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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
|_| TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from . . . . . . . .to . . .........................
Commission file number ...............................................33-62278
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 Number
101 Crain Highway, S.E., Glen Burnie, MD 21061
- --------------------------------------- ----------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code 410-766-3300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
- ---------------------- -----------------------------------------
Securities registered pursuant to section 12(g) of the Act:
None
-----------------------------------------------------------
(Title of class)
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 No X
Indicate by check mark if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.|X|
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of December 31, 1995 was $30,276,658, and as of February
28, 1997 was $22,980,308.
The number of outstanding shares of the registrant's common stock as of
December 31, 1995 was 872,838, and as of February 28, 1997 was 883,858.
Page 1 of 131 Pages
Exhibit Index is on Page 56.
PART I
ITEM 1. Business
Glen Burnie Bancorp (the "Company") is a bank holding company organized
in 1990 under the laws of the State of Maryland and located in Anne Arundel
County, Maryland. It presently owns all outstanding shares of capital stock of
The Bank of Glen Burnie (the "Bank"), a federally-insured commercial bank
organized in 1949 under the laws of the State of Maryland, basically serving
Anne Arundel County and surrounding areas. The Bank is engaged in the commercial
and retail banking business as authorized by the banking statutes of the State
of Maryland, including the receiving of demand and time deposits, and the making
of loans to individuals, associations, partnerships and corporations. Real
estate financing consists of residential first and second mortgage loans, home
equity lines of credit and commercial mortgage loans. Commercial lending
consists of both secured and unsecured loans.
Deposits and Loans
The Bank's deposit products include regular savings accounts
(statements), money market deposit accounts, demand deposit accounts, NOW
checking accounts, IRA accounts and certificates of deposit accounts. Variations
in service charges, terms and interest rates are used to target specific
markets.
Retail loan products including mortgage loans, personal loans, consumer
loans, overdraft protection, and loans secured by deposit accounts.
Ancillary products and services include safe deposit boxes, money
orders and travellers checks, night depositories, ACH transactions, wire
transfers, automated teller machines, telephone banking, and a customer call
center.
The Bank actively solicits loan applications from small to medium size
businesses. The Bank believes that this is a market in which a relatively small
community bank has a competitive advantage in personal service and flexibility.
The funds needed by the Bank to make loans are generated by deposit
accounts maintained at the Bank. Total deposits at the Bank were $232,745,975 as
of December 31, 1996. In addition, the Bank may borrow up to $26 million under a
line of credit from The Federal Home Loan Bank of Atlanta. As of December 31,
1996, the Bank's "Tier 1" capital (consisting of stockholders' equity, excluding
unrealized after tax net gain or loss on investment securities available for
sale) was $18,321,565. Its ratio of Tier 1 capital to risk-based assets (12.9%
as of December 31, 1996), total capital to risk-based assets (13.5% as of
2
December 31, 1996) and leverage ratio of Tier 1 capital to average total assets
(6.6% as of December 31, 1996) exceed the minimum ratios required by the Federal
Deposit Insurance Corporation ("FDIC").
Memorandum of Understanding
In the Fall of 1995, the FDIC and the Maryland State Bank Commissioner
(the "Commissioner") performed a routine examination of the Bank. Following the
examination, the Bank, the FDIC and the Commissioner entered into a Memorandum
of Understanding ("M.O.U.") effective June 13, 1996. The M.O.U. required the
Bank to establish written programs to reduce classified assets and contingent
liabilities and to report to the FDIC and the Commissioner quarterly on the
status of such assets and liabilities, to collect or charge-off certain
classified loans, to maintain ratios relating to capital and to delinquent and
non-accrued loans, to provide the FDIC and the Commissioner with thirty days
notice prior to dividend payments, to develop an internal loan review and
grading system, policies for loan underwriting and administration, a strategic
plan for improving operations and budgets, and policies and monitoring systems
for liquidity and interest rate risk, to evaluate the allowance for loan and
lease losses quarterly, to engage a chief lending officer, to cease any
violations of law or regulations cited by the FDIC or the Commissioner, and to
establish a committee of three directors to monitor compliance with the M.O.U.
The Bank is in the process of finalizing the systems and policies required under
the M.O.U., is continuing with the required periodic monitoring and notice
requirements, and has completed the other requirements under the M.O.U.
Should the Bank fail to comply with the provisions of the M.O.U., the
FDIC or the Commissioner could assert greater control over the Bank's operations
and impose penalties. Enforcement actions may include the issuance of formal and
informal agreements, the imposition of civil money penalties and the issuance of
a cease-and-desist order that can be judicially enforced. Neither the FDIC nor
the Commissioner has sought to initiate any such measures.
Recent Loan Loss Experience Involving Significant Borrowers
During its 1995 fiscal year, the Bank had outstanding loans to Brian
Davis, Oceanic Ltd., Inc. ("Oceanic"), McCafferty's Restaurant ("McCafferty's")
and other entities affiliated with Mr. Davis aggregating approximately
$5,804,000 (equalling approximately 28% of the Company's and its subsidiaries'
consolidated revenues for such fiscal year). The Bank filed suit to recover
amounts due under the Oceanic loans, alleging that documents evidencing security
interests for many of the Oceanic loans were falsified by or on behalf of the
borrower. Mr. Davis, Oceanic and McCafferty's have all filed bankruptcy
3
proceedings and significant recovery by the Bank is unlikely. As a result of the
foregoing, approximately $4,533,000 of these loans have been charged-off.
McCafferty's has brought a proceeding against the Bank seeking damages in
connection with loans involving McCafferty's. See "Legal Proceedings."
An equipment and automobile leasing company and its affiliates had
approximately $8,610,000 in outstanding loans and leases during the Bank's 1995
fiscal year (equalling about 42% of the Company's and its subsidiaries'
consolidated revenues for such fiscal year). The Bank has ceased approving new
loans for these customers due to concerns about the quality of certain of the
loans and leases. As of December 31, 1996 the aggregate outstanding balance of
all loans and leases to these customers was approximately $6,218,000.
The Bank does not believe that the loss of these customers has
materially adversely affected its loan generation business, although the
charge-offs in connection therewith adversely affected its 1995 net income and
earnings per share. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
Certain other customers hold secured commercial real estate loans. The
outstanding principal amount of some of these loans exceeds ten percent (10%) of
the consolidated revenues of the Company and its subsidiaries; however, the
required annual debt service payments under each such loan does not exceed ten
percent (10%) of the Company's consolidated revenues. The Company does not
believe that the retirement of these loans or loss of such business, should it
occur for any reason, would have a material adverse effect on the Bank's
business.
Strategic Plan
In order to enhance its business and resolve certain of the problems it
has faced as described above and pursuant to the M.O.U., the Bank has adopted a
strategic plan (the "Strategic Plan"). The objectives of the Strategic Plan are
to increase returns on average assets and average equity to set percentages
within set time frames, improve the Bank's efficiency ratio (non-interest
expense divided by the sum of net interest income and non-interest income),
decrease delinquent loans and classified assets as a percentage of total loans
within set time periods, increase the ratio of total loans to total assets
within a set time period while maintaining and improving asset quality, increase
total deposits to a set amount within a set time period, build capital to a set
percentage of assets within set time periods while continuing to make dividend
payments, maintain regulatory compliance and improve effectiveness of corporate
4
structure and communications. The Strategic Plan establishes strategies and
action plans to enable the Company to meet these objectives. It is subject to
review by the FDIC and the Commissioner.
Competition
The Bank faces competition from other community banks and financial
institutions and larger intrastate and interstate banks and financial
institutions (currently, twelve financial institutions operate within two miles
of the Bank's headquarters). The Bank's interest rates, loan and deposit terms,
and offered products and services are governed, to a large extent, by such
competition. The Bank attempts to provide superior service within its community
and to know and facilitate its customers. It seeks commercial relationships with
small to medium size businesses who, it believes, would welcome personal service
and flexibility. While the Company believes it is the sixth largest deposit
holder in Anne Arundel County, Maryland, with an estimated 5.63% market share as
of June 1995 (the latest date for which the Bank has relevant data available),
it believes its greatest competition comes from smaller community banks which
offer similar personalized services.
Federal and State Regulation
The Company, as a bank holding company, is subject to regulation under
the Bank Holding Company Act and is registered with and subject to the
supervision of the Federal Reserve Board and is subject to Federal Reserve Board
regulation, examination, supervision and reporting requirements. The Company is
required to furnish to the Federal Reserve Board annual and quarterly reports of
its operations and such additional information as the Federal Reserve Board may
require, and is subject to regular inspection by Federal Reserve Board
examiners.
Under the Bank Holding Company Act, the Company may not engage in any
business other than managing or controlling banks or furnishing services to its
subsidiaries, except that it may engage in certain activities which, in the
opinion of the Federal Reserve Board, are so closely related to banking or to
managing or controlling banks as to be a proper incident thereto. The Company is
also prohibited, with certain exceptions, from acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any company unless
the company is engaged in such permitted activities. The Bank Holding Company
Act also prohibits a bank holding company or any of its subsidiaries from
acquiring voting shares or substantially all the assets of any bank holding
company or bank, or from merging or consolidating with any other bank holding
company, unless such acquisition is approved by the Federal Reserve Board. Under
Maryland law, a
5
bank holding company is prohibited from acquiring control of any bank if, as a
result of such acquisition, the bank holding company would control more than 30%
of the total deposits of all depository institutions in the State of Maryland
unless such limit is waived by the Commissioner.
The Federal Reserve Board has adopted guidelines regarding the capital
adequacy of bank holding companies, which require bank holding companies to
maintain specified minimum ratios of capital to total assets and capital to
risk-weighted assets. The Federal Reserve Board has also issued a policy
statement expressing its view that a bank holding company should pay cash
dividends only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention that
is consistent with the company's capital needs, asset quality and overall
financial condition. The Federal Reserve Board has the power to prohibit a bank
holding company from paying dividends if it deems such payment to constitute an
unsafe or unsound practice.
The Company's primary source of income is the receipt of dividends from
its subsidiaries. The Bank's ability to make such payments to the Company is
subject to certain statutory and regulatory restrictions. Under Maryland law,
Maryland banks may only pay dividends from undivided profits or, with the prior
approval of the Commissioner, their surplus in excess of 100% of required
capital stock. Every Maryland bank is prohibited from declaring dividends on its
shares of common stock in excess of 90% of net earnings unless its surplus fund
equals the amount of required capital stock. In addition, the Bank is prohibited
by Federal statute from paying dividends or making other capital distributions
that would cause the Bank to fail to meet its regulatory capital requirements.
The FDIC also has the authority to prohibit the payment of dividends if it
determines such payments to constitute unsafe or unsound banking practices.
Banks are extensively regulated under both Federal and state law. The
Bank, as a Maryland state chartered bank, is subject to primary supervision,
periodic examination and regulation by the Commissioner and the FDIC. Although
the Bank is not a member of the Federal Reserve System, it is nevertheless
subject to certain regulations of the Federal Reserve Board. State and Federal
statutes and regulations relate to many aspects of the Bank's operations,
including reserves against deposits, loans, investments, transactions with
affiliates, mergers and acquisitions, borrowings, dividends and locations of
branch offices. The FDIC and the Commissioner regularly examine the operations
of the Bank, which must file quarterly and annual reports with such agencies.
Such requirements are intended for the protection of the Bank's depositors and
not its stockholders.
6
The Bank is subject to various regulatory capital requirements
administered by Federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain actions by regulators that, if
undertaken, could have a direct material effect on the Bank's financial
statements. The Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain off-
balance sheet items as calculated under regulatory accounting principles. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios.
There are no conditions or events since that notification that the Bank believes
have changed the institution's category, although there can be no assurance that
the Bank will continue to meet the minimum ratios necessary to maintain such
categorization.
The Company believes that it and the Bank are both currently in
substantial compliance with all applicable Federal and state regulations.
Statistical Information
Set forth below is certain statistical information concerning the
performance and financial position of the Bank for the indicated period. The
information presented below should be read in conjunction with "Selected
Financial Data", "Management's Discussion And Analysis of Financial Condition
and Results of Operation" and "Financial Statements and Supplementary Data."
7
The following table provides information concerning average balances
and net income, including rate and volume information, for each of the years
indicated.
