents 8,706 1,473 Cash and cash equivalents, beginning of year 15,509 8,883 ------- ------- Cash and cash equivalents, end of period $24,215 $10,356 ======= ======= See accompanying notes to condensed consolidated financial statements.

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 months ended March 31, 2001 and 2000. Operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. NOTE 2 - EARNINGS PER SHARE 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. 8 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, had consolidated net income of $467,000 ($0.42 basic and diluted earnings per share) for the first quarter of 2001, compared to first quarter 2000 consolidated net income of $367,000 ($0.33 basic and diluted earnings per share). The increase in consolidated net income was primarily due to an increase in securities income, partially offset by an increase in interest expenses in long-term borrowings and junior subordinated debentures. Net Interest Income. The Company's consolidated net interest income prior to provision for credit losses for the three months ended March 31, 2001 was $2,547,000, compared to $2,485,000 for the same period in 2000, an increase of $62,000 or (2.49%) for the three-month period. This increase was primarily attributable to an increase in securities income, offset in part by interest expense on long-term borrowings, junior subordinated debentures and deposits. Interest income increased $462,000 (12.07%) for the three months ended March 31, 2001, compared to the same period in 2000, due to an increase in securities income. Interest income on loans increased $168,000 (5.39%) for the three months ended March 31, 2001, compared to the same period in 2000, due to an increased loan portfolio. Interest expense increased $400,000 (29.76%) for the three months ended March 31, 2001 compared to the 2000 period, due to $108,000 interest on long-term borrowings, $141,000 interest on junior subordinated debentures, and an increase in deposit expense of $169,000. This was partially offset by an $18,000 decrease in interest on short-term borrowings. Net interest margins for the three months ended March 31, 2001 was 5.03%, compared to tax equivalent net interest margins of 5.05% for the three months ended March 31, 2000. The decrease in net interest margins for the three ended March 31, 2001 was primarily due to a decline in the interest rates on earning assets. Provision For Credit Losses. The Company made no additional provision for credit losses during the three month periods ended March 31, 2001 and 2000. As of March 31, 2001, the allowance for credit losses equaled 1,556.54% of non-accrual and past due loans compared to 837.87% at December 31, 2000 and 275.89% at March 31, 2000. During the three month period ended March 31, 2001, the Company recorded net charge-offs of $54,000, compared to net charge-offs of $39,000 during the corresponding periods of the prior year. On an annualized basis, net charge-offs for the 2001 period represent .14% of the average loan portfolio. Other Income. Other income decreased from $440,000 for the three month period ended March 31, 2000, to $398,000 for the corresponding 2001 period, a $42,000 (9.55%) decrease. The decrease was primarily due to a decline in the service charges earned on deposit accounts and other non-interest income, partially offset by an increase in other fees and commissions. Other Expense. Other expense decreased from $2,386,000 for the three month period ended March 31, 2000, to $2,288,000 for the corresponding 2001 period, a $98,000 (4.11%) decrease. The decrease was primarily due to a decrease in salary expenses and legal and professional fees. Income Taxes. During the three months ended March 31, 2001, the Company recorded income tax expense of $190,000, compared to an income tax expense of $172,000, for the corresponding period of the prior year. The increase in income tax expenses reflect the Company's higher earnings during the current year's period. The Company's effective tax rate for the three month period in 2001 was 29%, compared to 32% for the prior year period. 9 FINANCIAL CONDITION General. The Company's assets increased to $244,971,000 at March 31, 2001 from $239,211,000 at December 31, 2000 primarily due to an increase in interest-bearing deposits in other financial institutions, federal funds sold and investment securities which were offset by a decrease in loans. The Bank's net loans totaled $158,129,000 at March 31, 2001, compared to $162,374,000 on December 31, 2000, a decrease of $4,245,000 (2.61%), primarily attributable to a decline in commercial and industrial mortgages. The Company's total investment securities portfolio (including both investment securities available for sale and investment securities held to maturity) totaled $54,155,000 at March 31, 2001, a $1,560,000 or 2.97% increase from $52,595,000 at December 31, 2000. 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, 2001, totaled $24,215,000, an increase of $8,706,000 (56.14%) from the December 31, 2000 total of $15,509,000. The aggregate market value of investment securities held by the Bank as of March 31, 2001 was $54,319,000 compared to $52,328,000 as of December 31, 2000, a $1,991,000 (3.8%) increase. Deposits as of March 31, 2001 totaled $212,577,000, which is an increase of $6,609,000 (3.0%) from $205,968,000 at December 31, 2000. Demand deposits as of March 31, 2001 totaled $51,699,024 which is a decrease of $1,263,467 (2.39%) from $52,962,491 at December 31, 2000. NOW accounts as of March 31, 2001 totaled $20,136,635 which is an increase of $491,750 (2.50%) from $19,644,885 at December 31, 2000. Money market accounts as of March 31, 2001 totaled $17,439,761, which is an increase of $673,371 (4.01%), from $16,766,390 at December 31, 2000. Savings deposits as of March 31, 2001 totaled $41,318,951, an increase of $804,421 (2%) from $40,514,530 at December 31, 2000. Certificates of deposit over $100,000 totaled $13,360,876 on March 31, 2001, an increase of $1,365,120 (11.38%) from $11,995,756 at December 31, 2000. Other time deposits (made up of certificates of deposit less than $100,000 and individual retirement accounts) totaled $68,368,830 on March 31, 2001, a $4,457,654 (7%) increase from the $63,911,176 total at December 31, 2000. The Company attributes the increase in total deposits to the recent flow of funds out of the stock market into safer investments. 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. 10

