Glen Burnie Bancorp(US:GLBZ)2019-11-14 15:28Accounting Standards Updates - The Company adopted ASU 2016-02 on January 1, 2019, which requires lessees to recognize a lease liability and a right-of-use asset for all operating leases[85]. - The implementation of ASU 2016-13 is expected to increase the allowance for loan losses balance, although the Company is still evaluating the potential impact on its financial statements[87]. - ASU 2016-15, effective for fiscal years beginning after December 15, 2017, did not have a material effect on the Company's consolidated financial statements[88]. - The Company adopted ASU 2018-13, which revises disclosure requirements for fair value measurements, and it is not expected to have a material impact on the financial statements[95]. - ASU 2019-05 provides entities with an option to elect the fair value option for certain financial instruments upon adoption of ASC 326-20, effective for reporting periods beginning after December 15, 2019[99]. - The Company adopted ASU 2017-01, clarifying the definition of a business, effective January 1, 2018, with no significant impact on financial statements[90]. - ASU 2016-01, effective January 1, 2018, did not have a material impact on the consolidated financial statements, as the Company's equity securities are excluded from fair value pricing[84]. - The Company adopted ASU 2017-12 on January 1, 2019, which aligns risk management activities with financial reporting for hedging relationships, with no significant impact on financial statements[92]. Financial Performance - Net income available to common stockholders for the three-month period ended September 30, 2019 was $606,000, or $0.21 per share, compared to $439,000, or $0.16 per share for the same period in 2018[112]. - Net income available to common stockholders for the nine-month period ended September 30, 2019 was $1,060,000, or $0.38 per share, compared to $1,172,000, or $0.42 per share for the same period in 2018[112]. - Return on average assets for the three-month period ended September 30, 2019 was 0.63%, compared to 0.43% for the same period in 2018[108]. - Comprehensive income for the third quarter of 2019 totaled $727,000, compared to $44,000 for the same period in 2018, driven by net unrealized gains on available-for-sale securities[126]. Income and Expenses - Net interest income for the three-month period ended September 30, 2019 was $3.1 million, a decrease of $158,000, or 4.78%, compared to the same period in 2018[113]. - Total interest income for the third quarter 2019 decreased by $272,000, or 7.05%, compared to the same period in 2018[114]. - Interest expense for the third quarter 2019 decreased by $114,000, or 20.27%, from $560,000 in 2018 to $446,000 in 2019[115]. - Noninterest income increased to $391,000 for the three-month period ended September 30, 2019, an increase of $60,000, or 18.13%, primarily due to higher other fees and commissions[123]. - Noninterest expenses for the three-month periods ended September 30 remained stable at $2.9 million for both 2018 and 2019, while nine-month expenses increased by $218,000, or 2.50%, to $8.9 million in 2019[124]. - The company recorded income tax expense of $212,000 for the three-month period ended September 30, 2019, compared to $89,000 for the same period in 2018, with an annualized effective tax rate of 22.32%[125]. Asset and Liability Management - Total assets decreased to $383.4 million at September 30, 2019, from $413.0 million at December 31, 2018, a decrease of $29.6 million or 7.17%[127]. - The company's cash and cash equivalents increased by $3.6 million, or 22.67%, to $19.6 million as of September 30, 2019, compared to $16.0 million at December 31, 2018[127]. - The Company's investment securities available for sale decreased by $16.8 million, or 20.54%, totaling $64.8 million as of September 30, 2019, compared to $81.6 million at December 31, 2018[128]. - Total deposits increased by $2.8 million, or 0.87%, totaling $325.3 million as of September 30, 2019[134]. - Noninterest-bearing deposits increased by $10.1 million, or 9.95%, totaling $111.5 million at September 30, 2019[134]. - Time deposits over $100,000 decreased by $5.9 million, or 14.09%, totaling $35.8 million at September 30, 2019[134]. Loan Portfolio and Credit Quality - The Company's loan portfolio decreased by $15.0 million, or 5.06%, in the first nine months of 2019 due to a slower pace of loan originations[107]. - Net loans decreased by $15.0 million, or 5.06%, totaling $281.6 million at September 30, 2019, primarily due to an increase in construction and commercial real estate loans[129]. - The allowance for credit losses represented 0.81% of total loans as of September 30, 2019, compared to 0.83% at the same date in 2018, indicating improved credit quality[122]. - The company recognized provisions for credit losses of negative $139,000 for the three-month period ending September 30, 2019, compared to $246,000 for the same period in 2018, reflecting a decrease in net charge-offs[122]. - Impaired loans totaled $5.0 million at September 30, 2019, including $4.2 million classified as nonaccrual loans[132]. - Total nonperforming assets increased to $5.151 million, with nonperforming assets to total assets ratio at 1.34% as of September 30, 2019, compared to 0.70% at December 31, 2018[133]. Capital and Ratios - The Bank's total regulatory capital to risk-weighted assets was 13.18% at September 30, 2019, compared to 12.64% for the same period of 2018[107]. - The Bank's Tier 1 leverage ratio was 9.26% as of September 30, 2019, exceeding the minimum requirement of 4.0%[162]. - The common equity Tier 1 capital ratio was 12.36% as of September 30, 2019, above the minimum requirement of 4.5%[162]. - The company's stockholders' equity increased by $1.3 million, or 3.87%, during the nine-month period ended September 30, 2019, primarily due to a decrease in accumulated other comprehensive loss[158]. Risk Management - The simulation analysis as of September 30, 2019, indicated that the Bank is in a neutral to slightly asset-sensitive position regarding interest rate risk[146]. - Estimated changes in net interest income for a +200 basis points change in rates showed an increase of 11% as of September 30, 2019[148]. - The economic value of equity decreased by 15% under a -200 basis points rate change scenario as of September 30, 2019[152]. - The company reported a cumulative GAP of $(143.96) million, which is -37.54% of total assets[149]. - The Bank had $20.0 million in short-term borrowings outstanding as of September 30, 2019, down from $55.0 million at December 31, 2018[157]. Internal Controls and Compliance - The Company has maintained a system of disclosure controls and procedures that is effective, as evaluated by the Chief Executive Officer and Chief Financial Officer[169]. - There have been no changes in the Company's internal control over financial reporting that materially affected or are likely to materially affect the Company's internal control[169]. - The Company is classified as a "smaller reporting company," thus not required to disclose certain market risk information[168]. Tax and Valuation - Management estimates income tax expense based on expected amounts owed to tax authorities, reflecting the net estimated amount due[165]. - Deferred income taxes are recognized for temporary differences based on enacted tax rates expected to be in effect when amounts are realized or settled[166]. - A valuation allowance is established if there is doubt about the likelihood of a deferred tax asset being realized, based on future taxable income assessments[167]. - The valuation of the securities portfolio is assessed periodically to determine if any decline in value is other than temporary, impacting earnings if so[164]. - The Company’s allowance for credit losses is based on estimates that can change with actual events, including historical losses and economic conditions[163].