GLEN BURNIE BANCORP
For the period ended Jun 30, 2024. Filed Aug 12, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 12, 2024
GLBZ$4.57+0.4%Stored close · as of Jul 8, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-13.
0001558370-24-007935
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-12.
0001558370-24-011874
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 83 previous paragraphs and 82 current paragraphs.
35 unchanged; 34 reworded; 9 added; 11 removed; 3 previous and 4 current paragraphs rearranged.
Tables are not compared: 10 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Net loss attributable to common stockholders for the six-month period ended June 30, 2024, was $201,000, or $0.07 per basic and diluted common share compared to net income of $710,000, or $0.25 per basic and diluted common share for the same period of 2023. The results recorded for the six-month period ended June 30, 2024, were lower than the same period of 2023 resulting primarily from a $917,000, or 2,413.16%, increase in interest expense on short-term borrowings, a $764,000, or 344.14%, increase in interest expense on deposits and a $609,000, or 716.47%, increase in the provision for credit losses on loans, partially offset by an increase of $517,000, or 12.24%, in loan interest income and fees, a $402,000, or 110.14%, increase in interest on deposits with banks and a $532,000, or 475.00%, decrease in the provision for income taxes.
Current report
Net Interest Income. The Company’s net interest income for the three-month period ended June 30, 2024 was $2.8 million, as compared to $3.1 million for the same period in 2023, a decrease of $328,000, or 10.53%. The decrease in net interest income was primarily due to the $954,000, or 623.53%, increase in the cost of interest-bearing deposits and borrowings driven by a $26.6 million, or 12.81%, increase in the average balance of interest-bearing funds and a $19.1 million, or 14.50%, decrease in the average balance of noninterest-bearing deposits. The higher expenses were partially offset by a $626,000, or 19.16%, increase in total interest income due to a $7.4 million, or 2.02%, increase in the average balance of interest earning assets.
Current report
Net interest income for the six-month period ended June 30, 2024, totaled $5.4 million, a decrease of $935,000, or 14.86%, from the six-month period ended June 30, 2023. The decrease in net interest income was due to a $1.7 million, or 646.54%, increase in the cost of interest-bearing deposits and borrowings driven by a $17.3 million, or 8.23%, increase in the average balance of interest-bearing funds and a $21.7 million, or 15.98%, decrease in the average balance of noninterest-bearing deposits. The higher expenses were partially offset by a $746,000, or 11.38%, increase in total interest income due to a 0.44% increase in the yield of interest earning assets.
Current report
Net interest margin for the three-month period ended June 30, 2024 was 3.02% compared to 3.44% for the three-month period ended June 30, 2023, a decrease of 0.42%. The decrease in the net interest margin is due to increases in average interest-bearing funds, lower average noninterest-bearing deposits, and higher cost of funds partially offset by higher average yields and balances on interest earning assets were the primary drivers of year-over-year results. The average balance of interest-bearing funds and noninterest-bearing funds increased $26.6 million, or 12.81%, and decreased $19.1 million, or 14.50%, respectively, and the cost of funds increased 1.11%, when comparing the three-month periods ending June 30, 2023, and 2024. The average balance of interest-earning assets increased $7.4 million, or 2.02%, while the yield increased 0.62% from 3.60% to 4.22%, when comparing the three-month periods ending June 30, 2023, and 2024, respectively.
Current report
The average balance of interest-bearing deposits in banks and investment securities increased $2.4 million, or 1.32%, from $181.9 million to $184.3 million for the second quarter of 2024, compared to the same period of 2023 while the yield increased from 2.49% to 2.97% during that same period. The increase in yields is attributed to the higher interest rate environment and its positive impact on cash balances and investment yields.
Current report
The average balance of interest-bearing deposits in banks and investment securities decreased $2.5 million, or 1.33%, from $187.7 million to $185.2 million for the first half of 2024, compared to the same period of 2023 while the yield increased from 2.48% to 2.78% during that same period. The increase in yields is attributed to the higher interest rate environment and its positive impact on cash balances and investment yields.
Current report
Average total loan balances increased $5.0 million to $186.7 million for the three-month period ended June 30, 2024, compared to $181.7 million for the same period of 2023, while the yield increased from 4.71% to 5.44% during that same period. The increase in loan yields for the second quarter of 2024 reflected the runoff of the lower yielding loans and origination of higher yielding loans in the current higher rate environment.
Current report
Average total loan balances decreased $1.9 million, or 1.07%, to $181.3 million for the six-month period ended June 30, 2024, compared to $183.2 million for the same period of 2023, while the yield increased from 4.65% to 5.26% during that same period. The increase in loan yields for the first half of 2024 reflected the runoff of the lower yielding loans and origination of higher yielding loans in the current higher rate environment.
Current report
Noninterest Expenses. Noninterest expenses for the three-month period ended June 30, 2024 and 2023 were $2.89 million and $2.93 million, respectively, a decrease of $31,000, or 1.06%. The primary contributors to the decrease, when compared to the three-month period ended June 30, 2023, were decreases in salary and employee benefits, and data processing and item processing services, offset by increases in occupancy and equipment expenses, legal, accounting, and other professional fees, and other expenses. Noninterest expenses decreased from $5.87 million for the six-month period ended June 30, 2023 to $5.76 million for the corresponding period in 2024, a $115,000 or 1.96% decrease. The primary contributors when comparing to the six-month period ended June 30, 2023, were decreases in salary and employee benefits costs, and data processing and item processing services, partially offset by increases in occupancy and equipment expenses, and other expenses.
