
Part I. FINANCIAL INFORMATION This section presents the company's comprehensive financial statements, management's discussion and analysis of performance, market risk disclosures, and internal controls for the reporting period Item 1. Financial Statements This chapter includes the company's consolidated balance sheets, statements of income, comprehensive income (loss), changes in stockholders' equity, and cash flows, along with detailed notes on organizational structure, accounting policies, credit loss allowance, investment securities, loans, fair value measurements, and recent accounting pronouncements Consolidated Balance Sheets This section presents the company's consolidated financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2022, and December 31, 2021 | Metric (Thousands of USD) | As of March 31, 2022 (Unaudited) | As of December 31, 2021 (Audited) | Change | Change Rate | | :------------------------ | :------------------------------- | :------------------------------- | :----- | :---------- | | Assets | | | | | | Cash and Cash Equivalents | 68,840 | 62,181 | 6,659 | 10.71% | | Available-for-Sale Investment Securities | 147,371 | 155,927 | (8,556) | -5.49% | | Loans, Net | 201,872 | 207,922 | (6,050) | -2.91% | | Total Assets | 437,445 | 442,066 | (4,621) | -1.05% | | Liabilities | | | | | | Total Deposits | 387,774 | 383,247 | 4,527 | 1.18% | | Total Liabilities | 410,165 | 406,350 | 3,815 | 0.94% | | Stockholders' Equity | | | | | | Total Stockholders' Equity | 27,280 | 35,716 | (8,436) | -23.62% | Consolidated Statements of Income This section outlines the company's financial performance, including interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expenses, and net income for the three months ended March 31, 2022 and 2021 | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Total Interest Income | 2,916 | 3,161 | (245) | -7.75% | | Total Interest Expense | 234 | 284 | (50) | -17.61% | | Net Interest Income | 2,682 | 2,877 | (195) | -6.78% | | Provision for Credit Losses on Loans | (100) | (404) | 304 | -75.25% | | Total Noninterest Income | 254 | 247 | 7 | 2.83% | | Total Noninterest Expenses | 2,784 | 2,828 | (44) | -1.56% | | Net Income | 231 | 594 | (363) | -61.11% | | Basic and Diluted Net Income Per Share | 0.08 | 0.21 | (0.13) | -61.90% | Consolidated Statements of Comprehensive Income (Loss) This section presents the company's comprehensive income (loss), including net income and other comprehensive income (loss) components, for the three months ended March 31, 2022 and 2021 | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Net Income | 231 | 594 | (363) | -61.11% | | Unrealized Loss on Available-for-Sale Securities, Net | (8,652) | (2,591) | (6,061) | 233.92% | | Unrealized Gain on Interest Rate Swaps, Net | 244 | 102 | 142 | 139.22% | | Other Comprehensive Loss | (8,408) | (2,489) | (5,919) | 237.81% | | Comprehensive Loss | (8,177) | (1,895) | (6,282) | 331.50% | Consolidated Statements of Changes in Stockholders' Equity This section details the changes in the company's stockholders' equity, including net income, cash dividends, dividend reinvestments, and other comprehensive loss, for the three months ended March 31, 2022 and 2021 | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Balance as of December 31, 2021/2020 | 35,716 | 37,093 | | Net Income | 231 | 594 | | Cash Dividends | (286) | (284) | | Dividend Reinvestment | 27 | 33 | | ASC 326 Adoption Transition Adjustment | — | (1,472) | | Other Comprehensive Loss | (8,408) | (2,489) | | Balance as of March 31, 2022/2021 | 27,280 | 33,475 | Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities, and the net increase in cash and cash equivalents for the three months ended March 31, 2022 and 2021 | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Net Cash from Operating Activities | (230) | 283 | | Net Cash from Investing Activities | 2,620 | (17,286) | | Net Cash from Financing Activities | 4,269 | 20,384 | | Net Increase in Cash and Cash Equivalents | 6,659 | 3,381 | | Cash and Cash Equivalents at End of Period | 68,840 | 40,474 | Notes to Consolidated Financial Statements This section provides detailed explanatory notes supporting the consolidated financial statements, covering significant accounting policies, estimates, and other relevant financial information NOTE 1 – ORGANIZATIONAL Glen Burnie Bancorp, a bank holding company established in 1990, provides financial services in central Maryland through its wholly-owned subsidiary, The Bank of Glen Burnie, under federal and state regulation - Glen Burnie Bancorp is a Maryland bank holding company, established in 1990, providing financial services in Anne Arundel County and surrounding areas through