Monday, 20 May 2019
BREAKING NEWS

Glen Burnie Bancorp Announces Fourth Quarter and Full Year 2018 Results – Nasdaq


GLEN BURNIE, Md., March 06, 2019 (GLOBE NEWSWIRE) — Glen Burnie Bancorp (“Bancorp”) (NASDAQ:GLBZ), the bank holding company for The Bank of Glen Burnie (“Bank”), announced today net income of $0.31 million, or $0.11 per basic and diluted common share for the three-month period ended December 31, 2018, as compared to a net loss of $153,000, or $0.05 per basic and diluted common share for the three-month period ended December 31, 2017.

Bancorp reported net income of $1.58 million, or $0.56 per basic and diluted common share for the year ended December 31, 2018, compared to $0.91 million, or $0.33 per basic and diluted common share for the same period in 2017.  Net loans grew by $27.6 million, or 10.24% during the twelve-month period ended December 31, 2018, compared to $6.4 million, or 2.46% growth during the same period of 2017.  At December 31, 2018, Bancorp had total assets of $413.0 million.  Bancorp, the oldest independent commercial bank in Anne Arundel County, paid its 106th consecutive quarterly dividend on February 1, 2019.

During 2018, the Company conducted a periodic review of the estimated direct cost to originate loans resulting in a change to the estimated materiality of these costs.  Prior to January 1, 2018, the Company expensed direct costs to originate loans in the period incurred based on management’s judgement that the costs were immaterial.  This yearlong project resulted in a change in the estimated materiality of these costs.  Effective January 1, 2018, the Company increased its estimates for these costs and changed its accounting method from expense as incurred to defer and amortize in accordance with accounting standard 310-20 Receivables – Nonrefundable Fees and Other Costs.  This preferred method recognizes loan interest income and costs incurred to generate the revenue in the same period.  The effect of this change in accounting method was inseparable from the effect of the change in accounting estimate, and therefore, accounted for as a change in estimate.  As a result, the Company began recognizing certain direct loan origination costs over the life of the related loan as a reduction of the loan’s yield by the interest method based on the contractual term of the loan.  In the fourth quarter of 2018, the Company recorded a reduction of noninterest expense and an increase in loan balances of $375,000, and reduced loan balances and loan interest income by $51,000 due to the amortization of deferred costs.  The effect of these adjustments increased income before taxes for the three- and twelve-month periods ended December 31, 2018 by $324,000 and increased net income by $300,000 or $0.11 per basic and diluted common share for the twelve-month period ended December 31, 2018.

“Consistent with the first three quarters of 2018, we continued to show positive momentum during the fourth quarter even when considering the impact of the change in estimate noted above.  We expanded our net interest margin and net interest income reflects outstanding credit quality, disciplined loan pricing and a beneficial balance sheet structure,” stated John D. Long, President and CEO.  “We continue to invest in technology systems that allow us to remain competitive in the rapidly changing technology environment.  As such, our strong fundamental performance was somewhat offset by the significant technology and infrastructure investments made across the Company.  We are encouraged by the progress of the past year and remain confident that these investments have built a foundation for sustainable growth in 2019 and beyond.”

“Tax law changes in the fourth quarter of 2017 impacted the comparability of our quarterly and year-over-year income metrics,” continued Mr. Long.  “However, I am pleased about 2018 results, with net income of $0.31 million for the fourth quarter of 2018, an increase of 301% from the fourth quarter of 2017.  In addition, net income of $1.58 million for the year ended December 31, 2018 increased $0.67 million, or 74%, over the $0.91 million for the year ended December 31, 2017.  Headquartered in the dynamic Northern Anne Arundel County market, we believe the Bank is well positioned with sound asset growth, asset quality and capital levels, a widening net interest margin, and an experienced and seasoned executive team.  We remain deeply committed to serving the financial needs of the community through the development of new loan and deposit products.”

Highlights for the Quarter and Year ended December 31, 2018

Bancorp continued to grow organically in the fourth quarter of 2018 driven primarily by favorable net loan growth.  Bancorp has strong liquidity and capital positions that provide ample capacity for future growth, along with the Bank’s total regulatory capital to risk weighted assets of 13.18% at December 31, 2018, as compared to 13.84% for the same period of 2017.

