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 second quarter, was $2,993,000 in 2008 compared to $3,034,000 in 2009. Interest income for the second quarter increased from $4,492,000 in 2008 to $4,689,000 in 2009, a 4.39% increase. Total interest expense for the quarter increased from $1,499,000 in 2008 to $1,655,000 in 2009, a 10.41% increase. The Company realized consolidated net income of $490,000 for the second quarter of 2009 compared to consolidated net income of $604,000 for the second quarter of 2008, an 18.87% decrease. Year-to-date net interest income before provision for credit losses was $5,858,000 in 2008, compared to $5,899,000 in 2009, a 0.7% increase. Interest income year-to-date increased from $8,905,000 in 2008 to $9,222,000 in 2009, a 3.56% increase. Total interest expense year-to-date increased from $3,047,000 in 2008 to $3,323,000 in 2009, a 9.06% increase. The Company realized consolidated net income of $945,000 for the first six months of 2009 compared to consolidated net income of $1,140,000 for the first six months of 2008, a 17.11% decrease. The decrease in net income for the second quarter and year-to-date 2009 was primarily due to a larger provision for loan losses (an increase of $57,000 in the second quarter and $152,000 year to date), a provision for an additional FDIC assessment of $160,000 which is due in September (included in the other expense amount), interest expense on long-term borrowings from the Federal Home Loan Bank originated during the third quarter of 2008, and an increase in interest expense on deposits. This was partially offset by an increase on loan income and a decrease in income tax expense. In addition, income for 2008 includes dividends on the Company's holdings of FHLB stock, which dividends have been suspended in 2009.

While the Bank has not been directly impacted by many of the difficulties facing other financial institutions in the current economic downturn, the turbulence in the U.S. economy and the stock market continues to have a significant impact on the Bank in specific identifiable areas. Overall deposits have continued to increase as stock market investors have sought more secure places to invest their funds. In addition, there has been an overall decline in interest rates in response to stock market turbulence. Both rates of interest paid by the Bank on deposits and rates of interest earned by the Bank on loans and other interest earning assets have declined, with the rates on earning assets declining at a faster rate than the rates paid on deposits, resulting in a decline in the net interest margin.

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 $490,000 ($0.18 basic and diluted loss per share) for the second quarter of 2009, compared to the second quarter 2008 consolidated net income of $604,000 ($0.20 basic and diluted earnings per share). Year-to-date consolidated net income was $945,000 ($0.34 basic and diluted loss per share) for the six months ended June 30, 2009, compared to consolidated net income of $1,140,000 ($0.38 basic and diluted earnings per share) for the six months ended June 30, 2008. The decrease for the second quarter and year-to-date was due to a provision for a special FDIC assessment due in September 2009, an increase in the provision for loan losses, additional long-term borrowings expense due to two additional FHLB advances taken in the third quarter of 2008, and an increase in interest expense on deposits, partially offset by an increase in loan income and a decrease in income tax expense.

Net Interest Income. The Company's consolidated net interest income prior to provision for credit losses for the three and six months ended June 30, 2009 was $3,034,000 and $5,899,000, respectively, compared to $2,993,000 and $5,858,000 for the same period in 2008, an increase of $41,000 (1.37%) for the three months and an increase of $41,000 (0.70%) for the six month period.

Interest income increased $197,000 (4.39%) and $317,000 (3.56%) for the three and six months ended June 30, 2009, compared to the same periods in 2008. Interest income increased for the three and six month periods due to an increase in loan income resulting from growth in the loan portfolio, partially offset by a decrease in interest income on U.S. Government agency securities and municipal securities, as a result of recent sales and maturities, and a decrease in other income, as a result of the suspended dividend on FHLB stock.

Interest expense increased $156,000 (10.41%) and $276,000 (9.06%) for the three and six months ended June 30, 2009, compared to the same 2008 period. The increase in interest expense for the three and six month periods ended June 30, 2009 was due to an increase in interest paid on increased deposit balances and interest on long-term borrowings from the Federal Home Loan Bank.

Net interest margins for the three and six months ended June 30, 2009 was 4.01% and 4.03%, compared to tax equivalent net interest margins of 4.39% and 4.33% for the three and six months ended June 30, 2008. This decline is due to the continued narrowing of the gap between the interest rates offered by the Bank on increasing customer deposits and the rates the Bank is able to obtain on loans and other interest earning assets. Accordingly, while net interest income before provision for credit losses for the three and six month periods has increased over the same periods in 2008, the net interest margin has declined in 2009 compared to 2008.

Provision for Credit Losses. The Company made a provision for credit losses of $209,000 and $359,000 during the three and six month period ended June 30, 2009 and $152,000 and $207,000 for credit losses during the three and six month period ended June 30, 2008. As of June 30, 2009, the allowance for credit losses equaled 176.45% of non-accrual and past due loans compared to 224.42% at December 31, 2008 and 211.87% at June 30, 2008. During the three and six month period ended June 30, 2009, the Company recorded net charge-offs of $388,000 and $583,000, compared to net charge-offs of $73,000 and $383,000 during the corresponding period of the prior year. On an annualized basis, net charge-offs for the 2009 period represent 0.49% of the average loan portfolio.