its wholly-owned subsidiary, The Bank of Glen Burnie19 - The Bank is subject to regulation and periodic examination by federal and state agencies19 NOTE 2 – BASIS OF PRESENTATION This note explains the basis of financial statement preparation, adhering to U.S. GAAP interim reporting requirements, and details the adoption of ASU 2016-13 (ASC 326) for credit loss allowance, including the CECL methodology, loan portfolio segmentation, and impairment model for available-for-sale debt securities - The company's financial statements are prepared in accordance with U.S. GAAP and include all necessary normal recurring adjustments20 - The company adopted ASU 2016-13 (ASC 326) on January 1, 2021, changing the credit loss allowance calculation method from an incurred loss model to an expected credit loss (CECL) model2259 - The CECL method requires estimating expected credit losses for loan portfolios and unfunded loan commitments based on past events, current conditions, and reasonable and supportable future forecasts2359 - The company segments its loan portfolio into real estate mortgage loans, commercial and industrial loans, and consumer loans, further categorizing them to assess credit risk25 - For available-for-sale (AFS) debt securities, the impairment model differs from CECL, primarily assessing whether the company intends to sell or will likely be required to sell the security before recovering its amortized cost, and whether the decline in fair value is due to credit losses3133 NOTE 3 – EARNINGS PER SHARE This note provides the calculation and amounts for basic and diluted earnings per share, which were $0.08 for the three months ended March 31, 2022, down from $0.21 in the prior year period | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------- | :-------------------------------- | :-------------------------------- | | Net Income (USD) | 230,733 | 593,993 | | Weighted Average Common Shares Outstanding | 2,855,253 | 2,843,775 | | Basic and Diluted Net Income Per Share | 0.08 | 0.21 | - Diluted earnings per share calculations were the same as basic earnings per share for the three months ended March 31, 2022 and 2021, as there were no outstanding stock options41 NOTE 4 – INVESTMENT SECURITIES This note details the accounting treatment, fair value, unrealized gains/losses, and contractual maturities of the company's investment securities, with available-for-sale securities totaling $147.4 million as of March 31, 2022, primarily due to increased unrealized losses from market value declines - The company holds no trading or held-to-maturity securities; all investment securities are classified as available-for-sale, reported at fair value, with unrealized gains and losses included in other comprehensive income42 | Metric (Thousands of USD) | As of March 31, 2022 | As of December 31, 2021 | Change | Change Rate | | :------------------------ | :------------------- | :---------------------- | :----- | :---------- | | Available-for-Sale Securities Amortized Cost | 160,073 | 156,692 | 3,381 | 2.16% | | Available-for-Sale Securities Fair Value | 147,371 | 155,927 | (8,556) | -5.49% | | Total Unrealized Gains | 171 | 1,340 | (1,169) | -87.24% | | Total Unrealized Losses | (12,873) | (2,105) | (10,768) | 511.54% | - As of March 31, 2022, the company's available-for-sale debt securities portfolio had total unrealized losses of $12,873,000 across 203 securities, primarily due to market value declines, spread volatility, and other temporary factors; management believes these securities are not credit-impaired and has no intent to sell them before maturity47 | Maturity Period | Amortized Cost (Thousands of USD) | Fair Value (Thousands of USD) | | :-------------- | :-------------------------------- | :---------------------------- | | Within One Year | — | — | | One to Five Years | 12,469 | 12,411 | | Five to Ten Years | 33,967 | 32,294 | | Ten Years or More | 113,637 | 102,666 | | Total Debt Securities | 160,073 | 147,371 | NOTE 5 – LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES This note describes the company's loan portfolio, credit risk management, changes in the allowance for credit losses, and asset quality, showing net loans of $201.9 million as of March 31, 2022, a 2.91% decrease from December 31, 2021, with improved asset quality metrics - The company manages credit risk through loan portfolio diversification, categorizing loans into three main segments: real estate mortgage loans, commercial and industrial loans, and consumer loans5253 | Loan Category (Thousands of USD) | As of March 31, 2022 | As of December 31, 2021 | Change | Change Rate | | :------------------------------- | :------------------- | :---------------------- | :----- | :---------- | | Total