UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-24047
GLEN BURNIE BANCORP
(Exact name of registrant as specified in its charter)
Maryland 52-1782444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Crain Highway, S.E.
Glen Burnie, Maryland 21061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 766-3300
Inapplicable
(Former name, former address and former fiscal year
if changed from last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At July 26, 2002, the number of shares outstanding of the registrant's common
stock was 1,669,907.
TABLE OF CONTENTS
Part I - Financial Information Page
----
Item 1. Financial Statements:
-------
Condensed Consolidated Balance Sheets,
June 30, 2002 (unaudited) and December
31, 2001 (audited) 3
Condensed Consolidated Statements of Income
for the Three and Six Months Ended June 30, 2002
and 2001 (unaudited) 4
Condensed Consolidated Statements of Comprehensive
Income for the Three and Six Months Ended
Months Ended June 30, 2002 and 2001 (unaudited) 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended June 30, 2002
and 2001 (unaudited) 6
Notes to Unaudited Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
------- Financial Condition and Results of Operations 9
Item 3. Quantitative And Qualitative Disclosure
------- About Market Risk 13
Part II - Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 14
-------
Item 6. Exhibits and Reports on Form 8-K 14
-------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
June 30, 2002 December 31,
------------- ------------
ASSETS (unaudited) 2001
----
Cash and due from banks $7,845 $10,888
Interest-bearing deposits in other financial institutions 377 1,879
Federal funds sold 5,672 5,453
------ -------
Cash and cash equivalents 13,894 18,220
Certificates of deposit in other financial institutions 100 100
Investment securities available for sale, at fair value 71,327 55,548
Investment securities held to maturity, at cost
(fair value June 30: $14,140; December 31: $16,881) 13,669 16,517
Federal Home Loan Bank stock, at cost 703 652
Common Stock in the Glen Burnie Statutory Trust I 155 155
Loans, less allowance for credit losses
(June 30: $2,766; December 31: $2,938) 161,286 164,569
Premises and equipment, at cost, less accumulated depreciation 3,766 3,887
Other real estate owned 417 420
Other assets 3,159 3,294
-------- --------
Total assets $268,476 $263,362
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $233,275 $229,307
Short-term borrowings 630 882
Long-term borrowings 7,263 7,275
Other liabilities 2,150 2,881
-------- --------
Total liabilities 243,318 240,345
-------- --------
Guaranteed preferred beneficial interests in Glen Burnie Bancorp
junior subordinated debentures 5,155 5,155
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, par value $1, authorized 15,000,000 shares;
Issued and outstanding: June 30: 1,669,907 shares;
December 31: 1,663,560 shares 1,670 1,664
Surplus 10,527 10,390
Retained earnings 7,212 5,971
Accumulated other comprehensive income (loss), net of tax 594 (163)
-------- --------
Total stockholders' equity 20,003 17,862
-------- --------
Total liabilities and stockholders' equity $268,476 $263,362
======== ========
See accompanying notes to condensed consolidated
financial statements.
3
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
2002 2001 2002 2001
---- ---- ---- ----
Interest income on:
Loans, including fees $3,091 $3,249 $6,206 $6,535
U.S. Treasury and U.S. Government agency securities 674 651 1,279 1,293
State and Municipal securities 281 167 539 291
Other 132 236 275 475
------ ------ ------ ------
Total interest income 4,178 4,303 8,299 8,594
------ ------ ------ ------
Interest expense on:
Deposits 1,039 1,384 2,163 2,872
Short-term borrowings 1 4 3 11
Long-term borrowings 107 73 213 181
Junior subordinated debentures 137 137 273 278
------ ------ ------ ------
Total interest expense 1,284 1,598 2,652 3,342
------ ------ ------ ------
Net interest income 2,894 2,705 5,647 5,252
Provision for credit losses 0 0 0 0
------ ------ ------ ------
Net interest income after provision for credit 2,894 2,705 5,647 5,252
losses ------ ------ ------ ------
Other income:
Service charges on deposit accounts 251 248 500 480
Other fees and commissions 148 141 286 282
Other non-interest income 1 9 4 16
Gain on termination of post-retirement plan 0 0 764 0
Gains on investment securities 2 29 6 47
------ ------ ------ ------
Total other income 402 427 1,560 825
------ ------ ------ ------
Other expenses:
Salaries and employee benefits 1,494 1,434 2,918 2,825
Occupancy 146 117 292 281
Other expenses 894 1,096 1,794 1,887
------ ------ ------ ------
Total other expenses 2,534 2,647 5,004 4,993
------ ------ ------ ------
Income before income taxes 762 485 2,203 1,084
Income tax expense 175 108 628 275
------ ------ ------ ------
Net income $ 587 $ 377 $1,575 $ 809
====== ====== ====== ======
Basic and diluted earnings per share of common stock $ .35 $ .23 $ .94 $ .50
====== ====== ====== ======
Weighted average shares of common stock outstanding 1,666,052 1,654,051 1,664,911 1,655,578
========= ========= ========= =========
Dividends declared per share of common stock $ .10 $ .10 $ .20 $ .20
====== ====== ====== ======
See accompanying notes to condensed consolidated
financial statements.