Removed paragraphs (11)
Previous report
Net Interest Income. The Company’s net interest income for the three-month period ended March 31, 2024 was $2.6 million, as compared to $3.2 million for the same period in 2023, a decrease of $606,000, or 19.07%. The decrease in net interest income was primarily due to the $726,000 increase in interest expense related to higher balances and rates on money market deposits and short-term borrowings partially offset by higher interest income.
Previous report
Net interest margin for the three-month period ended March 31, 2024 was 2.86% compared to 3.41% for the three-month period ended March 31, 2023, a decrease of 0.55%. The decrease in the net interest margin is due to increases in average deposit costs and short-term borrowing costs, partially offset by increases in yields on investment securities, loans, and interest-bearing deposits at the Federal Reserve Bank. Loan yields increased from 4.58% to 5.06% between the two periods while the cost of interest-bearing liabilities increased from 0.20% to 1.51% between the two periods.
Previous report
Noninterest Expenses. Noninterest expenses for the three-month period ended March 31, 2024 and 2023 were $2.86 million and $2.94 million, respectively, a decrease of $83,000, or 2.82%. The decrease was driven by a year-over-year decrease of $80,000 in salary and employee benefits attributable to decreases in group insurance costs and bonus pension/expense.
Previous report
*Valuation of the Securities Portfolio.*The Company early adopted ASC 326 during the first fiscal quarter 2021 and based on the application of the modified retrospective method it became effective on January 1, 2021 for all financial assets measured at amortized cost. Under ASC 326, the Company is required to use an allowance approach when recognizing credit loss for its Available-For-Sale (“AFS”) debt securities. This is measured as the difference between the investment security’s amortized cost basis and the amount expected to be collected over the investment security’s lifetime. Specifically, the length of time the security has been in an unrealized loss position will no longer be used to determine whether a credit loss exists. Impairment must be evaluated at the individual security level during each reporting period, through a comparison of the present value of expected cash flows from the security with the amortized cost basis of the security.
Previous report
The Company conducts its assessment at the individual security level. When an AFS investment security is considered impaired, the Company determines whether the decline is credit loss related or due to other factors. To evaluate the nature of the impairment, the Company compares, at the reporting date, the present value of future cash flows expected to be received to the amortized cost basis. An impairment more than the calculated allowance related to credit losses is then recorded through other comprehensive income in equity, net of applicable taxes.
Previous report
AFS investment securities issued by U.S. government agencies or U.S. government sponsored enterprises carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Municipal bonds are considered to have issuer(s) of high credit quality (rated A or higher) and the decline in fair value is due to changes in interest rates and other market conditions.
Previous report
Corporate securities are non-rated investments that are booked as a debt security where rating agencies do not provide a rating. The absence of a rating does not imply substandard quality. Non-rated corporate securities may be purchased from issuers operating in and around the Company’s operating footprint.
Previous report
*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
Previous report
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.
Previous report
Deferred Income Taxes. Deferred income taxes are recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities based on enacted tax rates expected to be in effect when such amounts are realized or settled. Deferred tax assets are recognized only to the extent that it is more likely than not that such an amount will be realized based on consideration of available evidence.
Previous report
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. To the extent that current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. We recognize a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination presumed to occur. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The judgment about the level of future taxable income is inherently subjective and is reviewed on a continual basis as regulatory and business factors change.
Reworded paragraphs (34)
Previous wording
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. Net income for the three-month periods ended March 31, 2024 and 2023, totaled $3,000 and $435,000, respectively. The decrease was primarily due to the $726,000 increase in interest expense and the $211,000 increase in provision for credit loss that were only partially offset by a $120,000 increase in interest income and a $318,000 decrease in tax expense.
Current wording
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 reported a net loss of $201,000 for the six-month period ended June 30, 2024 compared to net income of $710,000 for the same period in 2023. The decrease was primarily due to the $917,000 increase in interest expense on short-term borrowings, a $764,000 increase in interest expense on deposits and a $609,000 increase in the provision for credit losses on loans, partially offset by an increase of $517,000 in loan interest income and fees, a $402,000 increase in interest on deposits with banks and a $532,000 decrease in the provision for income taxes. The increase in interest expense on deposits was driven by the higher rate and balances in money market deposits. The increase in interest on borrowings was driven by an increase in short-term borrowings due to the elevated level of deposit runoff in 2023. The higher interest expense was partially offset by the increase in loan interest income due to higher yields on loans for the first half of 2024 and resulted in a decrease in net interest income of $935,000 for the six-months ended June 30, 2024, versus the same period last year. Total interest income increased $746,000 to $7.3 million for the six-month period ended June 30, 2024, as compared to the same period in 2023. This resulted primarily from a 0.61% increase in the yield on loans that more than offset the $2.0 million, or 1.07% decline in average total loan balances.
Previous wording
Total assets increased to $369.9 million on March 31, 2024, an increase of $18.1 million from December 31, 2023. Cash and cash equivalents increased by $27.4 million or 179.69%, during the first three months of 2024. The Bank’s loan portfolio increased by $1.8 million or 1.01% and investment securities available for sale declined by $10.7 million or 7.67% over the same period. The Company’s allowance for credit losses was $2.04 million as of March 31, 2024, compared to $2.16 million at December 31, 2023, a decrease of $122,000 or 5.66%. Total deposits increased $9.2 million, or 3.05%, during the first three months of 2024 and short-term borrowings increased by $10.0 million or 33.33%. Shareholder’s equity was $18.1 million on March 31, 2024, a $1.2 million or 6.19% decrease, as compared to $19.3 million on December 31, 2023. The decrease was primarily due to unrealized losses, net of taxes, on securities available for sale amounting to $19.3 million on March 31, 2024, compared to $18.4 million at December 31, 2023. The Company has strong liquidity and capital positions that provide ample capacity for future growth. The Bank’s total regulatory capital to risk weighted assets were 18.30% on March 31, 2024, as compared to 18.40% on December 31, 2023.
