Edgar Filing: GLEN BURNIE BANCORP

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended March 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-24047

GLEN BURNIE BANCORP

(Exact name of registrant as specified in its charter)


Maryland	52-1782444
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

101 Crain Highway, S.E.	21061
Glen Burnie, Maryland	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (410) 766-3300

Inapplicable

(Former name, former address and former fiscal year if changed from last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-Accelerated Filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

At May 11, 2015, the number of shares outstanding of the registrant’s common stock was 2,767,798.

TABLE OF CONTENTS


Part I - Financial Information			Page

	Item 1.	Consolidated Financial Statements:

		Condensed Consolidated Balance Sheets, March 31, 2015 (unaudited) and December 31, 2014 (audited)	3

		Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2015 and 2014 (unaudited)	4

		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (unaudited)	6

		Notes to Unaudited Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

	Item 4.	Controls and Procedures	23

Part II - Other Information

	Item 6.	Exhibits	24

		Signatures	25

PART I - FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

GLEN BURNIE BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


	March 31,		December 31,
	2015		2014
ASSETS	(unaudited)		(audited)

Cash and due from banks	$	6,247	$	7,101
Interest-bearing deposits in other financial institutions		6,136		2,155
Federal funds sold		5,058		4,024
Cash and cash equivalents		17,441		13,280
Investment securities available for sale, at fair value		97,316		87,993
Federal Home Loan Bank stock, at cost		1,203		1,328
Maryland Financial Bank stock		30		30
Loans, less allowance for credit losses
(March 31: $3,193; December 31: $3,118)		268,233		273,986
Premises and equipment, at cost, less accumulated depreciation		3,632		3,671
Other real estate owned		45		45
Cash value of life insurance		9,193		9,139
Other assets		4,984		5,158

Total assets	$	402,077	$	394,630

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Deposits	$	346,571	$	338,877
Long-term borrowings		20,000		20,000
Other liabilities		1,367		1,922
Total liabilities		367,938		360,799

Commitments and contingencies

Stockholders’ equity:
Common stock, par value $1, authorized 15,000,000 shares; issued and outstanding: March 31: 2,764,458 shares; December 31: 2,760,964 shares		2,764		2,761
Surplus		9,890		9,854
Retained earnings		21,216		21,113
Accumulated other comprehensive gain (loss), net of taxes		269		103
Total stockholders’ equity		34,139		33,831

Total liabilities and stockholders’ equity	$	402,077	$	394,630

See accompanying notes to condensed consolidated financial statements.

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GLEN BURNIE BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended
	March 31,
	2015		2014
Interest income on:
Loans, including fees	$	2,943	$	3,106
U.S. Treasury and U.S. Government agency securities		210		216
State and municipal securities		302		330
Other		25		23
Total interest income		3,480		3,675

Interest expense on:
Deposits		462		430
Long-term borrowings		158		158
Total interest expense		620		588

Net interest income		2,860		3,087

Provision for credit losses		150		38

Net interest income after provision for credit losses		2,710		3,049

Other income:
Service charges on deposit accounts		105		124
Other fees and commissions		170		171
Other non-interest income		10		4
Income on life insurance		54		55
Gains on investment securities		199		79
Total other income		538		433

Other expenses:
Salaries and employee benefits		1,668		1,677
Occupancy		214		222
Other expenses		937		1,016
Total other expenses		2,819		2,915

Income before income taxes		429		567

Income tax expense		49		94

Net income	$	380	$	473

Basic and diluted earnings per share of common stock	$	0.14	$	0.17

Weighted average shares of common stock outstanding		2,764,129		2,750,603

Dividends declared per share of common stock	$	0.10	$	0.10

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)

(Unaudited)


	Three Months Ended
	March 31,
	2015			2014

Net income	$	380		$	473

Other comprehensive income, net of tax

Unrealized gains on securities:

Unrealized holding gains arising during the period		286			1,223

Reclassification adjustment for gains included in net income		(120	)		(48	)

Comprehensive income	$	546		$	1,648

See accompanying notes to condensed consolidated financial statements.

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GLEN BURNIE BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Three Months Ended March 31,
	2015			2014

Cash flows from operating activities:
Net income	$	380		$	473
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion		223			144
Provision for credit losses		150			38
Gains on disposals of assets, net		(199	)		(1	)
Income on investment in life insurance		(55	)		(55	)
Changes in assets and liabilities:
Decrease in other assets		116			116
Decrease in other liabilities		(556	)		(342	)

Net cash provided by operating activities		59			373

Cash flows from investing activities:
Maturities and proceeds of available for sale mortgage-backed securities		2,879			1,820
Proceeds from maturities and sales of other investment securities		6,368			2,263
Purchases of investment securities		(18,211	)		(1,244	)
Sale of Federal Home Loan Bank stock		125			125
Proceeds from sales of other real estate		-			230
Decrease (increase) in loans, net		5,603			(7,902	)
Purchases of premises and equipment		(120	)		(124	)

Net cash used by investing activities		(3,356	)		(4,832	)

Cash flows from financing activities:
Increase in deposits, net		7,694			13,120
Dividends paid		(275	)		(275	)
Common stock dividends reinvested		39			40

Net cash provided by financing activities		7,458			12,885

Increase in cash and cash equivalents		4,161			8,426

Cash and cash equivalents, beginning of year		13,280			10,953

Cash and cash equivalents, end of period	$	17,441		$	19,379

See accompanying notes to condensed consolidated financial statements.

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GLEN BURNIE BANCORP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying condensed balance sheet as of December 31, 2014, which has been derived from audited financial statements, and the unaudited interim consolidated financial statements were prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, changes in stockholders’ equity, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the unaudited consolidated financial statements have been included in the results of operations for the three months ended March 31, 2015 and 2014.