4
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net income $587 $377 $1,575 $809
Other comprehensive income (loss), net of tax
Unrealized gains (losses) securities:
Unrealized holding gains (losses) arising
during period 995 (59) 759 100
Reclassification adjustment for gains
included in net income (1) (18) (2) (29)
------ ---- ------ ----
Comprehensive income $1,581 $300 $2,332 $880
====== ==== ====== ====
See accompanying notes to condensed consolidated
financial statements.
5
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Six Months Ended June 30,
-------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income $1,575 $809
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion 53 292
Compensation expense from vested stock options 39 0
Provision for credit losses 0 0
Gains on disposals of assets, net (3) 0
Changes in assets and liabilities:
(Increase) decrease in other assets (411) (124)
(Decrease) increase in other liabilities (703) (759)
------- -------
Net cash provided by operating activities 550 218
------- -------
Cash flows from investing activities:
Maturities of available for sale mortgage-backed securities 4,687 2,081
Proceeds from disposals of investment securities 4,136 4,500
Purchases of investment securities (20,204) (12,254)
Purchase of Federal Home Loan Bank stock (51) 0
Decrease in loans, net 3,283 2,340
Purchases of premises and equipment (176) (303)
Proceeds from sale of other real estate 3 2
------- -------
Net cash used by investing activities (8,322) (3,634)
------- -------
Cash flows from financing activities:
Increase in deposits, net 3,968 8,880
Increase (decrease) in short-term borrowings (252) 360
Repayment of long-term borrowings (12) (11)
Dividends paid (362) (380)
Common stock dividends reinvested 72 39
Issuance of common stock 32 0
Repurchase and retirement of common stock 0 (149)
------- -------
Net cash provided by financing activities 3,446 8,739
------- -------
Increase (decrease) in cash and cash equivalents (4,326) 5,323
Cash and cash equivalents, beginning of year 18,220 15,509
------- -------
Cash and cash equivalents, end of period $13,894 $20,832
======= =======
See accompanying notes to condensed consolidated
financial statements.
6
GLEN BURNIE BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-Q and, therefore, do not include all
information and notes necessary for a complete presentation of financial
position, results of operations, changes in stockholders' equity, and cash flows
in conformity with generally accepted accounting principles. However, all
adjustments (consisting only of normal recurring accruals) which, in the opinion
of management, are necessary for a fair presentation of the unaudited
consolidated financial statements have been included in the results of
operations for the three and six months ended June 30, 2002 and 2001.
Operating results for the three and six-month periods ended June 30, 2002
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002.
NOTE 2 - PRIOR YEAR'S ADJUSTMENTS
The results for the three and six months ended June 30, 2001 have been
restated to reflect a positive amendment to the Company's post-retirement health
insurance benefit plan effective during the first quarter of 2001 and reported
in the Company's audited financial statements for the year ended December 31,
2001.
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share of common stock are computed by dividing net
earnings by the weighted average number of common shares outstanding during the
period. Diluted earnings per share are calculated by including the average
dilutive common stock equivalents outstanding during the periods. Dilutive
common equivalent shares consist of stock options, calculated using the treasury
stock method.
Three Months Ended Six Months Ended
June 30, 2002 June 30, 2002
------------------ ----------------
Diluted:
Net income $ 587,000 $1,575,000
Weighted average common shares outstanding 1,666,052 1,664,911
Dilutive effect of stock options 2,573 1,286
--------- ----------
Average common shares outstanding - diluted 1,668,625 1,666,197
Diluted net income per share $0.35 $0.94
Diluted earnings per share calculations were not required for the three and
six months ended June 30, 2001 since there were no options outstanding.