Current wording
Total assets increased to $355.7 million on June 30, 2024, an increase of $3.9 million from December 31, 2023. Cash and cash equivalents increased by $1.5 million or 10.14%, during the first six months of 2024. The Bank’s loan portfolio increased by $24.7 million or 14.20% and investment securities available for sale declined by $22.2 million or 15.96% over the same period. The Company’s allowance for credit losses was $2.63 million as of June 30, 2024, compared to $2.16 million at December 31, 2023, an increase of $468,000 or 21.70%. Total deposits increased $5.8 million, or 1.93%, during the first six months of 2024 and short-term borrowings were unchanged at $30.0 million on June 30, 2024 and at year end 2023. Shareholder’s equity was $17.5 million on June 30, 2024, a $1.9 million or 9.59% decrease, as compared to $19.3 million on December 31, 2023. The decrease was primarily due to unrealized losses, net of taxes, on securities available for sale amounting to $19.5 million on June 30, 2024, compared to $18.4 million at December 31, 2023. The Company has strong liquidity and capital positions that provide ample capacity for future growth. The Bank’s total regulatory capital to risk weighted assets were 16.84% on June 30, 2024, as compared to 18.40% on December 31, 2023.
Previous wording
Return on average assets for the three-month period ended March 31, 2024, was 0.00% compared to 0.47% for the three-month period ended March 31, 2023. Lower net income partially offset by a lower average asset balance primarily drove the lower return on average assets for the three-month period ended March 31, 2024, when compared to
Current wording
Return on average assets for the three- and six-month periods ended June 30, 2024, was (0.22)% and (0.11)% compared to 0.31% and 0.39% for the three- and six-month periods ended June 30, 2023, respectively. The current period net loss and a higher average asset balance primarily drove the lower return on average assets for the three-month periods ended June 30, 2024, when compared to the same period in 2023. Return on average equity for the three-month
Previous wording
the same period in 2023. Return on average equity for the three-month period ended March 31, 2024, was 0.06% compared to 9.9% for the three-month period ended March 31, 2023. Lower net income and a higher average equity balance primarily drove the lower return on average equity for the three-month period ended March 31, 2024, compared to the same periods in 2023.
Current wording
period ended June 30, 2024, was (4.72)% compared to 5.88% for the three-month period ended June 30, 2023. The current period net loss and a lower average equity balance primarily drove the lower return on average equity for the three-month period ended June 30, 2024, compared to the same periods in 2023.
Previous wording
The book value per share of Bancorp’s common stock was $6.28 on March 31, 2024, as compared to $6.36 per share on March 31, 2023. The decrease primarily resulted from the unrealized losses on the Company’s available for sale securities and the higher level of interest rates in 2024.
Current wording
The book value per share of Bancorp’s common stock was $6.04 on June 30, 2024, as compared to $6.01 per share on June 30, 2023. The increase primarily resulted from the lower unrealized losses on the Company’s available for sale securities of $19.5 million at June 30, 2024 compared to $20.2 million at June 30, 2023.
Previous wording
At March 31, 2024, the Bank remained above all “well-capitalized” regulatory requirement levels. The Bank’s tier 1 risk-based capital ratio was 17.14% at March 31, 2024, compared to 17.37% at December 31, 2023.
Current wording
At June 30, 2024, the Bank remained above all “well-capitalized” regulatory requirement levels. The Bank’s tier 1 risk-based capital ratio was 15.59% at June 30, 2024, compared to 17.37% at December 31, 2023.
Previous wording
Net income attributable to common stockholders for the three-month period ended March 31, 2024, was $3,000, or $0.00 per basic and diluted common share compared to $435,000, or $0.15 per basic and diluted common share for the same period of 2023. The results for the three-month period ended March 31, 2024, were lower than the same period of 2023 resulting primarily from a $431,000 increase in interest expense on short-term borrowings, a $295,000 increase in interest expense on deposits and a $211,000 increase in the provision for credit losses on loans, partially offset by an increase of $128,000 in loan interest income and fees and a $318,000 decrease in the provision for income taxes. The Company’s need to defend its deposit base as well as grow interest-earning asset balances necessitated a strategic change in direction.
Current wording
Net loss attributable to common stockholders for the three-month period ended June 30, 2024, was $204,000, or $0.07 per basic and diluted common share compared to net income of $276,000, or $0.10 per basic and diluted common share for the same period of 2023. The results for the three-month period ended June 30, 2024, were lower than the same period of 2023 resulting primarily from a $485,000, or 1,276.32%, increase in interest expense on short-term borrowings, a $469,000, or 407.83%, increase in interest expense on deposits and a $399,000, or 314.17%, increase in the provision for credit losses on loans, partially offset by an increase of $390,000, or 18.27%, in loan interest income and fees, a $381,000, or 286.47%, increase in interest on deposits with banks and a $214,000, or 856.00%, decrease in the provision for income taxes. The Company’s need to defend its deposit base as well as grow interest-earning asset balances necessitated a strategic change in direction.
