-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JAhcIZbP3XZFWfOk1CwFSnxAsNTHQFUyIku3+1BYW4KGITcmCV5+FZKrRVufDoIe xOLhA9mZZldtfhXiKyEPkw== 0001024739-97-000176.txt : 19970415 0001024739-97-000176.hdr.sgml : 19970415 ACCESSION NUMBER: 0001024739-97-000176 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19970414 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLEN BURNIE BANCORP CENTRAL INDEX KEY: 0000890066 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 521782444 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-49890 FILM NUMBER: 97580055 BUSINESS ADDRESS: STREET 1: 101 CRAIN HIGHWAY SE CITY: GLEN BURNIE STATE: MD ZIP: 21061 BUSINESS PHONE: 4107660090 MAIL ADDRESS: STREET 1: 101 CRAIN HWY SE CITY: GLEN BURNIE STATE: MD ZIP: 21061 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from . . . . . . . .to . . ......................... Commission file number ...............................................33-62278 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 Number 101 Crain Highway, S.E., Glen Burnie, MD 21061 - --------------------------------------- ---------------------- (Address of principal executive offices) Zip Code Registrant's telephone number, including area code 410-766-3300 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None - ---------------------- ----------------------------------------- Securities registered pursuant to section 12(g) of the Act: None ----------------------------------------------------------- (Title of class) 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 No X Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.|X| The aggregate market value of the voting stock held by non-affiliates of the registrant as of December 31, 1995 was $30,276,658, and as of February 28, 1997 was $22,980,308. The number of outstanding shares of the registrant's common stock as of December 31, 1995 was 872,838, and as of February 28, 1997 was 883,858. Page 1 of 131 Pages Exhibit Index is on Page 56. PART I ITEM 1. Business Glen Burnie Bancorp (the "Company") is a bank holding company organized in 1990 under the laws of the State of Maryland and located in Anne Arundel County, Maryland. It presently owns all outstanding shares of capital stock of The Bank of Glen Burnie (the "Bank"), a federally-insured commercial bank organized in 1949 under the laws of the State of Maryland, basically serving Anne Arundel County and surrounding areas. The Bank is engaged in the commercial and retail banking business as authorized by the banking statutes of the State of Maryland, including the receiving of demand and time deposits, and the making of loans to individuals, associations, partnerships and corporations. Real estate financing consists of residential first and second mortgage loans, home equity lines of credit and commercial mortgage loans. Commercial lending consists of both secured and unsecured loans. Deposits and Loans The Bank's deposit products include regular savings accounts (statements), money market deposit accounts, demand deposit accounts, NOW checking accounts, IRA accounts and certificates of deposit accounts. Variations in service charges, terms and interest rates are used to target specific markets. Retail loan products including mortgage loans, personal loans, consumer loans, overdraft protection, and loans secured by deposit accounts. Ancillary products and services include safe deposit boxes, money orders and travellers checks, night depositories, ACH transactions, wire transfers, automated teller machines, telephone banking, and a customer call center. The Bank actively solicits loan applications from small to medium size businesses. The Bank believes that this is a market in which a relatively small community bank has a competitive advantage in personal service and flexibility. The funds needed by the Bank to make loans are generated by deposit accounts maintained at the Bank. Total deposits at the Bank were $232,745,975 as of December 31, 1996. In addition, the Bank may borrow up to $26 million under a line of credit from The Federal Home Loan Bank of Atlanta. As of December 31, 1996, the Bank's "Tier 1" capital (consisting of stockholders' equity, excluding unrealized after tax net gain or loss on investment securities available for sale) was $18,321,565. Its ratio of Tier 1 capital to risk-based assets (12.9% as of December 31, 1996), total capital to risk-based assets (13.5% as of 2 December 31, 1996) and leverage ratio of Tier 1 capital to average total assets (6.6% as of December 31, 1996) exceed the minimum ratios required by the Federal Deposit Insurance Corporation ("FDIC"). Memorandum of Understanding In the Fall of 1995, the FDIC and the Maryland State Bank Commissioner (the "Commissioner") performed a routine examination of the Bank. Following the examination, the Bank, the FDIC and the Commissioner entered into a Memorandum of Understanding ("M.O.U.") effective June 13, 1996. The M.O.U. required the Bank to establish written programs to reduce classified assets and contingent liabilities and to report to the FDIC and the Commissioner quarterly on the status of such assets and liabilities, to collect or charge-off certain classified loans, to maintain ratios relating to capital and to delinquent and non-accrued loans, to provide the FDIC and the Commissioner with thirty days notice prior to dividend payments, to develop an internal loan review and grading system, policies for loan underwriting and administration, a strategic plan for improving operations and