NOTE 4 - EMPLOYEE STOCK PURCHASE BENEFIT PLANS
The Company has an employee stock purchase compensation plan. The Bank
applies Accounting Principles Board Opinion ("APB") No. 25 and related
Interpretations in accounting for this plan. Compensation cost of $39,000 has
been recognized in the second quarter of 2002. If compensation cost for the
Company's stock-based compensation plan had been determined based on the fair
value at the grant date for awards under this plan consistent with the methods
outlined in SFAS No. 123 Accounting for Stock-Based Compensation, there would be
no material change in reported net income.
During the second quarter of 2002, the Board of Directors finalized
additional options to be granted under this plan at $13.77 per share for a
period of 23 months, expiring August, 2003. As of June, 2002, 7,765 options had
been granted under this plan.
7
NOTE 5 - COMMITMENT AND CONTINGENCY
In May 2002, the Bank entered into an operating lease agreement for a new
branch. The lease is for a term of five years beginning October 2002, and the
rent is $2,500 per month. The Bank will also be required to pay all maintenance
costs and property taxes associated with the location.
NOTE 6 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections ("SFAS 145"). This statement
rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of
Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments
of Debt Made to Satisfy Sinking-Fund Requirements. This statement also rescinds
FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This
Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
efforts that are similar to sale-leaseback transactions. This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions.
The amendment to SFAS 13 is effective for transactions occurring after May
15, 2002. All other provisions are effective for financial statements issued on
or after May 15, 2002. In management's opinion, the Company and Bank are
currently in compliance with all applicable provisions of this pronouncement.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
General. Glen Burnie Bancorp, a Maryland corporation (the "Company"), and
its subsidiaries, The Bank of Glen Burnie (the "Bank") and GBB Properties, Inc.,
both Maryland corporations, and Glen Burnie Statutory Trust I, a Connecticut
business trust, had consolidated net income of $587,000 ($.35 basic and diluted
earnings per share) for the second quarter of 2002, compared to second quarter
2001 consolidated net income of $377,000 ($0.23 basic and diluted earnings per
share). The increase in consolidated net income was due to a reduction in
interest expense and other expenses, partially offset by a decline in interest
income.
Net Interest Income. The Company's consolidated net interest income prior
to provision for credit losses for the three and six months ended June 30, 2002
was $2,894,000 and $5,647,000, respectively, compared to $2,705,000 and
$5,252,000 for the same periods in 2001, an increase of $189,000 (or 6.99%) for
the three-month period, and an increase of $395,000 (or 7.52%) for the six-month
period. These increases were primarily attributable to a decline in rates paid
on deposits.
Interest income decreased $125,000 (2.90%) for the three months ended June
30, 2002, and decreased $295,000 (3.43%) for the six months ended June 30, 2002,
compared to the same periods in 2001. The decrease for the three-month and
six-month period was primarily due to declining outstanding balances on loans
and declining interest rate environment partially offset by increased income on
state and municipal securities. Interest income on loans decreased $158,000
(4.86%) for the three months ended June 30, 2002, and decreased $329,000 (5.03%)
for the six months ended June 30, 2002, compared to the same periods in 2001.
Interest expense decreased $314,000 (19.65%) for the three months ended
June 30, 2002, and decreased $690,000 (20.65%) for the six months ended June 30,
2002, compared to the 2001 periods, due to an overall decline in interest rates
paid on deposits as a result of the declining interest rate environment.
Net interest margins for the three and six months ended June 30, 2002 were
5.07% and 4.98%, respectively, compared to tax equivalent net interest margins
of 4.91% and 4.85%, for the three and six month periods ended June 30, 2001. The
increases in net interest margins for the three and six month periods ended June
30, 2002 were primarily due to a decrease in interest expenses.
Provision For Credit Losses. The Company made no additional provision for
credit losses during the three and six month periods ended June 30, 2002 and
2001. As of June 30, 2002, the allowance for credit losses equaled 693.23% of
non-accrual and past due loans compared to 445.30% at December 31, 2001 and
1,049.68% at June 30, 2001. During the three and six month periods ended June
30, 2002, the Company recorded net charge-offs of $66,000 and $172,000,
respectively, compared to net charge-offs of $35,000 and $89,000, respectively,
during the corresponding periods of the prior year. On an annualized basis, net
charge-offs for the 2002 period represent .21% of the average loan portfolio.
