Glen Burnie Bancorp Announces Third Quarter 2021 Results

GLEN BURNIE, Md., Nov. 03, 2021 (GLOBE NEWSWIRE) — Glen Burnie Bancorp (“Bancorp”) (NASDAQ: GLBZ), the bank holding company for The Bank of Glen Burnie (“Bank”), announced today net income of $888,000, or $0.31 per basic and diluted common share for the three-month period ended September 30, 2021, as compared to $949,000, or $0.33 per basic and diluted common share for the three-month period ended September 30, 2020. Bancorp reported net income of $1,962,000, or $0.69 per basic and diluted common share for the nine-month period ended September 30, 2021, compared to $1,123,000, or $0.40 per basic and diluted common share for the same period in 2020. On September 30, 2021, Bancorp had total assets of $432.8 million. Bancorp, the oldest independent commercial bank in Anne Arundel County, will pay its 117th consecutive quarterly dividend on November 8, 2021. The Company recorded a net benefit of $122,000 from the release of allowance for credit losses loans (“ACL-loans”) for the third quarter of 2021 and $593,000 for the nine months ended September 30, 2021. This compares to a release of ACL-loans of $669,000 for the third quarter of 2020 and $263,000 for the nine months ended September 30, 2020. (The third quarter of 2020 results include the reversal of a previously recorded $509,000 ACL-loan provision related to the expected impact on credit losses due the COVID-19 pandemic, which reversal is reflected in the 2020 nine-month results, as well). This provision was recaptured in September 2020 when it was determined that the impact of COVID-19 would be less significant than previously anticipated.

“Our third quarter 2021 earnings continue to reflect the strength and quality of our balance sheet, disciplined loan pricing and the ability to manage our net interest margin in a very challenging market rate environment,” said John D. Long, President and Chief Executive Officer. “The main story for the first nine months of 2021, is the $593,000 release of ACL-loans. Our margin continues to be under pressure as deposit growth driven by government stimulus has far outpaced net loan decreases. Seizing more opportunities to safely deploy the excess funds entrusted to us by our customers remains our priority. We continue to make progress in improving the fundamentals of the Company, including an increase in interest-earning assets, a better deposit mix, and a continued reduction in our cost of funds, all of which are improving our financial metrics. Our challenge for the remainder of 2021, and into 2022, will be generating loan growth in the post-pandemic economy. We are encouraged by the improving economic factors in our local markets as the economy continues to recover.”

“The progress made during this time of public health and economic challenges reflects our team’s exceptional dedication and commitment to meeting our communities’ financial and banking needs while maintaining safe, secure and efficient operations. Conditions during the past year have challenged us to enhance our digital customer communication and service capabilities while maintaining the personalized community banking service that has long characterized Glen Burnie Bancorp. We believe our 2021 financial performance reflects success in providing superior service and operational strength. I continue to be very proud of our team as we navigate through these unprecedented times while always thinking of how to better address the needs of our customers.”

Highlights for the First Nine Months of 2021

The Company recorded an ACL-loans benefit of $122,000 in the third quarter of 2021 as compared to an ACL-loans benefit of $669,000 in the third quarter of 2020, and a year-to-date ACL-loans benefit of $593,000 in 2021 as compared to a $263,000 ACL-loans benefit for the same period in 2020. The $547,000 increase in provision for credit losses loans (“PCL-loans”) in the third quarter of 2021 as compared to the third quarter of 2020, and the $330,000 ACL-loans benefit for the first nine months of 2021 compared to the same period in 2020 is due primarily to lower average balances on loans, and net recoveries of previously charged-off loan balances.

Total interest income declined $0.1 million to $10.1 million for the nine-month period ending September 30, 2021, compared to the same period in 2020. This decline was driven primarily by a $970,000 decrease in interest income on loans consistent with the $42.3 million decline in the average balance of the loan portfolio. Beyond pricing pressure/competition and the absolute low level of rates, the current economic outlook and prospects of a sustained historic low interest rate environment will likely continue to place pressure on net interest margin. Exacerbating the above, the Company had a $4.4 million higher level of excess liquidity as of September 30, 2021 as compared to the same period in 2020.