budgets, and policies and monitoring systems for liquidity and interest rate risk, to evaluate the allowance for loan and lease losses quarterly, to engage a chief lending officer, to cease any violations of law or regulations cited by the FDIC or the Commissioner, and to establish a committee of three directors to monitor compliance with the M.O.U. The Bank is in the process of finalizing the systems and policies required under the M.O.U., is continuing with the required periodic monitoring and notice requirements, and has completed the other requirements under the M.O.U. Should the Bank fail to comply with the provisions of the M.O.U., the FDIC or the Commissioner could assert greater control over the Bank's operations and impose penalties. Enforcement actions may include the issuance of formal and informal agreements, the imposition of civil money penalties and the issuance of a cease-and-desist order that can be judicially enforced. Neither the FDIC nor the Commissioner has sought to initiate any such measures. Recent Loan Loss Experience Involving Significant Borrowers During its 1995 fiscal year, the Bank had outstanding loans to Brian Davis, Oceanic Ltd., Inc. ("Oceanic"), McCafferty's Restaurant ("McCafferty's") and other entities affiliated with Mr. Davis aggregating approximately $5,804,000 (equalling approximately 28% of the Company's and its subsidiaries' consolidated revenues for such fiscal year). The Bank filed suit to recover amounts due under the Oceanic loans, alleging that documents evidencing security interests for many of the Oceanic loans were falsified by or on behalf of the borrower. Mr. Davis, Oceanic and McCafferty's have all filed bankruptcy 3 proceedings and significant recovery by the Bank is unlikely. As a result of the foregoing, approximately $4,533,000 of these loans have been charged-off. McCafferty's has brought a proceeding against the Bank seeking damages in connection with loans involving McCafferty's. See "Legal Proceedings." An equipment and automobile leasing company and its affiliates had approximately $8,610,000 in outstanding loans and leases during the Bank's 1995 fiscal year (equalling about 42% of the Company's and its subsidiaries' consolidated revenues for such fiscal year). The Bank has ceased approving new loans for these customers due to concerns about the quality of certain of the loans and leases. As of December 31, 1996 the aggregate outstanding balance of all loans and leases to these customers was approximately $6,218,000. The Bank does not believe that the loss of these customers has materially adversely affected its loan generation business, although the charge-offs in connection therewith adversely affected its 1995 net income and earnings per share. See "Management's Discussion and Analysis of Financial Condition and Results of Operation." Certain other customers hold secured commercial real estate loans. The outstanding principal amount of some of these loans exceeds ten percent (10%) of the consolidated revenues of the Company and its subsidiaries; however, the required annual debt service payments under each such loan does not exceed ten percent (10%) of the Company's consolidated revenues. The Company does not believe that the retirement of these loans or loss of such business, should it occur for any reason, would have a material adverse effect on the Bank's business. Strategic Plan In order to enhance its business and resolve certain of the problems it has faced as described above and pursuant to the M.O.U., the Bank has adopted a strategic plan (the "Strategic Plan"). The objectives of the Strategic Plan are to increase returns on average assets and average equity to set percentages within set time frames, improve the Bank's efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income), decrease delinquent loans and classified assets as a percentage of total loans within set time periods, increase the ratio of total loans to total assets within a set time period while maintaining and improving asset quality, increase total deposits to a set amount within a set time period, build capital to a set percentage of assets within set time periods while continuing to make dividend payments, maintain regulatory compliance and improve effectiveness of corporate 4 structure and communications. The Strategic Plan establishes strategies and action plans to enable the Company to meet these objectives. It is subject to review by the FDIC and the Commissioner. Competition The Bank faces competition from other community banks and financial institutions and larger intrastate and interstate banks and financial institutions (currently, twelve financial institutions operate within two miles of the Bank's headquarters). The Bank's interest rates, loan and deposit terms, and offered products and services are governed, to a large extent, by such competition. The Bank attempts to provide superior service within its community and to know and facilitate its customers. It seeks commercial relationships with small to medium size businesses who, it believes, would welcome personal service and flexibility. While the Company believes it is the sixth largest deposit holder in Anne Arundel County, Maryland, with an estimated 5.63% market share as of June 1995 (the latest date for which the Bank has relevant data available), it believes its greatest competition comes from smaller community banks which offer similar personalized services. Federal and State Regulation The Company, as a bank holding company, is