UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 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 October 29, 2002, the number of shares outstanding of the registrant's common
stock was 1,672,928.
TABLE OF CONTENTS
Part I - Financial Information Page
----
Item 1. Financial Statements:
-------
Condensed Consolidated Balance Sheets, September
30, 2002 (unaudited) and December 31, 2001 (audited) 3
Condensed Consolidated Statements of Income
for the Three and Nine Months Ended September
30, 2002 and 2001 (unaudited) 4
Condensed Consolidated Statements of Comprehensive
Income for the Three and Nine Months Ended
September 30, 2002 and 2001 (unaudited) 5
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 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 13
------- about Market Risk
Item 4. Controls and Procedures 13
-------
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 14
-------
Signatures 15
Certifications 16
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
September 30, 2002 December 31,
------------------ ------------
ASSETS (unaudited) 2001
----
Cash and due from banks $11,207 $10,888
Interest-bearing deposits in other financial institutions 138 1,879
Federal funds sold 5,266 5,453
------- -------
Cash and cash equivalents 16,611 18,220
Certificates of deposit in other financial institutions 100 100
Investment securities available for sale, at fair value 87,059 55,548
Investment securities held to maturity, at cost
(fair value September 30: $10,191; December 31: $16,881) 9,749 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
(September 30: $2,682; December 31: $2,938) 160,929 164,569
Premises and equipment, at cost, less accumulated depreciation 3,703 3,887
Other real estate owned 416 420
Other assets 3,099 3,294
-------- --------
Total assets $282,524 $263,362
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $241,853 $229,307
Short-term borrowings 3,814 882
Long-term borrowings 7,257 7,275
Other liabilities 2,935 2,881
------- -------
Total liabilities 255,859 240,345
------- -------
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: September 30: 1,672,928 shares;
December 31: 1,663,560 shares 1,673 1,664
Surplus 10,571 10,390
Retained earnings 7,703 5,971
Accumulated other comprehensive income (loss), net of tax 1,563 (163)
-------- --------
Total stockholders' equity 21,510 17,862
-------- --------
Total liabilities and stockholders' equity $282,524 $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 September 30 Nine Months Ended September 30
------------------------------- ------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Interest income on:
Loans, including fees $3,092 $3,336 $9,298 $9,871
U.S. Treasury and U.S. Government agency securities 720 567 1,999 1,860
State and Municipal securities 316 209 855 500
Other 122 185 397 660
------ ------ ------ ------
Total interest income 4,250 4,297 12,549 12,891
------ ------ ------ ------
Interest expense on:
Deposits 1,055 1,346 3,218 4,218
Short-term borrowings 2 4 5 15
Long-term borrowings 108 141 321 322
Junior subordinated debentures 137 136 410 414
------ ------ ------ ------
Total interest expense 1,302 1,627 3,954 4,969
------ ------ ------ ------
Net interest income 2,948 2,670 8,595 7,922
Provision for credit losses 0 0 0 0
------ ------ ------ ------
Net interest income after provision for credit losses 2,948 2,670 8,595 7,922
------ ------ ------ ------
Other income:
Service charges on deposit accounts 261 227 761 707
Other fees and commissions 158 152 444 434
Other non-interest income 3 3 7 19
Gain on termination of post-retirement plan 0 0 764 0
Gains on investment securities 42 137 48 184
------ ------ ------ ------
Total other income 464 519 2,024 1,344
------ ------ ------ ------
Other expenses:
Salaries and employee benefits 1,464 1,404 4,382 4,229
Occupancy 142 160 434 441
Other expenses 888 800 2,682 2,687
------ ------ ------ ------
Total other expenses 2,494 2,364 7,498 7,357
------ ------ ------ ------
Income before income taxes 918 825 3,121 1,909
Income tax expense 227 239 855 514
------ ------ ------ ------
Net income $691 $586 $2,266 $1,395
==== ==== ====== ======
Basic and diluted earnings per share of common stock $0.41 $0.35 $1.36 $0.85
===== ===== ===== =====
Weighted average shares of common stock outstanding 1,670,221 1,656,898 1,666,681 1,655,945
========= ========= ========= =========
Dividends declared per share of common stock $0.12 $0.10 $0.32 $0.30
===== ===== ===== =====
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 Nine Months Ended
------------------ -----------------
September 30 September 30
------------
2002 2001 2002 2001
---- ---- ---- ----
Net income $691 $586 $2,266 $1,395
Other comprehensive income, net of tax
Unrealized gains securities:
Unrealized holding gains
arising during period 991 228 1,750 319
Reclassification adjustment for gains
included in net income (22) (22) (22) (104)
------ ---- ------ ------
Comprehensive income $1,660 $730 $3,992 $1,610
====== ==== ====== ======
See accompanying notes to condensed consolidated
financial statements.
