10-Q 1 gbb6300210q.txt GLEN BURNIE BANCORP 6/30/02 10-Q 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 June 30, 2002 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 July 26, 2002, the number of shares outstanding of the registrant's common stock was 1,669,907. TABLE OF CONTENTS Part I - Financial Information Page ---- Item 1. Financial Statements: ------- Condensed Consolidated Balance Sheets, June 30, 2002 (unaudited) and December 31, 2001 (audited) 3 Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2002 and 2001 (unaudited) 4 Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended Months Ended June 30, 2002 and 2001 (unaudited) 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 (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 4. Submission of Matters to a Vote of Security Holders 14 ------- Item 6. Exhibits and Reports on Form 8-K 14 ------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GLEN BURNIE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited)

June 30, 2002 December 31, ------------- ------------ ASSETS (unaudited) 2001 ---- Cash and due from banks $7,845 $10,888 Interest-bearing deposits in other financial institutions 377 1,879 Federal funds sold 5,672 5,453 ------ ------- Cash and cash equivalents 13,894 18,220 Certificates of deposit in other financial institutions 100 100 Investment securities available for sale, at fair value 71,327 55,548 Investment securities held to maturity, at cost (fair value June 30: $14,140; December 31: $16,881) 13,669 16,517 Federal Home Loan Bank stock, at cost 703 652 Common Stock in the Glen Burnie Statutory Trust I 155 155 Loans, less allowance for credit losses (June 30: $2,766; December 31: $2,938) 161,286 164,569 Premises and equipment, at cost, less accumulated depreciation 3,766 3,887 Other real estate owned 417 420 Other assets 3,159 3,294 -------- -------- Total assets $268,476 $263,362 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits $233,275 $229,307 Short-term borrowings 630 882 Long-term borrowings 7,263 7,275 Other liabilities 2,150 2,881 -------- -------- Total liabilities 243,318 240,345 -------- -------- 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: June 30: 1,669,907 shares; December 31: 1,663,560 shares 1,670 1,664 Surplus 10,527 10,390 Retained earnings 7,212 5,971 Accumulated other comprehensive income (loss), net of tax 594 (163) -------- -------- Total stockholders' equity 20,003 17,862 -------- -------- Total liabilities and stockholders' equity $268,476 $263,362 ======== ======== 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 June 30 Six Months Ended June 30 -------------------------- ------------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Interest income on: Loans, including fees $3,091 $3,249 $6,206 $6,535 U.S. Treasury and U.S. Government agency securities 674 651 1,279 1,293 State and Municipal securities 281 167 539 291 Other 132 236 275 475 ------ ------ ------ ------ Total interest income 4,178 4,303 8,299 8,594 ------ ------ ------ ------ Interest expense on: Deposits 1,039 1,384 2,163 2,872 Short-term borrowings 1 4 3 11 Long-term borrowings 107 73 213 181 Junior subordinated debentures 137 137 273 278 ------ ------ ------ ------ Total interest expense 1,284 1,598 2,652 3,342 ------ ------ ------ ------ Net interest income 2,894 2,705 5,647 5,252 Provision for credit losses 0 0 0 0 ------ ------ ------ ------ Net interest income after provision for credit 2,894 2,705 5,647 5,252 losses ------ ------ ------ ------ Other income: Service charges on deposit accounts 251 248 500 480 Other fees and commissions 148 141 286 282 Other non-interest income 1 9 4 16 Gain on termination of post-retirement plan 0 0 764 0 Gains on investment securities 2 29 6 47 ------ ------ ------ ------ Total other income 402 427 1,560 825 ------ ------ ------ ------ Other expenses: Salaries and employee benefits 1,494 1,434 2,918 2,825 Occupancy 146 117 292 281 Other expenses 894 1,096 1,794 1,887 ------ ------ ------ ------ Total other expenses 2,534 2,647 5,004 4,993 ------ ------ ------ ------ Income before income taxes 762 485 2,203 1,084 Income tax expense 175 108 628 275 ------ ------ ------ ------ Net income $ 587 $ 377 $1,575 $ 809 ====== ====== ====== ====== Basic and diluted earnings per share of common stock $ .35 $ .23 $ .94 $ .50 ====== ====== ====== ====== Weighted average shares of common stock outstanding 1,666,052 1,654,051 1,664,911 1,655,578 ========= ========= ========= ========= Dividends declared per share of common stock $ .10 $ .10 $ .20 $ .20 ====== ====== ====== ====== 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 June 30 Six Months Ended June 30 -------------------------- ------------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Net income $587 $377 $1,575 $809 Other comprehensive income (loss), net of tax Unrealized gains (losses) securities: Unrealized holding gains (losses) arising during period 995 (59) 759 100 Reclassification adjustment for gains included in net income (1) (18) (2) (29) ------ ---- ------ ---- Comprehensive income $1,581 $300 $2,332 $880 ====== ==== ====== ==== See accompanying notes to condensed consolidated financial statements.

