FORWARD-LOOKING STATEMENTS

When used in this discussion and elsewhere in this Form 10-Q, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and readers are advised that various factors could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited to, those risks identified in the Company's periodic reports filed with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K.

The Company does not undertake and specifically disclaims any obligation to update any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

OVERVIEW

Net interest income before provision for credit losses, for the third quarter, was $3,035,000 in 2007 compared to $3,121,000 in 2008, a 2.83% increase. Interest income for the third quarter increased from $4,476,000 in 2007 to $4,667,000 in 2008, a 4.27% increase. Total interest expense for the quarter increased from $1,441,000 in 2007 to $1,546,000 in 2008, a 7.28% increase. The Company realized consolidated net loss of $2,118,000 for the third quarter of 2008 compared to consolidated net income $785,000 for the third quarter of 2007, a 369.81% decrease. The decrease was primarily due to a write-down of $2,816,000 taken on September 30, 2008 on investments in the three series of preferred stock issued by Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) held by the Company, as required by SFAS 115. Year-to-date net interest income before provision for credit losses was $8,885,000 in 2007 compared to $8,979,000 in 2008, a 1.06% increase. Interest income year-to-date increased from $13,350,000 in 2007 to $13,572,000 in 2008, a 1.66% increase. Total interest expense year-to-date increased from $4,465,000 in 2007 to $4,593,000 in 2008, a 2.87% increase. The Company realized consolidated net loss of $978,000 for the first nine months of 2008 compared to consolidated net income of $2,082,000 for the first nine months of 2007, a 146.97% decrease primarily due to the write-down of the three series of Fannie Mae and Freddie Mac preferred stock held by the Company.

Since December 31, 2007 loans have increased by $32,281,000, funded by deposits of $15,978,000, long-term borrowings from the Federal Home Loan Bank of Atlanta of $10,000,000 and net sales and maturities of investment securities of $11,092,000, resulting in a net increase of cash and equivalents of $3,423,000.

As a result of the write-down of $2,816,000 taken in the September 30, 2008 quarter on investments in the three series of Fannie Mae and Freddie Mac preferred stock held by the Company, the Company will recognize a tax credit of $1,110,771 in the quarter ending December 31, 2008.

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 loss of $2,118,000 ($0.71 basic and diluted loss per share) for the third quarter of 2008, compared to the third quarter 2007 consolidated net income of $785,000 ($0.26 basic and diluted earnings per share). The decrease in consolidated net income for the three month period was due to the write-down taken on the Fannie Mae and Freddie Mac preferred stock and an increase in the provision for loan losses. Year-to-date consolidated net loss was $978,000 ($0.33 basic and diluted loss per share) for the nine months ended September 30, 2008, compared to the nine months ended September 30, 2007 consolidated net income of $2,082,000 ($0.70 basic and diluted earnings per share).

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, 2008 was $3,121,000 and $8,979,000, respectively, compared to $3,035,000 and $8,885,000 for the same period in 2007, an increase of $86,000 (2.83%) for the three month period and an increase of $94,000 (1.06%) for the nine month period.

Interest income increased $191,000 (4.27%) and $222,000 (1.66%) for the three and nine months ended September 30, 2008, compared to the same periods in 2007. Interest income increased for the three and nine month periods due to an increase in loan income, partially offset by a decrease in interest income on U.S. Government agency securities, as a result of recent sales and maturities, and a decrease in other income.

Interest expense increased $105,000 (7.29%) and $128,000 (2.87%), respectively, for the three and nine months ended September 30, 2008, compared to the same 2007 periods. The increase in interest expense for the three and nine month periods ended September 30, 2008 were due to an increase in interest on new long-term borrowings, partially offset by a decrease in interest paid on deposits.

Net interest margin for the three and nine months ended September 30, 2008 were 4.54% and 4.36%, compared to tax equivalent net interest margin of 4.53% and 4.43% for the three and nine months ended September 30, 2007.

Provision for Credit Losses. The Company made a provision for credit losses of $239,000 and $446,000 during the three and nine month period ended September 30, 2008 and $0 and $50,000 for credit losses during the three and nine month period ended September 30, 2007. As of September 30, 2008, the allowance for credit losses equaled 919.11% of non-accrual and past due loans compared to 188.27% at December 31, 2007 and 240.20% at September 30, 2007. During the three and nine month period ended September 30, 2008, the Company recorded net charge-offs of $224,000 and $607,000, compared to net charge-offs of $93,000 and $222,000 during the corresponding period of the prior year. On an annualized basis, net charge-offs for the 2008 period represent 0.38% of the average loan portfolio.