Operating results for the three months ended March 31, 2015 is not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

NOTE 2 - EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated by including the average dilutive common stock equivalents outstanding during the periods. Dilutive common equivalent shares consist of stock options, calculated using the treasury stock method.


	Three Months Ended
	March 31,
	2015		2014
Basic and diluted:
Net income	$	380,000	$	473,000
Weighted average common shares outstanding		2,764,129		2,750,603
Basic and dilutive net income per share	$	0.14	$	0.17

Diluted earnings per share calculations were not required for the three months ended March 31, 2015 and 2014, since there were no options outstanding.

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

The FASB has issued several exposure drafts which, if adopted, would significantly alter the Company’s (and all other financial institutions’) method of accounting for, and reporting, its financial assets and some liabilities from a historical cost method to a fair value method of accounting as well as the reported amount of net interest income. Also, the FASB has issued several exposure drafts regarding a change in the accounting for leases. Under this exposure draft, the total amount of “lease rights” and total amount of future payments required under all leases would be reflected on the balance sheets of all entities as assets and debt. If the changes under discussion in either of these exposure drafts are adopted, the financial statements of the Company could be materially impacted as to the amounts of recorded assets, liabilities, capital, net interest income, interest expense, depreciation expense, rent expense and net income. The Company has not determined the extent of the possible changes at this time. The exposure drafts are in different stages of review, approval and possible adoption.

ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, is expected to eliminate diversity in practice as it provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (NOL) carryforward, a similar tax loss, or a tax credit carryforward exists. The changes were effective for the Company during the first quarter of 2014. Adoption of this ASU had no impact on the financial statements of the Company.

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In May 2014, the FASB and the International Accounting Standards Board (the “IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and International Financial Reporting Standards (“IFRS”). Previous revenue recognition guidance in GAAP comprised broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. In contrast, IFRS provided limited revenue recognition guidance and, consequently, could be difficult to apply to complex transactions. Accordingly, the FASB and the IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (1) Remove inconsistencies and weaknesses in revenue requirements; (2) Provide a more robust framework for addressing revenue issues; (3) Improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (4) Provide more useful information to users of financial statements through improved disclosure requirements; and (5) Simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard is now effective for public entities for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company is currently evaluating the provisions of ASU No. 2014-09 and will be closely monitoring developments and additional guidance to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation - Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in this ASU are effective for interim or annual reporting periods beginning after December 15, 2015; early adoption is permitted. Entities may apply the amendments in this ASU either: (1) prospectively to all awards granted or modified after the effective date; or (2) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. As of June 30, 2014, the Company did not have any share-based payment awards that include performance targets that could be achieved after the requisite service period. As such, the adoption of ASU No. 2014-12 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

ASU 2014-11, “Transfers and Servicing (Topic 860).” ASU 2014-11 requires that repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, ASU 2014-11 requires separate accounting for repurchase financings, which entails the transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty. ASU 2014-11 requires entities to disclose certain information about transfers accounted for as sales in transactions that are economically similar to repurchase agreements. In addition, ASU 2014-11 requires disclosures related to collateral, remaining contractual tenor and of the potential risks associated with repurchase agreements, securities lending transactions and repurchase-to-maturity transactions. ASU 2014-11 became effective for us on January 1, 2015 and did not have a significant impact on our financial statements.

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ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” ASU 2015-01 eliminates from U.S. GAAP the concept of extraordinary items, which, among other things, required an entity to segregate extraordinary items considered to be unusual and infrequent from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. ASU 2015-01 is effective for us beginning January 1, 2016, though early adoption is permitted. ASU 2015-01 is not expected to have a significant impact on our financial statements.

ASU 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis.” ASU 2015-02 implements changes to both the variable interest consolidation model and the voting interest consolidation model. ASU 2015-02 (i) eliminates certain criteria that must be met when determining when fees paid to a decision maker or service provider do not represent a variable interest, (ii) amends the criteria for determining whether a limited partnership is a variable interest entity and (iii) eliminates the presumption that a general partner controls a limited partnership in the voting model. ASU 2015-02 will be effective for us on January 1, 2016 and is not expected to have a significant impact on our financial statements.

ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015-03 will be effective for us on January 1, 2016, though early adoption is permitted. ASU 2015-03 is not expected to have a significant impact on our financial statements.

ASU 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 addresses accounting for fees paid by a customer in cloud computing arrangements such as (i) software as a service, (ii) platform as a service (iii) infrastructure as a service and (iv) other similar hosting arrangements. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 will be effective for us on January 1, 2016 and is not expected to have a significant impact on our financial statements.

NOTE 4 – FAIR VALUE

ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

Fair Value Hierarchy

ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

o Level 1 – Quoted prices in active markets for identical securities

o Level 2 – Other significant observable inputs (including quoted prices in active markets for similar securities)

o Level 3 – Significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to ASC 820-10.

The Company’s bond holdings in the investment securities portfolio are the only asset or liability subject to fair value measurements on a recurring basis. Two assets are valued under Level 1 inputs at March 31, 2015 or December 31, 2014. The Company has assets measured by fair value measurements on a non-recurring basis during 2015. At March 31, 2015, these assets include 32 loans classified as impaired, which include nonaccrual, past due 90 days or more and still accruing, and a homogeneous pool of indirect loans all considered to be impaired loans, which are valued under Level 3 inputs and one property classified as OREO valued under Level 2 inputs.

