Glen Burnie Bancorp(GLBZ) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements of Glen Burnie Bancorp and its subsidiary for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of income (loss), comprehensive income (loss), changes in stockholders' equity, and cash flows, along with accompanying notes detailing significant accounting policies, credit loss methodologies, investment securities, loan portfolio analysis, fair value measurements, recent accounting pronouncements, and subsequent events Consolidated Balance Sheets This statement provides a snapshot of the Company's assets, liabilities, and equity at specific dates Consolidated Balance Sheet Highlights (dollars in thousands) | Metric (dollars in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Assets | $350,721 | $358,956 | $(8,235) | (2.29)% | | Cash and Cash Equivalents | $12,668 | $24,464 | $(11,796) | (48.22)% | | Loans, net | $210,775 | $202,380 | $8,395 | 4.15% | | Total Deposits | $317,316 | $309,189 | $8,127 | 2.63% | | Short-term borrowings | $13,000 | $30,000 | $(17,000) | (56.67)% | | Total Stockholders' Equity | $18,933 | $17,817 | $1,116 | 6.26% | Consolidated Statements of Income (Loss) This statement details the Company's revenues, expenses, and net loss over specific periods Consolidated Income Statement Highlights (dollars in thousands) | Metric (dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Interest Income | $3,877 | $3,893 | $7,506 | $7,298 | | Total Interest Expense | $1,141 | $1,107 | $2,207 | $1,941 | | Net Interest Income | $2,736 | $2,786 | $5,299 | $5,357 | | (Release) provision of credit loss allowance | $79 | $600 | $(541) | $792 | | Total Noninterest Income | $220 | $241 | $425 | $471 | | Total Noninterest Expenses | $3,252 | $2,820 | $6,516 | $5,658 | | Net Loss | $(212) | $(204) | $(59) | $(201) | | Basic and diluted net loss per share | $(0.07) | $(0.07) | $(0.02) | $(0.07) | Consolidated Statements of Comprehensive Income (Loss) This statement presents net loss and other comprehensive income (loss) components, reflecting total equity changes Consolidated Comprehensive Income (Loss) Highlights (dollars in thousands) | Metric (dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(212) | $(204) | $(59) | $(201) | | Other comprehensive income (loss) | $(36) | $(196) | $1,174 | $(1,137) | | Comprehensive income (loss) | $(248) | $(400) | $1,115 | $(1,338) | Consolidated Statements of Changes in Stockholders' Equity This statement outlines changes in each component of stockholders' equity over the period Consolidated Stockholders' Equity Changes (dollars in thousands) | Metric (dollars in thousands) | Balance, December 31, 2024 | Net Loss | Other Comprehensive Income | Balance, June 30, 2025 | | :---------------------------- | :------------------------- | :------- | :------------------------- | :--------------------- | | Common Stock | $2,901 | — | — | $2,901 | | Additional Paid-in Capital | $11,037 | — | — | $11,037 | | Retained Earnings | $22,882 | $(59) | — | $22,823 | | Accumulated Other Comprehensive Income (Loss) | $(19,003) | — | $1,174 | $(17,828) | | Total Stockholders' Equity | $17,817 | $(59) | $1,174 | $18,933 | Consolidated Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities Consolidated Cash Flow Highlights (dollars in thousands) | Metric (dollars in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(356) | $259 |\n| Net cash used in investing activities | $(2,567) | $(3,998) | | Net cash (used in) provided by financing activities | $(8,873) | $5,284 | | Net (decrease) increase in cash and cash equivalents | $(11,796) | $1,545 | | Cash and cash equivalents at end of period | $12,668 | $16,786 | Notes to Consolidated Financial Statements These notes provide detailed information on the Company's organizational structure, basis of financial statement presentation, significant accounting policies (including the CECL methodology for credit losses), loss per share calculations, investment securities portfolio, loan portfolio composition and credit quality, fair value measurements, recent accounting pronouncements, and a significant subsequent event regarding a planned acquisition NOTE 1 – ORGANIZATIONAL This note describes Glen Burnie Bancorp's structure as a Maryland-based bank holding company and its subsidiary - Glen Burnie Bancorp is a Maryland-based bank holding company, owning The Bank of Glen Burnie, which provides financial services in Anne Arundel County and surrounding Central