5
GLEN BURNIE BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2001 2002
---- ----
Cash flows from operating activities:
Net income $2,266 $1,395
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion (332) 316
Compensation expense from vested stock options 39 0
Provision for credit losses 0 0
Gains on disposals of assets, net (45) (184)
Changes in assets and liabilities:
(Increase) decrease in other assets (960) (68)
(Decrease) increase in other liabilities 49 (302)
------ ------
Net cash provided by operating activities 1,017 1,157
------ ------
Cash flows from investing activities:
Maturities of available for sale mortgage-backed securities (includes 8,336 3,470
paydowns)
Proceeds from disposals of investment securities 9,460 16,934
Purchases of investment securities (38,809) (25,407)
Purchase of Federal Home Loan Bank stock (51) 0
Decrease (increase) in loans, net 3,640 (5,023)
Purchases of premises and equipment (288) (388)
Proceeds from sale of other real estate 4 3
------- -------
Net cash used by investing activities (17,708) (10,411)
------- -------
Cash flows from financing activities:
Increase in deposits, net 12,546 13,988
Increase in short-term borrowings 2,932 338
Repayment of long-term borrowings (18) (17)
Dividends paid (529) (547)
Common stock dividends reinvested 115 77
Issuance of common stock 36 0
Repurchase and retirement of common stock 0 (149)
------ ------
Net cash provided by financing activities 15,082 13,690
------ ------
Increase (decrease) in cash and cash equivalents (1,609) 4,436
Cash and cash equivalents, beginning of year 18,220 15,509
------- -------
Cash and cash equivalents, end of period $16,611 $19,945
======= =======
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 nine months ended September 30, 2002 and 2001.
Operating results for the three and nine month periods ended September 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 nine months ended September 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 Nine Months Ended
September 30, 2002 September 30, 2002
------------------ ------------------
Diluted:
Net income $691,000 $2,266,000
Weighted average common shares outstanding 1,670,221 1,666,681
Dilutive effect of stock options 5,186 2,587
--------- ----------
Average common shares outstanding - diluted 1,675,407 1,669,268
Diluted net income per share $0.41 $1.36
Diluted earnings per share calculations were not required for the three and
nine months ended September 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. As of September 30, 2002, 5,070
options were still outstanding under this plan.
NOTE 5 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued statements of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This
7
statement addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). This statement changes the current practice of accounting for
these transactions by changing the timing of the recognition of exit or disposal
costs and generally requires such costs to be recognized when the liability is
incurred rather than on the date the entity commits to a plan of exit or
disposal. It also requires such liabilities to be measured at fair value.
The provisions of this statement are effective for exit or disposal
activities initiated after December 31, 2002. In management's opinion, the
Company and the 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 $691,000 ($0.41 basic and diluted
earnings per share) for the third quarter of 2002, compared to third quarter
2001 consolidated net income of $586,000 ($0.35 basic and diluted earnings per
share). This increase was primarily due to a decrease in interest expense.
Year-to-date consolidated net income for the nine months ended September 30,
2002 was $2,266,000 ($1.36 basic and diluted earnings per share), compared to
$1,395,000 ($0.85 basic and diluted earnings per share) for the nine months
ended September 30, 2001.