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The changes in the assets subject to fair value measurements are summarized below by Level:


	(Dollars in Thousands)
										Fair
	Level 1			Level 2			Level 3			Value
December 31, 2014
Recurring:
Investment securities available for sale (AFS)	$	790		$	86,815		$	388		$	87,993

Non-recurring:
Maryland Financial Bank stock		-			-			30			30
Impaired loans		-			-			5,176			5,176
OREO		-			45			-			45
		790			86,860			5,594			93,244

Activity:
Investment securities AFS
Purchases of investment securities		-			18,211			-			18,211
Sales, calls and maturities of investment securities		-			(9,248	)		-			(9,248	)
Amortization/accretion of premium/discount		-			(115	)		-			(115	)
Increase (decrease) in market value		191			340			(56	)		475
Transfer to Level 2		(573	)		797			(224	)		-

Loans
New impaired loans		-			-			389			389
Payments and other loan reductions		-			-			(132	)		(132	)
Change in total provision		-			-			(44	)		(44	)

OREO
Sales of OREO		-			-			-			-
Loss on disposal of OREO		-			-			-			-
Write-down of OREO		-			-			-			-

March 31, 2015
Recurring:
Investment securities AFS		408			96,800			108			97,316

Non-recurring:
Maryland Financial Bank stock		-			-			30			30
Impaired loans		-			-			5,389			5,389
OREO		-			45			-			45
	$	408		$	96,845		$	5,527		$	102,780

The estimated fair values of the Company’s financial instruments at March 31, 2015 and December 31, 2014 are summarized below. The fair values of a significant portion of these financial instruments are estimates derived using present value techniques and may not be indicative of the net realizable or liquidation values. Also, the calculation of estimated fair values is based on market conditions at a specific point in time and may not reflect current or future fair values.

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	March 31, 2015				December 31, 2014
(In Thousands)	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and due from banks	$	6,247	$	6,247	$	7,101	$	7,101
Interest-bearing deposits		6,136		6,136		2,155		2,155
Federal funds sold		5,058		5,058		4,024		4,024
Investment securities		97,316		97,316		87,993		87,993
Investments in restricted stock		1,203		1,203		1,328		1,328
Ground rents		169		169		169		169
Loans, net		268,233		263,097		273,986		268,536
Accrued interest receivable		1,099		1,099		1,274		1,274

Financial liabilities:
Deposits		346,571		319,332		338,877		310,239
Long-term borrowings		20,000		21,035		20,000		20,951
Dividends payable		276		276		276		276
Accrued interest payable		42		42		40		40

Off-balance sheet commitments		25,786		25,786		21,430		21,430

Fair values are based on quoted market prices for similar instruments or estimated using discounted cash flows. The discounts used are estimated using comparable market rates for similar types of instruments adjusted to be commensurate with the credit risk, overhead costs and optionality of such instruments.

The fair value of cash and due from banks, federal funds sold, investments in restricted stocks and accrued interest receivable are equal to the carrying amounts. The fair values of investment securities are determined using market quotations. The fair value of loans receivable is estimated using discounted cash flow analysis.

The fair value of non-interest bearing deposits, interest-bearing checking, savings, and money market deposit accounts, securities sold under agreements to repurchase, and accrued interest payable are equal to the carrying amounts. The fair value of fixed-maturity time deposits is estimated using discounted cash flow analysis.

The gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2015 are as follows:


Securities available for sale:	Less than 12 months				12 months or more				Total
(Dollars in Thousands)
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss

Obligations of U.S. Govt Agencies	$	5	$	4	$	-	$	-	$	5	$	4
State and Municipal		5,411		87		803		23		6,214		110
Corporate Trust Preferred		-		-		108		80		108		80
Mortgage Backed		27,537		117		16,509		457		44,046		574
	$	32,953	$	208	$	17,420	$	560	$	50,373	$	768

At March 31, 2015, the company owned one pooled trust preferred security issued by Regional Diversified Funding, Senior Notes with a Moody’s rating of Ca. The market for this security (two different portions) at March 31, 2015 was not active and markets for similar securities were also not active. As a result, the Company had cash flow testing performed as of March 31, 2015 by an unrelated third party specialist in order to measure the possible extent of other-than-temporary-impairment (“OTTI”). This testing assumed future defaults on the currently performing financial institutions of 150 basis points applied annually with a 0% recovery on both current and future defaulting financial institutions. No write-down was taken in the first three months of 2015.

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Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary-impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain it’s investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

As of March 31, 2015, management had the ability and intent to hold the securities classified as available for sale for a period of time sufficient for a recovery of cost. On March 31, 2015, the Bank held 24 investment securities having continuous unrealized loss positions for more than 12 months. Management has determined that all unrealized losses are either due to increases in market interest rates over the yields available at the time the underlying securities were purchased, current call features that are nearing, and the effect the sub-prime market has had on all mortgage-backed securities. The Bank has no mortgage-backed securities collateralized by sub-prime mortgages. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Except as noted above, as of March 31, 2015, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in the Company’s consolidated income statement.

A rollforward of the cumulative other-than-temporary credit losses recognized in earnings for all debt securities for which a portion of an other-than-temporary loss is recognized in accumulated other comprehensive loss is as follows:


	At		At
	March 31,		December 31,
	2015		2014
	(Dollars in Thousands)

Estimated credit losses, beginning of year	$	3,262	$	3,262
Credit losses - no previous OTTI recognized		-		-
Credit losses - previous OTTI recognized		-		-

Estimated credit losses, end of period	$	3,262	$	3,262

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

When used in this discussion and elsewhere in this Form 10-Q, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and readers are advised that various factors could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited to, those risks identified in the Company’s periodic reports filed with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K.