Previous wording
Total interest income for the first quarter of 2024 increased $120,000, or 3.65% when compared to the same period in 2023, from $3.3 million in 2023 to $3.4 million in 2024. The primary driver of the increase was a $128,000, or 6.13%, increase in interest and fees on loans due to higher rates and $19,000 increase in interest on deposits with banks and federal funds that were partially offset by a $27,000 decrease in interest and dividends on investment securities due to maturities subsequent to the first quarter of 2023.
Current wording
Total interest income increased $746,000 for the six-month period ended June 30, 2024, when compared to the same period in 2023 from $6.6 million in 2023 to $7.3 million, an increase of 11.38%. The primary driver of the increase was an increase of $517,000, or 12.24% increase in interest and fees on loans due to higher rates and $402,000, or 110.14%, increase in interest on deposits with banks and federal funds that were partially offset by a $173,000, or 8.81%, decrease in interest and dividends on investment securities due to maturities.
Previous wording
Interest expense for the first quarter of 2024 increased $726,000 from $107,000 for the same period in 2023 to $833,000, an increase of 678.50%. The increase was attributable to higher balances and rates on money market deposits and short-term borrowings.
Current wording
Interest expense for the second quarter of 2024 increased $954,000 from $153,000 for the same period in 2023 to $1,107,000, an increase of 623.53%. The increase was attributable to higher balances and rates on money market deposits and short-term borrowings. Interest expense increased $1.7 million for the six month period ended June 30, 2024, from $260,000 for the same period in 2023 to $1.9 million, an increase of 646.54%.
Previous wording
The average balance of interest-earning assets decreased $16.3 million while the yield increased by 0.26% to 3.78% from 3.52%, when comparing the three-month periods ending March 31, 2024, and 2023, respectively. The average balance of interest-bearing funds increased $8.1 million. The average balance of noninterest-bearing funds decreased $24.4 million, and the cost of funds increased 0.87%, to 0.99% from 0.12% when comparing the three-month periods ending March 31, 2024, and 2023, respectively.
Current wording
Net interest margin for the six-month period ended June 30, 2024, was 2.94%, compared to 3.42% for the same period of 2023. Higher average interest-bearing funds, lower average noninterest-bearing funds, and higher cost of funds partially offset by higher average yields on interest-earning assets were the primary drivers of year-over-year results. The average balance of interest-bearing funds and noninterest-bearing funds increased $17.3 million, or 8.23%, and decreased $21.7 million, or 15.98%, respectively, and the cost of funds increased 0.99%, when comparing the six-month periods ending June 30, 2023, and 2024. The average balance of interest-earning assets decreased $4.5 million, or 1.20%, while the yield increased 0.44% from 3.56% to 4.00%, when comparing the six-month periods ending June 30, 2023, and 2024, respectively.
Previous wording
Provision for Credit Losses on Loans. The Company recognized a provision of $169,000 compared to a $42,000 release for the three-month period ended March 31, 2024, and 2023, respectively. The increase for the three-month period ended March 31, 2024, when compared to the three-month period ended March 31, 2023, primarily reflects a $5.8 million decrease in the reservable balance of the loan portfolio and a $334,000 increase in net charge offs. As a result, the allowance for credit loss on loans was $2.04 million on March 31, 2024, representing 1.14% of total loans, compared to $2.16 million, or 1.17% of total loans on March 31, 2023.
Current wording
Provision for Credit Losses on Loans. The Company recognized a provision of $526,000 compared to $127,000 for the three-month period ended June 30, 2024, and 2023, respectively. The increase for the three-month period ended June 30, 2024, when compared to the three-month period ended June 30, 2023, primarily reflects a $20.9 million increase in the reservable balance of the loan portfolio and a 0.07% increase in the current expected credit loss percentage. The Company recognized a provision of allowance for credit losses on loans in the amount of $694,000 and $85,000 for the six-month periods ended June 30, 2024 and 2023, respectively. As a result, the allowance for credit loss on loans was $2.63 million on June 30, 2024, representing 1.30% of total loans, compared to $2.22 million, or 1.23% of total loans on June 30, 2023.
Previous wording
Noninterest Income. Noninterest income decreased to $229,000 for the three-month period ended March 31, 2024, from $245,000 for the corresponding period in 2023, a decrease of $16,000, or 6.53%. The decrease was primarily due to decreases in other fees and commissions.
Current wording
Noninterest Income. Noninterest income increased to $241,000 for the three-month period ended June 30, 2024, from $239,000 for the corresponding period in 2023, an increase of $2,000, or 0.84%. Noninterest income decreased $14,000 to $471,000 for the six-month period ended June 30, 2024, from $485,000 for the corresponding period in 2023. The decrease was primarily due to decreases in other fees and commissions.
Previous wording
Income Taxes. During the three-month period ended March 31, 2024, the Company recorded an income tax benefit of $232,000 compared to an expense of $86,000 for the same period in 2023, a $318,000, or 369.77% decrease. The resulting effective tax rate was 101.31% for the first quarter of 2024 compared to an effective tax rate of 16.51% for the first quarter of 2023. The current year’s income tax benefit includes forecasted tax benefit of $145,000 for the current period and $87,000 associated with amended Maryland tax returns for tax years 2022 and 2021. The current period benefit is the result of pre-tax income containing a lower proportion of taxable income compared to the prior year period.