Return on average assets for the three-month period ended December 31, 2018 was 0.30%, as compared to -0.16% for the three-month period ended December 31, 2017.  Return on average equity for the three-month period ended December 31, 2018 was 3.74%, as compared to -1.75% for the three-month period ended December 31, 2017.  Return on average assets for the year ended December 31, 2018 was 0.39%, as compared to 0.23% for the year ended December 31, 2017.  Return on average equity for the year ended December 31, 2018 was 4.74%, as compared to 2.65% for the year ended December 31, 2017.

The Tax Cuts and Jobs Act (the Tax Act), signed into law on December 22, 2017, reduced the US federal corporate tax rate from 34% to 21%.  At December 31, 2018, we completed our accounting for the tax effects of enactment of the Tax Act.  We re-measured all deferred tax assets (“DTA”) and liabilities (“DTL”) based on the rates at which they are expected to reverse in the future.  We recognized an income tax expense of $0.6 million for the year ended December 31, 2017 related to adjusting our net deferred tax asset balance to reflect the new corporate tax rate.  In addition, DTAs/DTLs related to available for sale (“AFS”) securities unrealized losses that were revalued as of December 31, 2017 noted above created a “stranded tax effects” in Accumulated Other Comprehensive Income (“AOCI”) due to enactment of the Tax Act.  The issue arose due to the nature of generally accepted accounting principles recognition of tax rate change-effects on the AFS DTA/DTL revaluation as an adjustment to income tax provision.  In February 2018, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2018-02 – Income Statement – Reporting Comprehensive Income (Topic 220).  The Company early adopted the provisions of ASU 2018-02 and recorded a reclassification adjustment of $104,000 from AOCI to retained earnings for stranded tax effects related to AFS securities as a result of the newly enacted corporate tax rate.  The amount of the reclassification was the difference between the 34% historical corporate tax rate and the newly enacted 21% corporate tax rate. 

The book value per share of Bancorp’s common stock was $12.10 at December 31, 2018, as compared to $12.15 per share at December 31, 2017.

At December 31, 2018, the Bank remained above all “well-capitalized” regulatory requirement levels.  The Bank’s tier 1 risk-based capital ratio was approximately 12.27% at December 31, 2018, as compared to 12.83% at December 31, 2017.  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 $413.0 million at December 31, 2018, an increase of $23.5 million or 6.03%, from $389.5 million at December 31, 2017.  Investment securities were $81.6 million at December 31, 2018, a decrease of $7.7 million or 8.62%, from $89.3 million at December 31, 2017.  Loans, net of deferred fees and costs, were $299.1 million at December 31, 2018, an increase of $27.5 million or 10.13%, from $271.6 million at December 31, 2017.  Bank owned life insurance (BOLI) decreased $0.9 million or 9.80% from December 31, 2017 to December 31, 2018 primarily due to the redemption of BOLI policies.  Net deferred tax assets decreased $1.0 million and accrued taxes receivable increased $0.7 million from December 31, 2017 to December 31, 2018 primarily due to the elimination of the alternative minimum tax under the Tax Act. 

Total deposits were $322.5 million at December 31, 2018, a decrease of $11.7 million or 3.50%, from $334.2 million at December 31, 2017.  Noninterest-bearing deposits were $101.4 million at December 31, 2018, a decrease of $2.5 million or 2.55%, from $104.0 million at December 31, 2017.  Interest-bearing deposits were $221.1 million at December 31, 2018, a decrease of $9.1 million or 3.95%, from $230.2 million at December 31, 2017.  Total borrowings were $55.0 million at December 31, 2018, an increase of $35.0 million or 175.00%, from $20.0 million at December 31, 2017.

Stockholders’ equity was $34.1 million at December 31, 2018, an increase of $9,000 from $34.0 million at December 31, 2017.  The unrealized gains on interest rate swap contracts, 2018 retained earnings and stock issuances under the dividend reinvestment program, offset by $0.8 million decrease in accumulated other comprehensive loss associated with net unrealized losses on the available for sale bond portfolio drove the increase in stockholders’ equity.

Nonperforming assets, which consist of nonaccrual loans, troubled debt restructurings, accruing loans past due 90 days or more, and other real estate owned, represented 0.70% of total assets at December 31, 2018, as compared to 0.94% for the same period of 2017.

Review of Financial Results

For the three-month periods ended December 31, 2018 and 2017

Net income for the three-month period ended December 31, 2018 was $0.31 million, as compared to a net loss of $0.15 million for the three-month period ended December 31, 2017.