Other Income. Other income decreased from $639,000 for the three month period ended September 30, 2007, to $557,000 for the corresponding 2008 period, a $82,000 (12.83%) decrease. For the nine month period, other income decreased from $1,625,000 at September 30, 2007, to $1,539,000 for the corresponding 2008 period, an $86,000 (5.29%) decrease. The decrease for the three month period was primarily due to a decrease in service charges and lower gains on investment securities. The decrease for the nine month period was primarily due to a decrease in other fees and commissions and service charges partially offset by gains on investment securities.

Other Expenses. Other expenses increased from $2,625,000 for the three month period ended September 30, 2007, to $5,354,000 for the corresponding 2008 period, a $2,729,000 (103.96%) increase. For the nine month period, other expenses increased from $7,823,000 at September 30, 2007, to $10,619,000 for the corresponding 2008 period, a $2,796,000 (35.74%) increase. The increase for the three and nine month periods were primarily due to the write-down of $2,816,000 taken by the Company on three series of Fannie Mae and Freddie Mac preferred stock held by the Company, as required under SFAS 115. These securities, which were AAA rated at the time of purchase, had a cost of $3,000,000 as of June 30, 2008 and had declined in value to $184,000 as of the close of business on September 30, 2008 as a result of the appointment of the Federal Housing Finance Agency as conservator over both Fannie Mae and Freddie Mac, which was announced on September 7, 2008. Based on these developments, the Company recorded an other-than-temporary impairment and took a non-cash charge to earnings related to these preferred securities for the quarter ending September 30, 2008.

Income Taxes. Income tax expense for the quarter ended September 30, 2008 was $203,000 compared to $264,000 for the same period in 2007 reflecting the effect of the increased reserve for loan loss. For the third quarter, the write down on investments in the three series of preferred stock issued by Fannie Mae and Freddie Mac was treated as a capital loss. In the fourth quarter of 2008 a $1,110,000 tax benefit will impact tax expense and net income. For the first three quarters of 2008 income taxes were $431,000 compared to $555,000 for the same period in 2007. This decrease was primarily the result of lower income caused by the increase in loan loss reserve. The effective tax rate for the quarter was 22.5% and 19.0% for the nine month period ending September 30, 2008, both based on net income excluding the $2,816,000 write down on investments described above.

Comprehensive Income. In accordance with regulatory requirements, the Company reports comprehensive income in its financial statements. Comprehensive income consists of the Company's net income, adjusted for unrealized gains and losses on the Bank's investment portfolio of investment securities. For the third quarter of 2008, comprehensive (loss) income, net of tax, totaled ($2,586,000), compared to the September 30, 2007 total of $1,464,000. Year-to-date comprehensive (loss) income, net of tax, totaled ($2,228,000), as of September 30, 2008, compared to the September 30, 2007 total of $1,772,000. The decrease for the three and nine month period was due primarily to the net loss. The nine month period was also affected by the increase in unrealized holding losses on available for sale securities.

FINANCIAL CONDITION

General. The Company's assets increased to $329,258,000 at September 30, 2008 from $307,274,000 at December 31, 2007, primarily due to an increase in loans, deferred taxes and cash and cash equivalents, partially offset by a decrease in securities. The Bank's net loans totaled $232,034,000 at September 30, 2008, compared to $199,753,000 at December 31, 2007, an increase of $32,281,000 (16.16%), primarily attributable to an increase in purchase money mortgages, refinanced mortgages, commercial mortgages, mortgage participations purchased, and mortgage participations sold, partially offset by a decrease in indirect loans.