Real Estate Mortgage Loans | 135,469 | 136,705 | (1,236) | -0.90% | | Total Commercial and Industrial Loans | 15,834 | 17,447 | (1,613) | -9.25% | | Total Consumer Loans | 52,949 | 56,240 | (3,291) | -5.85% | | Loans, Net | 204,252 | 210,392 | (6,140) | -2.92% | | Allowance for Credit Losses | (2,380) | (2,470) | 90 | -3.64% | - For the three months ended March 31, 2022, the company released $100 thousand from the allowance for credit losses, compared to a $404 thousand release in the prior year period, primarily due to minimal charge-offs, recoveries on charged-off loans, and a reduction in the loan portfolio60117 | Asset Quality Metric (Thousands of USD) | As of March 31, 2022 | As of December 31, 2021 | Change | Change Rate | | :-------------------------------------- | :------------------- | :---------------------- | :----- | :---------- | | Nonaccrual Loans | 202 | 338 | (136) | -40.24% | | Loans 90 Days or More Past Due and Still Accruing | 14 | 15 | (1) | -6.67% | | Total Nonperforming Loans | 216 | 353 | (137) | -38.81% | | Total Nonperforming Assets | 216 | 353 | (137) | -38.81% | | Nonperforming Assets to Total Assets Ratio | 0.05% | 0.02% | 0.03% | 150.00% | - As of March 31, 2022, the company had one troubled debt restructuring (TDR) loan, a single-family residential loan totaling $35,616, which was on nonaccrual status73 NOTE 6 – FAIR VALUE This note provides the fair value measurement and disclosure framework under ASC Topic 820, including fair value hierarchy (Level 1, 2, 3) and valuation methods for available-for-sale investment securities, interest rate swaps, and impaired loans, with most securities and swaps classified as Level 2 - ASC 820 defines a fair value hierarchy, requiring entities to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value, categorized into Level 1 (quoted prices in active markets), Level 2 (other significant observable inputs), and Level 3 (significant unobservable inputs)828486 - Available-for-sale investment securities and interest rate swaps are measured at fair value on a recurring basis, primarily using independent pricing models or model-based valuation techniques, with most classified as Level 28487 - Impaired loans are measured at fair value on a nonrecurring basis, primarily based on collateral fair value using Level 3 inputs, with independent appraisal reports discounted between 0% and 16% based on specific circumstances for valuation86 | Asset/Liability Category (Thousands of USD) | Fair Value as of March 31, 2022 | Level 1 | Level 2 | Level 3 | | :---------------------------------------- | :------------------------------ | :------ | :------ | :------ | | Cash and Cash Equivalents | 68,840 | 68,840 | — | — | | Loans, Net | 201,975 | — | — | 201,975 | | Cash Value of Life Insurance | 8,375 | — | 8,375 | — | | Deposits | 387,250 | 155,680 | 231,570 | — | | Long-Term Debt | 9,930 | — | 9,930 | — | | Short-Term Debt | 9,759 | — | 9,759 | — | NOTE 7 – RECENT ACCOUNTING PRONOUNCEMENTS This note outlines recent and upcoming accounting standard updates, including the adoption of ASU 2016-13 (CECL) and its impact on retained earnings, along with the evaluation of ASU 2019-12, ASU 2020-04, ASU 2021-01, and ASU 2022-01, ASU 2022-02 - The company early adopted ASU 2016-13 (CECL) on January 1, 2021, resulting in a $1,472,000 reduction in retained earnings9596 | Metric (Thousands of USD) | As of December 31, 2020 | CECL Adoption Impact | As of January 1, 2021 | | :------------------------ | :---------------------- | :------------------- | :-------------------- | | Total Allowance for Credit Losses | 1,476 | 1,574 | 3,050 | | Reserve for Unfunded Commitments | 33 | 457 | 490 | | Total Allowance for Credit Losses | 1,509 | 2,031 | 3,540 | | Total Pre-Tax Impact | | 2,031 | | | Tax Impact | | (559) | | | Reduction in Retained Earnings | | 1,472 | | - The adoption of ASU 2019-12 (Simplifying Income Tax Accounting) had no material impact on the company's financial position or results of operations97 - The company is currently evaluating the impact of ASU 2020-04, ASU 2021-01 (Reference Rate Reform), ASU 2022-01 (Derivatives and Hedging), and ASU 2022-02 (Credit Losses and Troubled Debt Restructurings) on its consolidated financial statements9899100101 NOTE 8 – SUBSEQUENT EVENTS As of the report's issuance date, the company has no significant subsequent events requiring disclosure Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed analysis of the company's financial condition and operating results, covering forward-looking statements, overview, operating results, financial condition, market risk, liquidity, capital resources, and critical accounting policies, noting a decline in Q1 2022 net