AVERAGE BALANCES, NET INTEREST INCOME AND RATE/VOLUME ANALYSIS
(dollars in thousands)
AVERAGE BALANCES YIELD RATE(2)
------------------------------- ----------------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
ASSETS
Interest earning assets:
Money market investments:
Federal funds sold 2,416 2,799 3,807 5.75% 3.61% 2.78%
Interest bearing deposits 1,526 415 171 5.57% 5.54% 2.92%
Investment securities:
U.S. Treasury securities and
obligations of U.S. gov't agencies 40,263 38,430 39,328 6.43% 6.47% 6.80%
Obligations of states and
political subdivisions 21,479 20,240 18,404 8.54% 8.81% 9.22%
All other investment securities 696 443 7.47% 6.55%
- ---------------------------------------------------------------------------------------------------------------------------
Total investments 66,380 62,327 61,710 7.08% 7.10% 7.26%
Loans, net of unearned income
Demand time and lease 28,559 29,232 31,315 8.95% 8.45% 8.25%
Mortgage and construction 94,322 90,804 82,440 9.68% 9.73% 9.91%
Installment and credit card 33,338 31,897 25,525 8.38% 8.75% 9.19%
- ---------------------------------------------------------------------------------------------------------------------------
Total gross loans(1) 156,219 151,933 139,280 9.27% 9.28% 9.40%
- ----------------------------------------------------------------------------------------------------------------------------
Allowance for credit losses 2,766 2,762 2,139
- ----------------------------------------------------------------------------------------------------------------------------
Total Net loans 153,453 149,171 137,141 9.44% 9.45% 9.55%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EARNING ASSETS 219,833 211,498 198,851 8.73% 8.76% 8.84%
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Savings and NOW 68,957 78,067 70,744 3.17% 3.19% 3.50%
Money market 29,081 35,301 36,251 3.19% 3.05% 3.34%
Other time deposits 70,382 54,523 55,629 5.76% 4.48% 4.65%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INT-BEARING DEPOSITS 168,420 167,891 162,624 4.26% 3.58% 3.86%
- ----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 41,500 39,585 35,730
Total deposits 209,920 207,476 198,354 3.42% 2.90% 3.16%
Borrowed funds 1,549 1,573 1,010 5.75% 4.32% 2.28%
NET MARGIN ON INT-EARN ASSETS 219,833 211,498 198,850 5.42% 5.88% 5.67%
============================================================================================================================
8
The following table provides income and expense information for the
periods indicated.
INCOME/EXPENSE 1995 VS. 1994
-------------- -------------
INCREASE CHANGE DUE TO
1995 1994 1993 DECREASE RATE VOLUME
---- ---- ---- -------- ---- ------
ASSETS $ $ $
Interest earning assets:
Money market investments:
Federal funds sold 139 101 106 38 52 (14)
Interest bearing
deposits 85 23 5 62 0 62
Investment securities:
U.S. Treasury securities and
obligations of U.S. gov't
agencies 2,587 2,488 2,676 99 (20) 119
Obligations of states and
political subdivisions 1,835 1,783 1,696 52 (57) 109
All other investment
securities 52 29 23 6 17
- --------------------------------------------------------------------------------------------------------
Total investments 4,698 4,424 4,483 274 (19) 293
Loans, net of unearned income
Demand time and lease 2,557 2,469 2,582 88 145 (57)
Mortgage and construction 9,135 8,834 8,168 301 (41) 342
Installment and credit card 2,795 2,791 2,347 4 (122) 126
- --------------------------------------------------------------------------------------------------------
Total gross loans(1) 14,487 14,094 13,097 393 (18) 411
- --------------------------------------------------------------------------------------------------------
TOTAL INTEREST EARNING ASSETS 19,185 18,518 17,580 667 (37) 704
- --------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Savings and NOW 2,187 2,489 2,478 (302) (12) (290)
Money market 929 1,076 1,212 (147) 43 (190)
Other time deposits 4,057 2,444 2,587 1,613 902 711
- --------------------------------------------------------------------------------------------------------
TOTAL INT-BEARING DEPOSITS 7,173 6,009 6,277 1,164 933 231
- --------------------------------------------------------------------------------------------------------
Borrowed funds 89 68 23 21 22 (1)
NET MARGIN ON INT-EARN ASSETS 11,923 12,441 11,280 (518) (992) 474
========================================================================================================
1994 VS. 1993
-------------
INCREASE CHANGE DUE TO
DECREASE RATE VOLUME
-------- ---- ------
ASSETS $ $ $
Interest earning assets:
Money market investments:
Federal funds sold (5) 23 (28)
Interest bearing 18 11 7
deposits
Investment securities:
U.S. Treasury securities and
obligations of U.S. gov't
agencies (188) (127) (61)
Obligations of states and
political subdivisions 87 (82) 169
All other investment
securities 29 0 29
- --------------------------------------------------------------------
Total investments (59) (175) 116
Loans, net of unearned income
Demand time and lease (113) 59 (172)
Mortgage and construction 666 (163) 829
Installment and credit card 444 (142) 586
- --------------------------------------------------------------------
Total gross loans(1) 997 (246) 1,243
- --------------------------------------------------------------------
TOTAL INTEREST EARNING ASSETS 938 (421) 1,359
- --------------------------------------------------------------------
LIABILITIES
Deposits
Savings and NOW 11 (246) 257
Money market (136) (104) (32)
Other time deposits (143) (92) (51)
- --------------------------------------------------------------------
TOTAL INT-BEARING DEPOSITS (268) (442) 174
- --------------------------------------------------------------------
Borrowed funds 45 32 13
NET MARGIN ON INT-EARN ASSETS 1,161 (11) 1,172
====================================================================
- -------------
(1) Non-accrual loans included
(2) Tax equivalent basis
9
The following table provides yield information for the designated
periods.
AVERAGE BALANCES, YIELDS AND RATES
(dollars in thousands)
For the Year Ended Dec. 31, 1995 For the Year Ended Dec. 31, 1994
-------------------------------- --------------------------------
ASSETS Avg. Bal. Inc./Exp. Yld/Rate(2) Avg. Bal. Inc./Exp. Yld/Rate(2)
--------- --------- ----------- --------- --------- -----------
Interest earning assets
Money market investments:
Federal funds sold 2,416 139 5.75% 2,799 101 3.61%
Interest bearing deposits 1,526 85 5.57% 415 23 5.54%
Investment securities:
U.S. Treasury securities and
obligations of U.S. gov't
agencies 40,263 2,587 6.43% 38,430 2,488 6.47%
Obligations of States and
political subdivisions 21,479 1,835 8.54% 20,240 1,783 8.81%
- ------------------------------------------------------------------------------------------------------------------
All other investment securities 696 52 7.47% 443 29 6.55%
Total Investments 66,380 4,698 7.08% 62,327 4,424 7.10%
Loans, net of unearned income
Demand, time and lease 28,559 2,557 8.95% 29,232 2,469 8.45%
Mortgage and construction 94,322 9.135 9.68% 90,804 8,834 9.73%
Installment and credit card 33,338 2,795 8.38% 31,897 2,791 8.75%
- ------------------------------------------------------------------------------------------------------------------
Total gross loans (1) 156,219 14,487 9.27% 151,933 14,094 9.28%
- ------------------------------------------------------------------------------------------------------------------
Allowance for credit losses 2,766 2,762
- ------------------------------------------------------------------------------------------------------------------
Total Net loans 153,453 14,487 9.44% 149,171 14,094 9.45%
TOTAL INTEREST EARNING ASSETS 219,833 19,185 8.73% 211,498 18,518 8.76%
Cash and due from banks 7,152 9,769
Other Assets 8,471 8,817
- ------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 235,456 19,185 8.15% 230,084 18,518 8.05%
==================================================================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits
Savings and NOW 68,957 2,187 3.17% 78,067 2,489 3.19%
Money market 29,081 929 3.19% 35,301 1,076 3.05%
- ------------------------------------------------------------------------------------------------------------------
Other time deposits 70,382 4,057 5.76% 54,523 2,444 4.48%
- ------------------------------------------------------------------------------------------------------------------
TOTAL INT-BEARING DEPOSITS 168,420 7,173 4.26% 167,891 6,009 3.58%
- ------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 41,500 39,585
Total deposits 209,920 7,173 3.42% 207,476 6,009 2.90%
Borrowed funds 1,549 89 5.75% 1,573 68 4.32%
Other liabilities 699 638
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity 23,288 20,395
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and equity 235,456 7,262 3.08% 230,082 6,077 2.64%
==================================================================================================================
NET MARGIN ON INT-EARN ASSETS 219,833 11,923 5.42% 211,498 12,441 5.88%
==================================================================================================================
ASSETS For the Year Ended Dec. 31, 1993
--------------------------------
Avg. Bal. Inc./Exp. Yld/Rate(2)
Interest earning assets
Money market investments:
Federal funds sold 3,807 106 2.78%
Interest bearing deposits 171 5 2.92%
Investment securities:
U.S. Treasury securities a
obligations of U.S. gov't
agencies 39,328 2,676 6.80%
Obligations of States and
political subdivisions 18,404 1,696 9.22%
- --------------------------------------------------------------------
All other investment securit
Total Investments 61,710 4,483 7.26%
Loans, net of unearned income
Demand, time and lease 31,315 2,582 8.25%
Mortgage and construction 82,440 8,168 9.91%
Installment and credit card 25,525 2,347 9.19%
- --------------------------------------------------------------------
Total gross loans (1) 139,280 13,097 9.40%
- --------------------------------------------------------------------
Allowance for credit loss 2,139
- --------------------------------------------------------------------
Total Net loans 137,141 13,097 9.55%
TOTAL INTEREST EARNING ASSETS 198,851 17,580 8.84%
Cash and due from banks 10,026
Other Assets 8,347
- --------------------------------------------------------------------
TOTAL ASSETS 217,224 17,580 8.09%
====================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits
Savings and NOW 70,744 2,478 3.50%
Money market 36,251 1,212 3.34%
- --------------------------------------------------------------------
Other time deposits 55,629 2,587 4.65%
- --------------------------------------------------------------------
TOTAL INT-BEARING DEPOSITS 162,624 6,277 3.86%
- --------------------------------------------------------------------
Noninterest-bearing deposits 35,730
Total deposits 198,354 6,277 3.16%
Borrowed funds 1,010 23 2.28%
Other liabilities 645
- --------------------------------------------------------------------
Stockholders' equity 17,215
- --------------------------------------------------------------------
Total liabilities and equity 217,224 6,300 2.90%
====================================================================
NET MARGIN ON INT-EARN ASSETS 198,850 11,280 5.67%
====================================================================
- -------------
(1) Non-accrual loans included
(2) Tax equivalent basis
10
Time Deposit information is as follows:
1995 Time Deposits $100,000 or more maturity schedule
(dollars in thousands)
Three months or less 2,098
Over three through six months 1,893
Over six through 12 months 1,438
Over 12 months 4,416
-----
Total 9,845
=====
A summary of the consolidated investment securities is set forth below:
Investment Securities
(book value - in thousands)
1995 1994 1993
---- ---- ----
U.S. Treasury securities 15,071 17,099 18,855
U.S. Government agencies and
mortgage-backed 30,235 22,162 20,131
Obligations of states and political
subdivisions 27,380 20,471 19,487
Other securities and stock 699 685 0
------- ------ ------
TOTAL SECURITIES 73,385 60,417 58,473
======= ====== ======
Maturities Book Value Wt. Avg. Yld.
- ---------- ---------- -------------
U.S. Treasury securities
Due within one year 3,499 5.32%
Due over one to five years 9,252 5.89%
Due over five to ten years 2,320 6.10%
Due over ten years 0 0.00%
------- -----
Maturities Book Value Wt. Avg. Yld.
- --------------------------------------------------------------------------------
Total U.S. Treasury securities 15,071 5.79%
U.S. Government agencies and
mortgage-backed
Due within one year 1,751 6.93%
Due over one to five years 8,375 6.77%
Due over five to ten years 7,005 7.16%
Due over ten years 13,104 7.16%
- --------------------------------------------------------------------------------
Total U.S. Gov't agencies and
mortgage-backed 30,235 7.04%
Obligations of states and political
subdivisions
Due within one year 990 9.37%
Due over one to five years 3,762 8.79%
Due over five to ten years 6,727 7.94%
Due over ten years 15,901 7.94%
- --------------------------------------------------------------------------------
Total states and political subs 27,380 8.32%
Other securities and stock
Due within one year 699 7.47%
Due over one to five years 0 0.00%
Due over five to ten years 0 0.00%
Due over ten years 0 0.00%
- --------------------------------------------------------------------------------
Total other securities and stock 699 7.47%
- --------------------------------------------------------------------------------
TOTAL SECURITIES 73,385 7.49%
================================================================================
Concentrations of securities greater than 10% of equity
Book Value Market Value
---------- ------------
Maryland SCM's 23,209 23,900
Pennsylvania SCM's 4,171 4,185
The following table provides information on the loan portfolio for the
indicated periods.
