Earnings

Glen Burnie Bancorp Announces Third Quarter 2022 Results

Glen Burnie Bancorp logoGLEN BURNIE, MD (November 4, 2022) – Glen Burnie Bancorp (“Bancorp”) (NASDAQ: GLBZ), the bank holding company for The Bank of Glen Burnie (“Bank”), announced today net income of $375,000, or $0.13 per basic and diluted common share for the three-month period ended September 30, 2022, compared to net income of $888,000, or $0.31 per basic and diluted common share for the three-month period ended September 30, 2021.  Bancorp reported net income of $915,000, or $0.32 per basic and diluted common share for the nine-month period ended September 30, 2022, compared to $1,962,000, or $0.69 per basic and diluted common share for the same period in 2021.  On September 30, 2022, Bancorp had total assets of $415.6 million.  Bancorp, the oldest independent commercial bank in Anne Arundel County, will pay its 121st consecutive quarterly dividend on November 7, 2022.

“The decrease in earnings during the third quarter of 2022, as compared to the same period of 2021, was primarily due to decreases in our net interest income, although we began to see the positive impact of rising interest rates,” said John D. Long, President and Chief Executive Officer.  “We partially mitigated our declining net interest margin through the repricing of new and existing loans at higher yields and the deployment of excess liquidity held in fed funds into higher yielding securities during the first nine months of 2022.  Despite declining loan balances in a volatile market environment, we’ve built a stable earnings stream that should continue to deliver solid financial outcomes for the Company and our shareholders, even as interest rates continue to rise, and fears of an economic downturn continue to develop.  Anne Arundel County, our primary operating area, remains a vibrant market and should withstand this period of economic uncertainty.  Non-performing assets remain low, and we maintain our conservative approach to credit underwriting.  Historically, the Company has navigated both rising rate and recessionary cycles with good outcomes, and we believe that the Company and the Bank are well positioned to weather the current economic environment.”

In closing, Mr. Long added, “Our financial performance during the third quarter demonstrates our ability to navigate the current economic environment.  As we enter the final quarter of the year with positive momentum, we recognize the backdrop of economic uncertainty that persists.  Inflation levels remain elevated and market expectations suggest that interest rates will continue to rise, which will likely impact future economic growth and activity.  As such, we are intently focused on targeted balance sheet growth that optimizes capital, prudently managing spreads, and maintaining disciplined loan and deposit pricing strategies. We believe our conservative credit culture and emphasis on effective risk management has served, and will continue to serve, us well during periods of economic unrest.”

Highlights for the First Nine Months of 2022

Total interest income declined $0.8 million to $9.3 million for the nine-month period ending September 30, 2022, compared to the same period in 2021.  This resulted from a $1,654,000 decrease in interest income on loans consistent with the $37.4 million decline in the average balance of the loan portfolio.  The decline in interest income was driven by the repricing impact on earning asset yields of the change in asset mix from higher yielding loans into lower yielding investment securities, and the investment of excess liquidity derived from deposit growth in investment securities.  Loan pricing pressure/competition will likely continue to place pressure on the Company’s net interest margin.

Due to minimal charge-offs, lower recoveries on previously charged off loans, a decline in the loan portfolio balances, and strong credit discipline, the Company continued to release portions of its allowance for credit losses on loans in the first nine months 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 16.16% on September 30, 2022, compared to 14.86% for the same period of 2021, will provide ample capacity for future growth.

Return on average assets for the three-month period ended September 30, 2022, was 0.35%, compared to 0.81% for the three-month period ended September 30, 2021.  Return on average equity for the three-month period ended September 30, 2022, was 6.76%, compared to 9.56% for the three-month period ended September 30, 2021.  Lower net income and lower average asset balances primarily drove the lower return on average assets, while lower net income and a lower average equity balance, primarily drove the lower return on average equity.

The cost of funds remained unchanged at 0.27% when comparing the third quarter of 2021 to the third quarter of 2022.

The book value per share of Bancorp’s common stock was $5.01 on September 30, 2022, compared to $12.26 per share on September 30, 2021.  The decline was primarily due to the unrealized losses on available for sale securities, which was caused by the rapid increase in market interest rates.

On September 30, 2022, the Bank remained above all “well-capitalized” regulatory requirement levels.  The Bank’s tier 1 risk-based capital ratio was approximately 15.34% on September 30, 2022, compared to 14.05% on September 30, 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 $415.6 million on September 30, 2022, a decrease of $17.2 million or 3.89%, from $432.8 million on September 30, 2021.  Investment securities decreased by $17.8 million or 11.45% to $145.0 million as of September 30, 2022, compared to $162.8 million for the same period of 2021.  Loans, net of deferred fees and costs, were $194.1 million on September 30, 2022, a decrease of $30.6 million or 14.54%, from $224.7 million on September 30, 2021.  Cash and cash equivalents increased $22.7 million or 36.51%, from $31.5 million on September 30, 2021, to $54.2 million on September 30, 2022.  Deferred tax assets increased $7.7 million or 807.24%, from September 30, 2021, to September 30, 2022, due to the tax effects of unrealized losses on available for sale securities.