subject to regulation under the Bank Holding Company Act and is registered with and subject to the supervision of the Federal Reserve Board and is subject to Federal Reserve Board regulation, examination, supervision and reporting requirements. The Company is required to furnish to the Federal Reserve Board annual and quarterly reports of its operations and such additional information as the Federal Reserve Board may require, and is subject to regular inspection by Federal Reserve Board examiners. Under the Bank Holding Company Act, the Company may not engage in any business other than managing or controlling banks or furnishing services to its subsidiaries, except that it may engage in certain activities which, in the opinion of the Federal Reserve Board, are so closely related to banking or to managing or controlling banks as to be a proper incident thereto. The Company is also prohibited, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company unless the company is engaged in such permitted activities. The Bank Holding Company Act also prohibits a bank holding company or any of its subsidiaries from acquiring voting shares or substantially all the assets of any bank holding company or bank, or from merging or consolidating with any other bank holding company, unless such acquisition is approved by the Federal Reserve Board. Under Maryland law, a 5 bank holding company is prohibited from acquiring control of any bank if, as a result of such acquisition, the bank holding company would control more than 30% of the total deposits of all depository institutions in the State of Maryland unless such limit is waived by the Commissioner. The Federal Reserve Board has adopted guidelines regarding the capital adequacy of bank holding companies, which require bank holding companies to maintain specified minimum ratios of capital to total assets and capital to risk-weighted assets. The Federal Reserve Board has also issued a policy statement expressing its view that a bank holding company should pay cash dividends only to the extent that the company's net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the company's capital needs, asset quality and overall financial condition. The Federal Reserve Board has the power to prohibit a bank holding company from paying dividends if it deems such payment to constitute an unsafe or unsound practice. The Company's primary source of income is the receipt of dividends from its subsidiaries. The Bank's ability to make such payments to the Company is subject to certain statutory and regulatory restrictions. Under Maryland law, Maryland banks may only pay dividends from undivided profits or, with the prior approval of the Commissioner, their surplus in excess of 100% of required capital stock. Every Maryland bank is prohibited from declaring dividends on its shares of common stock in excess of 90% of net earnings unless its surplus fund equals the amount of required capital stock. In addition, the Bank is prohibited by Federal statute from paying dividends or making other capital distributions that would cause the Bank to fail to meet its regulatory capital requirements. The FDIC also has the authority to prohibit the payment of dividends if it determines such payments to constitute unsafe or unsound banking practices. Banks are extensively regulated under both Federal and state law. The Bank, as a Maryland state chartered bank, is subject to primary supervision, periodic examination and regulation by the Commissioner and the FDIC. Although the Bank is not a member of the Federal Reserve System, it is nevertheless subject to certain regulations of the Federal Reserve Board. State and Federal statutes and regulations relate to many aspects of the Bank's operations, including reserves against deposits, loans, investments, transactions with affiliates, mergers and acquisitions, borrowings, dividends and locations of branch offices. The FDIC and the Commissioner regularly examine the operations of the Bank, which must file quarterly and annual reports with such agencies. Such requirements are intended for the protection of the Bank's depositors and not its stockholders. 6 The Bank is subject to various regulatory capital requirements administered by Federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. The Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off- balance sheet items as calculated under regulatory accounting principles. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. As of December 31, 1996, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios. There are no conditions or events since that notification that the Bank believes have changed the institution's category, although there can be no assurance that the Bank will continue to meet the minimum ratios necessary to maintain such categorization. The Company believes that it and the Bank are both currently in substantial compliance with all applicable Federal and state regulations. Statistical Information Set forth below is certain statistical information concerning the performance and financial position of the Bank for the indicated period. The information presented below should be read in conjunction with "Selected Financial Data", "Management's Discussion And Analysis of Financial Condition and Results of Operation" and "Financial Statements and Supplementary Data." 7 The following table provides information concerning average balances and net income, including rate and volume information, for each of the years indicated.