Maryland[18] NOTE 2 – BASIS OF PRESENTATION This note outlines the basis for preparing unaudited interim financial statements, including GAAP and CECL methodology - The unaudited consolidated financial statements are prepared in conformity with U.S. GAAP for interim reporting, reflecting normal recurring adjustments. Operating results for the interim periods are not necessarily indicative of full-year results[19] - The Company applies ASU 2016-13 (ASC 326) for Allowance for Credit Losses (ACL), using the Current Expected Credit Loss (CECL) methodology, which estimates credit losses over the life of an exposure based on past events, current conditions, and reasonable forecasts[21][22] - The loan portfolio is segmented into real estate, commercial and industrial, and consumer loans, with further disaggregation into classes for ACL determination. Historical loss experience, adjusted for current conditions and future forecasts, is the primary basis for CECL[23][24][25] - For Available for Sale (AFS) debt securities, the Company assesses impairment based on intent/requirement to sell and credit losses. As of June 30, 2025, unrealized losses in AFS securities were not deemed credit losses[29][31] - Off-balance-sheet credit exposures, primarily unfunded loan commitments totaling $37.3 million as of June 30, 2025, have a reserve for expected lifetime credit losses recognized as a liability[32] NOTE 3 – LOSS PER SHARE This note details the calculation of basic and diluted loss per share for the reporting periods Loss Per Share Calculation (dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss (dollars) | $(211,974) | $(204,480) | $(59,004) | $(201,322) | | Weighted average common shares outstanding | 2,900,681 | 2,891,203 | 2,891,585 | 2,888,378 | | Basic and diluted net loss per share | $(0.07) | $(0.07) | $(0.02) | $(0.07) | - Diluted EPS calculations were not required for the periods presented due to no outstanding stock options[39] NOTE 4 – INVESTMENT SECURITIES This note provides information on the Company's available-for-sale investment securities, fair value, and unrealized losses - The Company holds no trading or held-to-maturity securities, only available-for-sale (AFS) investment securities, reported at fair value with unrealized gains/losses in other comprehensive income[40] AFS Investment Securities Summary (dollars in thousands) | Metric (dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Total AFS Securities (Fair Value) | $104,566 | $107,949 | | Total Amortized Cost | $129,163 | $134,166 | | Gross Unrealized Losses | $(24,610) | $(26,243) | - The Company does not believe the unrealized losses in AFS debt securities are due to credit impairment, as it does not intend to sell them before maturity or full recovery of amortized cost[43][44][45][46] NOTE 5 – LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES This note details the loan portfolio composition, credit quality, and the allowance for credit losses - The loan portfolio is diversified across real estate, commercial and industrial, and consumer segments, with credit risk managed through diversification and specific portfolio segment/class evaluations[50][51][53] Loan Portfolio Composition (dollars in thousands) | Loan Segment (dollars in thousands) | June 30, 2025 (Amount) | June 30, 2025 (%) | December 31, 2024 (Amount) | December 31, 2024 (%) | | :---------------------------------- | :--------------------- | :---------------- | :------------------------- | :-------------------- | | Loans Secured by Real Estate | $164,681 | 77% | $161,938 | 79% | | Commercial and Industrial | $24,551 | 11% | $22,396 | 11% | | Consumer Loans | $24,130 | 11% | $20,885 | 10% | | Total Loans, net of deferred fees and costs | $213,362 | 100% | $205,219 | 100% | | Less: Allowance for credit losses | $(2,587) | | $(2,839) | | Allowance for Credit Losses and Asset Quality Metrics (dollars in thousands) | Metric (dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Allowance for credit losses | $2,587 | $2,839 | | Net charge-offs to average loans (annualized) | 0.01% | 0.25% | | Nonaccrual loans | $1,066 | $360 | | Restructured loans to borrowers with financial difficulty | $24 | $26 | | Non-performing assets to total assets | 0.30% | 0.10% | - The Company utilizes an internal risk rating scale (1-8) for loan asset quality, classifying loans as Pass (1-4), Special Mention (5), Substandard (6), Doubtful (7), or Loss (8)[74][75][76][77][78][79] NOTE 6 – FAIR VALUE This note