Other Income. Other income decreased from $514,000 for the three month period ended June 30, 2008, to $493,000 for the corresponding 2009 period, a $21,000 (4.09%) decrease. The decrease for the three month period was primarily due to a decrease in service charges and other fees. For the six month period, other income decreased from $982,000 at June 30, 2008, to $907,000 for the corresponding 2009 period, a $75,000 (7.64%) decrease. The decrease for the six month period was primarily due to a decrease in service charges and other fees.

Other Expenses. Other expenses increased from $2,612,000 for the three month period ended June 30, 2008, to $2,748,000 for the corresponding 2009 period, a $136,000 (5.20%) increase. The increase for the three month period was primarily due to making a $120,000 provision for an additional Federal Deposit Insurance Corporation (FDIC) assessment which will be due in September. For the six month period, other expenses increased from $5,265,000 at June 30, 2008, to $5,367,000 for the corresponding 2009 period, a $102,000 (1.94%) increase. The increase for the six month period was primarily due to the making of a $160,000 provision for the additional FDIC assessment along with the $30,000 write-down, done in the first quarter, on the value of a Trust Preferred security. These increases were partially offset by a decrease in salaries and employee benefits.

Income Taxes. During the three and six months ended June 30, 2009, the Company recorded income tax expense of $80,000 and $135,000, respectively, compared to income tax expense of $139,000 and $228,000 for the same period in 2008 reflecting the effect of the increased provision for loan losses and the FDIC assessment. The Company's effective tax rate for the three and six month period in 2009 was 14.0% and 12.5%, respectively, compared to 18.71% and 16.67% for the prior year period. The decrease in the effective tax rate for the three month period was due to a decline in taxable income combined with an increase in the proportion of tax exempt income.

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 second quarter of 2009, comprehensive income, net of tax, totaled $518,000, compared to the June 30, 2008 comprehensive loss of $425,000. The increase for the three month period was due primarily to the decrease in unrealized losses on securities. Year-to-date comprehensive income, net of tax, totaled $508,000, as of June 30, 2009, compared to the June 30, 2008 total of $358,000. The increase for the six month period was due primarily to lower unrealized losses on securities.

FINANCIAL CONDITION

General. The Company's assets increased to $355,950,000 at June 30, 2009 from $332,502,000 at December 31, 2008, primarily due to an increase in securities and loans offset partially by a decrease in cash and cash equivalents. The Bank's net loans totaled $240,087,000 at June 30, 2009, compared to $235,133,000 at December 31, 2008, an increase of $4,954,000 (2.12%), primarily attributable to an increase in commercial mortgages, with lesser increases in home equity loans, refinanced mortgages and demand business loans, and partially offset by a decrease in commercial construction loans, indirect loans (primarily auto loans) and mortgage loans purchased.

The Company's total investment securities portfolio (investment securities available for sale) totaled $84,819,000 at June 30, 2009, a $26,870,000 (46.37%) increase from $57,949,000 at December 31, 2008. This increase was funded by the increase in deposits received during the six month period that exceeded the amount needed to fund loan growth and the decrease in federal funds sold and interest bearing deposits at other institutions. 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 June 30, 2009, totaled $11,955,000, a decrease of $9,283,000 (43.71%) from the December 31, 2008 total of $21,238,000.

Deposits as of June 30, 2009 totaled $296,540,000, which is an increase of $26,772,000 (9.92%) from $269,768,000 at December 31, 2008. Demand deposits as of June 30, 2009 totaled $68,305,000, which is an increase of $4,766,000 (7.50%) from $63,539,000 at December 31, 2008. NOW accounts as of June 30, 2009 totaled $24,272,000, which is an increase of $3,193,000 (15.15%) from $21,079,000 at December 31, 2008. Money market accounts as of June 30, 2009 totaled $15,144,000, which is an increase of $2,380,000 (18.65%), from $12,764,000 at December 31, 2008. Savings deposits as of June 30, 2009 totaled $49,061,000, which is an increase of $3,259,000 (7.12%) from $45,802,000 at December 31, 2008. Certificates of deposit over $100,000 totaled $32,395,000 on June 30, 2009, which is an increase of $4,512,000 (16.18%) from $27,883,000 at December 31, 2008. Other time deposits (made up of certificates of deposit less than $100,000 and individual retirement accounts) totaled $107,363,000 on June 30, 2009, which is a $8,662,000 (8.78%) increase from the $98,701,000 total at December 31, 2008. Management continues to believe that the growth in deposits was due in part to the ongoing instability in the stock market and the resulting reallocation of investment portfolios by the Bank's customers.

