Glen Burnie Bancorp Announces First Quarter 2022 Results
GLEN BURNIE, MD (April 26, 2022) – Glen Burnie Bancorp (“Bancorp”) (NASDAQ: GLBZ), the bank holding company for The Bank of Glen Burnie (“Bank”), today reported results for the first quarter ended March 31, 2022. Net income for the first quarter was $0.23 million, or $0.08 per basic and diluted common share, as compared to $0.59 million, or $0.21 per basic and diluted common share for the three-month period ended March 31, 2021. On March 31, 2022, Bancorp had total assets of $437.4 million. Bancorp, the oldest independent commercial bank in Anne Arundel County, will pay its 119th consecutive quarterly dividend on May 9, 2022.
“We reported solid earnings, strong credit quality metrics, and robust capital ratios for the first quarter of 2022 as we continue to invest in building out the foundation for prudent future growth,” said John D. Long, President and Chief Executive Officer. “With the forward yield curve expectation of rising interest rates, we anticipate realizing more of the benefit of our deposit franchise. New business pipelines remain solid, and our balance sheet is positioned to benefit the Company in a rising rate environment. Asset quality remains strong as we continue to experience net recoveries of previously charged off loans. Our balance sheet remains strong, as well, which will allow us to grow loans and give our investments the flexibility to weather market volatility.
“Our residential mortgage and commercial pipelines have begun to normalize back to pre-pandemic levels, and we are cautiously optimistic that the business environment will remain favorable despite the headwinds of high inflation, rising interest rates, and geo-political tensions. We remain focused on maintaining rigorous underwriting standards and driving profitable growth across our markets while continuing to provide outstanding customer service. We are determined to deploy our excess liquidity responsibly to maximize our earning potential while recognizing the challenges of the shifting economic cycle. As interest rates increase and our balance sheet mix shifts from cash to higher yielding assets, we expect our core net interest margin to grow.”
Commenting on the first quarter results, Mr. Long continued, “In a period of market volatility, we believe that we delivered another quarter of strong performance. A devaluation of the investment portfolio, resulting in a higher level of unrealized losses, had a negative impact on our stockholders’ equity. Furthermore, the changes in investment gains and losses impact capital on an ongoing basis and were adversely impacted by the dramatic increase in market interest rates during the first quarter of 2022.”
In closing, Mr. Long added, “In these very unusual times, our strength and resolve enable us to take exceptional care of our customers, employees, and communities. Based on our capital levels, conservative underwriting policies, on- and off-balance sheet liquidity, strong loan diversification, and current economic conditions within the markets we serve, management expects to navigate the uncertainties and remain well-capitalized.”
Highlights for the First Three Months of 2022
Net interest income declined $196,000, or 6.81% to $2.7 million on March 31, 2022, as compared to $2.9 million during the prior-year first quarter. The decline was driven by the repricing impact on earning asset yields resulting from the change in asset mix from higher yielding loans to lower yielding investment securities, and the investment of excess liquidity derived from strong deposit growth. Partially offsetting the lower earning asset yields, the cost of funds improved 8 basis points to 0.23%, reflecting an improved funding mix. The decline in net interest income as a result of these factors was intensified by the Company’s decision to maintain significantly higher levels of excess balance sheet liquidity during the first quarter of 2022.
Because of minimal charge-offs, recoveries on previously charged off loans, reduction in the Company’s loan portfolio, and strong credit discipline, the Company was able to continue to release portions of its allowance for credit losses on loans in the first quarter of 2022. The Company expects that its strong liquidity and capital positions, along with the Bank’s total regulatory capital to risk weighted assets of 16.15% on March 31, 2022, as compared to 14.54% for the same period of 2021, will provide ample capacity for future growth.
Return on average assets for the three-month period ended March 31, 2022, was 0.21%, as compared to 0.58% for the three-month period ended March 31, 2021. Return on average equity for the three-month period ended March 31, 2022, was 2.74%, as compared to 6.68% for the three-month period ended March 31, 2021. Lower net income and higher average asset balances primarily drove the lower return on average assets, while lower net income, partially offset by a lower average equity balance, primarily drove the lower return on average equity.
On March 31, 2022, the Bank remained above all “well-capitalized” regulatory requirement levels. The Bank’s tier 1 risk-based capital ratio was approximately 15.33% on March 31, 2022, as compared to 15.32% on December 31, 2021. Liquidity remained strong due to managed cash and cash equivalents, borrowing lines with the FHLB of Atlanta, the Federal Reserve and correspondent banks, and the size and composition of the bond portfolio.
Balance Sheet Review
Total assets were $437.4 million on March 31, 2022, a decrease of $4.7 million or 1.05%, from $442.1 million on December 31, 2021. Investment securities were $147.4 million on March 31, 2022, a decrease of $8.5 million or 5.49%, from $155.9 million on December 31, 2021. Loans, net of deferred fees and costs, were $204.3 million on March 31, 2022, a decrease of $6.1 million or 2.92%, from $210.4 million on December 31, 2021. Cash and cash equivalents increased $6.7 million or 10.71%, from December 31, 2021, to March 31, 2022. Deferred tax assets increased $3.2 million or 333.93%, from December 31, 2021, to March 31, 2022.