The Company's total investment securities portfolio (including both investment securities available for sale and investment securities held to maturity) totaled $61,924,000 at September 30, 2008, a $15,942,000 (20.47%) decrease from $77,866,000 at December 31, 2007. This decrease was part of a planned process to fund loan demand. In the third quarter, the Company sold its remaining positions in securities classified as held to maturity. Inasmuch as these positions were liquidated prior to maturity in a manner which did not meet the prescribed requirements of SFAS 115, the Company will be precluded for a period of time from classifying any securities positions as held to maturity. The aggregate market value of investment securities held by the Bank as of September 30, 2008 was $61,924,000 compared to $77,908,000 as of December 31, 2007, a $15,984,000 (20.52%) decrease. The Bank's cash and due from banks (cash due from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of September 30, 2008, totaled $18,218,000, an increase of $3,423,000 (23.14%) from the December 31, 2007 total of $14,795,000

Deposits as of September 30, 2008 totaled $268,895,000, which is an increase of $15,978,000 (6.32%) from $252,917,000 at December 31, 2007. Demand deposits as of September 30, 2008 totaled $70,495,000, which is an increase of $1,735,000 (2.52%) from $68,760,000 at December 31, 2007. NOW accounts as of September 30, 2008 totaled $21,882,000, which is a decrease of $1,273,000 (5.50%) from $23,155,000 at December 31, 2007. Money market accounts as of September 30, 2008 totaled $13,569,000, which is an increase of $621,000 (4.8%), from $12,948,000 at December 31, 2007. Savings deposits as of September 30, 2008 totaled $47,145,000, which is a decrease of $237,000 (0.50%) from $47,382,000 at December 31, 2007. Certificates of deposit over $100,000 totaled $25,067,000 on September 30, 2008, which is an increase of $4,413,000 (21.37%) from $20,654,000 at December 31, 2007. Other time deposits (made up of certificates of deposit less than $100,000 and individual retirement accounts) totaled $90,737,000 on September 30, 2008, which is a $10,721,000 (13.40%) increase from the $80,016,000 total at December 31, 2007. The growth in deposits was due in part to a promotion for certificates of deposit and individual retirement accounts, coupled with the financial crisis in the stock market that took place during the quarter ended September 30, 2008.

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.

                                                    At September 30,     At December 31,
                                                          2008                2007
                                                           (Dollars in Thousands)

Restructured loans                                 $                -   $             578

Non-accrual loans:
Real-estate - mortgage:
Residential                                        $                -   $               -
Commercial                                                          -                   -
Real-estate - construction                                          -                   -
Installment                                                        95                 212
Home Equity                                                        48                   -
Commercial                                                          -                   -

Total non-accrual loans                                           143                 212

Accruing loans past due 90 days or more:
Real-estate - mortgage:
Residential                                                        13                 512
Commercial                                                          -                   -
Real-estate - construction                                          1                   -
Installment                                                         -                   -
Credit card and related                                             -                   -
Commercial                                                          -                 128
Other                                                               -                   -

Total accruing loans past due 90 days or more                      14                 640

Total non-accrual loans and past due loans         $              157   $             852

Non-accrual and past due loans to gross loans                    0.07 %              0.43 %

Allowance for credit losses to non-accrual and
past due loans                                                 919.11 %            188.27 %

At September 30, 2008, 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. Reflected in the above table are $0 of prior period troubled debt restructurings that are now not performing under the terms of their modified agreements.

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 for the nine months ended September 30, 2008 and 2007 were as follows:

                                                  Nine Months Ended September 30,
                                                      2008                2007
                                                       (Dollars in Thousands)

Beginning balance                               $          1,604    $          1,839

Charge-offs                                                 (867 )              (457 )
Recoveries                                                   260                 235
Net charge-offs                                             (607 )              (222 )
Provisions charged to operations                             446                  50

Ending balance                                  $          1,443    $          1,667

Average loans                                   $        212,788    $        195,852

Net charge-offs to average loans (annualized)               0.38 %              0.15 %

Reserve for Unfunded Commitments. As of September 30, 2008, the Bank had outstanding commitments totaling $22,778,000. These outstanding commitments consisted of letters of credit, undrawn lines of credit, and other loan commitments. The following table shows the Bank's reserve for unfunded commitments arising from these transactions:

                                      Nine Months Ended September 30,
                                         2008                  2007
                                           (Dollars in Thousands)

Beginning balance                  $            200      $            200

Provisions charged to operations                  -                     -

Ending balance                     $            200      $            200

Contractual Obligations and Commitments. No material changes, outside the normal course of business, have been made during the third quarter of 2008.