Net interest income for the three-month period ended December 31, 2018 totaled $3.24 million, as compared to $3.01 million for the three-month period ended December 31, 2017.  Average loan balances increased to $298 million for the three-month period ended December 31, 2018, as compared to $270 million for the same period of 2017.

Net interest margin for the three-month period ended December 31, 2018 was 3.26%, as compared to 3.20% for the same period of 2017.  Higher average balances and yields on interest-earning assets were the primary driver of year-over-year results, as the average balance increased $22 million and the yield on interest-earning assets increased 0.17% from 3.69% to 3.86%, offset by the cost of funds which increased 0.12% from 0.51% to 0.63% for the three-month periods ending December 31, 2017 and 2018, respectively.

The provision for loan losses for the three-month period ended December 31, 2018 was $255,000, as compared to $93,000 for the same period of 2017.  The increase for the three-month period ended December 31, 2018 primarily reflects loan growth, increased net charge offs, and change in product mix.  As a result, the allowance for loan losses was $2.54 million at December 31, 2018, representing 0.85% of total loans, as compared to $2.59 million, or 0.95% of total loans at December 31, 2017.

Noninterest income for the three-month period ended December 31, 2018 was $313,000, as compared to $349,000 for the three-month period ended December 31, 2017.  

For the three-month period ended December 31, 2018, noninterest expense was $2.94 million, as compared to $2.70 million for the three-month period ended December 31, 2017.  The primary contributors to the $0.24 million increase, when compared to the three-month period ended December 31, 2017 were increases in FDIC insurance costs, other insurance costs and other loan expense.

For the twelve-month periods ended December 31, 2018 and 2017

Net income for the twelve-month period ended December 31, 2018 was $1.58 million, as compared to net income of $0.91 million for the twelve-month period ended December 31, 2017.

Net interest income for the twelve-month period ended December 31, 2018 totaled $12.6 million, as compared to $11.7 million for the twelve-month period ended December 31, 2017.  Average earning loan balances increased to $287 million for the twelve-month period ended December 31, 2018, as compared to $270 million for the same period of 2017.

Net interest margin for the twelve-month period ended December 31, 2018 was 3.26%, as compared to 3.12% for the same period of 2017.  Higher average balances and yields on interest-earning assets were the primary driver of year-over-year results, as the average balance increased $12 million and the yield on interest-earning assets increased 0.17% from 3.64% to 3.81%, offset by the cost of funds which increased 0.03% from 0.54% to 0.57% for the three-month periods ending December 31, 2017 and 2018, respectively.

The provision for loan losses for the twelve-month period ended December 31, 2018 was $856,000, as compared to $336,000 for the same period of 2017.  The increase for the twelve-month period ended December 31, 2018 was primarily driven by $700,000 increase in net loan charge offs year-over-year.  As a result, the allowance for loan losses was $2.54 million at December 31, 2018, representing 0.85% of total loans, as compared to $2.59 million, or 0.95% of total loans for the same period of 2017.

Noninterest income for the twelve-month period ended December 31, 2018 was $1.52 million, as compared to $1.29 million for the twelve-month period ended December 31, 2017.  The increase for the twelve-month period ended December 31, 2018 was primarily driven by $308,000 gain on redemptions of BOLI policies.

For the twelve-month period ended December 31, 2018, noninterest expense was $11.5 million, as compared to $10.8 million for the twelve-month period ended December 31, 2017.  The primary contributors to the $0.7 million increase, when compared to the twelve-month period ended December 31, 2017 were increases in salary and employee benefits, legal, accounting and other professional fees, FDIC insurance costs, and loan collection costs, partially offset by decreases in advertising and marketing related expenses.  

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.

For further information contact:

Jeffrey D. Harris, Chief Financial Officer
410-768-8883
[email protected]
106 Padfield Blvd
Glen Burnie, MD 21061

 
GLEN BURNIE BANCORP AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
(dollars in thousands) 
           
           
  December 31,   September 30,   December 31,
   2018     2018     2017 
  (unaudited)   (unaudited)   (audited)
ASSETS          
Cash and due from banks $   2,605     $   5,282     $   2,610  
Interest bearing deposits with banks and federal funds sold   13,349       10,208       9,995  
Total Cash and Cash Equivalents   15,954       15,490       12,605  
           
Investment securities available for sale, at fair value     81,572         84,029         89,349  
Restricted equity securities, at cost     2,481         2,073         1,232  
                       
Loans, net of deferred fees and costs   299,120       294,981       271,612  
Less:  Allowance for loan losses   (2,541 )