Current wording
Income Taxes. During the three-month period ended June 30, 2024, the Company recorded an income tax benefit of $189,000 compared to an expense of $25,000 for the same period in 2023, a $214,000, or 856.00% decrease. The current quarter’s income tax benefit includes forecasted tax benefit of $102,000 for the current period and $87,000 associated with amended Maryland tax returns for tax years 2022 and 2021. The current period benefit is the result of pre-tax loss containing a lower proportion of taxable income compared to the pre-tax income for the prior year period. For the six-month period ended June 30, 2024, the Company recorded income tax benefit of $420,000 compared to $112,000 expense for the same period in 2023, a $532,000, or 475% increase. The year-to-date income tax benefit includes forecasted tax benefit of $333,000 for the current period loss and $87,000 associated with amended Maryland tax returns for tax years 2022 and 2021. The tax benefit for year-to-date June 30, 2024 is the result of pre-tax loss containing a lower proportion of taxable income compared to the pre-tax income for the prior year period.
Previous wording
Comprehensive Income (Loss). In accordance with regulatory requirements, the Company reports comprehensive income (loss) in its financial statements. Comprehensive income (loss) consists of the Company’s net income, adjusted for unrealized gains and losses on the Bank’s portfolio of investment securities. For the first quarter of 2024, the comprehensive loss, net of tax, totaled $0.9 million compared to income in the amount of $2.4 million for the same period in 2023. The decrease in comprehensive income was due to an increase in unrealized losses on securities for the period ended March 31, 2024 compared to a decrease in unrealized losses on securities for the comparable prior year period.
Current wording
Comprehensive Income (Loss). In accordance with regulatory requirements, the Company reports comprehensive income (loss) in its financial statements. Comprehensive income (loss) consists of the Company’s net income, adjusted for unrealized gains and losses on the Bank’s portfolio of investment securities. For the second quarter of 2024, the comprehensive loss, net of tax, totaled $0.4 million compared to comprehensive loss in the amount of $0.7 million for the same period in 2023. The $0.3 million decrease in comprehensive loss was due to a $0.8 million decrease in unrealized losses on securities for the period ended June 30, 2024 compared to the amount of unrealized losses on securities for the comparable prior year period which was partially offset by the $0.5 million decrease in net income for the second quarter of 2024 versus the same period of 2023. For the six months ended June 30, 2024, comprehensive loss, net of tax, totaled $1.3 million compared to comprehensive income, net of tax, in the amount of $1.7 million. The $3.0 million decline in comprehensive income for the six-months ended June 30, 2024 versus the comparable period in 2023, was attributable to the $2.1 million increase in the amount of unrealized loss on securities and the $0.9 million decline in net income for the 2024 period compared to the 2023 period.
Previous wording
General. The Company’s assets increased to $369.9 million at March 31, 2024 from $351.8 million at December 31, 2023, an increase of $18.1 million or 5.13%, primarily due to a $27.4 million increase in cash and cash equivalents, a $10.7 million decrease in investment securities available for sale, and a $1.8 million increase in loans, net. Cash and cash equivalents as of March 31, 2024, totaled $42.6** million, an increase of $27.4 million, or 179.69% from $15.2 million on December 31, 2023. Investment securities available for sale as of March 31, 2024, totaled $128.7 **million, a decrease of $10.7 million, or 7.67% from $139.4 million on December 31, 2023. Loans, net totaled $175.9 million at March 31, 2024, an increase of $1.8 million or 1.01%, from $174.2 million at December 31, 2023. The increase was primarily attributable to increases in construction and commercial and industrial loans partially offset by decreases in automobile and single-family residential loans.
Current wording
General. The Company’s assets increased to $355.7 million at June 30, 2024 from $351.8 million at December 31, 2023, an increase of $3.9 million or 1.11%, primarily due to a $1.5 million increase in cash and cash equivalents, a $22.2 million decrease in investment securities available for sale, and a $24.7 million increase in loans, net. Cash and cash equivalents as of June 30, 2024, totaled $16.8** **million, an increase of $1.5 million, or 10.14% from $15.2 million on
Previous wording
A loan is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are
Current wording
A loan is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the fair value of the collateral for collateral dependent loans and at the present value of expected future cash flows using the loans’ effective interest rates for loans that are not collateral dependent.
Previous wording
At March 31, 2024, impaired loans totaled $0.4 million, net of specific reserves. Included in the impaired loans total was $0.4 million in loans classified as nonaccrual loans. At March 31, 2024, impaired loans included restructured loans to borrowers with financial difficulty totaling $29,000. Borrowers under all other restructured loans are paying in accordance with the terms of the modified loan agreement and have been placed on accrual status after a period of performance with the restructured terms.
Current wording
At June 30, 2024, impaired loans totaled $0.3 million, net of specific reserves. Included in the impaired loans total was $0.3 million in loans classified as nonaccrual loans. At June 30, 2024, impaired loans included restructured loans to borrowers with financial difficulty totaling $28,000. Borrowers under all other restructured loans are paying in accordance with the terms of the modified loan agreement and have been placed on accrual status after a period of performance with the restructured terms.