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

Six Months Ended June 30, ------------------------- 2002 2001 ---- ---- Cash flows from operating activities: Net income $1,575 $809 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and accretion 53 292 Compensation expense from vested stock options 39 0 Provision for credit losses 0 0 Gains on disposals of assets, net (3) 0 Changes in assets and liabilities: (Increase) decrease in other assets (411) (124) (Decrease) increase in other liabilities (703) (759) ------- ------- Net cash provided by operating activities 550 218 ------- ------- Cash flows from investing activities: Maturities of available for sale mortgage-backed securities 4,687 2,081 Proceeds from disposals of investment securities 4,136 4,500 Purchases of investment securities (20,204) (12,254) Purchase of Federal Home Loan Bank stock (51) 0 Decrease in loans, net 3,283 2,340 Purchases of premises and equipment (176) (303) Proceeds from sale of other real estate 3 2 ------- ------- Net cash used by investing activities (8,322) (3,634) ------- ------- Cash flows from financing activities: Increase in deposits, net 3,968 8,880 Increase (decrease) in short-term borrowings (252) 360 Repayment of long-term borrowings (12) (11) Dividends paid (362) (380) Common stock dividends reinvested 72 39 Issuance of common stock 32 0 Repurchase and retirement of common stock 0 (149) ------- ------- Net cash provided by financing activities 3,446 8,739 ------- ------- Increase (decrease) in cash and cash equivalents (4,326) 5,323 Cash and cash equivalents, beginning of year 18,220 15,509 ------- ------- Cash and cash equivalents, end of period $13,894 $20,832 ======= ======= 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 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 six months ended June 30, 2002 and 2001. Operating results for the three and six-month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. NOTE 2 - PRIOR YEAR'S ADJUSTMENTS The results for the three and six months ended June 30, 2001 have been restated to reflect a positive amendment to the Company's post-retirement health insurance benefit plan effective during the first quarter of 2001 and reported in the Company's audited financial statements for the year ended December 31, 2001. NOTE 3 - 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.

Three Months Ended Six Months Ended June 30, 2002 June 30, 2002 ------------------ ---------------- Diluted: Net income $ 587,000 $1,575,000 Weighted average common shares outstanding 1,666,052 1,664,911 Dilutive effect of stock options 2,573 1,286 --------- ---------- Average common shares outstanding - diluted 1,668,625 1,666,197 Diluted net income per share $0.35 $0.94