Net Interest Income. The Company's consolidated net interest income prior
to provision for credit losses for the three and nine months ended September 30,
2002 was $2,948,000 and $8,595,000, respectively, compared to $2,670,000 and
$7,922,000, respectively, for the same periods in 2001, an increase of $278,000
(10.41%) for the three month period, and an increase of $673,000 (8.50%) for the
nine month period. The increase in net interest income for the three and nine
month period was primarily attributable to an increase in the interest earned on
securities and a decline in the rates paid on interest-bearing deposits.
Interest income decreased $47,000 (1.09%) for the three months ended
September 30, 2002 and decreased $342,000 (2.65%) for the nine months ended
September 30, 2002, compared to the same periods in 2001. The decrease in
interest income were attributable to declining loan balances partially offset by
increases in income from securities. Interest income on loans decreased $244,000
(7.31%) for the three months ended September 30, 2002, and decreased $573,000
(5.80%) for the nine months ended September 30, 2002, compared to the same
periods in 2001.
Interest expense decreased $325,000 (19.99%) and $1,015,000 (20.43%),
respectively, for the three and nine months ended September 30, 2002 compared to
the 2001 periods. For both periods the decrease was due to a decline in interest
rates paid on deposits.
Net interest margins for the three and nine months ended September 30, 2002
were 4.89% and 4.93%, respectively, compared to tax equivalent net interest
margins of 5.08% and 5.14% for the three and nine months ended September 30,
2001, respectively. The decrease in net interest margins for the three and nine
months ended September 30, 2001 were primarily due to a continuing decline in
the yield on earning assets.
Provision For Credit Losses. The Company made no additional provision for
credit losses during the three and nine month periods ended September 30, 2002
and 2001. As of September 30, 2002, the allowance for credit losses equaled
779.65% of non-accrual and past due loans compared to 445.30% at December 31,
2001 and 1,122.68% at September 30, 2001. During the three and nine month
periods ended September 30, 2002, the Company recorded net charge-offs of
$84,000 and $256,000, respectively, compared to net chargeoffs of $126,000 and
$215,000, respectively, during the corresponding periods of the prior year. On
an annualized basis, net chargeoffs for the 2002 period represent .21% of the
average loan portfolio.
Other Income. Other income for the three month period decreased from
$519,000 at September 30, 2001, to $464,000 at September 30, 2002, a decline of
$55,000 (10.60%). For the nine month period, other income increased from
$1,344,000 at September 30, 2001 to $2,024,000 at September 30, 2002, an
increase of $680,000 (50.60%). The decrease for the three month period was due
to decrease in gains on investments, partially offset by an increase in service
charges. The increase for the nine month period is primarily due to a gain of
$764,000 from the positive amendment on the Bank's post-retirement health
insurance benefit plan.
Other Expense. Other expenses for the three month period increased from
$2,364,000 at September 30, 2001, to $2,494,000 at September 30, 2002, an
increase of $130,000 (5.5%). For the nine month period, other expenses increased
9
from $7,357,000 at September 30, 2001 to $7,498,000 at September 30, 2002, an
increase of $141,000 (1.9%). The increase for both the three and nine month
periods was due to an increase on salaries and employee benefits.
Income Taxes. During the three and nine months ended September 30, 2002,
the Company recorded income tax expense of $227,000 and $855,000, respectively,
compared to an income tax expense of $239,000 and $514,000, respectively, for
the corresponding periods of the prior year. The Company's effective tax rate
for the three and nine month periods in 2002 were 24.7% and 27.4%, respectively,
compared to 29% and 26.9%, respectively, for the prior year periods.
FINANCIAL CONDITION
General. The Company's assets increased to $282,524,000 at September 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
investment securities held to maturity, loans and cash and cash equivalents. The
Bank's net loans totaled $160,929,000 at September 30, 2002, compared to
$164,569,000 at December 31, 2001, a decrease of $3,640,000 (2.21%), 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 $96,808,000 at September 30, 2002, a $24,743,000 or 34.33%
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 September 30, 2002, totaled
$16,611,000, a decrease of $1,609,000 (8.83%) from the December 31, 2001 total
of $18,220,000. The aggregate market value of investment securities held by the
Bank as of September 30, 2002 was $97,250,000 compared to $72,429,000 as of
December 31, 2001, a $24,821,000 (34.2%) increase.