income and EPS due to reduced net interest income and lower credit loss allowance release FORWARD-LOOKING STATEMENTS This section contains forward-looking statements, cautioning readers against undue reliance and noting that actual results may differ materially from expectations, with no obligation to update - The "forward-looking statements" in the report are intended to identify future expectations, but actual results may differ materially due to various factors104 - The company undertakes no obligation to update any forward-looking statements105 OVERVIEW Glen Burnie Bancorp faced challenges in Q1 2022 with declining total interest income and a reduced loan portfolio, leading to a significant drop in net income and EPS, and a substantial decrease in stockholders' equity due to unrealized losses on available-for-sale securities, yet maintaining strong liquidity and capital ratios - For the three months ended March 31, 2022, total interest income decreased by $245 thousand to $2.9 million, primarily due to reduced loan interest income106 - The loan portfolio decreased by $6.1 million, or 2.91%, during the first quarter of 2022106 - The company released $100 thousand from the allowance for credit losses, compared to a $404 thousand release in the prior year period106 - As of March 31, 2022, stockholders' equity decreased to $27.3 million, a $8.4 million or 23.62% reduction from December 31, 2021, mainly due to $9.2 million (after-tax) in unrealized losses on available-for-sale securities106155 | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------- | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Return on Average Assets (ROAA) | 0.21% | 0.58% | -0.37% | -63.79% | | Return on Average Equity (ROAE) | 2.74% | 6.68% | -3.94% | -58.98% | - As of March 31, 2022, the Bank's total regulatory capital to risk-weighted assets ratio was 16.15%, higher than 14.54% in the prior year period106 - Book value per share was $9.55 as of March 31, 2022, down from $11.77 as of March 31, 2021, primarily due to unrealized losses on available-for-sale securities and rapidly rising interest rates in Q1 2022108 RESULTS OF OPERATIONS This section analyzes the company's Q1 2022 operating results, showing a significant year-over-year decline in net income and EPS, primarily driven by reduced net interest income and lower credit loss allowance release, with slight increases in noninterest income and decreases in noninterest expenses Net income Net income attributable to common stockholders for the three months ended March 31, 2022, was $231 thousand, with basic and diluted earnings per share of $0.08, a significant decrease from $594 thousand and $0.21 in the prior year period | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :----------------------- | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Net Income (Thousands of USD) | 231 | 594 | (363) | -61.11% | | Basic and Diluted Net Income Per Share | 0.08 | 0.21 | (0.13) | -61.90% | - The decline in net income was primarily due to a $304 thousand reduction in the allowance for credit losses release in 2021, and a $195 thousand decrease in net interest income110 Net Interest Income For the three months ended March 31, 2022, net interest income was $2.68 million, a 6.79% year-over-year decrease, primarily due to reduced loan interest income, partially offset by increased interest and dividend income from securities | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Net Interest Income | 2,682 | 2,877 | (195) | -6.79% | | Total Interest Income | 2,916 | 3,161 | (245) | -7.74% | | Total Interest Expense | 234 | 284 | (50) | -17.61% | - The decrease in interest income was mainly due to a $6.1 million reduction in the loan portfolio balance, partially offset by a $193 thousand increase in interest and dividend income from investment securities and a $31 thousand increase in interest income from bank deposits and federal funds111112 - The decrease in interest expense was primarily due to a $44 thousand reduction in interest-bearing deposit expenses, attributed to a lower interest rate environment and a decline in the average balance of time deposits113 | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :----------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net Interest Margin | 2.54% | 2.93% | -0.39% | | Yield on Earning Assets | 2.76% | 3.17% | -0.41% | | Cost of Interest-Bearing Liabilities | 0.38% | 0.48% | -0.10% | | Net Interest Spread | 2.38% | 2.69% | -0.31% | Provision for Credit Losses on Loans For the three months ended March 31, 2022, the company released $100 thousand from the allowance for credit losses on loans, a significant reduction from $404 thousand in the prior year, attributed to