Loan Portfolio Analysis
December 31,
Dollars in thousands
1995 1994 1993 1992 1991
$ % $ % $ % $ % $ %
---- - ---- - ---- - ---- - ---- -
Mortgage
Residential 37,269 24.17% 34,303 21.91% 33,664 23.31% 33,480 25.76% 37,040 33.98%
Commercial 46,888 30.41% 39,398 25.16% 39,277 27.20% 35,111 27.02% 28,275 25.94%
Construction and land develop 14,265 9.25% 21,014 13.42% 12,372 8.56% 9,264 7.13% 8,252 7.57%
Lease Financing 13,242 8.59% 15,598 9.96% 17,774 12.31% 19,497 15.00% 7,661 7.03%
Demand and time 13,124 8.51% 12,680 8.10% 12,841 8.89% 10,633 8.18% 8,014 7.35%
Installment 29,382 19.06% 33,585 21.45% 28,490 19.73% 21,970 16.91% 19,770 18.13%
- -----------------------------------------------------------------------------------------------------------------------------
154,170 100.00% 156,578 100.00% 144,418 100.00% 129,955 100.00% 109,012 100.00%
Allowance for credit losses 3,698 2,764 2,552 1,756 993
- -----------------------------------------------------------------------------------------------------------------------------
Loans, net 150,472 153,814 141,866 128,199 108,019
=============================================================================================================================
12
The maturity and rate repricing distribution of the loan portfolio are as
follows:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Variable rate immediately 35,148 40,448 35,243 27,528 21,000
Due within one year 21,326 20,521 17,781 8,033 15,154
Due over one to five years 48,259 48,716 46,276 39,771 27,944
Due over five years 50,310 47,669 45,899 55,235 45,575
- ----------------------------------------------------------------------------
Total gross loans 155,043 157,354 145,199 130,567 109,673
Deferred origination fees 873 776 781 612 661
- ----------------------------------------------------------------------------
Total Net loans 154,170 156,578 144,418 129,955 109,012
============================================================================
Information not available by loan category
Transaction in the allowance for credit losses were as follows:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Beginning balance 2,764 2,552 1,755 993 669
Provisions charges to operations 7,925 1,120 1,080 1,000 336
Recoveries
Real estate 33 18 1 41 10
Installment 11 20 19 16 68
Credit card & related 0 0 0 0 0
Commercial 26 29 31 3 31
Loans charged off
Real estate 1,541 425 98 193 0
Installment 270 29 41 25 35
Credit card & related 194 1 1 7 0
Commercial 5,056 520 194 73 86
- ----------------------------------------------------------------------------
Ending balance 3,698 2,764 2,552 1,755 993
============================================================================
Average loans 156,219 151,933 139,280 116,782 93,194
Net charge off to total loans 4.48% 0.60% 0.20% 0.19% 0.01%
- ----------------------------------------------------------------------------
Nonperforming And Past Due Loans
Nonaccrual Loans 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Real estate 756 556 800 925 579
Installment 165 25 15 39 48
Credit card & related 4 0 0 0 0
Commercial 1,120 74 299 43 218
- ---------------------------------------------------------------------------
Total Nonaccrual 2,045 655 1,114 1,007 845
- ---------------------------------------------------------------------------
Past Due 90 days
Real Estate 3,297 2,604 1,602 1,702 1,837
Installment 300 0 0 0 0
Credit card & related 28 5 19 0 0
Commercial 610 310 424 0 0
- ---------------------------------------------------------------------------
Total Past Due 90 Days 4,235 2,919 2,045 1,702 1,837
- ---------------------------------------------------------------------------
Interest that would have been accrued under the terms of these loans was
$191,200 for the year ended December 31, 1995.
Loans are placed on non-accrual being 90 days delinquent, however, real estate
loans were considered on a case-by-case basis subject to collateral.
The bank identified impaired loans of $407,597 as of December 31, 1995. No
specific allowance for credit losses related to impaired loans was provided.
These loans were identified as impaired near the end of 1995, and no payments
were received on these loans in 1995 after they were classified impaired.
There were no concentrations of credit not previously disclosed. 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.
13
Other Activities
The Company also owns all outstanding shares of capital stock of GBB
Properties, Inc. ("GBB") another Maryland corporation organized in 1994 which is
engaged in the business of acquiring, holding and disposing of real property,
typically acquired in connection with foreclosure proceedings (or deed in lieu
of foreclosure) instituted by the Bank or acquired in connection with branch
expansions by the Bank. No branch expansion occurred in 1995.
Employees
The Bank currently employs 143 people. Neither the Company nor GBB
currently has any employees.
ITEM 2. Properties
The Bank owns its Banking Operations Center, its Executive Offices, its
main banking facility in Glen Burnie, and four (4) branch offices in various
communities in Anne Arundel County, Maryland, all of which are unencumbered. The
Company owns no real estate at present. GBB currently owns two parcels of real
estate obtained from foreclosures by the Bank. The book value of these
properties is $285,700. One is a residential property which can be used for
certain commercial purposes; GBB has contracted to sell it for $155,000 ($25,500
over its book value). The other consists of office condominiums. GBB also
intends to sell this property. The Bank also owns foreclosed real estate having
a book value of $143,000. It consists of residential property which the Bank is
holding for sale.
ITEM 3. Legal Proceedings
McCafferty's has commenced an adversary proceeding against the Bank
(McCafferty's , Inc. v. Bank of Glen Burnie Adversary Case, Case No.
96-5137-ESD, U.S. Bankr. Ct., D. Md.) on March 20, 1996 in McCafferty's pending
Chapter 11 bankruptcy case (In re McCafferty's, Inc., Case No. 96-5-2444-SD,
U.S. Bankr. Ct., D. Md.). McCafferty's seeks $5,000,000 in compensatory damages
and $50,000,000 in punitive damages. It alleges that the Bank acted in concert
with Brian Davis, who was McCafferty's treasurer and chief financial officer, in
an unspecified manner to defraud McCafferty's, that the Bank has accepted loan
payments from McCafferty's for loans which McCafferty's never signed nor
authorized, and that the Bank failed to make a loan it had promised to
McCafferty's. The Bank denies any liability and intends to continue contesting
the litigation vigorously. The Company does not believe that the outcome of this
litigation will have a material adverse effect on its business.
The Bank is involved in various other legal actions relating to its
business activities. These actions all involve claims for money damages which in
the aggregate do not exceed 10% of the Company's consolidated assets. The
Company does not believe that any ultimate liability or risk of loss with
respect to those actions will materially affect its consolidated financial
position.
14
ITEM 4. Submission of Matters to a Vote of Security Holders.
The Company did not submit any matters to a vote of its security
holders during the fourth quarter of its 1995 fiscal year. However, at its
annual stockholders' meeting on March 9, 1995, two slates of candidates ran for
election as directors. The winners received the following votes (rounded to the
nearest share):
Shirley Boyer 448,313
John E. Demyan 448,452
Susan Demyan 448,452
Richard A. Fine 448,452
F. William Kuethe, Jr. 448,452
Frederick W. Kuethe, III 448,452
William N. Scherer, Sr. 448,452
Karen B. Thorwarth 443,315
Neil C. Williams 443,315
The candidates on the losing slate received the following votes (rounded to the
nearest share):
Theodore L. Bertier, Jr. 287,508
Jan W. Clark 248,830
John E. DeGrange, Sr. 248,830
F. Ward DeGrange, Sr. 198,044
Louis J. Doetsch 246,653
F. Paul Dorr, Jr. 246,653
Carl L. Hein, Jr. 248,830
Henry L. Hein 248,830
Earl G. Walter 248,830
Katherine P. Wellford 246,653
Mary Lou Wilcox ran as an independent candidate, losing with 45,735 votes. The
elected directors represented a change from a majority of the directors
(including the Company's chief executive officer) previously in position.
Prior to the election, the directors who ultimately lost the election
filed a lawsuit in the name of the Company against a number of the candidates
who ultimately won the election. The suit was settled shortly after the
election, with the election results accepted by all parties in interest. (The
settlement did not terminate any solicitation conducted with respect to the
election.) The Company agreed to pay all legal fees in connection with the case.
No wrongdoing was found on the part of any director or candidate.
At the March 9, 1995 annual meeting the stockholders also approved the
selection of Rowles & Company as independent accountants for the Company and its
subsidiaries for its 1995 fiscal year. All shares voting voted in favor of such
appointment.
15
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's common equity consists of one class of common stock, par
value $10.00 per share. The Company effectuated a six for five stock split on
January 3, 1996. The Company's stock is traded in the over-the-counter market
and quoted in the pink sheets. The actual range of high and low bid quotations
for the common stock, which has been adjusted to give retroactive effect to the
stock split, for each full quarterly period during 1994 and 1995, based on
actual settlements reported by Legg Mason Wood Walker, the only source of such
information available to the Company, are as follows:
================================================================
High Low
- ----------------------------------------------------------------
1st qtr 1994 $30.833 $28.033
- ----------------------------------------------------------------
2nd qtr 1994 32.292 27.083
- ----------------------------------------------------------------
3rd qtr 1994 30.000 28.750
- ----------------------------------------------------------------
4th qtr 1994 29,479 29.479
- ----------------------------------------------------------------
1st qtr 1995 32.917 28.750
- ----------------------------------------------------------------
2nd qtr 1995 32.917 31.042
- ----------------------------------------------------------------
3rd qtr 1995 32.917 32.083
- ----------------------------------------------------------------
4th qtr 1995 34.375 28.854
================================================================
As of February 3, 1997, the most recent data for which the Company has
information of actual settlements reported by Legg Mason Wood Walker, the
reported high and low were $26.00.
As of December 31, 1996, the number of record holders of the Company's
common stock was 488.
Since its inception, the Company has paid quarterly cash dividends on
its common stock, except that certain dividends have been paid in stock, rather
than cash, to stockholders who participated in the Company's Dividend
Reinvestment and Stock Purchase Plan. The per share dividends paid in cash
during 1994 and 1995, giving retroactive effect to the stock split, were as
follows:
16
=======================================================================
Per Share Dividend
- -----------------------------------------------------------------------
1st qtr 1994 $.167
- -----------------------------------------------------------------------
2nd qtr 1994 .167
- -----------------------------------------------------------------------
3rd qtr 1994 .167
- -----------------------------------------------------------------------
4th qtr 1994 .167
- -----------------------------------------------------------------------
1st qtr 1995 .175
- -----------------------------------------------------------------------
2nd qtr 1995 .208
- -----------------------------------------------------------------------
3rd qtr 1995 .208
- -----------------------------------------------------------------------
4th qtr 1995 .208
=======================================================================
Pursuant to its Strategic Plan, the Company intends to pay dividends
equal to forty percent (40%) of its profits for each quarter. However, dividends
remain subject to declaration by the board of directors in its sole discretion
and there can be no assurance that the Company will be legally or financially
able to make such payments. Payment of dividends may be limited by Federal and
state regulations which impose general restrictions on a bank's and bank holding
company's right to pay dividends (and to make loans or advances to affiliates
which could be used to pay dividends). See "Business."
ITEM 6. Selected Financial Data.
The following chart presents consolidated selected financial data for
the Company and its subsidiaries for each of the fiscal years from and including
1992, during which the Company acquired the outstanding capital stock of the
Bank, and for the Bank's 1991 fiscal year. All amounts are expressed in
thousands of dollars except per share amounts. Adjustments in dividends and
earnings per share have been made to give retroactive effect to stock splits.
===================================================================================================================================
For Fiscal Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 11,339 $ 11,868 $ 10,736 $ 8,788 $ 7,182
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) (1,727) 3,517 3,047 2,284 2,022
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Per Share (2.01) 4.22 3.69 2.79 2.47
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets 246,165 232,935 223,422 203,573 172,120
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Obligations --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Dividends Declared Per .96 .80 .75 .72 .69
Common Share
- -----------------------------------------------------------------------------------------------------------------------------------
Return on Assets -0.73% 1.53% 1.40% 1.23% 1.27%
- -----------------------------------------------------------------------------------------------------------------------------------
Return on Equity -7.42% 17.24% 17.70% 15.23% 15.23%
- ----------------------------------------------------------------------------------------------------------------------------------
Dividend Payout -47.86% 19.24% 20.38% 25.89% 28.08%
- -----------------------------------------------------------------------------------------------------------------------------------
Avg. Equity to Avg. Assets 9.89% 8.86% 7.92% 8.05% 8.32%
===================================================================================================================================
17
ITEM 7. Management's Discussion And Analysis Of
Financial Condition And Results Of Operation.
Results Of Operation
In 1995, the Bank reported a net loss of ($1,678,941) as compared to
1994 net income of $3,516,593. The loss was primarily a result of loan losses
related to several large, uncollectible loans. Non-recurring litigation and
restructuring costs in 1995 totalled $1,407,641. Total assets grew 5.7% in 1995
with most of this growth in investment securities while gross loans declined by
1.5%. A 6% growth in deposits in 1995 accounted for the growth in assets.
The Company and its subsidiaries had a consolidated net loss of
$1,726,748 ($2.01 per share) for 1995, a significant change from their 1994
consolidated net income of $3,516,593 ($4.22 per share) and their 1993
consolidated net income of $3,047,112 ($3.69 per share). The change is primarily
due to a significant increase in the provision for loan losses of $7,925,000 for
1995 compared to $1,120,000 for 1994 and $1,080,000 for 1993. The increase
resulted from provisions being made to charge-off delinquent and non-performing
loans. The collectibility of certain loans, significant in aggregate amount,
became doubtful during 1995 and the Bank charged-off a significant amount of
such loans in 1996. The basic terms of the M.O.U. and possible sanctions should
the Bank fail to adhere to it, and certain specific problem loans, are described
under "Business."