explains the fair value measurement hierarchy for investment securities and impaired loans - Fair value measurements are categorized into a three-level hierarchy based on observability of inputs: Level 1 (quoted prices in active markets), Level 2 (other significant observable inputs), and Level 3 (significant unobservable inputs)[83][87] - Investment securities available for sale are primarily Level 1 and Level 2. Impaired loans, valued on a non-recurring basis, are classified as Level 3, relying on independent appraisals discounted based on individual circumstances[84][86] Fair Value Measurements by Level (dollars in thousands) | Metric (dollars in thousands) | Level 1 | Level 2 | Level 3 | Fair Value | | :---------------------------- | :------ | :------ | :------ | :--------- | | June 30, 2025 | | | | | | Securities available for sale | $13,650 | $90,916 | $— | $104,566 | | Impaired loans | $— | $— | $2,418 | $2,418 | | December 31, 2024 | | | | | | Securities available for sale | $14,188 | $93,761 | $— | $107,949 | | Impaired loans | $— | $— | $994 | $994 | NOTE 7 – RECENT ACCOUNTING PRONOUNCEMENTS This note confirms no material impact from new accounting pronouncements during the quarter - No new accounting pronouncements issued or effective during the quarter ended June 30, 2025, had a material effect on the Company's financial statements and disclosures[96] NOTE 8 – SUBSEQUENT EVENTS This note discloses a planned acquisition of Virginia Wholesale Mortgage, Inc. expected to close in August 2025 - On March 5, 2025, the Bank entered into a stock purchase agreement with Virginia Wholesale Mortgage, Inc. (VAWM), a mortgage banking services provider. The acquisition is expected to close in August 2025, providing access to new products, markets, off-balance sheet mortgage origination/sales, and cross-selling opportunities[97][98] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition and operating results, including forward-looking statements, an overview of key performance measures, recent industry events, detailed comparisons of financial performance for the three and six months ended June 30, 2025, versus 2024, an analysis of financial condition, market risk, liquidity, capital resources, and critical accounting policies CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This statement warns that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to various risks and uncertainties, including credit losses, real estate market weaknesses, regulatory restrictions, interest rate changes, cybersecurity risks, and economic conditions[99] - Actual future results may differ materially from anticipated results due to factors beyond the Company's control, and past performance is not indicative of future results[99][100] OVERVIEW This section provides an overview of the Company's primary income sources and key performance measures - The Company's primary income source is interest from loans and investments, with key success measures being net interest income (difference between interest earned and paid) and net interest spread[102] - An Allowance for Credit Losses (ACL) is maintained to absorb estimated expected credit losses on existing loans, established through a provision for or release of credit losses against earnings[102][105] RECENT INDUSTRY EVENTS This section discusses the impact of Federal Reserve monetary policies and market interest rate changes - Federal Reserve monetary policies significantly impact bank operations; the target range of federal funds decreased by 100 basis points from June 30, 2024, to June 30, 2025 (from 5.25%-5.50% to 4.25%-4.50%)[108] - Changes in market interest rates affect income/expense on interest-earning assets and liabilities, market value of short-term assets, and mortgage origination income[108] COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2025, TO THE THREE MONTHS ENDED JUNE 30, 2024 For the three months ended June 30, 2025, the Company reported a net loss of $(212) thousand, a slight increase from $(204) thousand in the prior year. This was driven by decreased net interest income and non-interest income, and increased non-interest expenses, partially offset by an improved provision for credit losses Net Income This section analyzes the Company's net loss and effective tax rate for the second quarter Net Income Highlights (dollars in thousands) | Metric (dollars in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :---------------------------- | :------ | :------ | :--------- | :--------- | | Net Loss | $(212) | $(204) | $(8) | 3.92% | | Basic and Diluted EPS | $(0.07) | $(0.07) | $0.00 | 0.00% | - The net loss increased by $8 thousand, primarily due to a $50 thousand decrease in net interest income and a $432 thousand increase in non-interest expenses, partially offset by a $521 thousand improvement in credit loss provision[109] - The effective tax rate was 43.5% in Q2 2025, down from 48.1% in Q2 2024, influenced by a high proportion of tax-exempt income relative to the pre-tax book loss[110] Net Interest Income This section examines changes in net interest income, net interest margin, and earning asset yields for the second quarter Net Interest Income Analysis (dollars in thousands) | Metric | Q2 2025 | Q2 2024 | Change | | :---------------------------- | :------ | :------ | :----- | | Net Interest Income (dollars in thousands) | $2,736 | $2,786 | $(50) | | Net Interest Margin (FTE) | 3.13% | 3.10% | 0.03% | | Average Earning Assets (dollars in millions) | $359.3 | $370.9 | $(11.6)| | Earning Asset Yield | 4.33% | 4.22% | 0.11% | | Cost of Interest-Bearing Liabilities | 1.99% | 1.90% | 0.09% | - The $50 thousand decrease in net interest income was due to a $16 thousand reduction in total interest income and a $34 thousand increase in the total cost of funds[112] - The earning asset yield increased by 11 basis points due to a shift in earning asset mix from cash and securities (down $17.5 million) to loans (up $22.3 million), with loans representing 58% of average earning assets in Q2 2025, up from 50% in Q2 2024[112] Provision and Allowance for Credit Losses This section analyzes the provision for credit loss allowance and its components for the second quarter Credit Loss Provision and Allowance (dollars in thousands) | Metric (dollars in thousands) | Q2 2025 | Q2 2024 | | :---------------------------- | :------ | :------ | | Provision for Credit Loss Allowance | $79 | $600 | | ACL for Loans (Release)/Provision | $(57) | $526 | | ACL for Unfunded Commitments (Provision) | $136 | $74 | - The provision for credit loss allowance significantly improved by $521 thousand, primarily driven by a release of ACL for loans in Q2 2025 compared to a provision in Q2 2024[115] Non-interest Income and Non-interest Expense This section reviews changes in non-interest income and expenses, including salary and benefits, for the second quarter Non-interest Income and Expense (dollars in thousands) | Metric (dollars in thousands) | Q2 2025 | Q2 2024 | Change ($) | | :---------------------------- | :------ | :------ | :--------- | | Non-interest Income | $220 | $241 | $(21) | | Non-interest Expense | $3,252 | $2,820 | $432 | | Salary and benefits | $2,026 | $1,601 | $425 | | Occupancy and equipment expenses | $256 | $338 | $(82) | - Non-interest income decreased by $21 thousand due to lower other fees and commissions (e.g., ATM usage, interchange fees)[116] - Non-interest expense increased by $432 thousand, mainly due to a $425 thousand rise in salary and benefits from new hires and non-recurring early retirement/headcount reduction costs, partially offset by an $82 thousand decrease in occupancy expenses from office closures[117][118] Comprehensive Income (Loss) This section analyzes the comprehensive loss, including the impact of unrealized gains/losses on securities, for the second quarter Comprehensive Income (Loss) Highlights (dollars in thousands) | Metric (dollars in thousands) | Q2 2025 | Q2 2024 | Change ($) | | :---------------------------- | :------ | :------ | :--------- | | Comprehensive Loss | $(248) | $(400) | $152 | - The comprehensive loss decreased by $152 thousand, primarily due to a $160 thousand net-of-tax decrease in unrealized losses on securities, despite an $8 thousand increase in net loss[117] COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2025, TO THE SIX MONTHS ENDED JUNE 30,2024 For the six months ended June 30, 2025, the Company significantly reduced its net loss to $(59) thousand from $(201) thousand in the prior year. This improvement was mainly driven by a substantial improvement in the provision for credit losses, partially offset by decreased net interest income and non-interest income, and increased non-interest expenses Net Income This section analyzes the Company's net loss and income tax benefit for the first half of the year Net Income Highlights (dollars in thousands) | Metric (dollars in thousands) | H1 2025 | H1 2024 | Change ($) | Change (%) | | :---------------------------- | :------ | :------ | :--------- | :--------- | | Net Loss | $(59) | $(201) | $(142) | (70.65)% | | Basic and Diluted EPS | $(0.02) | $(0.07) | $(0.05) | (71.43)% | - The net loss decreased by $142 thousand, primarily due to a $1.3 million improvement in credit loss provision, partially offset by a $58 thousand decrease in net interest income and an $858 thousand increase in non-interest expenses[122] - The income tax benefit decreased from $420 thousand in H1 2024 to $192 thousand in H1 2025, reflecting tax deferrals from losses, changes in market rates, and the mix of tax-exempt income[122] Net Interest Income This section examines changes in net interest income, net interest margin, and earning asset yields for the first half of the year Net Interest Income Analysis (dollars in thousands) | Metric | H1 2025 | H1 2024 | Change | | :---------------------------- | :------ | :------ | :----- | | Net Interest Income (dollars in thousands) | $5,299 | $5,357 | $(58) | | Net Interest Margin (FTE) | 3.06% | 3.02% | 0.04% | | Average Earning Assets (dollars in millions) | $357.7 | $366.5 | $(8.8) |\n| Earning Asset Yield | 4.23% | 4.00% | 0.23% | | Cost of Interest-Bearing Liabilities | 1.94% | 1.71% | 0.23% | - The $58 thousand decrease in net interest income resulted from a $208 thousand increase in total interest income being outpaced by a $266 thousand increase in the total cost of funds[123] - The earning asset yield increased by 23 basis points, driven by a strategic shift from lower-yielding cash and securities (down $24.0 million) to higher-yielding loans (up $26.1 million), with loans comprising 58% of average earning assets in H1 2025, up from 49% in H1 2024[123][124] Provision and Allowance for Credit Losses This section analyzes the provision for credit loss allowance and its components for the first half of the year Credit Loss Provision and Allowance (dollars in thousands) | Metric (dollars in thousands) | H1 2025 | H1 2024 | | :---------------------------- | :------ | :------ | | (Release)/Provision for Credit Loss Allowance | $(541) | $792 | | ACL for Loans (Release)/Provision | $(203) | $694 | | ACL for Unfunded Commitments (Release)/Provision | $(338) | $97 | - The Company recorded a $541 thousand release for credit loss allowance in H1 2025, a significant improvement compared to a $792 thousand provision in H1 2024, reflecting releases for both loans and unfunded commitments[127] Non-interest Income and Non-interest Expense This section reviews changes in non-interest income and expenses, including salary and benefits, for the first half of the year Non-interest Income and Expense (dollars in thousands) | Metric (dollars in thousands) | H1 2025 | H1 2024 | Change ($) | | :---------------------------- | :------ | :------ | :--------- | | Non-interest Income | $425 | $471 | $(46) | | Non-interest Expense | $6,516 | $5,658 | $858 | | Salary and benefits | $3,853 | $3,219 | $634 | | Legal, accounting, other professional fees | $662 | $502 | $160 | | Occupancy and equipment expenses | $565 | $669 | $(104) | - Non-interest income decreased by $46 thousand, primarily due to lower other fees and commissions ($38 thousand) and reduced service charges on deposit accounts ($8 thousand)[128] - Non-interest expense increased by $858 thousand, driven by a $634 thousand rise in salary and benefits (new hires, early retirement costs) and a $160 thousand increase in legal/accounting fees (internal audit, new credit card program), partially offset by a $104 thousand decrease in occupancy expenses due to office closures[129][132] Comprehensive Income (Loss) This section analyzes the comprehensive income (loss), including the impact of unrealized gains/losses on securities, for the first half of the year Comprehensive Income (Loss) Highlights (dollars in thousands) | Metric (dollars in thousands) | H1 2025 | H1 2024 | Change ($) | | :---------------------------- | :------ | :------ | :--------- | | Comprehensive Income (Loss) | $1,115 | $(1,338) | $2,453 | - Comprehensive income improved by $2.5 million, shifting from a loss of $1.3 million in H1 2024 to an income of $1.1 million in H1 2025, primarily due to a $2.3 million net-of-tax increase in unrealized income on securities[130] FINANCIAL CONDITION The Company's total assets decreased by $8.2 million to $351.0 million as of June 30, 2025, primarily due to a significant decrease in cash and cash equivalents, partially offset