Other Income. Other income for the three month period decreased from
$427,000 at June 30, 2001, to $402,000 at June 30, 2002, a decline of $25,000
(5.85%). For the six month period, other income increased from $825,000 at June
30, 2001 to $1,560,000 at June 30, 2002, an increase of $735,000 (89.1%). The
decrease for the three month period was due to a decline in gains on investment
securities. The increase for the six month period is primarily due to a gain of
$764,000 arising from the positive amendment on the Bank's post-retirement
health insurance benefit plan which was recognized in the first quarter of 2002.
Other Expense. Other expenses for the three month period decreased from
$2,647,000 at June 30, 2001, to $2,534,000 at June 30, 2002, a decline of
$113,000 (4.27%). For the six month period, other expenses increased from
$4,993,000 at June 30, 2001 to $5,004,000 at June 30, 2002, an increase of
$11,000 (0.22%). The decline for the three month period was due to a $70,000
legal settlement recognized in the second quarter 2001 and an overall general
decrease in various other expenses.
9
Income Taxes. During the three and six months ended June 30, 2002, the
Company recorded income tax expense of $175,000 and $628,000, respectively,
compared to an income tax expense of $108,000 and $275,000, respectively, for
the corresponding periods of the prior year. The increase in income tax expenses
reflect the Company's earnings [plus an increased tax advantaged portfolio in
the investment securities during the current year's periods]. The Company's
effective tax rate for the three and six month periods in 2002 were 22.97% and
28.51%, respectively, compared to 22.27% and 25.37%, respectively, for the prior
year periods.
FINANCIAL CONDITION
General. The Company's assets increased to $268,476,000 at June 30, 2002
from $263,362,000 at December 31, 2001 primarily due to an increase in
investment securities available for sale, partially offset by a decrease in
loans and cash and cash equivalents. The Bank's net loans totaled $161,286,000
at June 30, 2002, compared to $164,569,000 at December 31, 2001, a decrease of
$3,283,000 (1.99%), primarily attributable to a decline in the portfolio of
indirect loans.
The Company's total investment securities portfolio (including both
investment securities available for sale and investment securities held to
maturity) totaled $84,996,000 at June 30, 2002, a $12,931,000 or 17.94% increase
from $72,065,000 at December 31, 2001. The Bank's cash and cash equivalents
(cash due from banks, interest-bearing deposits in other financial institutions,
and federal funds sold), as of June 30, 2002, totaled $13,894,000, a decrease of
$4,326,000 (23.74%) from the December 31, 2001 total of $18,220,000. The
aggregate market value of investment securities held by the Bank as of June 30,
2002 was $85,467,000 compared to $72,429,000 as of December 31, 2001, a
$13,038,000 (18.0%) increase.
Deposits as of June 30, 2002 totaled $233,275,000 which is an increase of
$3,968,000 (1.73%) from $229,307,000 at December 31, 2001. Demand deposits as of
June 30, 2002 totaled $58,290,000 which is an increase of $2,605,000 (4.68%)
from $55,685,000 at December 31, 2001. NOW accounts as of June 30, 2002 totaled
$21,823,267 which is a decrease of $572,436 (2.56%) from $22,395,703 at December
31, 2001. Money market accounts as of June 30, 2002 totaled $19,632,095, which
is a decrease of $994,154 (4.82%), from $20,626,249 at December 31, 2001.
Savings deposits as of June 30, 2002 totaled $45,631,973, an increase of
$3,287,013 (7.76%) from $42,344,960 at December 31, 2001. Certificates of
deposit over $100,000 totaled $17,037,128 on June 30, 2002, a decrease of
$598,338 (3.4%) from $17,635,466 at December 31, 2001. Other time deposits (made
up of certificates of deposit less than $100,000 and individual retirement
accounts) totaled $70,241,820 on June 30, 2002, a $377,412 (.53%) decrease from
the $70,619,232 total at December 31, 2001.
Asset Quality. The following table sets forth the amount of the Bank's
restructured loans, non-accrual loans and accruing loans 90 days or more past
due at the dates indicated.
