In closing, Mr. Hanna added, “Our financial performance during the fourth quarter demonstrates this ability, although performance was still heavily impacted by the continuation of an inverted yield curve and rigorous competition for core deposits. Higher interest rate levels will keep pressure on loan growth and deposit retention, which impact our net interest margin. While interest rates may decrease in the future, we believe that the competition for loans and deposits will remain strong as we navigate through this cycle. We continue our focus on maintaining our strong capital levels, which are above regulatory required levels, preserving our solid asset quality, and maintaining our strong liquidity levels.   I am proud of the results and profitability the team was able to achieve in 2023. I look forward to continued progress towards our strategic objectives in 2024. I want to thank all of the Glen Burnie Bancorp associates for their incredible contributions and unwavering customer support during this uncertain period."

Highlights for the Quarter and Year ended December 31, 2023

Total interest income increased $0.6 million to $13.3 million for the twelve-month period ending December 31, 2023, compared to the same period in 2022. This resulted from a $744,000 increase in interest income on securities and a $122,000 increase in interest and fees on loans, consistent with the rising interest rate environment. The increase in interest income was driven by the repricing impact on earning asset yields of the change in asset mix from loans to investment securities. Loan pricing pressure/competition will continue to place pressure on the Company’s net interest margin.

The Company expects that its strong liquidity and capital positions, along with the Bank’s total regulatory capital to risk weighted assets of 18.40% on December 31, 2023, compared to 17.28% for the same period of 2022, will provide ample capacity for future growth.

Return on average assets for the three-month period ended December 31, 2023, was 0.19%, compared to 0.83% for the three-month period ended December 31, 2022. Return on average equity for the three-month period ended December 31, 2023, was 4.65%, compared to 21.74% for the three-month period ended December 31, 2022.   Lower net income primarily drove the lower return on average assets and the lower return on average equity.

The cost of funds was 0.64% for the quarter ended December 31, 2023, compared to 0.13% for the quarter ended December 31, 2022. The 0.51% increase was primarily driven by the increase in the cost of borrowed funds.

The book value per share of Bancorp’s common stock was $6.70 on December 31, 2023, compared to $5.60 per share on December 31, 2022. The increase was primarily due to the decline in unrealized losses on available for sale securities caused by higher market interest rates.

On December 31, 2023, the Bank remained above all “well-capitalized” regulatory requirement levels. The Bank’s tier 1 risk-based capital ratio was approximately 17.37% on December 31, 2023, compared to 16.45% on December 31, 2022. 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 $351.8 million on December 31, 2023, a decrease of $29.6 million or 7.77%, from $381.4 million on December 31, 2022.   Investment securities decreased by $4.7 million or 3.27%, to $139.4 million as of December 31, 2023, compared to $144.1 million for the same period of 2022.   Loans, net of deferred fees and costs, were $176.3 million on December 31, 2023, a decrease of $10.1 million or 5.43%, from $186.4 million on December 31, 2022. Cash and cash equivalents decreased $14.9 million or 49.35%, from $30.1 million on December 31, 2022, to $15.2 million on December 31, 2023. Deferred tax assets decreased $1.0 million or 11.29%, from $8.9 million on December 31, 2022, to $7.9 million on December 31, 2023, due to the tax effects of unrealized losses on available for sale securities.

Total deposits were $300.1 million on December 31, 2023, a decrease of $62.8 million or 17.32%, from $362.9 million on December 31, 2022. Noninterest-bearing deposits were $116.9 million on December 31, 2023, a decrease of $26.4 million or 18.39%, from $143.3 million on December 31, 2022.   Interest-bearing deposits were $183.1 million on December 31, 2023, a decrease of $36.6 million or 16.63%, from $219.7 million on December 31, 2022. Total borrowings were $30.0 million on December 31, 2023, an increase of $30.0 million from December 31, 2022.