by loan growth. Stockholders' equity increased due to lower unrealized losses on available-for-sale securities. Asset quality metrics show an increase in nonaccrual loans and nonperforming assets Financial Condition Highlights (dollars in millions) | Metric (dollars in millions) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Assets | $351.0 | $358.9 | $(7.9) | (2.20)% | | Cash and Cash Equivalents | $12.7 | $24.5 | $(11.8) | (48.16)% | | Loan Portfolio | $213.4 | $205.2 | $8.2 | 3.99% | | Investment Securities AFS | $104.6 | $107.9 | $(3.3) | (3.06)% | | Allowance for Credit Losses | $2.59 | $2.84 | $(0.25) | (8.80)% | | Total Deposits | $317.3 | $309.2 | $8.1 | 2.62% | | Short-term Borrowings | $13.0 | $30.0 | $(17.0) | (56.67)% | | Stockholders' Equity | $18.9 | $17.8 | $1.1 | 6.18% | Return and Book Value Metrics | Metric | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Return on average assets (3-month) | -0.24% | -0.22% | | Return on average assets (6-month) | -0.03% | -0.11% | | Return on average equity (3-month) | -4.30% | -4.72% | | Return on average equity (6-month) | -0.61% | -2.22% | | Book value per share | $6.53 | $6.14 | Asset Quality Metrics (dollars in thousands) | Metric (dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Nonaccrual loans | $1,066 | $360 | | Total nonperforming loans | $1,066 | $360 | | Total nonperforming assets | $1,066 | $360 | | Nonperforming assets to total assets | 0.30% | 0.10% | - Total deposits increased by $8.1 million, with noninterest-bearing deposits increasing by 6.23% and money market deposits increasing by 14.93%, while checking and savings deposits decreased[142] MARKET RISK AND INTEREST RATE SENSITIVITY The Company's primary market risk is interest rate fluctuation, managed by the Asset Liability Committee (ALCO) to optimize stockholder value and profitability. Simulation analysis indicates a modest asset-sensitive position in falling rate scenarios and a liability-sensitive position in rising rate scenarios, with measures of net interest income and economic value of equity at risk remaining within policy limits - Interest rate risk, arising from timing differences in rate changes and cash flows, is managed by the ALCO to maximize stockholder value and protect against adverse financial consequences[147][148] - Simulation analysis at June 30, 2025, shows the Bank is modestly asset sensitive in falling rate scenarios and liability sensitive in rising rate scenarios, aiming to maintain a consistent spread between asset yields and funding costs[153][155] Estimated Changes in Net Interest Income | Estimated Changes in Net Interest Income | -200 bp | -100 bp | +100 bp | +200 bp | | :--------------------------------------- | :------ | :------ | :------ | :------ | | Policy Limit | (15)% | (10)% | (10)% | (15)% | | June 30, 2025 | — % | (1)% | (2)% | (7)% | | June 30, 2024 | (5)% | (3)% | 1 % | — % | Estimated Changes in Economic Value of Equity (EVE) | Estimated Changes in Economic Value of Equity (EVE) | -200 bp | -100 bp | +100 bp | +200 bp | | :-------------------------------------------------- | :------ | :------ | :------ | :------ | | Policy Limit | (20)% | (10)% | (10)% | (20)% | | June 30, 2025 | 8 % | 4 % | (7)% | (17)% | | June 30, 2024 | 10 % | 6 % | (6)% | (15)% | LIQUIDITY AND CAPITAL RESOURCES The Company maintains strong liquidity and capital positions. Its primary liquidity sources are cash, dividends from the Bank, and principal/interest payments on loans and investments. The Bank has access to significant credit lines and maintains capital ratios well above regulatory 'well-capitalized' requirements, demonstrating ample capacity for future growth - The Bank's cash and cash equivalents decreased by $11.8 million (48.2%) to $12.7 million at June 30, 2025, from $24.5 million at December 31, 2024[164] - The Bank has access to an $89.5 million line of credit from FHLB of Atlanta, with $13.0 million outstanding at June 30, 2025 (down from $30.0 million at year-end 2024), and two unsecured federal funds lines of credit totaling $17.0 million with no outstanding balance[165][166] - Stockholders' equity increased by $1.1 million (6.3%) during the six-month period, primarily due to a $1.2 million decrease in after-tax net unrealized holding loss on AFS securities[166] Capital Ratios | Capital Ratio | June 30, 2025 | December 31, 2024 | Well Capitalized Threshold | | :---------------------------- | :------------ | :---------------- | :------------------------- | | Common