10
At June 30 At December 31,
---------- ---------------
2002 2001
---- ----
(Dollars in Thousands)
Restructured loans $ 39 $ 0
==== ====
Non-accrual loans:
Real estate - mortgage:
Residential $269 $284
Commercial 8 189
Real estate - construction 0 0
Installment 59 88
Credit card & related 0 0
Commercial 21 40
---- ----
Total non-accrual loans 357 601
---- ----
Accruing loans past due 90 days or more: Real estate - mortgage:
Residential 42 45
Commercial 0 0
Real estate - construction 0 0
Installment 0 13
Credit card & related 0 1
Commercial 0 0
Other 0 0
---- ----
Total accruing loans past due 90 days or more 42 59
---- ----
Total non-accrual and past due loans $399 $660
==== ====
Non-accrual and past due loans to gross loans 0.24% 0.39%
==== ====
Allowance for credit losses to non-accrual and past due loans 693.23% 445.30%
====== ======
At June 30, 2002, there were no loans outstanding, other than those
reflected in the above table, as to which known information about possible
credit problems of borrowers caused management to have serious doubts as to the
ability of such borrowers to comply with present loan repayment terms. Such
loans consist of loans which were not 90 days or more past due but where the
borrower is in bankruptcy or has a history of delinquency, or the loan to value
ratio is considered excessive due to deterioration of the collateral or other
factors.
Allowance For Credit Losses. The allowance for credit losses is established
through a provision for credit losses charged to expense. Loans are charged
against the allowance for credit losses when management believes that the
collectibility of the principal is unlikely. The allowance, based on evaluations
of the collectibility of loans and prior loan loss experience, is an amount that
management believes will be adequate to absorb possible losses on existing loans
that may become uncollectible. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions and trends that may affect the borrowers' ability to pay.
11
Transactions in the allowance for credit losses for the six months ended
June 30, 2002 and 2001 were as follows:
Six Months Ended
June 30
2002 2001
---- ----
(Dollars in Thousands)
Beginning balance $2,938 $3,385
Charge-offs (323) (265)
Recoveries 151 176
------ ------
Net charge-offs (172) (89)
Provisions charged to operations 0 0
------ ------
Ending balance $2,766 $3,296
====== ======
Average loans $162,366 $158,869
Net charge offs to average loans (annualized) 0.21% 0.11%
Reserve for Unfunded Commitments. As of June 30, 2002, the Bank had
outstanding commitments totaling $14,286,021. These outstanding commitments
consisted of letters of credit, undrawn lines of credit, and other loan
commitments. The following table shows the Bank's allowance for credit losses
arising from these unfunded commitments:
Six Months Ended
June 30
2002 2001
---- ----
(Dollars in Thousands)
Beginning balance $150 $0
Provisions charged to operations 0 0
---- ----
Ending balance $150 $ 0
==== ====
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no business other than that of the Bank and does
not currently have any material funding commitments. The Company's principal
sources of liquidity are cash on hand and dividends received from the Bank. The
Bank is subject to various regulatory restrictions on the payment of dividends.
The Bank's principal sources of funds for investments and operations are
net income, deposits from its primary market area, principal and interest
payments on loans, interest received on investment securities and proceeds from
maturing investment securities. Its principal funding commitments are for the
origination or purchase of loans and the payment of maturing deposits. Deposits
are considered a primary source of funds supporting the Bank's lending and
investment activities.
The Bank's most liquid assets are cash and cash equivalents, which are cash
on hand, amounts due from financial institutions, federal funds sold,
certificates of deposit with other financial institutions that have an original
maturity of three months or less and money market mutual funds. The levels of
such assets are dependent on the Bank's operating financing and investment
activities at any given time. The variations in levels of cash and cash
equivalents are influenced by deposit flows and anticipated future deposit
flows. The Bank's cash and cash equivalents (cash due from banks,
interest-bearing deposits in other financial institutions, and federal funds
sold), as of June 30, 2002, totaled $13,894,000 a decrease of $4,326,000
(23.74%) from the December 31, 2001 total of $18,220,000.
12
As of June 30, 2002, the Bank was permitted to draw on a $31,600,000 line
of credit from the FHLB of Atlanta. Borrowings under the line are secured by a
floating lien on the Bank's residential mortgage loans. As of June 30, 2002, a
$7.0 million long-term convertible advance was outstanding under this line. In
addition the Bank has a secured line of credit in the amount of $5.0 million
from another commercial bank on which it has not drawn. Furthermore, as of June
30, 2002, the Company had outstanding $5,155,000 of its 10.6% Junior
Subordinated Deferrable Interest Debentures issued to Glen Burnie Statutory
Trust I, a Connecticut statutory trust subsidiary of the Company.
