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| GLBZ > SEC Filings for GLBZ > Form 10-Q on 15-May-2012 | All Recent SEC Filings |
15-May-2012
Quarterly Report
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
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 had consolidated net income of $730,000 ($0.27 basic and diluted earnings per share) for the first quarter of 2012, compared to the first quarter of 2011 consolidated net income of $709,000 ($0.26 basic and diluted income per share), an 2.96% increase. The increases in earnings for the first quarter was primarily due to a decrease in the provision for credit losses and a decrease in interest expense on deposits, partially offset by a decrease in gains on investments and a decrease in interest income on loans and U. S. Government agency securities.
Results Of Operations
Net Interest Income. The Company's consolidated net interest income prior to provision for credit losses for the three months ended March 31, 2012 was $3,208,000, compared to $3,347,000 for the same period in 2011, a decrease of $139,000 (4.15%) for the three months.
Interest income for the first quarter decreased from $4,286,000 in 2011 to $4,056,000 in 2012, a 5.37% decrease. The interest income decrease for the three month period was due to a decrease in loan income and interest income on U.S. Government agency securities, partially offset by an increase in income on state and municipal securities.
Interest expense for the first quarter decreased from $939,000 in 2011 to $848,000 in 2012, a 9.69% decrease. The decreases in interest expense for the three month period ended March 31, 2012 was due to a decrease in interest paid on deposit balances.
Net interest margins for the three months ended March 31, 2012 was 4.07%, compared to tax equivalent net interest margin of 4.47% for the three months ended March 31, 2011. The decrease of the net interest margin from the 2011 to 2012 period was primarily due to the decline in the interest rates on loans and U.S. Government Agency securities partially offset by the reduction in interest expense, as noted above.
Provision for Credit Losses. The Company made a provision for credit losses of $0 during the three month period ended March 31, 2012 and $225,000 for credit losses during the three month period ended March 31, 2011. As of March 31, 2012, the allowance for credit losses equaled 79.71% of non-accrual and past due loans compared to 77.38% at December 31, 2011 and 57.51% at March 31, 2011. During the three month period ended March 31, 2012, the Company recorded net charge-offs of $105,000, compared to net charge-offs of $73,000 during the corresponding period of the prior year. On an annualized basis, net charge-offs for the 2012 period represent 0.18% of the average loan portfolio.
Other Income. Other income decreased from $611,000 for the three month period ended March 31, 2011, to $418,000 for the corresponding 2012 period, a $193,000 (31.59%) decrease. The decrease for the three month period was due to a decrease in gains on investment securities and service charges on deposit accounts.
Other Expenses. Other expenses decreased from $2,811,000 for the three month period ended March 31, 2011, to $2,686,000 for the corresponding 2012 period, a $125,000 (4.45%) decrease. The decrease for the three month period was primarily due to the decrease in occupancy, impairment on securities and FDIC expenses, partially offset by an increase in salaries.
Income Taxes. During the three months ended March 31, 2012, the Company recorded income tax expense of $210,000, compared to income tax expense of $213,000 for the same respective periods in 2011. The Company's effective tax rate for the three month period in 2012 was 22.34%, compared to 23.1% for the prior year period. The decrease in the effective tax rate for the three month period was due to an increase in the proportion of tax exempt income included in net interest 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 first quarter of 2012, comprehensive income, net of tax, totaled $1,019,000, compared to the March 31, 2011 comprehensive income of $1,373,000. The decrease was due to an increase in net income and a decrease in the net unrealized gains on securities arising during the three month period.
Financial Condition
General. The Company's assets increased to $374,313,000 at March 31, 2012 from $365,260,000 at December 31, 2011, primarily due to an increase in cash and cash equivalents, loans and securities, partially offset by a decrease in other assets and OREO. The Bank's net loans totaled $238,563,000 at March 31, 2012, compared to $232,734,000 at December 31, 2011, an increase of $5,829,000 (2.50%), primarily attributable to an increase in purchase money mortgages and indirect lending with lesser increases in other areas. This was partially offset by decreases in refinancing mortgages, land development and secured business installment loans.