Bancorp has strong liquidity and capital positions which, we believe, provide ample capacity for future growth, along with the Bank’s total regulatory capital to risk weighted assets of 14.86% on September 30, 2021, as compared to 12.66% for the same period in 2020.

Return on average assets for the three-month period ended September 30, 2021, was 0.81%, as compared to 0.92% for the three-month period ended September 30, 2020. Return on average equity for the three-month period ended September 30, 2021, was 9.56%, as compared to 10.18% for the three-month period ended September 30, 2020.  

The cost of funds decreased from 0.38% during the third quarter of 2020 to 0.27% during the third quarter of 2021. This decrease was primarily due to a change in funding mix, consisting of an increase in lower cost non-time deposits as a percentage of total funding sources, and lower rates on time deposits, reflecting the declining interest rate environment.

The book value per share of Bancorp’s common stock was $12.26 on September 30, 2021, as compared to $12.86 per share on September 30, 2020.

On September 30, 2021, the Bank remained above all “well-capitalized” regulatory requirement levels. The Bank’s tier 1 risk-based capital ratio was approximately 14.05% on September 30, 2021, as compared to 12.10% on September 30, 2020. 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 $432.8 million on September 30, 2021, an increase of $1.9 million or 0.44%, from $430.9 million on September 30, 2020. Investment securities increased by $48.3 million or 42.25% to $162.8 million as of September 30, 2021, as compared to $114.5 million for the same period of 2020. This increase is primarily due to changes in our balance sheet mix resulting from significant increases in deposits from government stimulus programs, deposit customers’ increased savings, and decreases in loan portfolio balances. Loans, net of deferred fees and costs, were $221.9 million on September 30, 2021, a decrease of $50.5 million or 18.55%, from $272.4 million on September 30, 2020. Net loans during the first nine months of 2021 and 2020 include loans funded under the Small Business Administration (SBA) Paycheck Protection Program (PPP), offset by forgiveness activity by the SBA. PPP loans carry a fixed interest rate of 1.0% with a two- or five-year contractual maturity depending on the origination date.

Total deposits were $374.5 million on September 30, 2021, an increase of $30.6 million or 8.89%, from $343.9 million on September 30, 2020. Noninterest-bearing deposits were $147.8 million on September 30, 2021, an increase of $18.1 million or 13.92%, from $129.7 million on September 30, 2020. The increase in deposits was primarily related to PPP and other government stimulus payments leading to historically high savings rates. Interest-bearing deposits were $226.7 million on September 30, 2021, an increase of $12.5 million or 5.84%, from $214.2 million on September 30, 2020. Total borrowings were $20.0 million on September 30, 2021, a decrease of $27.4 million or 57.78%, from $47.4 million on September 30, 2020. The Company participated in the Paycheck Protection Program Liquidity Facility (“PPPLF”) established by the Federal Reserve. On September 30, 2021, and 2020, the Company borrowed $0 and $17.4 million, respectively, under the PPPLF with a fixed rate of 0.35% and pledged PPP loans as collateral to secure the borrowings.

As of September 30, 2021, total stockholders’ equity was $35.0 million (8.09% of total assets), equivalent to a book value of $12.26 per common share. Total stockholders’ equity on September 30, 2020, was $36.5 million (8.47% of total assets), equivalent to a book value of $12.86 per common share. The reductions in the ratio of stockholders’ equity to total assets was due to higher asset balances from increased levels of cash equivalents and investment securities, along with decreases to equity from the decline in market value of the Company’s available-for-sale securities portfolio and the $1.5 million impact of the adoption of the CECL accounting standard for credit losses. Included in stockholders’ equity on September 30, 2021, and September 30, 2020, were unrealized losses (net of taxes) on the Company’s available-for-sale investment securities and derivative contracts totaling $1,325,000 and unrealized gains (net of taxes) of $246,000, respectively. This decrease in unrealized gains primarily resulted from decreasing market interest rates year-over-year, which decreased the fair value of the investment securities.