Diluted earnings per share calculations were not required for the three and six months ended June 30, 2001 since there were no options outstanding. NOTE 4 - 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 $39,000 has been recognized in the second quarter of 2002. 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 second quarter of 2002, the Board of Directors finalized additional options to be granted under this plan at $13.77 per share for a period of 23 months, expiring August, 2003. As of June, 2002, 7,765 options had been granted under this plan. 7 NOTE 5 - COMMITMENT AND CONTINGENCY In May 2002, the Bank entered into an operating lease agreement for a new branch. The lease is for a term of five years beginning October 2002, and the rent is $2,500 per month. The Bank will also be required to pay all maintenance costs and property taxes associated with the location. NOTE 6 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). This statement rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic efforts that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The amendment to SFAS 13 is effective for transactions occurring after May 15, 2002. All other provisions are effective for financial statements issued on or after May 15, 2002. In management's opinion, the Company and Bank are currently in compliance with all applicable provisions of this pronouncement. 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, and Glen Burnie Statutory Trust I, a Connecticut business trust, had consolidated net income of $587,000 ($.35 basic and diluted earnings per share) for the second quarter of 2002, compared to second quarter 2001 consolidated net income of $377,000 ($0.23 basic and diluted earnings per share). The increase in consolidated net income was due to a reduction in interest expense and other expenses, partially offset by a decline in interest income. Net Interest Income. The Company's consolidated net interest income prior to provision for credit losses for the three and six months ended June 30, 2002 was $2,894,000 and $5,647,000, respectively, compared to $2,705,000 and $5,252,000 for the same periods in 2001, an increase of $189,000 (or 6.99%) for the three-month period, and an increase of $395,000 (or 7.52%) for the six-month period. These increases were primarily attributable to a decline in rates paid on deposits. Interest income decreased $125,000 (2.90%) for the three months ended June 30, 2002, and decreased $295,000 (3.43%) for the six months ended June 30, 2002, compared to the same periods in 2001. The decrease for the three-month and six-month period was primarily due to declining outstanding balances on loans and declining interest rate environment partially offset by increased income on state and municipal securities. Interest income on loans decreased $158,000 (4.86%) for the three months ended June 30, 2002, and decreased $329,000 (5.03%) for the six months ended June 30, 2002, compared to the same periods in 2001. Interest expense decreased $314,000 (19.65%) for the three months ended June 30, 2002, and decreased $690,000 (20.65%) for the six months ended June 30, 2002, compared to the 2001 periods, due to an overall decline in interest rates paid on deposits as a result of the declining interest rate environment. Net interest margins for the three and six months ended June 30, 2002 were 5.07% and 4.98%, respectively, compared to tax equivalent net interest margins of 4.91% and 4.85%, for the three and six month periods ended June 30, 2001. The increases in net interest margins for the three and six month periods ended June 30, 2002 were primarily due to a decrease in interest expenses. Provision For Credit Losses. The Company made no additional provision for credit losses during the three and six month periods ended June 30, 2002 and 2001. As of June 30, 2002, the allowance for credit losses equaled 693.23% of non-accrual and past due loans compared to 445.30% at December 31, 2001 and 1,049.68% at June 30, 2001. During the three and six month periods ended June 30, 2002, the Company recorded net charge-offs of $66,000 and $172,000, respectively, compared to net charge-offs of $35,000 and $89,000, respectively, during the corresponding periods of the prior year. On an annualized basis, net charge-offs for the 2002 period represent .21% of the average loan portfolio. Other Income. Other income for the three month period decreased from $427,000 at June 30, 2001, to $402,000 at June 30, 2002, a decline of $25,000 (5.85%). For the six month period, other income increased from $825,000 at June 30, 2001 to $1,560,000 at June 30, 2002, an increase of $735,000 (89.1%). The decrease for the three month period was due to a decline in gains on investment securities. The increase for the six month period is primarily due to a gain of $764,000 arising from the positive amendment on the Bank's post-retirement health insurance benefit plan which was recognized in the first quarter of 2002. Other Expense. Other expenses for the three month period decreased from $2,647,000 at June 30, 2001, to $2,534,000 at June 30, 2002, a decline of $113,000 (4.27%). For the six month period, other expenses increased from $4,993,000 at June 30, 2001 to $5,004,000 at June 30, 2002, an increase of $11,000 (0.22%). The decline for the three month period was due to a $70,000 legal settlement recognized in the second quarter 2001 and an overall general decrease in various other expenses. 9 Income Taxes. During the three and six months ended June 30, 2002, the Company recorded income tax expense of $175,000 and $628,000, respectively, compared to an income tax expense of $108,000 and $275,000, respectively, for the corresponding periods of the prior year. The increase in income tax expenses reflect the Company's earnings [plus an increased tax advantaged portfolio in the investment securities during the current year's periods]. The Company's effective tax rate for the three and six month periods in 2002 were 22.97% and 28.51%, respectively, compared to 22.27% and 25.37%, respectively, for the prior year periods. FINANCIAL CONDITION General. The Company's assets increased to $268,476,000 at June 30, 2002 from $263,362,000 at December 31, 2001 primarily due to an increase in investment securities available for sale, partially offset by a decrease in loans and cash and cash equivalents. The Bank's net loans totaled $161,286,000 at June 30, 2002, compared to $164,569,000 at December 31, 2001, a decrease of $3,283,000 (1.99%), primarily attributable to a decline in the portfolio of indirect loans. The Company's total investment securities portfolio (including both investment securities available for sale and investment securities held to maturity) totaled $84,996,000 at June 30, 2002, a $12,931,000 or 17.94% increase from $72,065,000 at December 31, 2001. The Bank's cash and cash equivalents (cash due from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of June 30, 2002, totaled $13,894,000, a decrease of $4,326,000 (23.74%) from the December 31, 2001 total of $18,220,000. The aggregate market value of investment securities held by the Bank as of June 30, 2002 was $85,467,000 compared to $72,429,000 as of December 31, 2001, a $13,038,000 (18.0%) increase. Deposits as of June 30, 2002 totaled $233,275,000 which is an increase of $3,968,000 (1.73%) from $229,307,000 at December 31, 2001. Demand deposits as of June 30, 2002 totaled $58,290,000 which is an increase of $2,605,000 (4.68%) from $55,685,000 at December 31, 2001. NOW accounts as of June 30, 2002 totaled $21,823,267 which is a decrease of $572,436 (2.56%) from $22,395,703 at December 31, 2001. Money market accounts as of June 30, 2002 totaled $19,632,095, which is a decrease of $994,154 (4.82%), from $20,626,249 at December 31, 2001. Savings deposits as of June 30, 2002 totaled $45,631,973, an increase of $3,287,013 (7.76%) from $42,344,960 at December 31, 2001. Certificates of deposit over $100,000 totaled $17,037,128 on June 30, 2002, a decrease of $598,338 (3.4%) from $17,635,466 at December 31, 2001. Other time deposits (made up of certificates of deposit less than $100,000 and individual retirement accounts) totaled $70,241,820 on June 30, 2002, a $377,412 (.53%) decrease from the $70,619,232 total at December 31, 2001. 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 June 30 At December 31, ---------- --------------- 2002 2001 ---- ---- (Dollars in Thousands) Restructured loans $ 39 $ 0 ==== ==== Non-accrual loans: Real estate - mortgage: Residential $269 $284 Commercial 8 189 Real estate - construction 0 0 Installment 59 88 Credit card & related 0 0 Commercial 21 40 ---- ---- Total non-accrual loans 357 601 ---- ---- Accruing loans past due 90 days or more: Real estate - mortgage: Residential 42 45 Commercial 0 0 Real estate - construction 0 0 Installment 0 13 Credit card & related 0 1 Commercial 0 0 Other 0 0 ---- ---- Total accruing loans past due 90 days or more 42 59 ---- ---- Total non-accrual and past due loans $399 $660 ==== ==== Non-accrual and past due loans to gross loans 0.24% 0.39% ==== ==== Allowance for credit losses to non-accrual and past due loans 693.23% 445.30% ====== ======