The Company's total investment securities portfolio (investment securities available for sale) totaled $104,265,000 at March 31, 2012, a $1,398,000 (1.36%) increase from $102,867,000 at December 31, 2011. This increase was funded by the increase in deposits received during the three month period. 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 March 31, 2012, totaled $12,244,000, an increase of $2,290,000 (23.01%) from the December 31, 2011 total of $9,954,000. This increase comes from the increase in deposits received for the three month period ended March 31, 2012.
Deposits as of March 31, 2012, totaled $320,964,000, which is an increase of $9,019,000 (2.89%) from $311,945,000 at December 31, 2011. Demand deposits as of March 31, 2012, totaled $80,385,000, which is an increase of $7,046,000 (9.60%) from $73,339,000 at December 31, 2011. NOW accounts as of March 31, 2012, totaled $24,464,000, which is an increase of $425,000 (1.77%) from $24,039,000 at December 31, 2011. Money market accounts as of March 31, 2012, totaled $19,235,000, which is an increase of $1,151,000 (6.36%), from $18,084,000 at December 31, 2011. Savings deposits as of March 31, 2012, totaled $63,593,000, which is an increase of $3,529,000 (5.88%) from $60,064,000 at December 31, 2011. Certificates of deposit over $100,000 totaled $30,186,000 on March 31, 2012, which is a decrease of $1,229,000 (3.91%) from $31,415,000 at December 31, 2011. Other time deposits (made up of certificates of deposit less than $100,000 and individual retirement accounts) totaled $103,101,000 on March 31, 2012, which is a$1,903,000 (1.81%) decrease from the $105,004,000 total at December 31, 2011.
Asset Quality. The following tables set forth the amount of the Bank's current, past due, and non-accrual loans by categories of loans and restructured loans, at the dates indicated.
The following table analyzes the age of past due loans, including both accruing and non-accruing loans, segregated by class of loans as of the three months ended March 31, 2012 and the year ended December 31, 2011.
At March 31, 2012 90 Days or
(Dollars in Thousands) 30-89 Days More and
Current Past Due Still Accruing Nonaccrual Total
Commercial and industrial $ 6,061 $ 5 $ - $ 1,290 $ 7,356
Commercial real estate 67,286 - - 2,817 70,103
Consumer and indirect 54,689 674 - 25 55,388
Residential real estate 109,754 178 257 411 110,600
$ 237,790 $ 857 $ 257 $ 4,543 $ 243,447
At December 31, 2011 90 Days or
(Dollars in Thousands) 30-89 Days More and
Current Past Due Still Accruing Nonaccrual Total
Commercial and industrial $ 7,135 $ 38 $ - $ 20 $ 7,193
Commercial real estate 66,590 - - 4,484 71,074
Consumer and indirect 48,745 1,298 - 75 50,118
Residential real estate 108,703 135 18 482 109,338
$ 231,173 $ 1,471 $ 18 $ 5,061 $ 237,723
At At
March 31, December 31,
2012 2011
(Dollars in Thousands)
Restructured loans $ 4,097 $ 4,108
Non-accrual and 90 days or more and still accruing loans
to gross loans 1.98 % 2.15 %
Allowance for credit losses to non-accrual and 90 days
or more and still accruing loans 79.71 % 77.38 %
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At March 31, 2012, there was $4,575,000 in loans outstanding, included in the current and 30-89 days past due columns 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.
Below is a summary of the recorded investment amount and related allowance for losses of the Bank's impaired loans at March 31, 2012 and December 31, 2011.