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 June 30,       At December 31,
                                                                    2009                2008
                                                                      (Dollars in Thousands)

Restructured loans                                              $          99     $               -

Non-accrual loans:
Real-estate - mortgage:
Residential                                                     $         215     $               -
Commercial                                                                667                   659
Real-estate - construction                                                  -                     -
Installment                                                                40                   208
Home Equity                                                                 -                     -
Commercial                                                                  -                     -

Total non-accrual loans                                                   922                   867

Accruing loans past due 90 days or more:
Real-estate - mortgage:
Residential                                                                23                     3
Commercial                                                                  -                     -
Real-estate - construction                                                  -                     5
Installment                                                                 -                    26
Credit card and related                                                     -                     -
Commercial                                                                 74                     -
Other                                                                       -                     -

Total accruing loans past due 90 days or more                              97                    34

Total non-accrual loans and past due loans                      $       1,019     $             901

Non-accrual and past due loans to gross loans                            0.43 %                0.38 %

Allowance for credit losses to non-accrual and past due loans          176.45 %              224.42 %

At June 30, 2009, there was $228,000 in 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 collectability of the principal is unlikely. The allowance, based on evaluations of the collectability 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 are performed for each class of loans and take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, value of collateral securing the loans and current economic conditions and trends that may affect the borrowers' ability to pay. For example, delinquencies in unsecured loans and indirect automobile installment loans will be reserved for at significantly higher ratios than loans secured by real estate. Based on that analysis, the Bank deems its allowance for credit losses in proportion to the total non-accrual loans and past due loans to be sufficient.

Transactions in the allowance for credit losses for the six months ended June 30, 2009 and 2008 were as follows:

                                                  Six Months Ended June 30,
                                                    2009               2008
                                                    (Dollars in Thousands)

Beginning balance                               $       2,022       $    1,604

Charge-offs                                              (764 )           (568 )
Recoveries                                                181              185
Net charge-offs                                          (583 )           (383 )
Provisions charged to operations                          359              207

Ending balance                                  $       1,798       $    1,428

Average loans                                   $     237,526       $  205,732

Net charge-offs to average loans (annualized)            0.49 %           0.38 %

Reserve for Unfunded Commitments. As of June 30, 2009, the Bank had outstanding commitments totaling $21,476,000. 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:

                                       Six Months Ended June 30,
                                       2009                 2008
                                        (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 second quarter of 2009.

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 June 30, 2009.

                                                                               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                      $          -     $        -     $        -     $       -     $  10,645
Federal funds and overnight deposits                1,310              -              -             -         1,310
Securities                                              -              -          3,373        81,446        84,819
Loans                                              13,454          5,545         91,790       129,298       240,087
Fixed assets                                            -              -              -             -         3,428
Other assets                                            -              -              -             -        15,661

Total assets                                 $     14,764     $    5,545     $   95,163     $ 210,744     $ 355,950

Liabilities:
Demand deposit accounts                      $          -     $        -     $        -     $       -     $  68,305
NOW accounts                                       24,272              -              -             -        24,272
Money market deposit accounts                      15,144              -              -             -        15,144
Savings accounts                                   49,061              -              -             -        49,061
IRA accounts                                        2,707         13,676         20,951           838        38,172
Certificates of deposit                            14,322         54,881         32,206           177       101,586
Short-term borrowings                                 227              -              -             -           227
Long-term borrowings                                    9             30          7,014        20,000        27,053
Other liabilities                                       -              -              -             -         1,844
Junior subordinated debenture                           -              -          5,155             -         5,155
Stockholders' equity:                                   -              -              -             -        25,131

Total liabilities and stockholders' equity   $    105,742     $   68,587     $   65,326     $  21,015     $ 355,950

GAP                                          $    (90,978 )   $  (63,042 )   $   29,837     $ 189,729
Cumulative GAP                               $    (90,978 )   $ (154,020 )   $ (124,183 )   $  65,546
Cumulative GAP as a % of total assets              -25.56 %       -43.27 %       -34.89 %       18.41 %

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 March 31, 2009, 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                     -2.7 %             -1.6 %              2.0 %              2.0 %
% Change in Economic Value of Equity               -16.0 %             -7.1 %              6.9 %              0.9 %

LIQUIDITY AND CAPITAL RESOURCES

The Company currently has no business other than that of the Bank and does not currently have any material funding commitments. The Company's principal sources of liquidity are cash on hand and dividends received from the Bank. The Bank is subject to various regulatory restrictions on the payment of dividends.

The Bank's principal sources of funds for investments and operations are net income, deposits from its primary market area, principal and interest payments on loans, interest received on investment securities and proceeds from maturing investment securities. Its principal funding commitments are for the origination or purchase of loans and the payment of maturing deposits. Deposits are considered a primary source of funds supporting the Bank's lending and investment activities.

The Bank's most liquid assets are cash and cash equivalents, which are cash on hand, amounts due from financial institutions, federal funds sold, certificates of deposit with other financial institutions that have an original maturity of three months or less and money market mutual funds. The levels of such assets are dependent on the Bank's operating, financing and investment activities at any given time. The variations in levels of cash and cash equivalents are influenced by deposit flows and anticipated future deposit flows. The Bank's cash and cash equivalents (cash due from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of June 30, 2009, totaled $11,955,000, a decrease of $9,283,000 (43.71%) from the December 31, 2008 total of $21,238,000.

As of June 30, 2009, the Bank was permitted to draw on a $69,660,000 line of credit from the FHLB of Atlanta. Borrowings under the line are secured by a . . .