minimal charge-offs, recoveries, and a shrinking loan portfolio | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Provision for Credit Losses on Loans | (100) | (404) | 304 | -75.25% | - As of March 31, 2022, the allowance for credit losses represented 1.17% of total loans, compared to 1.18% as of March 31, 2021117 Noninterest Income For the three months ended March 31, 2022, noninterest income increased to $254 thousand, up 2.83% from $247 thousand in the prior year, primarily due to higher other fees and commissions | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Total Noninterest Income | 254 | 247 | 7 | 2.83% | Noninterest Expenses For the three months ended March 31, 2022, noninterest expenses were $2.78 million, a 1.54% decrease from $2.83 million in the prior year, mainly due to reduced salaries and benefits, data processing, and telephone costs, partially offset by increased occupancy and equipment, and legal, accounting, and other professional fees | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Total Noninterest Expenses | 2,784 | 2,828 | (44) | -1.56% | Income Taxes For the three months ended March 31, 2022, the company recorded an income tax expense of $21 thousand, an 80.19% decrease from $106 thousand in the prior year, primarily due to lower pre-tax income in the current period | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Income Tax Expense | 21 | 106 | (85) | -80.19% | | Annualized Effective Tax Rate | 9.76% | 15.20% | -5.44% | -35.79% | Comprehensive Income (Loss) In Q1 2022, the company reported a comprehensive loss of $8.177 million, a significant increase from the $1.895 million loss in Q1 2021, primarily due to decreased net income and increased unrealized losses on available-for-sale securities, partially offset by increased unrealized gains on interest rate swaps | Metric (Thousands of USD) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | Change Rate | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :---------- | | Comprehensive Loss | (8,177) | (1,895) | (6,282) | 331.50% | - The increase in comprehensive loss was primarily due to a decrease in net income and an increase in unrealized losses on available-for-sale securities, partially offset by an increase in unrealized gains on interest rate swaps121 FINANCIAL CONDITION This section outlines the company's financial condition as of March 31, 2022, showing a slight decrease in total assets, reduced loan portfolio and available-for-sale investment securities, but increases in cash and cash equivalents and deposits, alongside improved nonperforming loans and assets General As of March 31, 2022, total assets were $437.4 million, a $4.6 million (1.05%) decrease from December 31, 2021, primarily due to reductions in available-for-sale investment securities and net loans, partially offset by increases in interest-bearing deposits, other financial institution deposits, and deferred tax assets | Metric (Thousands of USD) | As of March 31, 2022 | As of December 31, 2021 | Change | Change Rate | | :------------------------ | :------------------- | :---------------------- | :----- | :---------- | | Total Assets | 437,445 | 442,066 | (4,621) | -1.05% | | Total Loans | 201,900 | 207,900 | (6,000) | -2.89% | | Available-for-Sale Investment Securities | 147,400 | 155,900 | (8,500) | -5.45% | | Cash and Cash Equivalents | 68,800 | 62,200 | 6,600 | 10.61% | - The decrease in loans was primarily attributed to reductions in construction and land, commercial loans, commercial and industrial loans, commercial SBA PPP loans, consumer loans, and automobile loans, partially offset by an increase in single-family residential loans122 - The reduction in available-for-sale investment securities primarily stemmed from the depreciation of the investment portfolio, leading to increased unrealized losses122 Nonperforming Loans and Assets As of March 31, 2022, total nonperforming loans were $216 thousand, a decrease from $353 thousand as of December 31, 2021, with reductions in nonaccrual loans and loans past due 90 days or more and still accruing, maintaining a low nonperforming assets to total assets ratio | Metric (Thousands of USD) | As of March 31, 2022 | As of December 31, 2021 | Change | Change Rate | | :------------------------ | :------------------- | :---------------------- | :----- | :---------- | | Nonaccrual Loans | 202 | 338 | (136) | -40.24% | | Loans 90 Days or More Past Due and Still Accruing | 14 | 15 | (1) | -6.67% | | Total Nonperforming Loans | 216 | 353 | (137) | -38.81% | | Total Nonperforming Assets | 216 | 353 | (137) | -38.81% | | Nonperforming Assets to Total Assets Ratio | 0.05% | 0.02% | 0.03% | 150.00% | - As of March 31, 2022, total impaired loans