Deposits as of September 30, 2002 totaled $241,853,000 which is an increase
of $12,546,000 (5.47%) from $229,307,000 at December 31, 2001. Demand deposits
as of September 30, 2002 totaled $62,111,928 which is an increase of $6,427,000
(11.54%) from $55,685,000 at December 31, 2001. NOW accounts as of September 30,
2002 totaled $23,868,130 which is an increase of $1,472,427 (6.57%) from
$22,395,703 at December 31, 2001. Money market accounts as of September 30, 2002
totaled $20,414,459, which is a decrease of $211,790 (1.03%), from $20,626,249
at December 31, 2001. Savings deposits as of September 30, 2002 totaled
$45,142,747, an increase of $2,797,787 (6.61%) from $42,344,960 at December 31,
2001. Certificates of deposit over $100,000 totaled $18,099,877 on September 30,
2002, an increase of $464,411 (2.63%) 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 $72,049,626 on September 30, 2002, a
$1,430,394 (2.03%) increase 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 September 30 At December 31,
--------------- ---------------
2002 2001
---- ----
(Dollars in Thousands)
----------------------
Restructured loans $3 $0
== ==
Non-accrual loans:
Real estate - mortgage:
Residential $267 $284
Commercial 8 189
Real estate - construction 0 0
Installment 39 88
Credit card & related 0 0
Commercial 29 40
---- ----
Total non-accrual loans 343 601
---- ----
Accruing loans past due 90 days or more: Real estate - mortgage:
Residential 1 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 1 59
---- ----
Total non-accrual and past due loans $344 $660
==== ====
Non-accrual and past due loans to gross loans 0.21% 0.39%
===== =====
Allowance for credit losses to non-accrual and past due loans 779.65% 445.30%
======= =======
At September 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.
Transactions in the allowance for credit losses relating to loans for the
nine months ended September 30, 2002 and 2001 were as follows:
11
Nine Months Ended
September 30
------------
2002 2001
---- ----
(Dollars in Thousands)
----------------------
Beginning balance $2,938 $3,385
Charge-offs (513) (470)
Recoveries 257 255
------ ------
Net charge-offs (256) (215)
Provisions charged to operations 0 (150)
------ ------
Ending balance $2,682 $3,020
====== ======
Average loans $161,562 $160,821
Net charge offs to average loans (annualized) 0.21% 0.18%
Reserve for Unfunded Commitments. As of September 30, 2002, the Bank had
outstanding commitments totaling $13,909,388. 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:
Nine Months Ended
September 30
------------
2002 2001
---- ----
(Dollars in Thousands)
----------------------
Beginning balance $150 $0
Provisions charged to operations 0 150
---- ----
Ending balance $150 $150
==== ====
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no business other than that of the Bank and does
not currently have any material funding commitments. The Company's principal
sources of liquidity are cash on hand and dividends received from the Bank. The
Bank is subject to various regulatory restrictions on the payment of dividends.
The Bank's principal sources of funds for investments and operations are
net income, deposits from its primary market area, principal and interest
payments on loans, interest received on investment securities and proceeds from
maturing investment securities. Its principal funding commitments are for the
origination or purchase of loans and the payment of maturing deposits. Deposits
are considered a primary source of funds supporting the Bank's lending and
investment activities.
The Bank's most liquid assets are cash and cash equivalents, which are cash
on hand, amounts due from financial institutions, federal funds sold,
certificates of deposit with other financial institutions that have an original
maturity of three months or less and money market mutual funds. The levels of
such assets are dependent on the Bank's operating, financing and investment
activities at any given time. The variations in levels of cash and cash
equivalents are influenced by deposit flows and anticipated future deposit
flows. The Bank's cash and cash equivalents (cash due from banks,
interest-bearing deposits in other financial institutions, and federal funds
sold), as of September 30, 2002, totaled $16,611,000, a decrease of $1,609,000
(8.83%) from the December 31, 2001 total of $18,220,000.