The consolidated net interest income prior to making provision for
credit losses decreased by $528,822 (4.5%) from $11,867,959 in 1994 to
$11,339,137 in 1995. Net interest income had increased by $1,131,865 (10.5%)
from $10,736,094 in 1993. The 1995 decrease is primarily due to an increase in
interest expense on deposits which exceeded a slight increase in total interest
revenues from lending activities for such period. The movement of deposits from
lower yielding savings and money market accounts to higher yielding certificates
of deposit resulted in an increase in the Bank's cost of deposits during 1995.
In addition, the Bank wrote off approximately $220,000 in interest income during
1995 in connection with its charge-off of certain loans as described above.
Increased expenses of the Company and its subsidiaries in 1995 also
resulted from $1,407,641 in litigation costs and costs relating to the 1995
directors' election contest. The Bank has obtained insurance reimbursement for
approximately $560,000 of this amount and does not expect to have such charges
(other than routine litigation costs) in the future.
Capital Resources and Liquidity
Total deposits increased from $208,565,653 at 1994 year end to
$221,120,763 at the end of 1995, an increase of $12,555,110 (6.0%). Total
deposits increased by $5,654,923 (2.8%) during 1994 from $202,910,730 at the end
of 1993. While deposits have increased over the past two years, the Bank
believes that a general downward trend in interest rates paid on deposit
accounts has resulted in a trend away from lower yielding deposit products
toward higher yielding long term deposits.
NOW accounts have remained relatively flat increasing by $472,703 in
1994 and $17,141 in 1995 from $21,800,005 at year end 1993. Over the same
period, savings deposits after increasing slightly in 1994 from $52,764,881 in
1993 to $52,830,352 in 1994, declined to $46,752,665 at the end of 1995, a
decrease of $6,077,687 (11.5%). Meanwhile, both certificates of deposit over
$100,000 and other time deposits (made up of certificates of deposit less than
$100,000 and individual retirement accounts) increased by $2,040,197 (26.1%) and
$17,788,337 (34.4%), respectively in 1995. In 1994 certificates of deposit over
$100,000 increased by $1,274,178 (19.5%) from $6,530,466 in 1993 and other time
deposits increased by $4,250,550 (9.0%) from $47,445,457 in 1993.
The Bank's cash and cash equivalents (cash plus federal funds sold) as
of December 31, 1995 ($9,450,021) was roughly the same as at December 31, 1994
($9,606,316), which, in turn, was only 66.5% of the December 31, 1993 total of
$14,435,017. The aggregate market value of investment securities held by the
Bank as of December 31, 1995 was $74,690,073, compared to $59,024,129 as of
December 31, 1994, a $15,665,944 (26.5%) increase. The reason for the large
increase in investment securities during 1995 was the 6.0% increase in deposits
coupled with declining loan demand. The market value of the Bank's investment
securities as of December 31, 1994 had decreased by $2,436,148 (4.1%) from their
December 31, 1993 total.
18
The Bank may draw on a $26,000,000 line of credit from The Federal Home
Loan Bank of Atlanta. As of December 31, 1994 $1,500,000 was outstanding under
this line. No amounts were outstanding at the end of either 1995 or 1993.
The Bank's net loans decreased by $3,342,654 (2.2%) from $153,814,422
in 1994 to $150,471,768 in 1995. The 1994 net loan total increased by
$11,948,629 (8.4%) from $141,865,793 in 1993. The variations are largely due to
an increase in construction and land development loans in 1994 followed by a
reduction in such loans in 1995. Residential and commercial mortgage loans
increased during 1995 whereas lease financings and installment loans decreased.
The Bank has determined to decrease its equipment and automobile lease based
lending because of the difficulties in monitoring the financial condition of the
clients of lease company borrowers.
ITEM 8. Financial Statements And Supplementary Data.
The response to this Item is set forth at the end of this report.
ITEM 9. Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure.
On April 11, 1996 the Company's board of directors decided not to
reengage Rowles & Company to review the Company's consolidated financial
statements for its 1996 fiscal year. Such accountants report on the Company's
consolidated financial statements for each of its prior two fiscal years did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. There were no
disagreements between the Company and Rowles & Company. On June 27, 1996, the
Company's board of directors decided to engage Trice & Geary LLC to perform such
function and Trice & Geary LLC was so engaged on August 16, 1996.
ITEM 10. Directors And Executive Officers Of The Registrant.
Set forth below is information about the directors,
executive officers and significant employees of the Company, the
Bank and GBB. Unless indicated otherwise, the positions stated
for each individual are positions held in the Company and in each
of its subsidiaries.
NAME: AGE: DIRECTOR SINCE:
Theodore L. Bertier 68 1997
Retired since 1993. Manager of design and drafting department of
Westinghouse Electric Corp. prior to retirement.
19
Shirley Boyer 60 1995
Owner/Manager of a large number of residential properties in Anne Arundel
County, Maryland. Thirteen years experience in banking (1954-1967) in positions
from Teller to Assistant Branch Manager.
Thomas Clocker 62 1995
Owner/Operator of Angel's Food Market in Pasadena, Maryland since 1960. Charter
member of and assisted in founding Pasadena Business Association. Community
involvement including local charities, schools, church, scout groups and
athletic programs.
John E. Demyan 49 1990
Chairman of the Board since 1995. Director of the Company and the Bank from 1990
through 1994. Completed Maryland Banking School in 1994. Owner/Manager of
commercial and residential properties in northern Anne Arundel County, Maryland.
Alan E. Hahn 62 1997
Retired information systems manager.
Charles L. Hein 75 1997
Retired clergyman. Purchaser and restorer of residential properties. Mortgagee
of residential properties.
F. William Kuethe, Jr. 64 1995
President and Chief Executive Officer of the Company and the Bank since 1995.
Director of the Bank from 1960 through 1989. Former President - Glen Burnie
Mutual Savings Bank. Licensed appraiser and real estate broker. Banking
experience from 1960 to present at all levels.
Frederick W. Kuethe, III 37 1995
Vice President of the Company since 1995. Director of the Bank since 1988.
Software design and systems integration - Westinghouse Electric Corporation
since 1981 to present. Chairman of Data Processing Committee for Bank. Son of
F. William Kuethe, Jr.
Eugene P. Nepa 67 1997
Retired engineer.
William N. Scherer, Sr. 74 1995
Attorney specializing in wills and estates. Formerly accountant
and tax specialist.
20
Karen B. Thorwarth 40 1995
Manager, Yacht Department - Basil-Voges, Inc. of Annapolis, Maryland. Licensed
insurance agent specializing in underwriting and marketing private pleasure
yacht insurance. Member - Annapolis Yacht Club.
Mary Lou Wilcox 49 1997
Elementary school teacher.
Dorothy A. Abel 55
Secretary of the Company since 1995. Vice President and Secretary of the Bank
since 1990.
John E. Porter 43
Treasurer and Chief Financial Officer of the Company since 1995. Vice President,
Treasurer and Chief Financial Officer of the Bank since 1990.
Secretary/Treasurer of GBB since 1995.
Michael L. Derr 46
Vice President Operations of the Bank since 1992. Assistant Vice President
Operations of the Bank since 1989.
Robert J. Riedel 55
Vice President of the Bank since 1990.
Michael Livingston 43
Chief Lending Officer of the Bank since 1996. Regional Vice President and
commercial loan officer with Citizens Bank from March 1993 until April 1996.
Comptroller with Land Services Group from April 1992 through January 1993.
ITEM 11. Executive Compensation.
General
The following chart sets forth the compensation paid by the Company and
the Bank to F. William Kuethe, Jr., their chief executive officer since March 9,
1995, and to Jan W. Clark, their chief executive officer prior to Mr. Kuethe,
during the years indicated.
21
SUMMARY COMPENSATION TABLE
Long Term Compensation
- -----------------------------------------------------------------------------------------------------------------
Annual Compensation Awards
-----------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
- -----------------------------------------------------------------------------------------------------------------------------------
Other
Annual Restricted Securities All Other
Compen- Stock Underlying Compen-
Name and Principal Salary ($) Bonus sation Award(s) Options/ sation
Position Year ($) ($) SARs (#) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
F. William Kuethe, Jr. 1995 $ 65,538 $ 7,500 $ 250 1 --- 250 $ 16,904 2
Chief Executive Officer 1994 1,500 --- --- --- 35,109 3
1993 1,350 250 1 --- 250 36,818 4
Jan W. Clark 1995 16,093 --- 438 5 --- --- $ 68,543 6
Former Chief Executive 1994 $109,574 $15,000 --- --- 940 29,001 7
Officer 1993 93,506 15,000 250 5 --- 833 26,386 8
===================================================================================================================================
Stock Option Plans
During 1995, all employees of the Company, including its prior chief
executive officer, received the right to purchase five shares of the Company's
common stock, at a per share price at 15% below the market price for such shares
on the date of
- --------
1 F. William Kuethe, Jr.'s "Other Annual Compensation" consisted solely of
the differences between the exercise price of director stock options exercised
by him during the respective years and the fair market value of the shares at
the time of exercise as determined by information furnished by Legg Mason Wood
Walker.
2 F. William Kuethe, Jr.'s "All Other Compensation" in 1995 consisted of
$1,240 in paid insurance premiums, $8,400 in directors' fees and $7,264 in
appraisal fees.
3 F. William Kuethe, Jr.'s "All Other Compensation" in 1994 consisted of
$22,655 in directors' fees, and $12,454 in appraisal fees.
4 F. William Kuethe, Jr.'s "All Other Compensation" in 1993 consisted of
$23,659 in directors' fees and $13,159 in appraisal fees.
5 Jan Clark's "Other Annual Compensation" consisted solely of the
differences between the exercise price of director stock options exercised by
him during the respective years and the fair market value of the shares at the
time of exercise as determined by information furnished by Legg Mason Wood
Walker.
6 The Company agreed to pay Jan W. Clark a severance payment of $143,345
payable in installments through March 16, 1997. $58,678 of this was paid in 1995
and is included in his "All Other Compensation" for such year. His "All Other
Compensation" in 1995 also consisted of paid insurance premiums of $984,
directors' fees of $3,750 and profit-sharing plan contributions of $5,171.
7 Jan W. Clark's "All Other Compensation" in 1994 consisted of paid
insurance premiums of $6,314, directors' fees of $14,300 and profit-sharing plan
contributions of $8,387.
8 Jan W. Clark's "All Other Compensation" in 1993 consisted of paid
insurance premiums of $5,188, directors' fees of $14,090, and profit-sharing
plan contributions of $7,078.
22
grant, for every $1,000 of salary and bonus paid during the preceding year. The
rights were granted on July 1, 1995 and could be exercised at any time through
September 30, 1996. The plan was suspended in June, 1996 and no options have
been granted thereunder since 1995. Options for 583 shares were granted to Mr.
Clark in 1993 and for 690 shares in 1994 under this plan.
The Company maintains a director stock purchase plan pursuant to which
directors may purchase the Company's common stock at its fair market value on
the date an option is granted. At December 31, 1995, there were 17,700 shares of
common stock reserved for issuance under the plan. No options are currently
outstanding under this plan. Options for 3,600 shares were exercised in 1995 at
prices of $28.33 to $31.67 per share. All of the options granted to Mr. Kuethe,
and options for 250 shares granted to Mr. Clark in each of 1993 and 1994 were
granted under the directors' stock purchase plan.
The following table sets forth information concerning the award of
stock options to the individuals named in the Summary Compensation Table during
the 1995 fiscal year.
====================================================================================================================================
Option/SAR Grants in Last Fiscal Year
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities % of total
Underlying Options/ Exercise
Options/ SARs Granted or Base Market
SARs to Employees Price Price
Name Granted (#) in Fiscal Year ($/Sh) ($/Sh) Expiration Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
F. William Kuethe, Jr. 250 9.1% $38.00 $38.00 July 1, 1996 $475.00 $950.00
- ------------------------------------------------------------------------------------------------------------------------------------
Jan W. Clark
====================================================================================================================================
23
The following table sets forth information concerning the exercise of
stock options by such individuals during the 1995 fiscal year:
================================================================================================================================
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
- --------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------------
F. William Kuethe, Jr. 250 $ 254 --- ---
- --------------------------------------------------------------------------------------------------------------------------------
Jan W. Clark 690 $4,592 --- ---
250 389 --- ---
================================================================================================================================
The realized value determination is based on the average of the last reported
sales prior to the exercise of the options and the first reported sales
thereafter.
Pension Plan Information
The Bank maintains a pension plan for substantially all employees
pursuant to which benefits are based on the employee's average rate of earnings
and years of service. A participant's pension is based on the average amount of
his annual earnings for his five most highly paid consecutive years during the
ten years immediately preceding his retirement. His pension is determined by
multiplying 2% of the "covered" portion of this amount and .65% of any
additional portion by the lesser of the number of his years of service or 20.