(Dollars in thousands)
Unpaid Interest Average
Recorded Principal Income Specific Recorded
March 31, 2012 Investment Balance Recognized Reserve Investment
Impaired loans with specific
reserves:
Real-estate - mortgage:
Residential $ 1,702 1,702 35 412 1,702
Commercial 6,460 7,060 33 1,456 6,480
Consumer 100 100 2 44 101
Installment - - - - -
Home Equity - - - - -
Commercial 719 719 10 451 725
Total impaired loans with
specific reserves $ 8,981 9,581 80 2,363 9,008
Impaired loans with no
specific reserve:
Real-estate - mortgage:
Residential $ 429 429 1 n/a 411
Commercial 1,015 1,015 11 n/a 1,025
Consumer - - - n/a -
Installment 66 66 - n/a 10
Home Equity - - - n/a -
Commercial 222 222 4 n/a 230
Total impaired loans with no
specific reserve $ 1,732 1,732 16 - 1,676
(Dollars in thousands)
Unpaid Interest Average
Recorded Principal Income Specific Recorded
December 31, 2011 Investment Balance Recognized Reserve Investment
Impaired loans with specific
reserves:
Real-estate - mortgage:
Residential $ 1,703 1,703 62 411 1,708
Commercial 6,503 7,103 219 1,642 6,559
Consumer 100 100 10 44 104
Installment - - - - -
Home Equity - - - - -
Commercial 731 731 41 456 755
Total impaired loans with
specific reserves $ 9,037 9,637 332 2,553 9,126
Impaired loans with no
specific reserve:
Real-estate - mortgage:
Residential $ 260 260 7 n/a 245
Commercial 1,036 1,036 50 n/a 1,051
Consumer 25 25 - n/a -
Installment 265 265 - n/a -
Home Equity - - - n/a -
Commercial 253 253 21 n/a 304
Total impaired loans with no
specific reserve $ 1,839 1,839 78 - 1,600
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Non-accrual loans with specific reserves at March 31, 2012 are comprised of:
Commercial loans - Two loans to one borrower totaling $20,000 with $20,000 of specific reserves established.
Commercial Real Estate - One loan to one borrower in the amount of $1,270,000, secured by commercial and/or residential properties with a specific reserve of $370,000 established for the loan.
Loans that were restructured by the Bank by categories of loans at March 31, 2012 are as follows:
At March 31, 2012
(Dollars in Thousands) Pre-Modification Post-Modification
Outstanding Outstanding
Number of Recorded Recorded
Contracts Investment Investment
Troubled Debt Restructurings:
Real Estate - Residential 1 $ 1,280 $ 1,280
Real Estate - Commercial 1 2,759 2,817
Commercial - - -
Finance leases - - -
Troubled Debt Restructurings Number of Recorded
That Subsequently Defaulted Contracts Investment
Troubled Debt Restructurings:
Real Estate - Residential - $ -
Real Estate - Commercial 1 2,817
Commercial - -
Finance leases - -
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At March 31, 2012, the Bank has one modified residential loan (done in 2011) in the amount of $1,280,423 which modifications qualify the loan as Troubled Debt Restructuring (TDR). The loan is included in the schedule above of accruing impaired loans. This borrower is in compliance with the modified term and is accruing interest. The Bank has one modified commercial real estate loan (done in 2010) in the amount of $2,817,000 which modifications qualify the loan as Troubled Debt Restructuring (TDR). The loan is included in the schedule above of non-accruing impaired loans. This borrower is not in compliance with the modified term and is not accruing interest.
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 three months ended March 31, 2012 and the year ended December 31, 2011 were as follows:
Commercial Consumer
March 31, 2012 and Commercial and Residential
(Dollars in Thousands) Industrial Real Estate Indirect Real Estate Unallocated Total
Balance, beginning of year $ 557 $ 2,013 $ 889 $ 596 $ (124 ) $ 3,931
Provision for credit losses 91 (252 ) 121 9 31 -
Recoveries 7 22 82 - - 111
Loans charged off (55 ) - (161 ) - - (216 )
Balance, end of quarter $ 600 $ 1,783 $ 931 $ 605 $ (93 ) $ 3,826
Commercial Consumer
December 31, 2011 and Commercial and Residential
(Dollars in Thousands) Industrial Real Estate Indirect Real Estate Unallocated Total
Balance, beginning of year $ 263 $ 2,108 $ 830 $ 196 $ 2 $ 3,399
Provision for credit losses 296 (166 ) 257 402 (126 ) 663
Recoveries 4 71 409 2 - 486
Loans charged off (6 ) - (607 ) (4 ) - (617 )
Balance, end of year $ 557 $ 2,013 $ 889 $ 596 $ (124 ) $ 3,931
At At
March 31, March 31,
2012 2011
(Dollars in Thousands)
Average loans $ 234,177 $ 229,906
Net charge-offs to average loans (annualized) 0.18 % 0.13 %
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During 2012, loans to 23 borrowers and related entities totaling approximately $216,000 were determined to be uncollectible and were charged off.