equity Tier 1 | 14.91% | 15.15% | 6.50% | | Total capital | 16.06% | 16.40% | 10.00% | | Tier 1 capital | 14.91% | 15.15% | 8.00% | | Tier 1 leverage | 9.59% | 9.97% | 5.00% | - The Bank remains well above all 'well-capitalized' regulatory requirement levels, demonstrating strong capital and liquidity positions[137][172] CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management's determination of the Allowance for Credit Losses (ACL) is a critical accounting estimate, requiring significant judgment based on credit risk, expected future cash flows, historical loss rates, and quantitative/qualitative evaluations of past events, current conditions, and reasonable forecasts. The CECL methodology, adopted in 2020, introduces potential volatility to the ACL and reported earnings - The Allowance for Credit Losses (ACL) is a critical accounting estimate, relying on credit risk assessment, estimates of future cash flows, historical loss rates, and forecasts of economic conditions[175][179] - The CECL methodology, adopted in 2020, requires immediate recognition of expected credit losses over the life of an exposure, replacing the 'incurred loss' approach[176][177][178] - Material changes in loan portfolio composition, characteristics, quality, economic conditions, and forecasts can lead to greater volatility in the ACL and reported earnings under CECL[180] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a 'smaller reporting company,' Glen Burnie Bancorp is not required to provide disclosures under this item - The Company is a 'smaller reporting company' and is therefore not required to provide disclosures regarding quantitative and qualitative market risk[182] ITEM 4. CONTROLS AND PROCEDURES The Company's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness related to the lack of a comprehensive control framework for CECL model inputs, assumptions, and results validation. Despite this, management concluded that the financial statements are fairly stated. Remediation efforts include hiring an experienced Chief Credit Officer and implementing new CECL controls, while a previously reported material weakness regarding segregation of duties for journal entries has been remediated - The Company's disclosure controls and procedures were not effective as of June 30, 2025[185] - A material weakness was identified: management has not fully implemented a comprehensive control framework to ensure key CECL model inputs, assumptions, and results are appropriately validated, documented, and assessed for reasonableness, and third-party data was relied upon without appropriate verification[185] - Remediation efforts include hiring an experienced Chief Credit Officer (effective March 31, 2025) and implementing numerous controls to address the CECL control gap[187] - A previously reported material weakness concerning segregation of duties for journal entries has been remediated through the implementation of system-based controls requiring secondary review and approval[189][191] PART II – OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS The Company is involved in litigation in the normal course of business but does not anticipate that the ultimate liability will have a material effect on its financial condition, operating results, or liquidity - The Company is party to litigation in the normal course of business, but management does not anticipate a material effect on financial condition, operating results, or liquidity[195] ITEM 1A. RISK FACTORS This item is not applicable to the Company - This item is not applicable[196] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report - None to report[197] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report - None to report[198] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the Company - This item is not applicable[199] ITEM 5. OTHER INFORMATION There is no other information to report under this item - None to report[200] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including organizational documents, equity plans, severance plans, deferred compensation plans, certifications, and XBRL-related documents - The exhibits include Articles of Incorporation, By-Laws, Description of Registrant's Securities, Director Stock Purchase Plan, Employee Stock Purchase Plan, Change-in-Control Severance Plan, Executive and Director Deferred Compensation Plan, Rule 15d-14(a) Certifications, Section 1350 Certifications, and Inline XBRL documents[201]