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 0.65% of total assets on September 30, 2021, as compared to 1.32% for the same period of 2020. The $705,000 decrease in OREO balance, a $1.9 million higher asset balance, and a $2.2 million decrease in nonaccrual loans drove the 0.67% decrease in nonperforming assets as percentage of total assets from September 30, 2020, to September 30, 2021.

Review of Financial Results

For the three-month periods ended September 30, 2021, and 2020

Net income for the three-month period ended September 30, 2021, was $888,000, as compared to $949,000 for the three-month period ended September 30, 2020.

Net interest income for the three-month period ended September 30, 2021, totaled $3.34 million, an increase of $344,000 from the three-month period ended September 30, 2020. The increase in net interest income was due to a $255,000 increase in interest income and a $89,000 reduction in the costs of interest-bearing deposits. Net interest margin expansion drove the higher interest income resulting from bond purchases in response to COVID-19 driven excess liquidity. Our securities holdings, which generally yield less than loans, increased as a percentage of our total assets reflecting deployment of increased deposit balances.

Net interest margin for the three-month period ended September 30, 2021, was 3.22%, as compared to 3.05% for the same period of 2020. Higher 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 $25.4 million while the yield increased 0.06% from 3.41% to 3.47%, when comparing the three-month periods ending September 30, 2020, and 2021. The average balance on interest-bearing funds and noninterest-bearing funds increased $8.3 million and $16.2 million, respectively. The cost of funds decreased 0.11%, when comparing the three-month periods ending September 30, 2020, and 2021. 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 $75.5 million from $110.9 million to $186.4 million for the third quarter of 2021, as compared to the same period of 2020, while the yield increased from 1.53% to 1.73% during that same period. Much of the increase in yields for the three-month period can be attributed to a significant increase in investment securities available for sale.

Average loan balances decreased $50.2 million or 17.94%, to $229.6 million for the three-month period ended September 30, 2021, as compared to $279.8 million for the same period of 2020 while the yield increased from 4.16% to 4.89% during that same period. The increase in loan yields for the third quarter of 2021 reflected the recognition of interest income and fees associated with the positive resolution of distressed loans.

The Company recorded an ACL-loan benefit of $122,000 in the third quarter of 2021 as compared to a benefit of $669,000 in the third quarter of 2020. The $547,000 increase in PCL-loans in the third quarter of 2021 as compared to the second quarter of 2020, is due primarily to lower average balances on loans, net recoveries of previously charged-off loan balances and strong credit discipline. The third quarter 2020 results include the reversal of a $509,000 provision recorded in the second quarter of 2020 related to the expected impact on credit losses due to the COVID-19 pandemic. This provision was recaptured in September 2020 when it was determined that the impact of COVID-19 would be less significant than previously anticipated. As a result, the ACL-loan was $2.8 million on September 30, 2021, representing 1.24% of total loans, as compared to the allowance for loan losses of $1.7 million, or 0.61% of total loans on September 30, 2020. The ratio of the ACL-loan to total loans increased 0.63% primarily due to the Company’s adoption of the CECL accounting standard effective January 1, 2021. The Company’s financial statements for periods prior to January 1, 2021, were prepared under the previous incurred loss accounting standard. No provision for loan losses on PPP loans was recognized as the SBA guarantees 100% of loans funded under the program.

Noninterest income for the three-month period ended September 30, 2021, was $359,000, as compared to $260,000 for the three-month period ended September 30, 2020, an increase of $99,000 or 38.03%, driven primarily by $97,000 higher other fees and commissions due to higher ATM interchange fees.