amounted to $200 thousand, which included $200 thousand in nonaccrual loans and $36 thousand in troubled debt restructurings (TDRs)127 Deposits As of March 31, 2022, total deposits were $387.8 million, an increase of $4.6 million (1.18%) from December 31, 2021, with growth in interest-bearing demand, savings, and money market accounts, partially offset by slight decreases in noninterest-bearing and time deposits | Deposit Category (Thousands of USD) | As of March 31, 2022 | As of December 31, 2021 | Change | Change Rate | | :---------------------------------- | :------------------- | :---------------------- | :----- | :---------- | | Noninterest-Bearing Deposits | 155,027 | 155,624 | (597) | -0.38% | | Interest-Bearing Demand Deposits | 39,099 | 37,305 | 1,794 | 4.81% | | Savings Accounts | 110,636 | 106,818 | 3,818 | 3.57% | | Money Market Accounts | 23,405 | 23,103 | 302 | 1.31% | | Total Time Deposits | 59,607 | 60,397 | (790) | -1.31% | | Total Deposits | 387,774 | 383,247 | 4,527 | 1.18% | Lease Commitments The company adopted FASB's lease standard on January 1, 2019, recognizing assets and liabilities for operating leases, with total future minimum operating lease payments amounting to $485 thousand as of March 31, 2022 - The company adopted FASB's lease standard on January 1, 2019, recognizing assets and liabilities for operating leases, with no material impact on beginning retained earnings131 | Year | Amount (Thousands of USD) | | :--- | :------------------------ | | 2022 | 138 | | 2023 | 181 | | 2024 | 161 | | 2025 | 3 | | 2026 | 2 | | Thereafter | — | | Total | 485 | Pension and Profit Sharing Plans The bank maintains a 401(k) defined contribution retirement plan for all employees and accrued $82 thousand for 401(k) matching contributions and other profit-sharing benefits for the three months ended March 31, 2022 - The Bank maintains a 401(k) defined contribution retirement plan covering all employees134 - For the three months ended March 31, 2022, the Bank accrued $82 thousand for 401(k) matching contributions and other profit-sharing benefits135 MARKET RISK AND INTEREST RATE SENSITIVITY This section discusses the company's primary market risk—interest rate fluctuation risk—and its management through the Asset/Liability Committee (ALCO), using simulation analysis to measure the potential impact of interest rate changes on short-term earnings and long-term value, aiming for asset sensitivity in a rising rate environment - The company's primary market risk is interest rate fluctuation, managed by the Asset/Liability Committee (ALCO) with objectives to maximize shareholder value, enhance profitability and capital, and protect the company from significant financial impacts of interest rate changes136138139 - The company conducts simulation analyses at least quarterly to assess changes in net interest income and economic value of equity (EVE) under interest rate shocks of +/- 100, 200, 300, and 400 basis points141 - As of March 31, 2022, simulation analysis indicated the Bank was in an asset-sensitive position, which is theoretically favorable in a rising interest rate environment143 | Interest Rate Change Scenario | Policy Limit | As of March 31, 2022 | As of March 31, 2021 | | :---------------------------- | :----------- | :------------------- | :------------------- | | -200 bp | (15)% | (18)% | (10)% | | -100 bp | (10)% | (11)% | (7)% | | +100 bp | (10)% | 11% | 9% | | +200 bp | (15)% | 22% | 18% | | Interest Rate Change Scenario | Policy Limit | As of March 31, 2022 | As of March 31, 2021 | | :---------------------------- | :----------- | :------------------- | :------------------- | | -200 bp | (15)% | (20)% | (35)% | | -100 bp | (10)% | 4% | (10)% | | +100 bp | (10)% | 7% | 4% | | +200 bp | (15)% | 15% | 6% | - In a rising interest rate environment, the company's interest income grows faster than total interest expense, thereby increasing net interest income; however, in a declining interest rate environment, the decrease in interest income would exceed the decrease in interest expense due to already low liability costs, leading to reduced net interest income149 LIQUIDITY AND CAPITAL RESOURCES This section details the company's liquidity sources and capital adequacy, primarily relying on cash, bank deposits, and loan principal/interest collections, supplemented by Federal Home Loan Bank (FHLB) credit lines, noting that despite a decrease in stockholders' equity due to unrealized losses, the bank's regulatory capital ratios remain well above "well capitalized" requirements - The company's primary liquidity sources include cash on hand, bank dividends, deposits, loan principal and interest payments, and interest and maturities from