The Company's stockholders' equity increased by $2,141,000 or 11.9%, during
the six months ended June 30, 2002, due to earnings, partially offset by
decreases in equity accounts from dividend distributions. The Company's
accumulated other comprehensive income net of tax increased by $757,000 from
$163,000 loss at December 31, 2001 to $594,000 income at June 30, 2002, as a
result of unrealized holding gains relating to securities held for investment
arising during the period. Retained earnings increased by $1,241,000 during the
six month period as the result of earnings during the period, partially offset
by dividends. In addition, $72,289 was transferred to stockholders' equity in
consideration for shares to be issued under the Company's dividend reinvestment
plan in lieu of cash dividends.
The Federal Reserve Board and the FDIC have established guidelines with
respect to the maintenance of appropriate levels of capital by bank holding
companies and state non-member banks, respectively. The regulations impose two
sets of capital adequacy requirements: minimum leverage rules, which require
bank holding companies and banks to maintain a specified minimum ratio of
capital to total assets, and risk-based capital rules, which require the
maintenance of specified minimum ratios of capital to "risk-weighted" assets. At
June 30, 2002, the Bank was in full compliance with these guidelines with a Tier
1 leverage ratio of 9.20%, a Tier 1 risk-based capital ratio of 14.18% and a
total risk-based capital ratio of 15.43%.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
13
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 9, 2002, the Company held its Annual Meeting of Stockholders. The
only matters submitted to the stockholders for a vote were the election of four
directors and the authorization of the Board of Directors to select an outside
auditing firm for the Company's fiscal year ending December 31, 2002. The
nominees submitted for election as directors were John E. Demyan, Theodore L.
Bertier, Jr., F. W. Kuethe, III, and Mary Lou Wilcox.
At the Meeting, at least 1,338,857 shares were voted in favor of each
nominee, no more than 138 shares were voted to withhold approval of any
director. As a result, all of the nominees were elected to serve as directors
until the next annual meeting of shareholders of the Company and until their
successors are duly elected and qualified. Directors not up for re-election and
continuing in office after the Meeting are: Charles L. Hein, Alan E. Hahn,
Shirley E. Boyer, John I. Young, F. William Kuethe, Jr., William N. Scherer,
Sr., Thomas Clocker, and Karen Thorwarth.
At the Meeting, 1,205,415 shares were voted in favor of authorizing the
Board of Directors to select an outside auditing firm for the Company's fiscal
year ending December 31, 2002, 174,124 shares voted to withhold authorization,
and 4,803 shares abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No.
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
Amendment No. 1 to the Registrant's Form 8-A filed December 27, 1999,
File No. 0-24047)
3.2 By-Laws (incorporated by reference to Exhibit 3.2 to the Registrant's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1998, File No. 0-24047)
3.3 Articles Supplementary, dated November 16, 1999 (incorporated by
reference to Exhibit 3.3 to the Registrant's Current Report on Form
8-K filed December 8, 1999, File No. 0-24047)
4.1 Rights Agreement, dated as of February 13, 1998, between Glen Burnie
Bancorp and The Bank of Glen Burnie, as Rights Agent, as amended and
restated as of December 27, 1999 (incorporated by reference to Exhibit
4.1 to Amendment No. 1 to the Registrant's Form 8-A filed December 27,
1999, File No. 0-24047)
10.1 Glen Burnie Bancorp Director Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-8, File No. 33-62280)
10.2 The Bank of Glen Burnie Employee Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-8, File No. 333-46943)
10.3 Change-in-Control Severance Plan (incorporated by reference to Exhibit
10.3 to the Registrant's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 2001, File No. 0-24047)
10.4 The Bank of Glen Burnie Executive and Director Deferred Compensation
Plan (incorporated by reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1999, File No. 0-24047)
99.1 Certification Required Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) Reports on Form 8-K:
None.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLEN BURNIE BANCORP
(Registrant)
Date: August 6, 2002 By: /s/ F. William Kuethe, Jr.
----------------------------------
F. William Kuethe, Jr.
President, Chief Executive Officer
By: /s/ John E. Porter
----------------------------------
John E. Porter
Chief Financial Officer
15
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Glen Burnie Bancorp (the
"Company") on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission and to which this Certification is an exhibit
(the "Report"), the undersigned hereby certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company
for the periods reflected therein.
Date: August 6, 2002 /s/ F. William Kuethe, Jr.
-------------------------------------
F. William Kuethe, Jr.
President, Chief Executive Officer
/s/ John E. Porter
-------------------------------------
John E. Porter
Chief Financial Officer