Total deposits were $378.9 million on September 30, 2022, an increase of $4.4 million or 1.14%, from $374.5 million on September 30, 2021.  Noninterest-bearing deposits were $149.2 million on September 30, 2022, an increase of $1.4 million or 0.88%, from $147.8 million on September 30, 2021.  Interest-bearing deposits were $229.7 million on September 30, 2022, an increase of $3.0 million or 1.32%, from $226.7 million on September 30, 2021.  Total borrowings were $20.0 million on September 30, 2022, unchanged from September 30, 2021.

As of September 30, 2022, total stockholders’ equity was $14.3 million (3.45% of total assets), equivalent to a book value of $5.01 per common share.  Total stockholders’ equity on September 30, 2021, was $35.0 million (8.08% of total assets), equivalent to a book value of $12.26 per common share.  The reduction in the ratio of stockholders’ equity to total assets was primarily due to the $21.7 million after-tax decline in market value of the Company’s available-for-sale securities portfolio.  These increases in unrealized losses primarily resulted from increasing market interest rates year-over-year, 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 September 30, 2022.  Nonperforming assets, which consist of nonaccrual loans, troubled debt restructurings, accruing loans past due 90 days or more, and other real estate owned (“OREO”), represented 0.05% of total assets on September 30, 2022, compared to 0.02% on December 31, 2021, demonstrating positive asset quality trends across the portfolio.  The decrease in total assets from December 31, 2021, to September 30, 2022, and the decline in nonperforming assets primarily drove the change.  The allowance for credit losses on loans was $2.3 million, or 1.17% of total loans, as of September 30, 2022, 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 $469,000 as of September 30, 2022, compared to $371,000 as of December 31, 2021.

Review of Financial Results

For the three-month periods ended September 30, 2022, and 2021

Net income for the three-month period ended September 30, 2022, was $375,000, compared to $888,000 for the three-month period ended September 30, 2021.

Net interest income for the three-month period ended September 30, 2022, totaled $3.0 million, a decrease of $302,000 from the three-month period ended September 30, 2021.  The decrease in net interest income was primarily due to a $296,000 reduction in interest income.  Net interest margin compression drove the lower interest income resulting from declining loan balances, increases in cash held in interest-bearing deposits in banks, and security purchases.  Our cash balances and securities holdings, excluding unrealized market value losses, generally yield less than loans and increased as a percentage of our total assets reflecting increased deployment of excess liquidity.

Net interest margin for the three-month period ended September 30, 2022, was 2.83%, compared to 3.22% for the same period of 2021.  Lower average yields and higher average balances on interest-earning assets combined with higher average interest-bearing funds, higher average noninterest-bearing funds, and lower cost of funds were the primary drivers of year-over-year results.  The average balance on interest-earning assets increased $9.2 million while the yield decreased 0.38% from 3.47% to 3.09%, when comparing the three-month periods ending September 30, 2021, and 2022.  The average balance on interest-bearing funds and noninterest-bearing funds increased $4.9 million and $3.8 million, respectively, and the cost of funds remained unchanged at 0.27%, when comparing the three-month periods ending September 30, 2021, and 2022.  The decrease in interest expense is related to a continuing shift in deposit mix and the ongoing downward repricing of interest-bearing deposits.  As time deposits matured, they renewed at lower market rates, or they exited the Company and were replaced by lower cost checking and money market accounts.

The average balance of interest-bearing deposits in banks and investment securities increased $41.7 million from $186.4 million to $228.1 million for the third quarter of 2022, compared to the same period of 2021 while the yield increased from 1.73% to 2.13% during that same period.  The increase in yields for the three-month period can be attributed to the change in mix of cash held in interest-bearing deposits in banks and investment securities available for sale and increases in the overnight fed funds rate.

Average loan balances decreased $32.4 million to $197.2 million for the three-month period ended September 30, 2022, compared to $229.6 million for the same period of 2021, while the yield decreased from 4.89% to 4.21% during that same period.  The decrease in loan yields for the third quarter of 2022 reflected continued runoff of the indirect automobile loan portfolio.