The Company does not undertake and specifically disclaims any obligation to update any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Overview

Glen Burnie Bancorp, a Maryland corporation (the “Company”), through its subsidiary, The Bank of Glen Burnie, a Maryland banking corporation (the “Bank”), operates a commercial bank with eight offices in Anne Arundel County Maryland. The Company had consolidated net income of $380,000 ($0.14 basic and diluted earnings per share) for the first quarter of 2015, compared to the first quarter of 2014 consolidated net income of $473,000 ($0.17 basic and diluted income per share), a 19.66% decrease. The decrease in net income for the three month period was primarily due to the increase in the provision for loan losses and the decrease in loan interest income, partially offset by the increase in gains on investment securities. During the three months ended March 31, 2015, deposits increased by $7,694,000 and net loans decreased by $5,753,000.

Results Of Operations

Net Interest Income. The Company’s consolidated net interest income prior to provision for credit losses for the three months ended March 31, 2015 was $2,860,000, compared to $3,087,000 for the same period in 2014, a decrease of $227,000 (7.35%) for the three months.

Interest income for the first quarter decreased from $3,675,000 in 2014 to $3,480,000 in 2015, a 5.31% decrease. The primary reason for the decline in interest income for the 2015 period when compared to the 2014 period was the decline in loan income as both yields and balances declined.

Interest expense for the first quarter increased from $588,000 in 2014 to $620,000 in 2015, a 5.44% increase. The increase was due to higher interest rates paid and the increase of deposit balances.

Net interest margins on a tax equivalent basis for the three months ended March 31, 2015 was 3.31%, compared to 3.74% for the three months ended March 31, 2014. The decrease of the net interest margin for the first quarter was primarily due to declining yields on earning assets, as loan balances have declined and the balances of lower yielding securities have increased.

Provision for Credit Losses. The Company made a provision for credit losses of $150,000 during the three month period ending March 31, 2015 and $38,000 during the three month period ending March 31, 2014. As of March 31, 2015, the allowance for credit losses equaled 93.44% of non-accrual and past due loans compared to 104.84% at December 31, 2014 and 71.33% at March 31, 2014. During the three month period ended March 31, 2015, the Company recorded a net charge-off of $75,000, compared to a net charge-off of $34,000 during the corresponding period of the prior year. On an annualized basis, net charge-offs for the 2015 period represent 0.12% of the average loan portfolio.

Other Income. Other income increased from $433,000 for the three month period ended March 31, 2014, to $538,000 for the corresponding 2015 period, a $105,000 (24.25%) increase. The increase for the three month period was due to an increase in gains on investment securities, partially offset by a reduction in service charges.

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Other Expenses. Other expenses decreased from $2,915,000 for the three month period ended March 31, 2014, to $2,819,000 for the corresponding 2015 period, a $96,000 (3.29%) decrease. The decrease for the three month period was primarily due to a loss on Other Real Estate Owned being booked in the first quarter of 2014.

Income Taxes. During the three months ended March 31, 2015, the Company recorded income tax expense of $49,000, compared to income tax expense of $94,000 for the same respective period in 2014. The Company’s effective tax rate for the three month period in 2015 was 11.42% compared to 16.58% for the prior year period. The decrease in the effective tax rate for the three month period was due to the increase in the proportion of state and municipal income.

Comprehensive Income. In accordance with regulatory requirements, the Company reports comprehensive income in its financial statements. Comprehensive income consists of the Company’s net income, adjusted for unrealized gains and losses on the Bank’s investment portfolio of investment securities. For the first quarter of 2015, comprehensive income, net of tax, totaled $546,000, compared to the March 31, 2014 comprehensive income, net of tax, of $1,648,000. The decrease for the three month period were due to a decrease in the net unrealized gain on securities during those periods.

Financial Condition

General. The Company’s assets increased to $402,077,000 at March 31, 2015 from $394,630,000 at December 31, 2014, primarily due to an increase in cash and cash equivalents and investment securities, offset by a decrease in loans. The Bank’s net loans totaled $268,233,000 at March 31, 2015, compared to $273,986,000 at December 31, 2014, a decrease of $5,753,000 (2.10%), primarily attributable to a decrease in indirect lending with lesser decreases in residential construction (non-homeowner occupied), purchase money mortgage and refinance loans, partially offset by business secured time loans.

The Company’s total investment securities portfolio (investment securities available for sale) totaled $97,316,000 at March 31, 2015, a $9,323,000 (10.60%) increase from $87,993,000 at December 31, 2014. The Bank’s cash and due from banks (cash due from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of March 31, 2015, totaled $17,441,000, an increase of $4,161,000 (31.34%) from the December 31, 2014 total of $13,280,000. The increase in cash, cash equivalents and investments was a result of the increase in deposits over what was needed to fund loans.

Deposits as of March 31, 2015, totaled $346,571,000, which is an increase of $7,694,000 (2.27%) from $338,877,000 at December 31, 2014. Demand deposits as of March 31, 2015, totaled $95,286,000, which is an increase of $6,723,000 (7.59%) from $88,563,000 at December 31, 2014. NOW accounts as of March 31, 2015, totaled $29,409,000, which is an increase of $2,419,000 (8.96%) from $26,990,000 at December 31, 2014. Money market accounts as of March 31, 2015, totaled $20,278,000, which is a decrease of $187,000 (0.92%), from $20,465,000 at December 31, 2014. Savings deposits as of March 31, 2015, totaled $76,651,000, which is an increase of $1,678,000 (2.24%) from $74,973,000 at December 31, 2014. Certificates of deposit over $100,000 totaled $35,302,000 on March 31, 2015, which is a decrease of $816,000 (2.26%) from $36,118,000 at December 31, 2014. Other time deposits (made up of certificates of deposit less than $100,000 and individual retirement accounts) totaled $89,645,000 on March 31, 2015, which is a $2,123,000 (2.32%) decrease from the $91,768,000 total at December 31, 2014.

Asset Quality. The following tables set forth the amount of the Bank’s current, past due, and non-accrual loans by categories of loans and restructured loans, at the dates indicated.