At June 30, 2002, 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 six months ended June 30, 2002 and 2001 were as follows:

Six Months Ended June 30 2002 2001 ---- ---- (Dollars in Thousands) Beginning balance $2,938 $3,385 Charge-offs (323) (265) Recoveries 151 176 ------ ------ Net charge-offs (172) (89) Provisions charged to operations 0 0 ------ ------ Ending balance $2,766 $3,296 ====== ====== Average loans $162,366 $158,869 Net charge offs to average loans (annualized) 0.21% 0.11% Reserve for Unfunded Commitments. As of June 30, 2002, the Bank had outstanding commitments totaling $14,286,021. These outstanding commitments consisted of letters of credit, undrawn lines of credit, and other loan commitments. The following table shows the Bank's allowance for credit losses arising from these unfunded commitments: Six Months Ended June 30 2002 2001 ---- ---- (Dollars in Thousands) Beginning balance $150 $0 Provisions charged to operations 0 0 ---- ---- Ending balance $150 $ 0 ==== ====

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 June 30, 2002, totaled $13,894,000 a decrease of $4,326,000 (23.74%) from the December 31, 2001 total of $18,220,000. 12 As of June 30, 2002, the Bank was permitted to draw on a $31,600,000 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 June 30, 2002, 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 June 30, 2002, 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 $2,141,000 or 11.9%, during the six months ended June 30, 2002, due to earnings, partially offset by decreases in equity accounts from dividend distributions. The Company's accumulated other comprehensive income net of tax increased by $757,000 from $163,000 loss at December 31, 2001 to $594,000 income at June 30, 2002, as a result of unrealized holding gains relating to securities held for investment arising during the period. Retained earnings increased by $1,241,000 during the six month period as the result of earnings during the period, partially offset by dividends. In addition, $72,289 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 June 30, 2002, the Bank was in full compliance with these guidelines with a Tier 1 leverage ratio of 9.20%, a Tier 1 risk-based capital ratio of 14.18% and a total risk-based capital ratio of 15.43%. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. 13 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On May 9, 2002, the Company held its Annual Meeting of Stockholders. The only matters submitted to the stockholders for a vote were the election of four directors and the authorization of the Board of Directors to select an outside auditing firm for the Company's fiscal year ending December 31, 2002. The nominees submitted for election as directors were John E. Demyan, Theodore L. Bertier, Jr., F. W. Kuethe, III, and Mary Lou Wilcox. At the Meeting, at least 1,338,857 shares were voted in favor of each nominee, no more than 138 shares were voted to withhold approval of any director. As a result, all of the nominees were elected to serve as directors until the next annual meeting of shareholders of the Company and until their successors are duly elected and qualified. Directors not up for re-election and continuing in office after the Meeting are: Charles L. Hein, Alan E. Hahn, Shirley E. Boyer, John I. Young, F. William Kuethe, Jr., William N. Scherer, Sr., Thomas Clocker, and Karen Thorwarth. At the Meeting, 1,205,415 shares were voted in favor of authorizing the Board of Directors to select an outside auditing firm for the Company's fiscal year ending December 31, 2002, 174,124 shares voted to withhold authorization, and 4,803 shares abstained. 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 10.3 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) 99.1 Certification Required Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (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: August 6, 2002 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 99.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Glen Burnie Bancorp (the "Company") on Form 10-Q for the period ending June 30, 2002 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: August 6, 2002 /s/ F. William Kuethe, Jr. ------------------------------------- F. William Kuethe, Jr. President, Chief Executive Officer /s/ John E. Porter ------------------------------------- John E. Porter Chief Financial Officer