investment securities150151 - As of March 31, 2022, total cash and cash equivalents amounted to $68.8 million, an increase of $6.7 million, or 10.71%, from December 31, 2021152 - As of March 31, 2022, the Bank had $110.5 million available from its FHLB Atlanta line of credit, along with $9 million and $8 million in unsecured federal funds lines of credit153 - As of March 31, 2022, the company's stockholders' equity decreased by $8.4 million, or 23.62%, primarily due to an increase in after-tax unrealized holding losses on available-for-sale securities, partially offset by unrealized market value gains on interest rate swap contracts155 - The Bank's regulatory capital ratios are well above the "well capitalized" regulatory requirements, with a Tier 1 leverage ratio of 8.42%, a Tier 1 risk-based capital ratio of 15.33%, a Common Equity Tier 1 risk-based capital ratio of 15.33%, and a Total risk-based capital ratio of 16.15% as of March 31, 2022109163 CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section highlights significant judgmental accounting estimates and principles in the financial statements, including the allowance for credit losses (ACL), securities portfolio valuation, and accrued and deferred income taxes, noting the adoption of the CECL model in Q1 2021 for timely recognition of expected credit losses - The Allowance for Credit Losses (ACL) is a critical accounting estimate, relying on significant judgment regarding borrower credit risk, future cash flow estimates, historical loss rates, and qualitative and quantitative assessments of past events, current conditions, and future forecasts164167168 - The company early adopted ASC 326 (CECL) in the first quarter of 2021, changing the credit loss measurement from an "incurred loss" to an "expected loss" method, resulting in a $1,472,000 reduction in retained earnings165166167 - Under ASC 326, the impairment assessment for available-for-sale (AFS) debt securities no longer considers the length of time a security has been in an unrealized loss position, but rather determines credit losses by comparing the present value of expected future cash flows to the amortized cost170171 - Estimates for accrued and deferred income taxes involve judgment regarding future events and interpretations of tax laws, with the recognition of deferred tax assets depending on the likelihood of future realization174176177 Item 3. Quantitative and Qualitative Disclosures about Market Risk As a "smaller reporting company," the company is not required to provide disclosures for this item - As a "smaller reporting company," the company is not required to provide quantitative and qualitative disclosures about market risk178 Item 4. Controls and Procedures Company management has evaluated the disclosure controls and procedures system as of the end of the quarter and concluded it is effective, with no significant changes in internal control reported this quarter - The company's Chief Executive Officer and Chief Financial Officer have evaluated the disclosure controls and procedures system and concluded it is effective179 - No significant changes in internal control were reported during the quarter179 Part II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, equity security sales, senior security defaults, mine safety disclosures, and a list of exhibits Item 1. Legal Proceedings The company is involved in legal proceedings in the ordinary course of business, but management does not expect these matters to have a material adverse effect on its financial condition, results of operations, or liquidity - The company is involved in legal proceedings in the ordinary course of business, but management does not anticipate a material financial impact180 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds during the quarter Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the quarter Item 4. Mine Safety Disclosures This disclosure is not applicable Item 5. Other Information No other information is required to be disclosed this quarter Item 6. Exhibits This section lists the exhibits filed with this report, including the company's articles of incorporation, stock plans, executive certifications, and XBRL data files - Exhibits include the company's articles of incorporation, stock plans, executive certifications (such as CEO and CFO 15d-14(a) certifications), and XBRL data files186 SIGNATURES This report was signed by John D. Long, President and Chief Executive Officer, and Jeffrey D. Harris, Chief Financial Officer of Glen Burnie Bancorp, on May 13, 2022 - This report was signed by John D. Long, President and Chief Executive Officer, and Jeffrey D. Harris, Chief Financial Officer of Glen Burnie Bancorp, on May 13, 2022189