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The following table analyzes the age of past due loans, including both accruing and non-accruing loans, segregated by class of loans as of the three months ended March 31, 2015 and the year ended December 31, 2014.


At March 31, 2015					90 Days or
(Dollars in Thousands)			30-89 Days		More and
	Current		Past Due		Still Accruing		Nonaccrual		Total

Commercial and industrial	$	3,818	$	-	$	-	$	-	$	3,818
Commercial real estate		65,401		-		-		1,080		66,481
Consumer and indirect		78,049		1,342		-		600		79,991
Residential real estate		120,155		334		41		1,696		122,226

	$	267,423	$	1,676	$	41	$	3,376	$	272,516


At December 31, 2014					90 Days or
(Dollars in Thousands)			30-89 Days		More and
	Current		Past Due		Still Accruing		Nonaccrual		Total

Commercial and industrial	$	3,519	$	-	$	-	$	-	$	3,519
Commercial real estate		64,545		-		-		1,097		65,642
Consumer and indirect		81,316		2,272		-		515		84,103
Residential real estate		123,285		319		197		1,166		124,967

	$	272,665	$	2,591	$	197	$	2,778	$	278,231

The balances in the above charts have not been reduced by the allowance for loan loss and the unearned income on loans. For the period ending March 31, 2015, the allowance for loan loss is $3,193,000 and the unearned income is $1,090,000. For the period ending December 31, 2014, the allowance for loan loss is $3,118,000 and the unearned income is $1,127,000.


	At			At
	March 31,			December 31,
	2015			2014
	(Dollars in Thousands)

Restructured loans	$	250		$	253
Non-accrual and 90 days or more and still accruing loans to gross loans		1.25	%		1.07	%
Allowance for credit losses to non-accrual and 90 days or more and still accruing loans		93.44	%		104.84	%

At March 31, 2015, there was $3,060,000 in loans outstanding, included in the current and 30-89 days past due columns in the above table, as to which known information about possible credit problems of borrowers caused management to have serious doubts as to the ability of such borrowers to comply with present loan repayment terms. Such loans consist of loans which were not 90 days or more past due but where the borrower is in bankruptcy or has a history of delinquency, or the loan to value ratio is considered excessive due to deterioration of the collateral or other factors.

Non-accrual loans with specific reserves at March 31, 2015 are comprised of:

Consumer loans – Three loans to three borrowers in the amount of $485,000 with a specific reserve of $117,000 established for the loan.

Commercial Real Estate – Two loans to two borrowers in the amount of $1,077,000, secured by commercial and/or residential properties with a specific reserve of $149,000 established for the loans.

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Residential Real Estate – Six loans to four borrowers in the amount of $828,000, secured by residential property with a specific reserve of $289,000 established for the loans.

Below is a summary of the recorded investment amount and related allowance for losses of the Bank’s impaired loans at March 31, 2015 and December 31, 2014.


(Dollars in thousands)
March 31, 2015	Recorded Investment		Unpaid Principal Balance		Interest Income Recognized		Specific Reserve		Average Recorded Investment
Impaired loans with specific reserves:
Real-estate - mortgage:
Residential	$	2,925		2,925		40		778		2,932
Commercial		1,077		1,077		-		149		1,087
Consumer		558		558		6		137		570
Installment		-		-		-		-		-
Home Equity		-		-		-		-		-
Commercial		250		250		3		250		251
Total impaired loans with specific reserves	$	4,810		4,810		49		1,314		4,840

Impaired loans with no specific reserve:
Real-estate - mortgage:
Residential	$	367		428		1		n/a		519
Commercial		1,043		1,043		11		n/a		1,055
Consumer		229		229		-		n/a		50
Installment		254		254		-		n/a		-
Home Equity		-		-		-		n/a		-
Commercial		-		-		-		n/a		-
Total impaired loans with no specific reserve	$	1,893		1,954		12		-		1,624

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(Dollars in thousands)
December 31, 2014	Recorded Investment		Unpaid Principal Balance		Interest Income Recognized		Specific Reserve		Average Recorded Investment
Impaired loans with specific reserves:
Real-estate - mortgage:
Residential	$	2,726		2,726		177		682		2,747
Commercial		1,094		1,094		1		149		1,162
Consumer		612		612		31		186		623
Installment		-		-		-		-		-
Home Equity		-		-		-		-		-
Commercial		253		253		11		253		259
Total impaired loans with specific reserves	$	4,685		4,685		220		1,270		4,791

Impaired loans with no specific reserve:
Real-estate - mortgage:
Residential	$	205		266		3		n/a		340
Commercial		1,061		1,061		48		n/a		1,090
Consumer		61		61		-		n/a		-
Installment		434		434		-		n/a		-
Home Equity		-		-		-		n/a		-
Commercial		-		-		-		n/a		-
Total impaired loans with no specific reserve	$	1,761		1,822		51		-		1,430

Credit Quality Information

The following tables represent credit exposures by creditworthiness category for the quarter ending March 31, 2015 and the year ended December 31, 2014. The use of creditworthiness categories to grade loans permits management to estimate a portion of credit risk. The Bank’s internal creditworthiness is based on experience with similarly graded credits. Loans that trend upward toward higher credit grades typically have less credit risk and loans that migrate downward typically have more credit risk.

The Bank’s internal risk ratings are as follows:

Superior – minimal risk (normally supported by pledged deposits, United States government securities, etc.)