The "covered" portion is his social security taxable wage basis taken over a
period of up to 35 years. The following table shows the estimated annual
benefits payable upon retirement in specified compensation and years of service
classifications based on the assumption that the "covered" portion equals
$65,400 (the current maximum salary subject to social security tax) for all
employees receiving more than such amount and that the highest salary payable is
$100,000 per annum. Currently, no employee earns this much and the Bank does not
anticipate that any employee will in the foreseeable future.
================================================================================
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
Years of Service
- --------------------------------------------------------------------------------
Remuneration 5 10 15 20
- --------------------------------------------------------------------------------
10,000 1,000 2,000 3,000 4,000
- --------------------------------------------------------------------------------
20,000 2,000 4,000 6,000 8,000
- --------------------------------------------------------------------------------
30,000 3,000 6,000 9,000 12,000
- --------------------------------------------------------------------------------
40,000 4,000 8,000 12,000 16,000
- --------------------------------------------------------------------------------
50,000 5,000 10,000 15,000 20,000
- --------------------------------------------------------------------------------
60,000 6,000 12,000 18,000 24,000
- --------------------------------------------------------------------------------
70,000 6,690 13,379 20,069 26,758
- --------------------------------------------------------------------------------
80,000 7,015 14,029 21,044 28,058
- --------------------------------------------------------------------------------
90,000 7,340 14,679 22,019 29,358
- --------------------------------------------------------------------------------
100,000 7,665 15,329 22,994 30,658
================================================================================
24
The total compensation covered by the pension plan for the year ended
December 31, 1995 was $2,617,791. 2.5% of the covered compensation represents
compensation paid to F. William Kuethe, Jr. His credited years of service is one
year. 0.6% of the covered compensation represents compensation paid to Jan W.
Clark.
Benefits under the pension plan are not subject to deduction for social
security payments or other offsets.
Directors' Fees
Each director receives a $600 fee for attending each meeting of the
board of directors or of committees of the board. During 1995, $94,625 was paid
in directors' fees.
Compensation Committee
A compensation committee of directors approved by the board sets
director compensation. The board sets the compensation of the chief executive
officer. The chief executive officer sets the compensation of the other
executive officers. Executive officers are placed at certain grade levels with
the salary range of each grade level established by the compensation committee,
subject to board approval, based on comparable salaries paid by similar
financial institutions. Within such range, an individual's salary is based on a
performance review conducted by the board or president, as indicated above.
Bonuses are discretionary and largely based on the Bank's financial performance.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The following table provides information as of December 31, 1996
concerning ownership of the Company's common stock (which constitutes its only
class of equity securities) by any individual or group known to the Company to
be the beneficial owner of more than 5% of its common stock, each of its
directors,
25
each of the individuals listed in the Summary Compensation Table, included with
Item 11 above and all executive officers and directors as a group. Each person
listed has sole voting and sole investment power with respect to the shares
listed across from his name except as noted otherwise.
================================================================================
Name and Address of Account And Nature of Percent of Class
Beneficial Owner Beneficial Ownership (If 1% or more)
- --------------------------------------------------------------------------------
Ethel Webster 167,517 18.95%
104 W. Pasadena Road
Pasadena, MD
- --------------------------------------------------------------------------------
John E. Demyan 73,107 1/ 8.27% 1/
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
F. William Kuethe, Jr. 46,482 2/ 5.26% 2/
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Theodore L. Bertier 6,479 3/
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Shirley Boyer 4,212
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Thomas Clocker 371
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Alan E. Hahn 1,658
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Charles L. Hein 36,442 4/ 4.12% 4/
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Frederick W. Kuethe, III 9,735 5/ 1.10% 5/
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Eugene P. Nepa 22,877 2.59%
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
William N. Scherer, Sr. 2,432 6/
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Karen B. Thorwarth 500
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Mary Lou Wilcox 317
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Jan W. Clark 2
101 Crain Highway, S.E.
Glen Burnie, MD 21061
- --------------------------------------------------------------------------------
Cede & Co. 49,018 5.55%
- --------------------------------------------------------------------------------
All directors and executive 171,036 19.35%
officers as a group
================================================================================
- ---------------------------
1/ Includes 3,000 shares owned by John Demyan's spouse as to which he
disclaims beneficial ownership.
2/ F. William Kuethe, Jr. has shared voting and shared investment power
with respect to 20,097 of these shares.
3/ Theodore L. Bertier has shared voting and shared investment power with
respect to 679 of these shares.
4/ Charles L. Hein has shared voting and shared investment power with
respect to 23,570 of these shares.
5/ Frederick W. Kuethe, III has shared voting and shared investment power
with respect to 9,637 of these shares.
6/ William N. Scherer, Sr. has shared voting and shared investment power
with respect to 2,367 of these shares.
26
ITEM 13. Certain Relationships and Related Transactions
The executive officers and directors of the Bank enter into loan
transactions with the Bank in the ordinary course of business. Loans to them are
made on the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with unrelated borrowers and the
Bank does not believe that they involve more than the normal risk of
collectibility or present other unfavorable features. At December 31, 1995,
1994, and 1993, the amounts of such loans outstanding were $2,878,742, $685,613,
and $535,347, respectively. The election in 1995 of new directors having
outstanding loans is the main reason for the increase in 1995.
27
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8K.
Exhibit List
3.1 Articles of Incorporation
3.2 By-Laws
10.1 Glen Burnie Bancorp Stockholder Purchase Plan
10.2 Glen Burnie Bancorp Dividend Reinvestment and Stock
Purchase Plan
10.3 Glen Burnie Bancorp Director Stock Purchase Plan
10.4 Glen Burnie Bancorp Employee Stock Purchase Plan
10.5 The Bank of Glen Burnie Pension Plan
11 Statement re computation of per share earnings
16 Letter re: change in certifying public accountant
21 Subsidiaries of the registrant
27 Financial Data Schedule
The Company did not file any report on Form 8-K during the last quarter
of its 1995 fiscal year.
28
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant): Glen Burnie Bancorp
By (Signature and Title): [F. William Kuethe, Jr.]
----------------------------------
Signature
Chief Executive Officer, President
Date: 3/27/97 F. William Kuethe, Jr.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By (Signature and Title): [John E. Porter]
----------------------------------
Signature
Chief Financial Officer
Date: 3/27/97 John E. Porter
By (Signature and Title): [Beatrice S. McQuarrie]
----------------------------------
Signature
Principal Accounting Officer
Date: 3/27/97 Beatrice S. McQuarrie
By (Signature and Title): [Alan E. Hahn]
----------------------------------
Signature
Director, Alan E. Hahn
Date: 3/27/97
By (Signature and Title): [Theodore L. Bertier, Jr.]
----------------------------------
Director, Theodore L. Bertier, Jr.
Date: 3/27/97
By (Signature and Title): [Karen Thorwarth]
----------------------------------
Director, Karen Thorwarth
Date: 3/27/97
29
By (Signature and Title): [Mary L. Wilcox]
----------------------------------
Director, Mary L. Wilcox
Date: 3/27/97
By (Signature and Title): [Thomas Clocker]
----------------------------------
Director, Thomas Clocker
Date: 3/27/97
By (Signature and Title): [William N. Scherer, Sr.]
----------------------------------
Director, William N. Scherer, Sr.
Date: 3/27/97
By (Signature and Title): [Charles L. Hein]
----------------------------------
Director, Charles L. Hein
Date: 3/27/97
By (Signature and Title): [F. W. Kuethe, III]
----------------------------------
Director, F.W. Kuethe, III
Date: 3/27/97
By (Signature and Title): [Shirley E. Boyer]
----------------------------------
Director, Shirley E. Boyer
Date: 3/27/97
By (Signature and Title): [Eugene P. Nepa]
----------------------------------
Director, Eugene P. Nepa
Date: 3/27/97
30
Glen Burnie Bancorp and Subsidiaries
Table of Contents
Page
Report of independent auditors F-1
Financial statements
Consolidated balance sheets F-2
Consolidated statements of income F-3
Consolidated statements of changes in stockholders' equity F-4
Consolidated statements of cash flows F-5-6
Notes to consolidated financial statements F-7-21
Report of Independent Auditors
The Board of Directors and
Stockholders
Glen Burnie Bancorp and Subsidiaries
Glen Burnie, Maryland
We have audited the accompanying consolidated balance sheets of Glen Burnie
Bancorp and Subsidiaries as of December 31, 1995, 1994, and 1993, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Glen Burnie Bancorp and Subsidiaries as of December 31, 1995, 1994, and 1993,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
As discussed in Note 11 to the financial statements, the Company changed its
method of accounting for postretirement health care benefits in 1995.
Baltimore, Maryland
March 8, 1996
F-1
Glen Burnie Bancorp and Subsidiaries
Consolidated Balance Sheets
- -------------------------------------------------------------------------------------------------------------------
December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Assets
Cash and due from banks $ 9,450,021 $ 7,806,316 $ 10,235,017
Federal funds sold - 1,800,000 4,200,000
Securities available for sale 68,597,172 3,273,076 -
Securities held to maturity (market value
of $6,092,901, $55,751,053 and $61,460,277) 6,001,675 57,128,637 58,473,048
Ground rents 269,825 269,825 269,825
Loans, less allowance for credit losses
of $3,698,271, $2,763,874, and $2,552,355 150,471,768 153,814,422 141,865,793
Bank premises and equipment 4,248,830 4,661,344 4,711,994
Other real estate owned 432,926 417,993 475,985
Accrued interest receivable 2,154,599 2,236,803 1,958,063
Prepaid income taxes 3,164,915 277,636 136,541
Deferred income taxes 263,860 778,818 829,590
Other assets 1,109,145 469,862 265,845
------------ ------------- ------------
$246,164,736 $232,934,732 $223,421,701
============ ============ ============
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing $ 45,147,023 $ 41,081,119 $ 37,868,118
Interest-bearing 175,973,740 167,484,534 165,042,612
------------ ------------ ------------
Total deposits 221,120,763 208,565,653 202,910,730
Short-term borrowings 1,757,722 2,226,568 1,269,261
Dividend payable 218,208 169,987 157,384
Accrued interest payable 229,715 186,823 181,513
Other liabilities 2,300,942 108,668 286,236
------------ ------------ ------------
225,627,350 211,257,699 204,805,124
------------ ------------ ------------
Stockholders' equity
Common stock, par value $10.00 per share;
authorized 5,000,000 shares; issued
and outstanding 727,366 shares in 1995, 708,083
shares in 1994, and 583,402 shares in 1993 7,273,664 7,080,834 5,834,024
Stock dividend to be distributed 1,454,719 - -
Surplus 5,917,043 5,450,852 5,290,979
Retained earnings 5,146,724 9,154,546 7,491,574
Net unrealized gain (loss) on securities
available for sale, net of income taxes 745,236 (9,199) -
------------- ------------- -------------
20,537,386 21,677,033 18,616,577
------------- ------------- -------------
$246,164,736 $232,934,732 $223,421,701
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-2
Glen Burnie Bancorp and Subsidiaries
Consolidated Statements of Income
- -------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Interest revenue
Loans, including fees $14,475,876 $14,085,642 $13,091,166
U.S. Treasury securities 987,119 1,037,453 1,136,624
U.S. Government agency securities 1,599,850 1,450,536 1,539,051
State and municipal securities 1,261,886 1,218,119 1,158,832
Federal funds sold 138,678 101,537 105,947
Other 137,296 51,814 4,679
----------- ----------- -----------
Total interest revenue 18,600,705 17,945,101 17,036,299
----------- ----------- -----------
Interest expense
Deposits 7,172,845 6,008,866 6,277,686
Other 88,723 68,276 22,519
----------- ----------- -----------
Total interest expense 7,261,568 6,077,142 6,300,205
----------- ----------- -----------
Net interest income 11,339,137 11,867,959 10,736,094
Provision for credit losses 7,925,000 1,120,000 1,080,000
----------- ----------- -----------
Net interest income after
provision for credit losses 3,414,137 10,747,959 9,656,094
----------- ----------- -----------
Other operating revenue
Service charges on deposit accounts 948,021 956,643 1,002,953
Other fees and commissions 449,567 480,019 400,131
Gains on investment securities 506,695 78,169 5,406
----------- ----------- -----------
Total other revenue 1,904,283 1,514,831 1,408,490
----------- ----------- -----------
Other expenses
Salaries 2,954,742 2,831,455 2,626,476
Employee benefits 1,182,490 1,156,763 1,050,334
Occupancy 465,732 484,738 486,742
Furniture and equipment 741,602 645,707 615,222
Restructuring and litigation charges 1,407,641 - -
Other operating 1,987,405 2,020,773 1,937,610
----------- ----------- -----------
Total other expenses 8,739,612 7,139,436 6,716,384
----------- ----------- -----------
Income (loss) before income taxes and cumulative
effect of a change in accounting method (3,421,192) 5,123,354 4,348,200
Income taxes (benefit) (1,694,444) 1,606,761 1,328,919
----------- ----------- -----------
Income (loss) before cumulative effect of a change
in accounting method (1,726,748) 3,516,593 3,019,281
Cumulative effect of a change in the method
of accounting for income taxes - - 27,831
----------- ----------- -----------
Net income (loss) $(1,726,748) $ 3,516,593 $ 3,047,112
=========== =========== ===========
Earnings per share
Income (loss) before cumulative effect of a
change in accounting method $ (2.01) $ 4.22 $ 3.66
Cumulative effect of a change in the
method of accounting for income taxes - - .03
----------- ----------- -----------
Net income (loss) $ (2.01) $ 4.22 $ 3.69
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
Glen Burnie Bancorp and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Net unrealized
gain (loss) on
Common stock securities
--------------------------- Retained available
Shares Par value Surplus earnings for sale
------ --------- ------- -------- --------
Balance, December 31, 1992 568,769 $5,687,690 $4,963,204 $5,065,481 $ -
Net income - - - 3,047,112 -
Issuance of shares for employee and
director stock purchase plans 8,068 80,680 170,726 - -
Cash dividends, $.75 per share - - - (621,019) -
Dividends reinvested 6,565 65,654 157,049 - -
------- ---------- ---------- ---------- -------
Balance, December 31, 1993 583,402 5,834,024 5,290,979 7,491,574 -
Unrealized gain on securities
available for sale at
January 1, 1994 - - - - 132,529
Net income - - - 3,516,593 -
Stock split effected in the form of
20% stock dividend 117,705 1,177,053 - (1,177,053) -
Issuance of shares for employee and
director stock purchase plans 4,605 46,050 96,247 - -
Shares retired (10,558) (105,580) (237,574) - -
Cash dividends, $.80 per share - - - (676,568) -
Dividends reinvested 12,929 129,287 301,200 - -
Change in unrealized (loss) on
securities available for sale - - - - (141,728)
------- ---------- ---------- ---------- --------
Balance, December 31, 1994 708,083 7,080,834 5,450,852 9,154,546 (9,199)
Net loss - - - (1,726,748) -
Issuance of shares for employee and
director stock purchase plans 8,488 84,880 191,174 - -
Cash dividends, $.96 per share - - - (826,355) -
Dividends reinvested 10,795 107,950 275,017 - -
Stock split effected in the form of
20% stock dividend 145,472 1,454,719 - (1,454,719) -
Change in unrealized gain on
securities available for sale - - - - 754,435
------- ---------- ---------- ---------- --------
Balance, December 31, 1995 872,838 $8,728,383 $5,917,043 $5,146,724 $745,236
======= ========== ========== ========== ========
The accompanying notes are an integral part of these financial statements.