Previous wording
Deposits as of March 31, 2024, totaled $309.2 million, an increase of $9.1 million, or 3.05%, from $300.1 million on December 31, 2023. Demand deposits as of March 31, 2024 totaled $115.2 million, a decrease of $1.8 million, or 1.50% from $116.9 million at December 31, 2023. Interest-bearing checking accounts as of March 31, 2024 totaled $26.0 million, a decrease of $2.6 million, or 9.07% from $28.6 million at December 31, 2023. Savings accounts as of March 31, 2024 totaled $89.7 million, a decrease of $3.4 million, or 3.63%, from $93.1 million at December 31, 2023. Money market accounts as of March 31, 2024 totaled $46.7 million, an increase of $19.8 million, or 73.95%, from $26.8 million at December 31, 2023. Time deposits under $100,000 totaled $19.9 million on March 31, 2024, a $2.2 million or a 10.08% decrease from $22.1 million at December 31, 2023. Time deposits over $100,000 totaled $11.8 million on March 31, 2024, a $0.7 million, or 5.81% decrease from $12.5 million at December 31, 2023.
Current wording
Deposits as of June 30, 2024, totaled $305.9 million, an increase of $5.8 million, or 1.93%, from $300.1 million on December 31, 2023. Demand deposits as of June 30, 2024 totaled $109.6 million, a decrease of $7.3 million, or 6.24% from $116.9 million at December 31, 2023. Interest-bearing checking accounts as of June 30, 2024 totaled $25.3 million, a decrease of $3.3 million, or 11.54% from $28.6 million at December 31, 2023. Savings accounts as of June 30, 2024 totaled $81.6 million, a decrease of $11.5 million, or 12.40%, from $93.1 million at December 31, 2023. Money market accounts as of June 30, 2024 totaled $61.4 million, an increase of $34.6 million, or 128.97%, from $26.8 million at December 31, 2023. Time deposits of $250,000 or less totaled $26.6 million on June 30, 2024, a $5.6 million or a 17.28% decrease from $32.1 million at December 31, 2023. Time deposits over $250,000 totaled $1.4 million on June 30, 2024, a $1.1 million, or 44.78% decrease from $2.5 million at December 31, 2023.
Previous wording
For the three months ended March 31, 2024, the Bank accrued $69,000 for its projected 401(k) match contribution as well as other profit sharing benefits.
Current wording
For the six months ended June 30, 2024, the Bank accrued $137,000 for its projected 401(k) match contribution as well as other profit sharing benefits.
Previous wording
Our primary market risk is interest rate fluctuation. Interest rate risk results primarily from the traditional banking activities in which the Bank engages, such as gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences affect the difference between the interest earned on our assets and the interest paid on liabilities. Our interest rate risk represents the level of exposure we have to fluctuations in interest rates and is primarily measured as the change in earnings and the theoretical market value of equity that results from changes in interest rates. The Investment Committee (“IC”) oversees our management of interest rate risk. The objective of the management of interest rate risk is to maximize stockholder value, enhance profitability and increase capital, serve customer and community needs, and protect the Company from any adverse material financial consequences associated with changes in interest rate risk.
Current wording
Our primary market risk is interest rate fluctuation. Interest rate risk results primarily from the traditional banking activities in which the Bank engages, such as gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences affect the difference between the interest earned on our assets and the interest paid on liabilities. Our interest rate risk represents the level of exposure we have to fluctuations in interest rates and is primarily measured as the change in earnings and the theoretical market value of equity that results from changes in interest rates. The Asset Liability Committee (“ALCO”) oversees our management of interest rate risk. The objective of the management of interest rate risk is to maximize stockholder value, enhance profitability and increase capital, serve customer and community needs, and protect the Company from any adverse material financial consequences associated with changes in interest rate risk.
Previous wording
The Company’s Board of Directors has established a comprehensive interest rate risk management policy, which is administered by our IC. The policy establishes limits on risk, which are quantitative measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital (a measure of economic value of equity or “EVE” at risk) resulting from a hypothetical change in U.S. Treasury interest rates. We measure the potential adverse impacts that changing interest rates may have on our short-term earnings, long-term value, and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures optionality factors such as call features and interest rate caps and floors embedded in investment and loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology we employ. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan customers’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products.
Current wording
The Company’s Board of Directors has established a comprehensive interest rate risk management policy, which is administered by our ALCO. The policy establishes limits on risk, which are quantitative measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital (a measure of economic value of equity or “EVE” at risk) resulting from a hypothetical change in U.S. Treasury interest rates. We measure the potential adverse impacts that changing interest rates may have on our short-term earnings, long-term value, and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures optionality factors such as call features and interest rate caps and floors embedded in investment and loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology we employ. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan customers’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products.
Previous wording
We prepare a current base case and alternative simulations at least once a quarter and report the analysis to the IC and Board of Directors. In addition, more frequent forecasts are produced when the direction or degree of change in interest rates are particularly uncertain to evaluate the impact of balance sheet strategies or when other business conditions so dictate.
Current wording
We prepare a current base case and alternative simulations at least once a quarter and report the analysis to the ALCO and Board of Directors. In addition, more frequent forecasts are produced when the direction or degree of change in interest rates are particularly uncertain to evaluate the impact of balance sheet strategies or when other business conditions so dictate.
Previous wording
At March 31, 2024, the simulation analysis indicated that the Bank is in an asset sensitive position. Management strives to optimize the level of higher costing fixed rate funding instruments, while seeking to increase assets that are more fluid in their repricing. An asset sensitive position, theoretically, is favorable in a rising rate environment since more assets than liabilities will re-price in a given time frame as interest rates rise. Similarly, a liability sensitive position, theoretically, is favorable in a declining interest rate environment since more liabilities than assets will re-price in a given time frame as interest rates decline. Management works to maintain a consistent spread between yields on assets and costs of deposits and borrowings, regardless of the direction of interest rates.