Above Average – low risk. (all of the risks associated with this credit based on each of the bank’s creditworthiness criteria are minimal)

Average – moderately low risk. (most of the risks associated with this credit based on each of the bank’s creditworthiness criteria are minimal)

Acceptable – moderate risk. (the weighted overall risk associated with this credit based on each of the bank’s creditworthiness criteria is acceptable)

Other Assets Especially Mentioned – moderately high risk. (possesses deficiencies which corrective action by the bank would remedy; potential watch list)

Substandard – (the bank is inadequately protected and there exists the distinct possibility of sustaining some loss if not corrected)

Doubtful – (weaknesses make collection or liquidation in full, based on currently existing facts, improbable)

Loss – (of little value; not warranted as a bankable asset)

Loans rated 1-4 are considered “Pass” for purposes of the risk rating chart below.

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Risk ratings of loans by categories of loans are as follows:


	Commercial				Consumer
March 31, 2015	and		Commercial		and		Residential
(Dollars in Thousands)	Industrial		Real Estate		Indirect		Real Estate		Total

Pass	$	3,482	$	59,753	$	77,292	$	118,543	$	259,070
Special mention		86		4,608		1,838		432		6,964
Substandard		250		2,120		707		3,088		6,165
Doubtful		-		-		154		-		154
Loss		-		-		-		163		163

	$	3,818	$	66,481	$	79,991	$	122,226	$	272,516

Non-accrual		-		1,080		600		1,696		3,376
Troubled debt restructures		250		-		-		-		250
Number of TDRs contracts		1		-		-		-		1
Non-performing TDRs		-		-		-		-		-
Number of TDR accounts		-		-		-		-		-

	Commercial				Consumer
December 31, 2014	and		Commercial		and		Residential
(Dollars in Thousands)	Industrial		Real Estate		Indirect		Real Estate		Total

Pass	$	3,178	$	58,837	$	80,502	$	121,244	$	263,761
Special mention		89		4,649		2,556		833		8,127
Substandard		253		2,156		882		2,726		6,017
Doubtful		-		-		163		-		163
Loss		-		-		-		163		163

	$	3,520	$	65,642	$	84,103	$	124,966	$	278,231

Non-accrual		-		1,097		515		1,166		2,778
Troubled debt restructures		253		-		-		-		253
Number of TDRs contracts		1		-		-		-		1
Non-performing TDRs		-		-		-		-		-
Number of TDR accounts		-		-		-		-		-

Other Real Estate Owned. At March 31, 2015, the Company had $45,000 in real estate acquired in partial or total satisfaction of debt, compared to $45,000 at December 31, 2014. Currently one property is left on OREO at March 31, 2015. All such properties are recorded at the lower of cost or fair value (net realizable value) at the date acquired and carried on the balance sheet as other real estate owned. Losses arising at the date of acquisition are charged against the allowance for credit losses. Subsequent write-downs that may be required and expense of operation are included in non-interest expense. Gains and losses realized from the sale of other real estate owned are included in non-interest income or expense.

Allowance For Credit Losses. The allowance for credit losses is established through a provision for credit losses charged to expense. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. The allowance, based on evaluations of the collectability of loans and prior loan loss experience, is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible. The evaluations are performed for each class of loans and take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, value of collateral securing the loans and current economic conditions and trends that may affect the borrowers’ ability to pay. For example, delinquencies in unsecured loans and indirect automobile installment loans will be reserved for at significantly higher ratios than loans secured by real estate. Based on that analysis, the Bank deems its allowance for credit losses in proportion to the total non-accrual loans and past due loans to be sufficient.

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Transactions in the allowance for credit losses for the three months ended March 31, 2015 and the year ended December 31, 2014 were as follows:


	Commercial						Consumer
March 31, 2015	and			Commercial			and			Residential
(Dollars in Thousands)	Industrial			Real Estate			Indirect			Real Estate			Unallocated			Total

Balance, beginning of year	$	386		$	335		$	1,281		$	1,170		$	(54	)	$	3,118
Provision for credit losses		(28	)		(17	)		(290	)		331			154			150
Recoveries		1			-			158			-			-			159
Loans charged off		-			-			(234	)		-			-			(234	)

Balance, end of quarter	$	359		$	318		$	915		$	1,501		$	100		$	3,193

Individually evaluated for impairment:
Balance in allowance	$	250		$	149		$	137		$	778		$	-		$	1,314
Related loan balance		250			2,120			1,041			3,292			-			6,703

Collectively evaluated for impairment:
Balance in allowance	$	109		$	169		$	778		$	723		$	100		$	1,879
Related loan balance		3,568			64,361			78,950			118,934			-			265,813

	Commercial						Consumer
December 31, 2014	and			Commercial			and			Residential
(Dollars in Thousands)	Industrial			Real Estate			Indirect			Real Estate			Unallocated			Total

Balance, beginning of year	$	413		$	898		$	1,188		$	593		$	(120	)	$	2,972
Provision for credit losses		(4	)		(448	)		601			806			66			1,021
Recoveries		6			128			331			6			-			471
Loans charged off		(29	)		(243	)		(839	)		(235	)		-			(1,346	)

Balance, end of year	$	386		$	335		$	1,281		$	1,170		$	(54	)	$	3,118

Individually evaluated for impairment:
Balance in allowance	$	253		$	149		$	186		$	682		$	-		$	1,270
Related loan balance		253			2,156			1,106			2,931			-			6,446

Collectively evaluated for impairment:
Balance in allowance	$	133		$	186		$	1,095		$	488		$	(54	)	$	1,848
Related loan balance		3,267			63,486			82,997			122,035			-			271,785

As of March 31, 2015 and December 31, 2014, the allowance for loan losses included an unallocated overage (shortfall) in the amount of $100,000 and ($54,000), respectively. Management is comfortable with these amounts as they believe the amounts are adequate to absorb additional inherent potential losses in the loan portfolio.