As of September 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 September 30,
2002, a $7 million long-term convertible advance and a $3 million short-term
12
overnight rate advance were 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 September 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 $3,648,000 or 20.42% during
the nine months ended September 30, 2002, due to earnings, offset by dividend
distributions. The Company's accumulated other comprehensive income net of tax
increased by $1,726,000 from $163,000 loss at December 31, 2001 to $1,563,000
income at September 30, 2002 as a result of unrealized holding gains. Retained
earnings increased by $1,732,000 during the nine month period due to earnings
offset by dividends. In addition, $115,074 was transferred to stockholders'
equity in consideration for shares to be issued under the Company's dividend
reinvestment plan in lieu of cash dividends.
The Federal Reserve Board and the FDIC have established guidelines with
respect to the maintenance of appropriate levels of capital by bank holding
companies and state non-member banks, respectively. The regulations impose two
sets of capital adequacy requirements: minimum leverage rules, which require
bank holding companies and banks to maintain a specified minimum ratio of
capital to total assets, and risk-based capital rules, which require the
maintenance of specified minimum ratios of capital to "risk-weighted" assets. At
September 30, 2002, the Bank was in full compliance with these guidelines with a
Tier 1 leverage ratio of 9.11%, a Tier 1 risk-based capital ratio of 14.11% and
a total risk-based capital ratio of 15.37%.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued statements of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This
statement addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). This statement changes the current practice of accounting for
these transactions by changing the timing of the recognition of exit or disposal
costs and generally requires such costs to be recognized when the liability is
incurred rather than on the date the entity commits to a plan of exit or
disposal. It also requires such liabilities to be measured at fair value.
The provisions of this statement are effective for exit or disposal
activities initiated after December 31, 2002. In management's opinion, the
Company and the Bank are currently in compliance with all applicable provisions
of this pronouncement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and procedures
by F. William Kuethe, Jr., the Company's Chief Executive Officer, and John E.
Porter, the Company's Chief Financial Officer, as of a date within 90 days of
the filing date of this quarterly report, such officers have concluded that the
Company's disclosure controls and procedures are effective in ensuring that
information required to be disclosed by the Company in the reports that it files
or submits under the Securities and Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported, within the time period specified
by the Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No.
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
Amendment No. 1 to the Registrant's Form 8-A filed December 27, 2000,
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, 2000 (incorporated by
reference to Exhibit 3.3 to the Registrant's Current Report on Form
8-K filed December 8, 2000, 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, 2000 (incorporated by reference to Exhibit
4.1 to Amendment No. 1 to the Registrant's Form 8-A filed December 27,
2000, File No. 0-24047)
10.1 Glen Burnie Bancorp Director Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-8, File No. 33-62280)
10.2 The Bank of Glen Burnie Employee Stock Purchase Plan (incorporated by
reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-8, File No. 333-46943)
10.3 Change-in-Control Severance Plan (incorporated by reference to Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 1997, File No. 0-24047)
10.4 The Bank of Glen Burnie Executive and Director Deferred Compensation
Plan (incorporated by reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
2000, 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: November 1, 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
CERTIFICATION
I, F. William Kuethe, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Glen Burnie
Bancorp;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Quarterly
Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this Quarterly Report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 1, 2002 /s/ F. William Kuethe, Jr.
-------------------------------------
F. William Kuethe, Jr.
Chief Executive Officer
16
CERTIFICATION
I, John E. Porter, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Glen Burnie
Bancorp;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Quarterly
Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this Quarterly Report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
d) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
e) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
f) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
c) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
d) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 1, 2002 /s/ John E. Porter
-------------------------------------
John E. Porter
Chief Financial Officer
17
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 September 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: November 1, 2002 /s/ F. William Kuethe, Jr.
-------------------------------------
F. William Kuethe, Jr.
President, Chief Executive Officer
/s/ John E. Porter
-------------------------------------
John E. Porter
Chief Financial Officer