Current wording
price in a given time frame as interest rates rise. Similarly, a liability sensitive position, theoretically, is favorable in a declining interest rate environment since more liabilities than assets will re-price in a given time frame as interest rates decline. Management works to maintain a consistent spread between yields on assets and costs of deposits and borrowings, regardless of the direction of interest rates.
Previous wording
The foregoing analysis assumes that the Company’s assets and liabilities move with rates at their earliest repricing opportunities based on final maturity, while considering optionality such as call features, where applicable. Certificates of deposit and IRA accounts are presumed to be repriced at maturity. NOW savings accounts are assumed to be repriced within three-months although it is the Company’s experience that such accounts may be less sensitive to changes in market rates.
Current wording
The foregoing analysis assumes that the Company’s assets and liabilities move with rates at their earliest repricing opportunities based on final maturity, while considering optionality such as call features, where applicable. Certificates of deposit and IRA accounts are presumed to be repriced at maturity. NOW and savings accounts are assumed to be repriced within three months although it is the Company’s experience that such accounts may be less sensitive to changes in market rates.
Previous wording
As shown above, measures of net interest income at risk were more favorable in up-rate scenarios and less favorable in down-rate scenarios on March 31, 2024 than on March 31, 2023 over a 12-month modeling period. These measures remained within prescribed policy limits in the up and down interest rate scenarios.
Current wording
As shown above, measures of net interest income at risk were slightly more favorable in up-rate scenarios and in down-rate scenarios on June 30, 2024 than on June 30, 2023 over a 12-month modeling period. These measures remained within prescribed policy limits in the up and down interest rate scenarios.
Previous wording
Inasmuch as a large portion of the Company’s deposits are non-interest bearing, in an increasing interest rate environment the Company’s interest income increases at a proportionally greater rate than its total interest expense, thereby resulting in higher net interest income. Conversely, in a declining interest rate environment the decreases in the Company’s interest income will be greater than decreases in its already low interest expense, thereby resulting in lower net interest income. In a rising interest rate environment, the Company is positioned to generate more economic value of equity as asset values rise faster than funding sources because the liabilities reprice much slower than our assets, especially considering our interest-earning assets are much greater than our interest-bearing liabilities. Conversely, the Company’s economic value of equity declines in a falling interest rate environment as the majority of our liabilities have a longer duration than the Company’s assets and cannot continue to decrease much from their current low levels. Thus, the economic value of equity declines.
Current wording
In an increasing interest rate environment, the Company’s interest income changes at a rate consistent with changes in its total interest expense, thereby resulting in a balanced profile, with net interest income exhibiting minor changes in rising rate scenarios. Conversely, in a declining interest rate environment the decreases in the Company’s interest income will be greater than decreases in its already low interest expense, thereby resulting in lower net interest income. In a rising interest rate environment, the Company is positioned to generate less economic value of equity as the duration of the assets is longer than the duration of the liabilities, with liabilities repricing more quickly than our assets. Conversely, the Company’s economic value of equity increases in a falling interest rate environment as the longer duration of the assets benefits the Company in falling rate scenarios. Thus, the economic value of equity increases.
Previous wording
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
Current wording
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
Previous wording
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, 2024, totaled $42.6 million, an increase of $27.4 million, or 179.69% from $15.2 million at December 31, 2023.
Current wording
from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of June 30, 2024, totaled $16.8 million, an increase of $1.5 million, or 10.14% from $15.2 million at December 31, 2023.
Previous wording
As of March 31, 2024, the Bank was permitted to draw on an $88.0 million line of credit from the FHLB of Atlanta. Short-term borrowings under the line totaled $0 and $20.0 million at March 31, 2024 and December 31, 2023, respectively. Borrowings under the line are secured by a floating lien on the Bank’s residential mortgage loans and investment securities. As of March 31, 2024, the Bank had $40.0 million in outstanding short-term borrowings from the Federal Reserve Bank (“FRB”) under the Bank Term Funding Program (“BTFP”). At December 31, 2023, there was $10.0 million in short-term borrowings from the FRB. Borrowings under the line are secured by investment securities. As of March 31, 2024, no further advances are available under the BTFP as that program has been terminated by the FRB. The Bank also has an unused line of credit through the Federal Reserve Discount Window that is limited to the amount of qualifying collateral pledged, which at March 31, 2024, totaled $0.
Current wording
As of June 30, 2024, the Bank was permitted to draw on a $92.5 million line of credit from the FHLB of Atlanta. Short-term borrowings under the line totaled $0 and $20.0 million at June 30, 2024 and December 31, 2023, respectively. Borrowings under the line are secured by a floating lien on the Bank’s residential mortgage loans and investment securities. As of June 30, 2024, the Bank had $30.0 million in outstanding short-term borrowings from the Federal Reserve Bank (“FRB”) under the Bank Term Funding Program (“BTFP”). At December 31, 2023, there was $10.0 million in short-term borrowings outstanding from the FRB. Borrowings under the line are secured by investment securities. As of June 30, 2024, no further advances are available under the BTFP as that program has been terminated by the FRB. The Bank also has an unused line of credit through the Federal Reserve Discount Window that is limited to the amount of qualifying collateral pledged, which at June 30, 2024, totaled $0.
Previous wording
In addition, the Bank has two unsecured federal funds lines of credit in the amount of $9.0 million and $8.0 million, of which $0 was outstanding as of March 31, 2024.