F-4
Glen Burnie Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Interest received $ 18,637,384 $ 17,654,147 $ 17,115,168
Fees and commissions received 1,397,588 1,436,662 1,403,084
Interest paid (7,218,676) (6,071,832) (6,310,764)
Cash paid to suppliers and employees (7,785,480) (6,934,724) (6,099,518)
Income taxes paid (1,152,564) (1,691,297) (1,662,725)
------------ ------------ ------------
3,878,252 4,392,956 4,445,245
------------ ------------ ------------
Cash flows from investing activities
Proceeds from disposal of securities
Maturity of securities held to maturity 10,266,038 11,405,887 8,836,375
Maturity of securities available for sale 500,000 - -
Sales of securities available for sale 20,109,830 2,530,156 -
Purchases of securities held to maturity (493,391) (12,512,137) (12,385,767)
Purchases of securities available for sale (41,033,354) (3,282,257) -
Loans made to customers, net of
principal collected (3,064,585) (12,222,908) (19,973,503)
Loans purchased (1,730,000) (4,170,190) (2,751,250)
Loans sold - 2,776,000 7,547,887
Sales of real estate 588,747 553,922 291,043
Purchases of premises, equipment, software,
and intangibles (1,144,983) (478,025) (453,415)
------------ ------------ ------------
(16,001,698) (15,399,552) (18,888,630)
------------ ------------ ------------
Cash flows from financing activities
Net increase in deposits 12,555,110 5,654,923 16,552,513
Increase (decrease) in short-term borrowings (468,846) 957,307 288,921
Dividends paid (778,134) (663,965) (611,515)
Dividends reinvested 382,967 430,487 222,703
Shares of stock issued 276,054 142,297 251,406
Shares of stock retired - (343,154) -
------------ ------------ ------------
11,967,151 6,177,895 16,704,028
------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents (156,295) (4,828,701) 2,260,643
Cash and cash equivalents at
beginning of year 9,606,316 14,435,017 12,174,374
------------ ------------ ------------
Cash and cash equivalents at end of year $ 9,450,021 $ 9,606,316 $ 14,435,017
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
Glen Burnie Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
(Continued)
- -------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Reconciliation of net income to net
cash provided by operating activities
Net income (loss) $(1,726,748) $ 3,516,593 $ 3,047,112
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 583,530 536,605 515,380
Provision for credit losses 7,925,000 1,120,000 1,080,000
Provisions for other losses 136,800 123,000 10,000
Deferred income taxes 40,272 56,559 (377,805)
Losses (gains) on sale of assets, net (509,982) (139,646) 53,744
Amortization of premiums and accretion of
discounts, net (18,997) (7,131) 7,785
Decrease (increase) in
Accrued interest receivable 82,204 (278,740) (98,297)
Prepaid income taxes and other assets (2,943,020) (356,943) (59,268)
Increase (decrease) in
Accrued interest payable 42,892 5,310 (10,559)
Deferred loan origination fees (26,529) (5,083) 169,381
Other liabilities 292,830 (177,568) 107,772
----------- ----------- -----------
$ 3,878,252 $ 4,392,956 $ 4,445,245
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
The accounting and reporting policies reflected in the financial
statements conform to generally accepted accounting principles and to
general practices within the banking industry. Management makes estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosures of commitments and contingent liabilities at the date of
the financial statements and revenues and expenses during the year. Actual
results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of Glen
Burnie Bancorp (the Company) and its subsidiaries, The Bank of Glen Burnie
(the Bank) and GBB Properties, Inc. Intercompany balances and transactions
have been eliminated. The Parent Only financial statements of the Company
account for the subsidiaries using the equity method of accounting.
Business
The Bank provides credit and deposit services to individuals and
businesses located in Anne Arundel County and surrounding areas of central
Maryland.
Cash equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks, and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods.
Investment securities
In 1994, the Bank adopted Statement No. 115 of the Financial
Accounting Standards Board (FASB), Accounting for Certain Investments in
Debt and Equity Securities. Management has reviewed its portfolio and
classified securities as held to maturity or available for sale. Securities
which management has the intent and ability to hold to maturity are
recorded at amortized cost which is cost adjusted for amortization of
premiums and accretion of discounts to maturity. Securities held to meet
liquidity needs or which may be sold before maturity are classified as
available for sale and carried at fair value with unrealized gains and
losses included in stockholders' equity on an after tax basis.
Gains and losses on disposal are determined using the
specific-identification method.
Loans
Loans are stated at the current amount of unpaid principal, less
deferred origination fees and the allowance for credit losses.
Interest on loans is accrued based on the principal amounts
outstanding. Origination fees are amortized to income over the terms of
loans. Origination costs have been measured and determined by management to
be immaterial to the financial statements. The accrual of interest is
discontinued when management believes, after considering business
conditions and collection efforts, that collection is doubtful.
Allowance for credit losses
The allowance for credit losses represents an amount which, in
management's judgment will be adequate to absorb possible losses on
existing loans and other extensions of credit that may become
uncollectible. Management's judgment in determining the adequacy of the
allowance is based on evaluations of the collectibility of loans. These
evaluations take into consideration such factors as the volume and quality
of the loan portfolio and current economic conditions that may affect the
borrowers' ability to pay. Actual loan performance may differ from
management's estimates.
Management classifies loans as impaired when collection of
contractual obligations, including principal and interest, is doubtful.
F-7
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
1. Summary of Significant Accounting Policies (Continued)
Ground rents
Ground rents are recorded at cost.
Bank premises and equipment
Bank premises and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed over the estimated useful lives of
the assets using the straight-line and accelerated methods.
Other real estate owned
Real estate acquired through foreclosure is recorded at the lower of
cost or fair market value on the date acquired. Losses incurred at the time
of acquisition of the property are charged to the allowance for credit
losses. Subsequent reductions in the estimated carrying value of the
property and other expenses of owning the property are included in other
operating expense.
Software and intangible assets
Costs incurred in the organization of the Company are being amortized
over five years. Computer software is recorded at cost, and amortized over
three to five years. A deposit acquisition premium is recorded at cost, and
amortized over ten years. Amortization is computed using the straight-line
method.
Income taxes
The provision for income taxes includes taxes payable for the current
year and deferred income taxes. The Bank recognizes deferred tax assets and
liabilities for the expected future tax consequences of events that have
been reported differently in the financial statements and tax returns.
Under this method, deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Per share data
Earnings per share are determined by dividing net income by the
weighted average number of shares of common stock outstanding, giving
retroactive effect to stock dividends declared. Weighted average shares
were 861,116 for 1995, 833,849 for 1994, and 826,244 for 1993. Dividends
per share are restated giving retroactive effect to stock dividends
declared.
2. Cash and Equivalents
Cash and due from banks includes money market mutual fund accounts of
$1,457,693, $1,253,540, and $173,996, at December 31, 1995, 1994, and 1993,
respectively.
The Bank normally carries balances with another bank that exceed the
federally insured limit. Average balances carried in excess of the limit
were $4,010,911 for 1995, $6,663,893 for 1994, and $7,169,579 for 1993. The
Bank sold federal funds, on a secured basis, to the same bank that averaged
$2,416,318 for 1995, $2,798,922 for 1994, and $3,807,077 for 1993.
Banks are required to carry noninterest-bearing cash reserves of
specified percentages of deposit balances. The Bank's normal balances of
cash on hand and on deposit with other banks are sufficient to satisfy the
reserve requirements.
F-8
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
3. Investment Securities
Investment securities are summarized as follows:
Amortized Unrealized Unrealized Market
December 31, 1995 cost gains losses value
----------------------- -------------- -------------- -------------- ----------
Available for sale
U. S. Treasury $10,067,337 $ 142,506 $ 7,845 $10,201,998
U. S. Government agency 26,187,078 287,223 3,601 26,470,700
Mortgage-backed 3,049,947 92,520 - 3,142,467
State and municipal 27,379,975 732,408 29,076 28,083,307
----------- ----------- ---------- -----------
66,684,337 1,254,657 40,522 67,898,472
Federal Home Loan Bank stock 698,700 - - 698,700
------------ -------------- --------- ------------
$67,383,037 $1,254,657 $ 40,522 $68,597,172
=========== ========== ========= ===========
Held to maturity
U. S. Treasury $ 5,003,789 $ 84,106 $ 3,750 $ 5,084,145
U. S. Government agency 997,886 10,870 - 1,008,756
----------- ----------- ---------- -----------
$ 6,001,675 $ 94,976 $ 3,750 $ 6,092,901
=========== =========== ========== ===========
December 31, 1994
-----------------
Available for sale
U. S. Treasury $ 1,494,530 $ 4,272 $ 24,102 $ 1,474,700
U. S. Government agency 500,000 - - 500,000
State and municipal 608,832 5,678 834 613,676
------------ ----------- ------------ ------------
2,603,362 9,950 24,936 2,588,376
Federal Home Loan Bank stock 684,700 - - 684,700
------------ ------------- -------------- ------------
$ 3,288,062 $ 9,950 $ 24,936 $ 3,273,076
=========== =========== =========== ===========
Held to maturity
U. S. Treasury $15,604,747 $ 18,616 $ 590,301 $15,033,062
U. S. Government agency 19,767,888 40,982 700,178 19,108,692
Mortgage-backed 1,894,261 19,336 45,941 1,867,656
State and municipal 19,861,741 414,704 534,802 19,741,643
----------- ------------ ------------ -----------
$57,128,637 $ 493,638 $ 1,871,222 $55,751,053
=========== =========== =========== ===========
December 31, 1993
-----------------
U. S. Treasury $18,855,022 $ 615,160 $ - $19,470,182
U. S. Government agency 18,476,871 642,457 10,374 19,108,954
Mortgage-backed 1,653,810 113,962 - 1,767,772
State and municipal 19,487,345 1,628,615 2,591 21,113,369
----------- ---------- ------------- -----------
$58,473,048 $3,000,194 $ 12,965 $61,460,277
=========== ========== ============ ===========
In 1995, the FASB granted a one-time opportunity to reclassify
securities. The Bank reclassified a majority of its securities from held to
maturity to available for sale.