For the three-month period ended September 30, 2021, noninterest expense was $2.69 million, unchanged from the three-month period ended September 30, 2020. The primary changes comparing the three-month period ended September 30, 2021 to 2020, were decreases in legal, accounting, and other professional fees, loan collection costs and data processing and item processing services, offset by increases in salary and employee benefits, occupancy and equipment expenses, and other expenses.

For the nine-month periods ended September 30, 2021, and 2020

Net income for the nine-month period ended September 30, 2021, was $1,962,000, as compared to a $1,123,000 for the nine-month period ended September 30, 2020.

Net interest income for the nine-month period ended September 30, 2021, totaled $9.2 million, an increase of $251,000 from the nine-month period ended September 30, 2020. The increase in net interest income was due to a $379,000 reduction in the costs of interest-bearing deposits and borrowings, offset by $128,000 lower 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 bond purchases in response to COVID-19 driven excess liquidity. Our securities holdings, which generally yield less than loans, increased as a percentage of our total assets reflecting the deployment of increased deposit balances.

Net interest margin for the nine-month period ended September 30, 2021, was 3.01%, as compared to 3.17% for the same period of 2020. 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 $31.3 million while the yield decreased 0.31% from 3.59% to 3.28%, when comparing the nine-month periods ending September 30, 2020, and 2021. The average balance on interest-bearing funds and noninterest-bearing funds increased $7.8 million and $22.5 million, respectively, and the cost of funds decreased 0.17%, when comparing the nine-month periods ending September 30, 2020, and 2021. 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 $73.6 million from $96.7 million to $170.3 million for the nine-month period ending September 30, 2021, as compared to the same period of 2020, while the yield decreased from 1.66% to 1.61% during that same period. Much of the decrease in yields for the nine-month period can be attributed to a significant increase in cash held in interest-bearing deposits in banks during this low interest rate period.

Average loan balances decreased $42.3 million or 15.01% to $239.5 million for the nine-month period ended September 30, 2021, as compared to $281.8 million for the same period of 2020 while the yield increased from 4.25% to 4.47% during that same period. The increase in loan yields during 2021 reflected the recognition of interest income and fees associated with the positive resolution of distressed loans.

The Company recorded an ACL-loans benefit of $593,000 for the nine-month period ending September 30, 2021, as compared to a benefit of $263,000 for the same period in 2020. The $330,000 increase in ACL-loans benefit in 2021 as compared to 2020, is due primarily to lower average balances on loans, net recoveries of previously charged-off loan balances, and strong credit discipline. As a result, the ACL-loan was $2.8 million on September 30, 2021, representing 1.24% of total loans, as compared to the allowance for loan losses of $1.7 million, or 0.61% of total loans on September 30, 2020. The ratio of the ACL-loans and the allowance for loan losses to total loans increased 0.63% primarily due to the Company’s adoption of the CECL accounting standard effective January 1, 2021. The Company’s financial statements for periods prior to January 1, 2021, were prepared under the previous incurred loss accounting standard. No provision for loan losses on PPP loans was recognized as the SBA guarantees 100% of loans funded under the program.

Noninterest income for the nine-month period ended September 30, 2021, was $886,000, as compared to $743,000 for the nine-month period ended September 30, 2020, an increase of $143,000 or 19.25% driven primarily by a $146,000 increase in other fees and commissions due to higher ATM interchange fees and a $14,000 gain on sale of other real estate.

For the nine-month period ended September 30, 2021, noninterest expense was $8.3 million, as compared to $8.5 million for the nine-month period ended September 30, 2020, a decrease of $225,000 or 2.63%. The primary contributors to the $225,000 decrease, when compared to the nine-month period ended September 30, 2020, were decreases in legal, accounting, and other professional fees and loan collection costs, offset by increases in data processing and item processing services.

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 www.thebankofglenburnie.com.

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.

CONTACT: For further information contact:

Jeffrey D. Harris, Chief Financial Officer
410-768-8883
jdharris@bogb.net
106 Padfield Blvd
Glen Burnie, MD 21061