As of December 31, 2023, total stockholders’ equity was $19.3 million (5.49% of total assets), equivalent to a book value of $6.70 per common share. Total stockholders’ equity on December 31, 2022, was $16.1 million (4.21% of total assets), equivalent to a book value of $5.60 per common share. The increase in the ratio of stockholders’ equity to total assets was primarily due to the $2.9 million after-tax increase in market value of the Company’s available-for-sale securities portfolio and a $29.6 million decrease in total assets. The decrease in unrealized losses primarily resulted from decreasing market interest rates year-over-year, which increased the fair value of the investment securities.

Asset quality, which has trended within a narrow range over the past several years, remains sound on December 31, 2023. Nonperforming assets, which consist of nonaccrual loans, troubled debt restructurings, accruing loans past due 90 days or more, and other real estate owned (“OREO”), represented 0.15% of total assets on December 31, 2023, compared to 0.13% on December 31, 2022. The $29.6 million decrease in total assets from December 31, 2022, to December 31, 2023, and the $39,000 increase in nonperforming assets drove the change. The allowance for credit losses on loans was $2.2 million, or 1.22% of total loans, as of December 31, 2023, compared to $2.2 million, or 1.16% of total loans, as of December 31, 2022. The allowance for credit losses for unfunded commitments was $473,000 as of December 31, 2023, compared to $477,000 as of December 31, 2022.

Review of Financial Results

For the three-month periods ended December 31, 2023, and 2022

Net income for the three-month period ended December 31, 2023, was $167,000, compared to $830,000 for the three-month period ended December 31, 2022.

Net interest income for the three-month period ended December 31, 2023, totaled $2.9 million, a decrease of $447,000 from the three-month period ended December 31, 2022. The decrease in net interest income was primarily due to a $425,000 increase in interest expenses predominantly related to short-term borrowings.

Net interest margin for the three-month period ended December 31, 2023, was 3.17%, compared to 3.27% for the same period of 2022.   Higher average yields and lower average balances on interest-earning assets combined with lower average interest-bearing funds, lower average noninterest-bearing funds, and higher cost of funds were the primary drivers of year-over-year results.

The average balance of interest-earning assets decreased $44.1 million while the yield increased 0.39% from 3.38% to 3.77%, when comparing the three-month periods ending December 31, 2022, and 2023, respectively. The average balance of interest-bearing funds and noninterest-bearing funds decreased $23.0 million and $21.4 million, respectively, and the cost of funds increased 0.51%, when comparing the three-month periods ending December 31, 2022, and 2023. The increase in interest expense is related to a continuing shift in funding mix between low-cost deposits and higher costing borrowed funds.

The average balance of interest-bearing deposits in banks and investment securities decreased $30.0 million from $215.9 million to $185.9 million for the fourth quarter of 2023, compared to the same period of 2022 while the yield increased 0.14% from 2.54% to 2.68% during that same period. The increase in yields for the three-month period can be attributed to the change in mix of cash held in interest-bearing deposits in banks and investment securities available for sale and increases in the overnight federal funds rate.

Average loan balances decreased $14.1 million to $175.5 million for the three-month period ended December 31, 2023, compared to $189.6 million for the same period of 2022, while the yield increased from 4.37% to 4.96% during that same period. The increase in loan yields for the fourth quarter of 2023 reflected continued runoff of the low-yielding indirect automobile loan portfolio and new loan originations at higher yields.

The provision of allowance for credit loss on loans for the three-month period ended December 31, 2023, was $103,000, compared to $65,000 for the same period of 2022. The increase in the provision for the three-month period ended December 31, 2023, when compared to the three-month period ended December 31, 2022, primarily reflects a 0.06% increase in the current expected credit loss percentage.

Noninterest income for the three-month period ended December 31, 2023, was $299,000, compared to $522,000 for the three-month period ended December 31, 2022, a decrease of $223,000 or 42.66%. The decrease was primarily driven by a $206,000 gain on the unwinding of derivative contracts in 2022.