F-9
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
3. Investment Securities (Continued)
Contractual maturities at December 31, 1995, 1994, and 1993, are
shown below. Actual maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Available for sale Held to maturity
Amortized Market Amortized Market
December 31, 1995 cost value cost value
--------------------------- -------------- --------------- -------------- ------------
Due within one year $ 6,239,463 $ 6,272,876 $ - $ -
Due over one to five years 16,130,873 16,449,969 5,258,197 5,328,052
Due over five to ten years 15,308,097 15,747,636 743,478 764,849
Due over ten years 25,955,957 26,285,524 - -
Mortgage-backed, due in
monthly installments 3,049,947 3,142,467 - -
----------- ------------ -------------- ----------
$66,684,337 $67,898,472 $6,001,675 $6,092,901
=========== =========== ========== ==========
December 31, 1994
-----------------
Due within one year $ 499,490 $ 503,750 $ 6,598,185 $ 6,604,743
Due over one to five years 1,495,040 1,470,950 34,059,243 33,071,197
Due over five to ten years - - 9,926,296 9,730,426
Due over ten years 608,832 613,676 4,650,652 4,477,031
Mortgage-backed, due in
monthly installments - - 1,894,261 1,867,656
------------- ------------ ----------- -----------
$ 2,603,362 $ 2,588,376 $57,128,637 $55,751,053
=========== =========== =========== ===========
December 31, 1993
-----------------
Due within one year $ 7,089,159 $ 7,163,994
Due over one to five years 31,347,218 32,776,360
Due over five to ten years 13,308,887 14,252,018
Due over ten years 5,073,974 5,500,133
Mortgage-backed, due in
monthly installments 1,653,810 1,767,772
------------ ------------
$58,473,048 $61,460,277
============ ===========
Proceeds from sales of investments prior to maturity were $20,338,033
during 1995 and $2,530,156 during 1994. Gains of $563,764 and losses of
$72,482, were realized on those sales for 1995. Gains of $62,385 and losses
of $18,738 were realized on those sales for 1994. There were no sales of
investments prior to maturity for 1993.
At December 31, 1995, 1994, and 1993, securities with an amortized
cost of $3,004,119, $2,500,000, and $1,600,162, were pledged as collateral
for government deposits and short-term borrowings.
The investment securities include obligations of the State of
Maryland and its subdivisions with an amortized cost of $18,839,735,
$20,217,039, and $19,233,538, at December 31, 1995, 1994, and 1993.
F-10
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
4. Loans
Major categories of loans are as follows:
1995 1994 1993
--------------- --------------- ----------
Mortgage
Residential $ 37,269,279 $ 34,302,680 $ 33,664,092
Commercial 46,888,141 39,397,909 39,276,953
Construction and land development 14,264,761 21,014,457 12,372,074
Lease financing 13,241,832 15,597,789 17,773,635
Demand and time 13,123,542 12,680,512 12,841,248
Installment 29,382,484 33,584,949 28,490,146
------------- ------------- ------------
154,170,039 156,578,296 144,418,148
Allowance for credit losses 3,698,271 2,763,874 2,552,355
------------- ------------- ------------
Loans, net $150,471,768 $153,814,422 $141,865,793
============ ============ ============
The Bank makes loans to customers located primarily in Anne Arundel
County and surrounding areas of central Maryland. Although the loan
portfolio is diversified, its performance will be influenced by the economy
of the region.
The maturity and rate repricing distribution of the loan portfolio
are as follows:
1995 1994 1993
--------------- --------------- ---------
Variable rate immediately $ 35,148,040 $ 40,448,637 $ 35,243,050
Due within one year 21,326,466 20,520,984 17,781,365
Due over one to five years 48,258,718 48,715,788 46,275,618
Due over five years 50,309,892 47,668,693 45,899,004
------------ ------------- -------------
155,043,116 157,354,102 145,199,037
Deferred fees and discount 873,077 775,806 780,889
-------------- -------------- --------------
$154,170,039 $156,578,296 $144,418,148
============ ============ ============
Transactions in the allowance for credit losses were as follows:
Beginning balance $ 2,763,874 $ 2,552,355 $ 1,755,385
Provision charged to operations 7,925,000 1,120,000 1,080,000
Recoveries 70,047 67,663 50,627
------------- ------------- --------------
10,758,921 3,740,018 2,886,012
Loans charged off 7,060,650 976,144 333,657
------------- ------------- -------------
Ending balance $ 3,698,271 $ 2,763,874 $ 2,552,355
============ ============ ============
Management has identified impaired loans of $407,597 as of December
31, 1995. No specific allowance for losses related to impaired loans has
been provided. These loans were identified as impaired near the end of
1995, and no payments have been received on these loans since they were
classified impaired.
F-11
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
4. Loans (Continued)
Loans on which the accrual of interest has been discontinued amounted
to $2,374,643, $654,568, and $1,113,701, at December 31, 1995, 1994, and
1993, respectively. Interest that would have been accrued under the terms
of these loans was $191,200, $38,469, and $182,495, at December 31, 1995,
1994, and 1993, respectively.
Principal balances of loans past due 90 days or more, including past
due nonaccrual loans, are as follows:
1995 1994 1993
----------- ------------- ---------
Demand and time $ 293,462 $ 199,873 $ 339,108
Mortgage 3,258,164 2,486,348 2,094,193
Installment 1,459,411 845,494 615,184
Lease financing 1,269,102 41,912 110,886
---------- ----------- -----------
$6,280,139 $3,573,627 $3,159,371
========== ========== ==========
5. Credit Commitments
Outstanding loan commitments, unused lines of credit and letters of
credit are as follows
1995 1994 1993
----------- ------------ --------
Loan commitments
Construction and land development $3,145,000 $ 2,354,000 $ 3,105,000
Other mortgage loans 703,000 1,181,900 2,141,747
Lease financing 395,000 750,000 -
----------- ------------ ----------
$4,243,000 $ 4,285,900 $ 5,246,747
========== =========== ===========
Unused lines of credit
Home-equity lines $ 2,678,990 $ 2,561,861 $ 2,579,440
Commercial lines 13,430,907 18,424,323 18,217,753
Unsecured consumer lines 2,419,052 1,886,600 1,696,982
----------- ------------ -----------
$18,528,949 $22,872,784 $22,494,175
=========== =========== ===========
Letters of credit $ 4,297,760 $ 4,467,523 $ 4,276,619
=========== =========== ===========
Loan commitments and lines of credit are agreements to lend to a
customer as long as there is no violation of any condition to the contract.
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. Such lines do not represent
future cash requirements because it is unlikely that all customers will
draw upon their lines in full at any time. Letters of credit are
commitments issued to guarantee the performance of a customer to a third
party.
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
collateral, as outstanding loans. An allowance of $108,000 has been
provided to record a possible loss on a letter of credit.
F-12
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
6. Bank Premises and Equipment
A summary of bank premises and equipment is as follows:
Useful
lives 1995 1994 1993
------------- ------------ ------------ --------
Land $ 509,803 $ 896,170 $ 896,170
Bank buildings 5-50 years 3,494,122 3,467,732 3,357,690
Construction in progress 29,019 65,024 175,771
Equipment and fixtures 5-30 years 3,430,771 3,037,146 2,890,047
---------- ----------- ----------
7,463,715 7,466,072 7,319,678
Accumulated depreciation 3,214,885 2,804,728 2,607,684
---------- ---------- ----------
$4,248,830 $4,661,344 $4,711,994
========== ========== ==========
Depreciation expense was $533,197, $511,919, and $449,426, for 1995,
1994, and 1993, respectively. Amortization of software and intangible
assets was $50,332, $24,686, and $15,954 for 1995, 1994, and 1993,
respectively.
The Bank leases the South Crain Branch. Minimum obligations under the
lease are $23,460 per year until the lease expires on June 30, 2000. The
Bank is also required to pay maintenance costs. Rent expense was $11,681
for 1995.
7. Short-term borrowings
Short-term borrowings are as follows:
1995 1994 1993
---------- ---------- ----------
Notes payable - U.S. Treasury $ 282,722 $ 726,568 $1,269,261
Federal funds purchased 975,000 - -
Securities sold under repurchase agreement 500,000 - -
Federal Home Loan Bank notes - 1,500,000 -
---------- ---------- ----------
$1,757,722 $2,226,568 $1,269,261
========== =========== ==========
The Bank may borrow up to $26 million under a line of credit with the
Federal Home Loan Bank. The line of credit is secured by a floating lien on
the Bank's residential mortgage loans and by investment securities with an
amortized cost of $3,004,119 at December 31, 1995.
Notes payable to the U.S. Treasury are federal treasury tax and loan
deposits accepted by the Bank from its customers to be remitted on demand
to the Federal Reserve Bank. The Bank pays interest on these balances at a
slight discount to the federal funds rate.
The Bank also has available lines of credit, less amounts currently
outstanding, of $1,000,000 in overnight federal funds and $2,000,000 in
short-term secured credit from another bank.
F-13
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
8. Deposits
Major classifications of interest-bearing deposits are as follows:
1995 1994 1993
--------------- --------------- ----------
NOW and SuperNOW $ 22,289,849 $ 22,272,708 $ 21,800,005
Money market 27,602,041 32,880,823 36,501,803
Savings 46,752,665 52,830,352 52,764,881
Certificates of deposit, $100,000 or more 9,844,841 7,804,644 6,530,466
Other time deposits 69,484,344 51,696,007 47,445,457
------------- ------------- -------------
$175,973,740 $167,484,534 $165,042,612
============ ============ ============
Certificates of deposit $100,000 or more mature as follows:
1995 1994 1993
------------- ------------- ---------
Three months or less $2,097,599 $3,315,755 $2,266,140
Three through 12 months 3,331,546 3,047,900 1,970,334
Over 12 months 4,415,696 1,440,989 2,293,992
---------- ----------- -----------
$9,844,841 $7,804,644 $6,530,466
========== ========== ==========
Interest expense associated with certificates of deposit of $100,000
or more was $394,092, $312,993, and $298,594, for the years ended December
31, 1995, 1994, and 1993, respectively.
9. Other Operating Expenses
Other operating expenses include the following:
1995 1994 1993
------------ ------------ --------
Professional services $ 329,849 $ 245,932 $ 151,751
Stationery, printing, and supplies 278,366 235,500 241,708
Postage and delivery 253,253 201,094 187,134
FDIC assessment 237,565 455,250 420,481
Directors fees and expenses 133,202 159,518 195,963
Marketing 118,948 97,671 112,089
Data processing 97,608 92,237 74,830
Correspondent bank services 78,631 53,285 44,423
Telephone 49,021 38,598 49,257
Liability insurance 45,075 48,405 51,424
Losses and expenses on real estate owned 23,733 107,553 102,323
Other 342,154 285,730 306,227
----------- ----------- -----------
$1,987,405 $2,020,773 $1,937,610
========== ========== ==========
F-14
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
10. Pension and Profit Sharing Plans
The Bank has a defined benefit pension plan covering substantially
all of the employees. Benefits are based on the employee's average rate of
earnings for the five consecutive years before retirement. The Bank's
funding policy is to contribute annually the maximum amount that can be
deducted for income tax purposes, determined using the frozen entry age
actuarial cost method. Assets of the plan are held in a trust fund
principally comprised of growth and income mutual funds managed by another
bank.
The following table sets forth the financial status of the plan:
1995 1994 1993
------------- ------------ --------
Accumulated benefit obligation
Vested $2,183,088 $2,003,059 $1,839,440
Nonvested 63,366 98,277 59,410
----------- ----------- -----------
$2,246,454 $2,101,336 $1,898,850
========== ========== ==========
Plan assets at fair value $3,399,653 $2,767,215 $2,771,950
Projected benefit obligation 3,365,078 3,085,573 2,709,239
---------- ---------- ----------
Plan assets in excess of (less than)
projected benefit obligation 34,575 (318,358) 62,711
Unrecognized prior service cost 199,924 225,521 251,118
Unrecognized net (gain) loss (6,440) 332,303 (74,306)
Unamortized net asset from transition (73,012) (85,181) (97,350)
---------- ---------- ----------
Prepaid pension expenses included in
other assets $ 155,047 $ 154,285 $ 142,173
========== ========== ==========
Net pension expense includes the following:
Service cost $ 177,998 $ 175,424 $ 143,683
Interest cost 256,958 232,123 198,606
Actual return on assets (577,586) 96,951 (292,053)
Net amortization and deferral 364,911 (314,269) 96,846
---------- ---------- ----------
Net pension expense $ 222,281 $ 190,229 $ 147,082
========== ========== ==========
Assumptions used in the accounting for net pension
expense were:
Discount rates 8.5% 8.5% 8.5%
Rate of increase in compensation levels 6.5% 6.5% 6.5%
Long-term rate of return on assets 8.5% 8.5% 8.5%
The Bank has a defined contribution retirement plan qualifying under
Section 401(k) of the Internal Revenue Code that is funded through a profit
sharing agreement and voluntary employee contributions. The Bank's
contributions to the plan are determined annually by the Board of
Directors. The plan covers substantially all employees. The Bank's
contributions to the plan, included in expenses, for 1995, 1994, and 1993
were $165,100, $154,900, and $141,700, respectively.