Current wording
In addition, the Bank has two unsecured federal funds lines of credit in the amount of $9.0 million and $8.0 million, respectively, of which $0 was outstanding as of June 30, 2024.
Previous wording
The Company’s stockholders’ equity decreased $1.2 million, or 6.19% during the three-month period ended March 31, 2024. The decrease was primarily due to an increase in the after-tax net unrealized holding loss on securities available for sale in the amount of $0.9 million and the $287,000 in dividends paid in the quarter ended March 31, 2024.
Current wording
The Company’s stockholders’ equity decreased $1.9 million, or 9.59% during the six-month period ended June 30, 2024. The decrease was primarily due to an increase in the after-tax net unrealized holding loss on securities available for sale in the amount of $1.1 million, the $577,000 in dividends paid and the $201,000 net loss in the period ended June 30, 2024.
Previous wording
The rules also revise the definition and calculation of Tier 1 capital, Total Capital, and risk-weighted assets. The Common Equity Tier 1, Tier 1 and Total Capital ratios are calculated by dividing the respective capital amounts by
Current wording
The rules also revised the definition and calculation of Tier 1 capital, Total Capital, and risk-weighted assets. The Common Equity Tier 1, Tier 1 and Total Capital ratios are calculated by dividing the respective capital amounts by
Previous wording
The regulations impose several 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. In addition, there are requirements to maintain a capital conservation buffer which raised the minimum required common equity Tier 1 capital ratio to 7.00%, the Tier 1 capital ratio to 8.50% and the total capital ratio to 10.50%. At March 31, 2024, the Bank was in full compliance with these guidelines with a Tier 1 leverage ratio of 10.43%, a Tier 1 risk-based capital ratio of 17.14%, a common equity Tier 1 risk-based capital ratio of 17.14%, and a total risk-based capital ratio of 18.30%. The Company’s capital amounts and ratios at March 31, 2024 and December 31, 2023 were as follows:
Current wording
The regulations impose several 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. In addition, there are requirements to maintain a capital conservation buffer which raised the minimum required common equity Tier 1 capital ratio to 7.00%, the Tier 1 capital ratio to 8.50% and the total capital ratio to 10.50%. At June 30, 2024, the Bank was in full compliance with these guidelines with a Tier 1 leverage ratio of 10.10%, a Tier 1 risk-based capital ratio of 15.59%, a common equity Tier 1 risk-based capital ratio of 15.59%, and a total risk-based capital ratio of 16.84%. The Company’s capital amounts and ratios at June 30, 2024 and December 31, 2023 were as follows:
Previous wording
Allowance for Credit Losses. The allowance for credit losses (“ACL”) consists of the allowance for credit losses and the reserve for unfunded commitments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASC 326”). The ASC, as amended, is intended to provide financial statement users with more decision useful information about the expected credit losses on financial instruments that are not accounted for at fair value through nt income.
Current wording
Allowance for Credit Losses. The allowance for credit losses (“ACL”) consists of the allowance for credit losses and the reserve for unfunded commitments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASC 326”). The ASC, as amended, is intended to provide financial statement users with more decision useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Total interest income for the second quarter of 2024 increased $626,000, or 19.16% when compared to the same period in 2023, from $3.3 million in 2023 to $3.9 million in 2024. The primary driver of the increase was a $390,000, or 18.27%, increase in interest and fees on loans due to higher rates and $381,000, or 286.47%, increase in
Current report — wording carried from elsewhere
interest on deposits with banks and federal funds that were partially offset by a $145,000, or 14.51%, decrease in interest and dividends on investment securities due to maturities subsequent to the first quarter of 2023.
Current report — wording carried from elsewhere
December 31, 2023. Investment securities available for sale as of June 30, 2024, totaled $117.2** **million, a decrease of $22.2 million, or 15.96% from $139.4 million on December 31, 2023. Loans, net totaled $198.9 million at June 30, 2024, an increase of $24.7 million or 14.20%, from $174.2 million at December 31, 2023. The increase was primarily attributable to increases in construction, single-family residential, commercial real estate and commercial and industrial loans partially offset by decreases in automobile loans.
Current report — wording carried from elsewhere
At June 30, 2024, the simulation analysis indicated that the Bank is in an asset sensitive position in all falling rate scenarios and the +100 bp shock scenario, and is slightly liability sensitive in the +200, +300, and +400 bp shock scenarios. Overall, rising rate scenarios indicate a fairly balanced profile. Management strives to optimize the level of higher costing fixed rate funding instruments, while seeking to increase assets that are more fluid in their repricing. An asset sensitive position, theoretically, is favorable in a rising rate environment since more assets than liabilities will re-
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
The increase in interest expense on deposits was driven by the higher rate and balances in money market deposits. The increase in interest on borrowings was driven by a $40.0 million increase in short-term borrowings due to the elevated level of deposit runoff in 2023. The higher interest expense was partially offset by the $128,000 increase in loan interest income and resulted in a decrease in net interest income of $606,000 for the three-months ended March 31, 2024 versus the same period last year.
Previous report — wording carried elsewhere
Total interest income increased $120,000 to $3.4 million for the three-month period ended March 31, 2024, as compared to the same period in 2023. This resulted primarily from a 0.48% increase in the yield on loans that more than offset the $8.9 million, or 4.80% decline in average total loan balances.
Previous report — wording carried elsewhere
measured based on the fair value of the collateral for collateral dependent loans and at the present value of expected future cash flows using the loans’ effective interest rates for loans that are not collateral dependent.