AVERAGE BALANCES, NET INTEREST INCOME AND RATE/VOLUME ANALYSIS (dollars in thousands) AVERAGE BALANCES YIELD RATE(2) ------------------------------- ---------------------------- 1995 1994 1993 1995 1994 1993 ---- ---- ---- ---- ---- ---- ASSETS Interest earning assets: Money market investments: Federal funds sold 2,416 2,799 3,807 5.75% 3.61% 2.78% Interest bearing deposits 1,526 415 171 5.57% 5.54% 2.92% Investment securities: U.S. Treasury securities and obligations of U.S. gov't agencies 40,263 38,430 39,328 6.43% 6.47% 6.80% Obligations of states and political subdivisions 21,479 20,240 18,404 8.54% 8.81% 9.22% All other investment securities 696 443 7.47% 6.55% - --------------------------------------------------------------------------------------------------------------------------- Total investments 66,380 62,327 61,710 7.08% 7.10% 7.26% Loans, net of unearned income Demand time and lease 28,559 29,232 31,315 8.95% 8.45% 8.25% Mortgage and construction 94,322 90,804 82,440 9.68% 9.73% 9.91% Installment and credit card 33,338 31,897 25,525 8.38% 8.75% 9.19% - --------------------------------------------------------------------------------------------------------------------------- Total gross loans(1) 156,219 151,933 139,280 9.27% 9.28% 9.40% - ---------------------------------------------------------------------------------------------------------------------------- Allowance for credit losses 2,766 2,762 2,139 - ---------------------------------------------------------------------------------------------------------------------------- Total Net loans 153,453 149,171 137,141 9.44% 9.45% 9.55% - ---------------------------------------------------------------------------------------------------------------------------- TOTAL INTEREST EARNING ASSETS 219,833 211,498 198,851 8.73% 8.76% 8.84% - ---------------------------------------------------------------------------------------------------------------------------- LIABILITIES Deposits Savings and NOW 68,957 78,067 70,744 3.17% 3.19% 3.50% Money market 29,081 35,301 36,251 3.19% 3.05% 3.34% Other time deposits 70,382 54,523 55,629 5.76% 4.48% 4.65% - ---------------------------------------------------------------------------------------------------------------------------- TOTAL INT-BEARING DEPOSITS 168,420 167,891 162,624 4.26% 3.58% 3.86% - ---------------------------------------------------------------------------------------------------------------------------- Noninterest-bearing deposits 41,500 39,585 35,730 Total deposits 209,920 207,476 198,354 3.42% 2.90% 3.16% Borrowed funds 1,549 1,573 1,010 5.75% 4.32% 2.28% NET MARGIN ON INT-EARN ASSETS 219,833 211,498 198,850 5.42% 5.88% 5.67% ============================================================================================================================