F-15
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
11. Postretirement Health Care Benefits
The Bank provides health care benefits to employees who retire at age
65. The plan is funded only by the Bank's monthly payments of insurance
premiums due. The following table sets forth the financial status of the
plan at December 31, 1995:
Accumulated postretirement benefit obligation
Retirees $185,057
Other active participants, not fully eligible 482,922
--------
667,979
Unrecognized transition obligation 535,126
--------
Accrued postretirement benefit cost $132,853
========
Net postretirement benefit expense for
1995 includes the following:
Service cost $ 55,885
Interest cost 56,778
Amortization of unrecognized transition obligation 33,399
--------
Net postretirement benefit expense $146,062
========
Assumptions used in the accounting for
net postretirement benefit
expense were:
Health care cost trend rate 8.0%
Discount rate 8.5%
If the assumed health care cost trend rate were increased to 9.0%,
the total of the service and interest cost components of net periodic
postretirement health care benefit cost would increase by $28,808, and the
accumulated postretirement benefit obligation would increase by $161,117.
12. Litigation and Restructuring Charges
In 1995, two opposing groups ran for election to the Board of
Directors. The Company incurred legal expenses and entered into a severance
agreement with a former executive officer in connection with this
restructuring at costs totaling $687,841. The Company also incurred losses
of $719,800 to settle the claim of a borrower who asserted damages for
discrimination. These nonrecurring charges are included in operating
expenses for 1995.
13. Contingencies
The Bank is involved in various legal actions arising from normal
business activities. Management believes that the ultimate liability or
risk of loss resulting from these actions will not materially affect the
Bank's financial position.
F-16
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
14. Income Taxes
The components of income tax expense (benefit) are as follows:
1995 1994 1993
----------- ----------- --------
Current
Federal $ (1,494,542 $1,204,547 $1,310,228
State (240,172) 345,654 368,665
------------ ---------- ----------
(1,734,714) 1,550,201 1,678,893
Deferred 40,270 56,560 (349,974)
------------ ---------- ----------
$ (1,694,444) $1,606,761 $1,328,919
============ ========== ==========
The components of the deferred tax expense (benefits) are as follows:
Depreciation $ (5,786) $ (1,155) $ 8,705
Discount accretion (7,465) 4,714 6,820
Provision for credit losses 149,670 (107,971) (301,872)
Deferred loan origination fees (16,343) 150,535 (81,619)
Deferred compensation plans (79,806) 10,437 17,992
---------- --------- ---------
$ 40,270 $ 56,560 $(349,974)
========== ========= =========
As of January 1, 1993, the Company recorded a tax credit of $27,831,
or $0.03 per share resulting from the adoption of FASB Statement No. 109.
This amount represents the net increase in the deferred tax asset as of
that date, and is included in the consolidated statements of income as the
cumulative effect of an accounting change.
The components of the net deferred tax asset (liability) are as
follows:
1995 1994 1993
------------ ------------ ---------
Deferred tax assets
Allowance for credit losses $ 837,382 $ 987,052 $ 879,081
Deferred loan origination fees 138,285 121,942 272,477
Unrealized loss on securities available for sale - 5,788 -
Deferred compensation and benefit plans 87,543 7,443 13,202
----------- ------------ -----------
1,063,210 1,122,225 1,164,760
---------- ---------- ----------
Deferred tax liabilities
Depreciation 245,201 250,987 252,142
Discount accretion 25,370 32,835 28,121
Prepaid pension contributions 59,879 59,585 54,907
Unrealized gain on securities available for sale 468,899 - -
----------- ----------- ---------
799,349 343,407 335,170
----------- ----------- -----------
Net deferred tax asset $ 263,861 $ 778,818 $ 829,590
========== ========== ==========
F-17
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
14. Income Taxes (Continued)
The differences between the federal income tax computed at the
statutory rate of 34 percent and the income taxes for the Company are
reconciled as follows:
1995 1994 1993
------------ ------------ --------
Income (loss) before income taxes $(3,421,192) $ 5,123,354 $ 4,348,200
=========== =========== ===========
Taxes computed at federal income tax rate $(1,163,205) $ 1,741,940 $ 1,478,388
Increase (decrease) resulting from
Tax-exempt income (384,915) (377,591) (359,031)
State income taxes, net of federal benefit (154,710) 237,724 201,452
Nondeductible expenses 8,386 4,688 8,110
------------- ------------- ------------
$(1,694,444) $ 1,606,761 $ 1,328,919
=========== =========== ===========
15. Capital Standards
The Federal Reserve Board and the Federal Deposit Insurance
Corporation have adopted risk-based capital standards for banking
organizations. These standards require minimum ratios of capital to
risk-based assets of 4 percent for Tier 1 capital and 8 percent for total
capital. Tier 1 capital consists of stockholders' equity, excluding the
unrealized net gain or loss, after applicable income taxes, on investment
securities available for sale, and total capital includes a limited amount
of the allowance for credit losses. In calculating risk-weighted assets,
specified risk percentages are applied to each category of asset and
off-balance sheet items.
The Company and the Bank must also maintain minimum capital leverage
ratios of 3 to 5 percent of Tier 1 capital to average total assets. The
standard is based on a discretionary evaluation of the Bank's risk profile
by the Federal Reserve and the FDIC.
A bank is considered well capitalized if it has minimum Tier 1 and
total risk-based capital ratios of 6 percent and 10 percent, respectively,
and a minimum leverage ratio of 5 percent.
The Company's capital ratios, capital balances, and risk-weighted
assets at December 31 were as follows:
1995 1994 1993
-------------- -------------- ---------
Risk-based ratios
Tier 1 capital 12.4% 14.0% 13.0%
Total risk-based capital 13.7% 15.3% 14.3%
Leverage ratio (approximated using
year-end assets) 7.8% 9.3% 8.3%
Capital balances
Tier 1 $ 19,261,115 $ 21,686,232 $ 18,616,577
Total 21,226,040 23,624,870 20,409,840
Risk-weighted assets 154,987,000 154,393,000 142,697,000
F-18
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
16. Parent Company Financial Information
The balance sheets and statements of income for Glen Burnie Bancorp
(Parent Only) are presented below:
Balance Sheets
- --------------------------------------------------------------------------------------------------------------
December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
Assets
Cash $ 264,757 $ - $ 174,463
Investment in The Bank of Glen Burnie 20,478,884 21,718,390 18,201,804
Investment in GBB Properties, Inc. - 1,899 -
Land - 384,700 384,700
Other assets 27,142 16,582 12,994
----------- ----------- -----------
Total assets $20,770,783 $22,121,571 $18,773,961
=========== =========== ===========
Liabilities and stockholders' equity
Dividend payable $ 218,208 $ 169,987 $ 157,384
Due to affiliates 15,189 274,551 -
----------- ----------- -----------
233,397 444,538 157,384
----------- ----------- -----------
Stockholders' equity
Common stock 7,273,664 7,080,834 5,834,024
Stock dividend to be distributed 1,454,719 - -
Surplus 5,917,043 5,450,852 5,290,979
Retained earnings 5,146,724 9,154,546 7,491,574
Net unrealized gain (loss) on securities
available for sale, net of income taxes 745,236 (9,199) -
----------- ----------- -----------
Total stockholders' equity 20,537,386 21,677,033 18,616,577
----------- ----------- -----------
Total liabilities and stockholders' equity $20,770,783 $22,121,571 $18,773,961
=========== =========== ===========
Statements of Income
- --------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
Dividend from subsidiaries $ 315,000 $ - $ 160,000
Expenses 61,775 7,060 9,136
------------ ----------- -----------
Income before income taxes and equity in
undistributed net income of subsidiaries 253,225 (7,060) 150,864
Income tax benefit 21,056 5,970 -
Equity in undistributed net income of subsidiaries (2,001,029) 3,517,683 2,896,248
------------ ------------ -----------
Net income (loss) $ (1,726,748) $ 3,516,593 $ 3,047,112
============ =========== ===========
F-19
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
17. Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments are
as follows:
December 31, 1995 December 31, 1994
------------------------------ ------------------------------
Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----
Financial assets
Cash and due from banks $ 9,450,021 $ 9,450,021 $ 7,806,316 $ 7,806,316
Federal funds sold - - 1,800,000 1,800,000
Investment securities 74,598,847 74,690,073 60,401,713 59,024,129
Variable rate loans 35,148,040 35,148,040 40,448,637 40,448,637
Accrued interest receivable 2,154,599 2,154,599 2,236,803 2,236,803
Financial liabilities
Noninterest-bearing deposits $ 45,147,023 $ 45,147,023 $ 41,081,119 $ 41,081,119
Variable rate deposits 96,644,555 96,644,555 107,983,883 107,983,883
Short-term borrowings 1,757,722 1,757,722 2,226,568 2,226,568
Interest and dividend payable 447,923 447,923 356,810 356,810
The fair values of investment securities are estimated using a matrix
that considers yield to maturity, credit quality, and marketability. This
method of valuation is permitted by the FASB, but may not be indicative of
net realizable or liquidation values.
It is not practicable to estimate the fair value of loans with fixed
maturities, deposit liabilities with fixed maturities, or outstanding
credit commitments. The Company does not presently have available resources
to estimate fair values based on quoted prices or discounted cash flows for
individual accounts or groups of accounts.
Maturities and weighted-average interest rates on loans and deposits
with fixed maturities are as follows:
December 31, 1995 December 31, 1994
---------------------- ---------------------
Amount Rate Amount Rate
------ ---- ------ ----
Loans
Maturing within one year $ 21,326,466 8.7% $ 20,520,984 8.7%
Maturing over one to five years 48,258,718 9.0% 48,715,788 8.8%
Maturing over five years 50,309,892 9.1% 47,668,693 9.3%
------------- ------------
$119,895,076 $116,905,465
============ ============
Deposits
Maturing within three months $ 17,035,145 5.7% $ 13,342,709 4.0%
Maturing over three to six months 16,598,147 5.8% 12,985,504 4.8%
Maturing over six months to one year 13,014,695 5.7% 12,643,752 5.0%
Maturing over one to five years 32,681,198 6.5% 20,528,686 5.8%
------------- -------------
$ 79,329,185 $ 59,500,651
============ ============
F-20
Glen Burnie Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
18. Related Party Transactions
The executive officers and directors of the Bank enter into loan
transactions with the Bank in the ordinary course of business. These loans
were made on the same terms, including interest rates and collateral, as
those prevailing at the time for comparable loans with unrelated borrowers.
At December 31, 1995, 1994, and 1993, the amounts of such loans outstanding
were $2,878,742, $685,613, and $535,347, respectively.
19. Stockholders' Equity
Employees who have completed one year of service are eligible to
participate in the employee stock purchase plan. The plan allows employees
to purchase stock at 85 percent of the fair market value. At December 31,
1995, there were 31,980 shares of common stock reserved for issuance under
the plan. Options for 4,555 of those shares are outstanding, at $26.92 per
share, expiring October 1, 1996. Options for 6,586 shares were exercised in
1995 at prices of $24.08 to $26.92 per share.
The director stock purchase plan allows directors to purchase stock
at the fair market value on the date an option is granted. At December 31,
1995, there were 17,700 shares of common stock reserved for issuance under
the plan. Options for 300 of those shares are outstanding at $31.67 per
share, expiring October 1, 1997. Options for 3,600 shares were exercised in
1995 at prices of $28.33 to $31.67 per share.
The dividend reinvestment and stock purchase plan allows
participating stockholders to invest their cash dividends in stock at 95
percent of the fair market value on the dividend payment date. At December
31, 1995, there were 105,190 shares of common stock reserved for issuance
under the plan.
The number of shares and prices per share have been retroactively
adjusted for stock dividends declared.
The Board of Directors may suspend or discontinue any of the plans at
its discretion.
20. Regulatory Matters
The FDIC has advised management that it will ask the Bank to agree to
a Memorandum of Understanding that management will correct violations of
law, improve loan administration and loan loss accounting methods, improve
loan collections, improve information to the board of directors, adopt a
strategic plan and budget, and maintain adequate capital.
F-21
Exhibit Index
Page No.
3.1 Articles of Incorporation ___
3.2 By-Laws ___
10.1 Glen Burnie Bancorp Stockholder Purchase Plan ___
10.2 Glen Burnie Bancorp Dividend Reinvestment and ___
Stock Purchase Plan
10.3 Glen Burnie Bancorp Director Stock Purchase Plan ___
10.4 Glen Burnie Bancorp Employee Stock Purchase Plan ___
10.5 The Bank of Glen Burnie Pension Plan ___
11 Statement re computation of per share earnings ___
16 Letter re: change in certifying public accountant ___
21 Subsidiaries of the registrant ___
27 Financial Data Schedule ___