Credit Quality Information
The following tables represents credit exposures by creditworthiness category for the quarter ending March 31, 2012 and the year ended December 31, 2011. The use of creditworthiness categories to grade loans permits management to estimate a portion of credit risk. The Bank's internal creditworthiness is based on experience with similarly graded credits. Loans that trend upward toward higher credit grades typically have less credit risk and loans that migrate downward typically have more credit risk.
The Bank's internal risk ratings are as follows:
1 Superior - minimal risk. (normally supported by pledged deposits, United States government securities, etc.)
2 Above Average - low risk. (all of the risks associated with this credit based on each of the bank's creditworthiness criteria are minimal)
3 Average - moderately low risk. (most of the risks associated with this credit based on each of the bank's creditworthiness criteria are minimal)
4 Acceptable - moderate risk. (the weighted overall risk associated with this credit based on each of the bank's creditworthiness criteria is acceptable)
5 Other Assets Especially Mentioned - moderately high risk. (possesses deficiencies which corrective action by the bank would remedy; potential watch list)
6 Substandard - (the bank is inadequately protected and there exists the distinct possibility of sustaining some loss if not corrected)
7 Doubtful - (weaknesses make collection or liquidation in full, based on currently existing facts, improbable)
Loans rated 1-4 are considered "Pass" for purposes of the risk rating chart below.
Risk ratings of loans by categories of loans are as follows:
Commercial Consumer
March 31, 2012 and Commercial and Residential
(Dollars in Thousands) Industrial Real Estate Indirect Real Estate Total
Pass $ 6,089 $ 57,649 $ 54,473 $ 107,556 $ 225,767
Special mention 326 4,979 835 1,324 7,464
Substandard 941 7,475 65 1,720 10,201
Doubtful - - 15 - 15
Loss - - - - -
$ 7,356 $ 70,103 $ 55,388 $ 110,600 $ 243,447
Commercial Consumer
December 31, 2011 and Commercial and Residential
(Dollars in Thousands) Industrial Real Estate Indirect Real Estate Total
Pass $ 5,883 $ 58,799 $ 48,528 $ 106,302 219,512
Special mention 327 4,736 1,325 1,333 7,721
Substandard 983 7,539 190 1,703 10,415
Doubtful - - 75 - 75
Loss - - - - -
$ 7,193 $ 71,074 $ 50,118 $ 109,338 $ 237,723
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The allowance for credit losses on loans classified by the Bank as impaired by categories of loans at March 31, 2012 is as follows:
March 31, 2012
(Dollars in Thousands) Commercial Consumer
and Commercial and Residential
Industrial Real Estate Indirect Real Estate Unallocated Total
Allowance for individually evaluated
impaired:
Balance, beginning of year $ 456 $ 1,642 $ 44 $ 411 $ - $ 2,553
Provision for credit losses (5 ) (186 ) - 1 - (190 )
Recoveries 7 - - - - 7
Loans charged off (7 ) - - - - (7 )
Balance, end of quarter $ 451 $ 1,456 $ 44 $ 412 $ - $ 2,363
Allowance for collectively evaluated
impaired:
Balance, beginning of year $ 102 $ 371 $ 844 $ 184 $ (123 ) $ 1,378
Provision for credit losses 117 (66 ) 99 10 30 190
Recoveries - 22 82 - - 104
Loans charged off (48 ) - (161 ) - - (209 )
Balance, end of quarter $ 171 $ 327 $ 864 $ 194 (93 ) $ 1,463
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Reserve for Unfunded Commitments. As of March 31, 2012, the Bank had outstanding commitments totaling $26,002,000. 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:
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