For the three-month period ended December 31, 2023, noninterest expense was $2.9 million, compared to $2.8 million for the three-month period ended December 31, 2022, an increase of $148,000 or 5.29%. The primary contributors to the $148,000 increase, when compared to the three-month period ended December 31, 2022, were increases in legal, accounting and other professional fees, and other expenses, partially offset by decreases in data processing and item processing services.

For the twelve-month periods ended December 31, 2023, and 2022

Net income for the twelve-month period ended December 31, 2023, was $1.4 million, compared to $1.7 million for the twelve-month period ended December 31, 2022.

Net interest income for the twelve-month period ended December 31, 2023, totaled $12.1 million, an increase of $276,000 from $11.8 million for the twelve-month period ended December 31, 2022. The increase in net interest income was primarily due to $625,000 higher interest income, partially offset by $350,000 higher costs of interest-bearing deposits and borrowings.

Net interest margin for the twelve-month period ended December 31, 2023, was 3.31%, compared to 2.81% for the same period of 2022. Higher average yields and lower average balances of interest-earning assets combined with lower average interest-bearing funds, lower average noninterest-bearing funds, and higher cost of funds were the primary drivers of year-over-year results.

The average balance of interest-earning assets decreased $55.6 million, while the yield increased 0.62% from 3.01% to 3.63%, when comparing the twelve-month periods ending December 31, 2022, and 2023. The average balance on interest-bearing funds and noninterest-bearing funds decreased $36.1 million and $20.0 million, respectively, and the cost of funds increased 0.14%, when comparing the twelve-month periods ending December 31, 2022, and 2023. The increase in interest expense is related to a continuing shift in funding mix between low-cost deposits and higher costing borrowed funds.

The average balance of interest-bearing deposits in banks and investment securities decreased $36.5 million from $223.8 million to $187.3 million for the twelve-month period ending December 31, 2023, compared to the same period of 2022. The yield increased 0.64% from 1.91% to 2.55% during that same period. The increase in yields for the twelve-month period can be attributed to the change in mix of cash held in interest-bearing deposits in banks and investment securities available for sale and increases in the overnight federal funds rate.

Average loan balances decreased $19.1 million to $179.8 million for the twelve-month period ended December 31, 2023, compared to $198.9 million for the same period of 2022. The yield increased from 4.24% to 4.76% during that same period. The increase in loan yields for the twelve-month period ending December 31, 2023, reflected continued runoff of the low-yielding indirect automobile loan portfolio and new loan originations at higher yields.

The Company recorded a provision of allowance for credit loss on loans of $96,000 for the twelve-month period ending December 31, 2023, compared to a release of $112,000 for the same period in 2022. The $208,000 increase in the provision in 2023 compared to 2022, primarily reflects a $86,000 increase in net charge offs, offset by a $9.7 million decrease in the reservable balance of the loan portfolio and a 0.06% increase in the current expected credit loss percentage.   As a result, the allowance for credit loss on loans was $2.2 million on December 31, 2023, representing 1.22% of total loans, compared to $2.2 million, or 1.16% of total loans on December 31, 2022.

Noninterest income for the twelve-month period ended December 31, 2023, was $1.1 million, compared to $1.4 million for the twelve-month period ended December 31, 2022, a decrease of $255,000 or 18.79%. The decrease was driven primarily a by $206,000 gain on unwind of derivative swap contracts in 2022.

For the twelve-month period ended December 31, 2023, noninterest expense was $11.6 million, compared to $11.3 million for the twelve-month period ended December 31, 2022. The primary contributors to the $299,000 increase when comparing to the twelve-month period ended December 31, 2022, were increases in salary and employee benefits costs, FDIC insurance costs, and loan collection costs, partially offset by decreases in legal, accounting, and other professional fees and other 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.

CONTACT: For further information contact: Jeffrey D. Harris, Chief Financial Officer 410-768-8883 [email protected] 106 Padfield Blvd Glen Burnie, MD 21061