MARKET RISK AND INTEREST RATE SENSITIVITY

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates or equity pricing. The Company's principal market risk is interest rate risk that arises from its lending, investing and deposit taking activities. The Company's profitability is dependent on the Bank's net interest income. Interest rate risk can significantly affect net interest income to the degree that interest bearing liabilities mature or reprice at different intervals than interest earning assets. The Bank's Asset/Liability and Risk Management Committee oversees the management of interest rate risk. The primary purpose of the committee is to manage the exposure of net interest margins to unexpected changes due to interest rate fluctuations. The Company does not utilize derivative financial or commodity instruments or hedging strategies in its management of interest rate risk. The primary tool used by the committee to monitor interest rate risk is a "gap" report which measures the dollar difference between the amount of interest bearing assets and interest bearing liabilities subject to repricing within a given time period. These efforts affect the loan pricing and deposit rate policies of the Company as well as the asset mix, volume guidelines, and liquidity and capital planning.

The following table sets forth the Company's interest-rate sensitivity at September 30, 2008.

                                                                  Over 1
                                                    Over 3 to     Through      Over
                                      0-3 Months    12 Months     5 Years     5 Years      Total
                                                         (Dollars in Thousands)
Assets:
Cash and due from banks              $          -   $        -   $       -   $       -   $  18,166
Federal funds and overnight
deposits                                       52            -           -           -          52
Securities                                      -            -       3,863      58,061      61,924
Loans                                      11,740        8,666      89,665     121,963     232,034
Fixed assets                                    -            -           -           -       3,129
Other assets                                    -            -           -           -      13,953

Total assets                         $     11,792   $    8,666   $  93,528   $ 180,024   $ 329,258

Liabilities:
Demand deposit accounts              $          -   $        -   $       -   $       -   $  70,495
NOW accounts                               21,882            -           -           -      21,882
Money market deposit accounts              13,569            -           -           -      13,569
Savings accounts                           47,145            -           -           -      47,145
IRA accounts                                3,764        9,508      17,339       1,076      31,687
Certificates of deposit                    22,859       28,836      32,126         296      84,117
Short-term borrowings                         350            -           -           -         350
Long-term borrowings                            9           28       7,044      20,000      27,081
Other liabilities                               -            -           -           -       1,722
Junior subordinated debenture                   -            -       5,155           -       5,155
Stockholders' equity:                           -            -           -           -      26,055

Total liabilities and
stockholders' equity                 $    109,578   $   38,372   $  61,664   $  21,372   $ 329,258

GAP                                  $    (97,786 ) $  (29,706 ) $  31,864   $ 158,652
Cumulative GAP                       $    (97,786 ) $ (127,492 ) $ (95,628 ) $  63,024
Cumulative GAP as a % of total
assets                                     -29.70 %     -38.72 %    -29.04 %     19.14 %

The foregoing analysis assumes that the Company's assets and liabilities move with rates at their earliest repricing opportunities based on final maturity. Mortgage backed securities are assumed to mature during the period in which they are estimated to prepay and it is assumed that loans and other securities are not called prior to maturity. Certificates of deposit and IRA accounts are presumed to reprice at maturity. NOW savings accounts are assumed to reprice at within three months although it is the Company's experience that such accounts may be less sensitive to changes in market rates.

In addition to GAP analysis, the Bank utilizes a simulation model to quantify the effect a hypothetical immediate plus or minus 200 basis point change in rates would have on net interest income and the economic value of equity. The model takes into consideration the effect of call features of investments as well as prepayments of loans in periods of declining rates. When actual changes in interest rates occur, the changes in interest earning assets and interest bearing liabilities may differ from the assumptions used in the model. As of June 30, 2008, the model produced the following sensitivity profile for net interest income and the economic value of equity.

                                                           Immediate Change in Rates
                                            -200             -100             +100             +200
                                        Basis Points     Basis Points     Basis Points     Basis Points

% Change in Net Interest Income                  -3.4 %           -1.6 %           -1.5 %           -3.1 %
% Change in Economic Value of Equity            -11.6 %           -5.6 %           -1.6 %           -7.4 %

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, 2008, totaled $18,218,000, an increase of $3,423,000 (23.14%) from the December 31, 2007 total of $14,795,000.

As of September 30, 2008, the Bank was permitted to draw on a $63,800,000 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, 2008, there were $27.0 million in long-term convertible advances outstanding with various monthly and quarterly call features and with final maturities ranging from November 2017 through August 2018. In addition, the Bank has an unsecured federal funds line of credit in the amount of $7.0 million from another commercial bank. Furthermore, as of September 30, 2008, 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 decreased $3,681,000 (12.38%) during the nine months ended September 30, 2008, due mainly to an increase in accumulated other comprehensive loss, net of tax benefits, and an increase in common stock, offset . . .