The provision of allowance for credit loss on loans for the three-month period ended September 30, 2022, was $39,000, compared to a release of $122,000 for the same period of 2021.  The increase in the provision for the three-month period ended September 30, 2022, when compared to the three-month period ended September 30, 2021, primarily reflects a $350,000 increase in net charge offs, offset by a $29.4 million decrease in the reservable balance of the loan portfolio (excluding PPP loans) and a 0.07% decrease in the current expected credit loss percentage.

Noninterest income for the three-month period ended September 30, 2022, was $317,000, compared to $359,000 for the three-month period ended September 30, 2021, a decrease of $42,000 or 11.59%.  The decrease was driven primarily a by $35,000 reduction in other fees and commissions.

For the three-month period ended September 30, 2022, noninterest expense was $2.92 million, compared to $2.69 million for the three-month period ended September 30, 2021, an increase of $231,000.  The primary contributors to the $231,000 increase, when compared to the three-month period ended September 30, 2021, were increases in legal, accounting, and other professional fees, data processing and item processing services, loan collection costs, and other expenses, offset by decreases in salary and employee benefits, occupancy and equipment expenses, and FDIC insurance costs.

For the nine-month periods ended September 30, 2022, and 2021

Net income for the nine-month period ended September 30, 2022, was $0.92 million, compared to $1.96 million for the nine-month period ended September 30, 2021.

Net interest income for the nine-month period ended September 30, 2022, totaled $8.5 million, a decrease of $713,000 from the nine-month period ended September 30, 2021.  The decrease in net interest income was primarily due to $802,000 lower interest income, offset by an $89,000 reduction in the costs of interest-bearing deposits and borrowings.  Net interest margin compression drove the lower interest income resulting from declining loan balances, increases in cash held in interest-bearing deposits in banks, and security purchases.  Our cash balances and securities holdings, excluding unrealized market value losses, generally yield less than loans and increased as a percentage of our total assets reflecting increased deployment of excess liquidity.

Net interest margin for the nine-month period ended September 30, 2022, was 2.66%, compared to 3.01% for the same period of 2021.  Lower average yields and higher average balances on interest-earning assets combined with higher average interest-bearing funds, higher average noninterest-bearing funds, and lower cost of funds were the primary drivers of year-over-year results.  The average balance on interest-earning assets increased $18.7 million, while the yield decreased 0.39% from 3.28% to 2.89%, when comparing the nine-month periods ending September 30, 2021, and 2022.  The average balance on interest-bearing funds and noninterest-bearing funds increased $8.0 million and $9.7 million, respectively, and the cost of funds decreased 0.04%, when comparing the nine-month periods ending September 30, 2021, and 2022.  The decrease in interest expense is related to a continuing shift in deposit mix and the downward repricing of interest-bearing deposits.  As time deposits matured, they renewed at lower market rates, or they exited the Company and were replaced by lower cost checking and money market accounts.

The average balance of interest-bearing deposits in banks and investment securities increased $56.1 million from $170.3 million to $226.4 million for the nine-month period ending September 30, 2022, compared to the same period of 2021.  The yield increased from 1.61% to 1.71% during that same period.  The increase in yields for the three-month period can be attributed to the change in mix of cash held in interest-bearing deposits in banks and investment securities available for sale and increases in the overnight fed funds rate.

Average loan balances decreased $37.4 million to $202.1 million for the nine-month period ended September 30, 2022, compared to $239.5 million for the same period of 2021.  The yield decreased from 4.47% to 4.20% during that same period.

The Company recorded a release of allowance for credit loss on loans of $178,000 for the nine-month period ending September 30, 2022, compared to a release of $593,000 for the same period in 2021.  The $415,000 decline in the release in 2022, compared to 2021, primarily reflects a $350,000 increase in net charge offs, offset by a $27.8 million decrease in the reservable balance of the loan portfolio (excluding PPP loans) and an 0.07% decrease in the current expected credit loss percentage.  As a result, the allowance for credit loss on loans was $2.3 million on September 30, 2022, representing 1.17% of total loans, compared to $2.8 million, or 1.24% of total loans on September 30, 2021.

Noninterest income for the nine-month period ended September 30, 2022, was $832,000, compared to $886,000 for the nine-month period ended September 30, 2021, a decrease of $54,000 or 6.11%.  The decrease was driven primarily by a $39,000 lower other fees and commissions, and $14,000 lower gain on sale of other real estate.

For the nine-month period ended September 30, 2022, noninterest expense was $8.5 million, compared to $8.3 million for the nine-month period ended September 30, 2021.  The primary contributors to the $228,000 increase when comparing to the nine-month period ended September 30, 2021, were increases in legal, accounting, and other professional fees, and other expenses, offset by decreases in salary and employee benefits costs, FDIC insurance costs, loan collection costs and telephone costs.

# # #

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.

Forward-Looking Statements

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.