Total deposits were $387.8 million on March 31, 2022, an increase of $4.5 million or 1.18%, from $383.2 million on December 31, 2021. Noninterest-bearing deposits were $155.0 million on March 31, 2022, a decrease of $0.6 million or 0.38%, from $155.6 million on December 31, 2021. Interest-bearing deposits were $232.7 million on March 31, 2022, an increase of $5.1 million or 2.25%, from $227.6 million on December 31, 2021. Total borrowings were $20.0 million on March 31, 2022, unchanged from December 31, 2021.
As of March 31, 2022, total stockholders’ equity was $27.3 million (6.24% of total assets), equivalent to a book value of $9.55 per common share. Total stockholders’ equity on December 31, 2021, was $35.7 million (8.08% of total assets), equivalent to a book value of $12.51 per common share. The reduction in the ratio of stockholders’ equity to total assets was due to lower asset balances, along with decreases to equity from the decline in market value of the Company’s available-for-sale securities portfolio. Included in stockholders’ equity on March 31, 2022, and December 31, 2021, were unrealized losses (net of taxes) on the Company’s available-for-sale investment securities and derivative contracts totaling $9.3 million and $0.9 million, respectively. This decrease in unrealized losses primarily resulted from increasing market interest rates during the first quarter of 2022, which decreased the fair value of the investment securities.
Asset quality, which has trended within a narrow range over the past several years, has remained sound and reflected no pandemic-related impact on March 31, 2022. Nonperforming assets, which consist of nonaccrual loans, troubled debt restructurings, accruing loans past due 90 days or more, and other real estate owned, represented 0.05% of total assets on March 31, 2022, as compared to 0.02% on December 31, 2021, demonstrating positive asset quality trends across the portfolio. The allowance for credit losses on loans was $2.4 million, or 1.17% of total loans, as of March 31, 2022, as compared to $2.5 million, or 1.17% of total loans, as of December 31, 2021. The allowance for credit losses for unfunded commitments was $354,000 as of March 31, 2022, as compared to $371,000 as of December 31, 2021. Net recoveries of previously charged off loans were $11,000 for the quarter ended March 31, 2022, as compared to net recoveries of $62,000 for the quarter ended December 31, 2021.
Review of Financial Results
For the three-month periods ended March 31, 2022, and 2021
Net income for the three-month period ended March 31, 2022, was $0.23 million, as compared to $0.59 million for the three-month period ended March 31, 2021. The decrease was predominantly driven by a decrease of $0.3 million in the release of allowance for credit losses on loans and a decrease of $0.2 million in net interest income.
Net interest income for the three-month period ended March 31, 2022, totaled $2.7 million, as compared to $2.9 million for the three-month period ended March 31, 2021. Average earning-asset balances were $429 million on March 31, 2022, as compared to $399 million during the prior-year first quarter. Although deposit driven excess liquidity fueled average interest-earning asset growth, competitive loan origination pressures as well as a low interest rate environment drove the decrease in average interest-earning asset yields.
Net interest margin for the three-month period ended March 31, 2022, was 2.54%, as compared to 2.93% for the same period of 2021, a decrease of 0.39%. Higher average balances combined with lower yields on interest-earning assets, and lower cost of funds on interest-bearing liabilities and higher noninterest-bearing deposits were the primary drivers of the results. The average balance on interest-earning assets increased $30 million while the yield decreased 0.41%. The cost of funds decreased 0.08% from 0.31% to 0.23%. While the strong deposit inflows are creating excess liquidity in the short-term that impacts net interest margin, the Company believes it is well positioned to generate higher revenue in the future as these funds are redeployed into higher yielding earning assets.
The release of allowance for loan losses on loans for the three-month period ended March 31, 2022, was $100,000, as compared to a release of $404,000 for the same period of 2021. The decrease for the three-month period ended March 31, 2022, when compared to the three-month period ended March 31, 2021, primarily reflects a $42.1 million decrease in the reservable balance of the loan portfolio (excluding PPP loans) and a $160,000 decrease in net charge offs.
Noninterest income for the three-month period ended March 31, 2022, was $254,000, as compared to $247,000 for the three-month period ended March 31, 2021.
For the three-month period ended March 31, 2022, noninterest expense was $2.78 million, as compared to $2.83 million for the three-month period ended March 31, 2021. The primary contributors to the $0.05 million decrease, when compared to the three-month period ended March 31, 2021, were decreases in salary and employee benefits, data processing and item processing services, FDIC insurance costs, loan collection costs, and telephone costs, offset by increases in occupancy and equipment expenses, and legal, accounting, and other professional fees.
For the three-month period ended March 31, 2022, income tax expense was $21,000, as compared with $106,000 for the same period a year earlier. The effective tax rate was 9.76%, compared with 15.20% for the same period a year ago.
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Glen Burnie Bancorp Information
Glen Burnie Bancorp is a bank holding company headquartered in Glen Burnie, Maryland. Founded in 1949, The Bank of Glen Burnie® is a locally-owned community bank with 8 branch offices serving Anne Arundel County. The Bank is engaged in the commercial and retail banking business including the acceptance of demand and time deposits, and the origination of loans to individuals, associations, partnerships and corporations. The Bank’s real estate financing consists of residential first and second mortgage loans, home equity lines of credit and commercial mortgage loans. The Bank also originates automobile loans through arrangements with local automobile dealers. Additional information is available at The Bank of Glen Burnie.
The statements contained herein that are not historical financial information, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, which could cause the company’s actual results in the future to differ materially from its historical results and those presently anticipated or projected. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. For a more complete discussion of these and other risk factors, please see the company’s reports filed with the Securities and Exchange Commission.