At March 31 At December 31, ----------- --------------- 2001 2000 ---- ---- (Dollars in Thousands) ---------------------- Restructured loans $212 $370 ==== ==== Non-accrual loans: Real estate - mortgage: Residential $111 $120 Commercial 0 77 Real estate - construction 0 0 Installment 70 72 Credit card & related 0 0 Commercial 8 101 ---- ---- Total nonaccrual loans 189 370 ---- ---- Accruing loans past due 90 days or more: Real estate - mortgage: Residential 24 34 Commercial 0 0 Real estate - construction 0 0 Installment 0 0 Credit card & related 1 0 Commercial 0 0 Other Total accruing loans past due 90 days or more 25 34 ---- ---- Total non-accrual and past due loans $214 $404 ==== ==== Non-accrual and past due loans to gross loans .13% 0.24% ==== ===== Allowance for credit losses to non-accrual and past due loans 1556.54% 837.87% ======== =======

At March 31, 2001, 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. 11 Transactions in the allowance for credit losses for the three months ended March 31, 2001 and 2000 were as follows:

Three Months Ended March 31 --------------------------- 2001 2000 ---- ---- (Dollars in Thousands) ---------------------- Beginning balance $ 3,385 $2,992 Charge-offs (155) (203) Recoveries 101 164 ------- ------ Net charge-offs (54) (39) Provisions charged to operations 0 0 ------- ------ Ending balance $3,331 $2,883 ====== ====== Average loans $159,021 $154,428 Net charge offs to average loans (annualized) .14% 0.10%

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, 2001, totaled $24,215,000, an increase of $8,706,000 (56.14%) from the December 31, 2000 total of $15,509,000. As of March 31, 2001, the Bank was permitted to draw on a $28,705,000 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, 2001, a $7.0 million long-term convertible advance was outstanding under this line. In addition the Bank has a secured 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, 2001, 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 by $368,000 or 2.14%, during the three months ended March 31, 2001, due to earnings, partially offset by decreases in equity accounts from the Company's common stock buy back and dividends. The Company's accumulated other comprehensive income increased by $148,000 from $153,000 at December 31, 2000 to $301,000 at March 31, 2001, as a result of unrealized holding gains (relating to securities held for investment) arising during the period. Retained earnings increased by $459,000 as the result of the Company's earnings during the quarter which were partially offset by dividends. In addition, $38,683 was transferred to stockholders' equity in consideration for shares to be issued under the Company's dividend reinvestment plan in lieu of cash dividends. 12 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, 2001, the Bank was in full compliance with these guidelines with a Tier 1 leverage ratio of 8.97%, a Tier 1 risk-based capital ratio of 12.48% and a total risk-based capital ratio of 13.74%. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. 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 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) (b) Reports on Form 8-K: None. 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: November 14, 2001 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