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	At			At
	March 31,			March 31,
	2015			2014
	(Dollars in Thousands)

Average loans	$	271,376		$	274,766
Net charge-offs to average loans (annualized)		0.12	%		0.04	%

During 2015, loans to 21 borrowers and related entities totaling approximately $234,000 were determined to be uncollectible and were charged off.

Reserve for Unfunded Commitments. As of March 31, 2015, the Bank had outstanding commitments totaling $25,786,000. These outstanding commitments consisted of letters of credit, undrawn lines of credit, and other loan commitments. The following table shows the Bank’s reserve for unfunded commitments arising from these transactions:

	Three Months Ended March 31,
	2015		2014
	(Dollars in Thousands)

Beginning balance	$	200	$	200

Provisions charged to operations		-		-

Ending balance	$	200	$	200

Contractual Obligations and Commitments. No material changes, outside the normal course of business, have been made during the first quarter of 2015.

Market Risk and Interest Rate Sensitivity

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates or equity pricing. The Company’s principal market risk is interest rate risk that arises from its lending, investing and deposit taking activities. The Company’s profitability is dependent on the Bank’s net interest income. Interest rate risk can significantly affect net interest income to the degree that interest bearing liabilities mature or reprice at different intervals than interest earning assets. The Bank’s Asset/Liability and Risk Management Committee oversees the management of interest rate risk. The primary purpose of the committee is to manage the exposure of net interest margins to unexpected changes due to interest rate fluctuations. The Company does not utilize derivative financial or commodity instruments or hedging strategies in its management of interest rate risk. The primary tool used by the committee to monitor interest rate risk is a “gap” report which measures the dollar difference between the amount of interest bearing assets and interest bearing liabilities subject to repricing within a given time period. These efforts affect the loan pricing and deposit rate policies of the Company as well as the asset mix, volume guidelines, and liquidity and capital planning.

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The following table sets forth the Company’s interest-rate sensitivity at March 31, 2015.


							Over 1
				Over 3 to			Through			Over
	0-3 Months			12 Months			5 Years			5 Years			Total
	(Dollars in Thousands)
Assets:
Cash and due from banks	$	-		$	-		$	-		$	-		$	6,247
Federal funds and overnight deposits		11,194			-			-			-			11,194
Securities		-			-			5,867			91,449			97,316
Loans		14,186			3,966			72,749			177,332			268,233
Fixed assets		-			-			-			-			3,632
Other assets		-			-			-			-			15,455

Total assets	$	25,380		$	3,966		$	78,616		$	268,781		$	402,077

Liabilities:
Demand deposit accounts	$	-		$	-		$	-		$	-		$	95,286
NOW accounts		29,409			-			-			-			29,409
Money market deposit accounts		20,278			-			-			-			20,278
Savings accounts		76,651			-			-			-			76,651
IRA accounts		3,852			8,688			25,364			3,298			41,202
Certificates of deposit		11,277			21,574			48,239			2,655			83,745
Long-term borrowings		-			-			20,000			-			20,000
Other liabilities		-			-			-			-			1,367
Stockholders’ equity:		-			-			-			-			34,139

Total liabilities and stockholders’ equity	$	141,467		$	30,262		$	93,603		$	5,953		$	402,077

GAP	$	(116,087	)	$	(26,296	)	$	(14,987	)	$	262,828
Cumulative GAP	$	(116,087	)	$	(142,383	)	$	(157,370	)	$	105,458
Cumulative GAP as a % of total assets		-28.87	%		-35.41	%		-39.14	%		26.23	%

The foregoing analysis assumes that the Company’s assets and liabilities move with rates at their earliest repricing opportunities based on final maturity. Mortgage backed securities are assumed to mature during the period in which they are estimated to prepay and it is assumed that loans and other securities are not called prior to maturity. Certificates of deposit and IRA accounts are presumed to reprice at maturity. NOW savings accounts are assumed to reprice at within three months although it is the Company’s experience that such accounts may be less sensitive to changes in market rates.

In addition to GAP analysis, the Bank utilizes a simulation model to quantify the effect a hypothetical immediate plus or minus 200 basis point change in rates would have on net interest income and the economic value of equity. The model takes into consideration the effect of call features of investments as well as prepayments of loans in periods of declining rates. When actual changes in interest rates occur, the changes in interest earning assets and interest bearing liabilities may differ from the assumptions used in the model. As of March 31, 2015, the model produced the following sensitivity profile for net interest income and the economic value of equity.


	Immediate Change in Rates
	-200			-100			+100			+200
	Basis Points			Basis Points			Basis Points			Basis Points

% Change in Net Interest Income		-5.0	%		-1.9	%		1.5	%		2.1	%
% Change in Economic Value of Equity		-18.8	%		-7.0	%		-2.3	%		-7.8	%

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Liquidity and Capital Resources

The Company currently has no business other than that of the Bank and does not currently have any material funding commitments. The Company’s principal sources of liquidity are cash on hand and dividends received from the Bank. The Bank is subject to various regulatory restrictions on the payment of dividends.

The Bank’s principal sources of funds for investments and operations are net income, deposits from its primary market area, principal and interest payments on loans, interest received on investment securities and proceeds from maturing investment securities. Its principal funding commitments are for the origination or purchase of loans and the payment of maturing deposits. Deposits are considered a primary source of funds supporting the Bank’s lending and investment activities.

The Bank’s most liquid assets are cash and cash equivalents, which are cash on hand, amounts due from financial institutions, federal funds sold, certificates of deposit with other financial institutions that have an original maturity of three months or less and money market mutual funds. The levels of such assets are dependent on the Bank’s operating, financing and investment activities at any given time. The variations in levels of cash and cash equivalents are influenced by deposit flows and anticipated future deposit flows. The Bank’s cash and cash equivalents (cash due from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of March 31, 2015, totaled $17,441,000, an increase of $4,161,000 (31.33%) from the December 31, 2014 total of $13,280,000.

As of March 31, 2015, the Bank was permitted to draw on a $68,755,000 line of credit from the FHLB of Atlanta. Borrowings under the line are secured by a floating lien on the Bank’s residential mortgage loans. At March 31, 2015, there was nothing outstanding in short-term borrowings from FHLB. As of March 31, 2015, there were $20.0 million in long-term convertible advances outstanding with various monthly and quarterly call features and with final maturities through August 2018. In addition, the Bank has three unsecured federal funds lines of credit in the amount of $3.0 million, $5.0 million and $8.0 million, of which nothing was outstanding as of March 31, 2015.

The Company’s stockholders’ equity increased $308,000 (0.91%) during the three months ended March 31, 2015, due mainly to an increase in other comprehensive gain (loss), net of taxes, and an increase in retained net income from the period. The Company’s accumulated other comprehensive gain (loss), net of taxes increased by $166,000 (161.17%) from $103,000 at December 31, 2014 to $269,000 at March 31, 2015, as a result of an increase in the market value of securities classified as available for sale. Retained earnings increased by $103,000 (0.49%) as the result of the Company’s net income for the three months, partially offset by dividends.

The Federal Reserve Board and the FDIC have established guidelines with respect to the maintenance of appropriate levels of capital by bank holding companies and state non-member banks, respectively. The regulations impose two sets of capital adequacy requirements: minimum leverage rules, which require bank holding companies and banks to maintain a specified minimum ratio of capital to total assets, and risk-based capital rules, which require the maintenance of specified minimum ratios of capital to “risk-weighted” assets. At March 31, 2015, the Bank was in full compliance with these guidelines with a Tier 1 leverage ratio of 8.42%, a Tier 1 risk-based capital ratio of 13.03% and a total risk-based capital ratio of 14.28%.

Current Outlook

The Bank’s results of operations continue to be affected by the low interest rate environment and slow recovering economy. In addition, as the values of real estate held as collateral securing loans declined, the Bank increased its loan loss reserves. As a result, net income for the quarter ended March 31, 2015 is lower than net income for the comparable 2014 period. Future results of operation depend greatly on the overall economy, actions of the Federal Reserve Board and other factors beyond the Bank’s control, and the Bank cannot accurately forecast these factors.

The Bank has initiated several new initiatives with the goal of increasing net interest income. These initiatives include becoming a Small Business Administration (SBA) lender and otherwise increasing focus on commercial loans, and increasing the Bank’s mortgage products offerings and income through loans arranged by a third party vendor but serviced by the Bank. Furthermore, the Bank will continue to update its technology to increase delivery channels to customers and update internal processes to increase efficiency. The Bank is also evaluating branch hours and efficiency in all departments and has engaged a marketing firm to strengthen its brand and expand its marketing efforts.

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Critical Accounting Policies and Estimates

The Company’s accounting policies are more fully described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. As discussed there, the preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Since future events and their effects cannot be determined with absolute certainty, the determination of estimates requires the exercise of judgment. Management has used the best information available to make the estimations necessary to value the related assets and liabilities based on historical experience and on various assumptions which are believed to be reasonable under the circumstances. Actual results could differ from those estimates, and such differences may be material to the financial statements. The Company reevaluates these variables as facts and circumstances change. Historically, actual results have not differed significantly from the Company’s estimates. The following is a summary of the more judgmental accounting estimates and principles involved in the preparation of the Company’s financial statements, including the identification of the variables most important in the estimation process:

Allowance for Credit Losses. The Bank’s allowance for credit losses is determined based upon estimates that can and do change when the actual events occur, including historical losses as an indicator of future losses, fair market value of collateral, and various general or industry or geographic specific economic events. The use of these estimates and values is inherently subjective and the actual losses could be greater or less than the estimates. For further information regarding the Bank’s allowance for credit losses, see “Allowance for Credit Losses”, above.

Accrued Taxes. Management estimates income tax expense based on the amount it expects to owe various tax authorities. Accrued taxes represent the net estimated amount due or to be received from taxing authorities. In estimating accrued taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance in the context of the Company’s tax position.

ITEM 4.

CONTROLS AND PROCEDURES

The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to management in a timely manner. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated this system of disclosure controls and procedures as of the end of the period covered by this quarterly report, and have concluded that the system is effective. There have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 6.

EXHIBITS


Exhibit No.
3.1	Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registrant’s Form 8-A filed December 27, 1999, File No. 0-24047)
3.2	Articles of Amendment, dated October 8, 2003 (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2003, File No. 0-24047)
3.3	Articles Supplementary, dated November 16, 1999 (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed December 8, 1999, File No. 0-24047)
3.4	By-Laws (incorporated by reference to Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2003, File No. 0-24047)
10.1	Glen Burnie Bancorp Director Stock Purchase Plan (incorporated by reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form S-8, File No.33-62280)
10.2	The Bank of Glen Burnie Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.1 to Post-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form S-8, File No. 333-46943)
10.3	Amended and Restated Change-in-Control Severance Plan (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2001, File No. 0-24047)
31.1	Rule 15d-14(a) Certification of Chief Executive Officer
31.2	Rule 15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certifications
99.1	Press release dated May 11, 2015
101	Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets, March 31, 2015 and December 31, 2014, (ii) Condensed Consolidated Statements of Income for the three months ended March 31, 2015 and 2014, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2015 and 2014, and (v) Notes to Unaudited Condensed Consolidated Financial Statements

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		GLEN BURNIE BANCORP
		(Registrant)

Date: May 14, 2015	By:	/s/ Michael G. Livingston.
		Michael G. Livingston
		President, Chief Executive Officer


	By:	/s/ John E. Porter
		John E. Porter
		Chief Financial Officer

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