8 The following table provides income and expense information for the periods indicated.
INCOME/EXPENSE 1995 VS. 1994 -------------- ------------- INCREASE CHANGE DUE TO 1995 1994 1993 DECREASE RATE VOLUME ---- ---- ---- -------- ---- ------ ASSETS $ $ $ Interest earning assets: Money market investments: Federal funds sold 139 101 106 38 52 (14) Interest bearing deposits 85 23 5 62 0 62 Investment securities: U.S. Treasury securities and obligations of U.S. gov't agencies 2,587 2,488 2,676 99 (20) 119 Obligations of states and political subdivisions 1,835 1,783 1,696 52 (57) 109 All other investment securities 52 29 23 6 17 - -------------------------------------------------------------------------------------------------------- Total investments 4,698 4,424 4,483 274 (19) 293 Loans, net of unearned income Demand time and lease 2,557 2,469 2,582 88 145 (57) Mortgage and construction 9,135 8,834 8,168 301 (41) 342 Installment and credit card 2,795 2,791 2,347 4 (122) 126 - -------------------------------------------------------------------------------------------------------- Total gross loans(1) 14,487 14,094 13,097 393 (18) 411 - -------------------------------------------------------------------------------------------------------- TOTAL INTEREST EARNING ASSETS 19,185 18,518 17,580 667 (37) 704 - -------------------------------------------------------------------------------------------------------- LIABILITIES Deposits Savings and NOW 2,187 2,489 2,478 (302) (12) (290) Money market 929 1,076 1,212 (147) 43 (190) Other time deposits 4,057 2,444 2,587 1,613 902 711 - -------------------------------------------------------------------------------------------------------- TOTAL INT-BEARING DEPOSITS 7,173 6,009 6,277 1,164 933 231 - -------------------------------------------------------------------------------------------------------- Borrowed funds 89 68 23 21 22 (1) NET MARGIN ON INT-EARN ASSETS 11,923 12,441 11,280 (518) (992) 474 ========================================================================================================
1994 VS. 1993 ------------- INCREASE CHANGE DUE TO DECREASE RATE VOLUME -------- ---- ------ ASSETS $ $ $ Interest earning assets: Money market investments: Federal funds sold (5) 23 (28) Interest bearing 18 11 7 deposits Investment securities: U.S. Treasury securities and obligations of U.S. gov't agencies (188) (127) (61) Obligations of states and political subdivisions 87 (82) 169 All other investment securities 29 0 29 - -------------------------------------------------------------------- Total investments (59) (175) 116 Loans, net of unearned income Demand time and lease (113) 59 (172) Mortgage and construction 666 (163) 829 Installment and credit card 444 (142) 586 - -------------------------------------------------------------------- Total gross loans(1) 997 (246) 1,243 - -------------------------------------------------------------------- TOTAL INTEREST EARNING ASSETS 938 (421) 1,359 - -------------------------------------------------------------------- LIABILITIES Deposits Savings and NOW 11 (246) 257 Money market (136) (104) (32) Other time deposits (143) (92) (51) - -------------------------------------------------------------------- TOTAL INT-BEARING DEPOSITS (268) (442) 174 - -------------------------------------------------------------------- Borrowed funds 45 32 13 NET MARGIN ON INT-EARN ASSETS 1,161 (11) 1,172 ====================================================================
- ------------- (1) Non-accrual loans included (2) Tax equivalent basis 9 The following table provides yield information for the designated periods.
AVERAGE BALANCES, YIELDS AND RATES (dollars in thousands) For the Year Ended Dec. 31, 1995 For the Year Ended Dec. 31, 1994 -------------------------------- -------------------------------- ASSETS Avg. Bal. Inc./Exp. Yld/Rate(2) Avg. Bal. Inc./Exp. Yld/Rate(2) --------- --------- ----------- --------- --------- ----------- Interest earning assets Money market investments: Federal funds sold 2,416 139 5.75% 2,799 101 3.61% Interest bearing deposits 1,526 85 5.57% 415 23 5.54% Investment securities: U.S. Treasury securities and obligations of U.S. gov't agencies 40,263 2,587 6.43% 38,430 2,488 6.47% Obligations of States and political subdivisions 21,479 1,835 8.54% 20,240 1,783 8.81% - ------------------------------------------------------------------------------------------------------------------ All other investment securities 696 52 7.47% 443 29 6.55% Total Investments 66,380 4,698 7.08% 62,327 4,424 7.10% Loans, net of unearned income Demand, time and lease 28,559 2,557 8.95% 29,232 2,469 8.45% Mortgage and construction 94,322 9.135 9.68% 90,804 8,834 9.73% Installment and credit card 33,338 2,795 8.38% 31,897 2,791 8.75% - ------------------------------------------------------------------------------------------------------------------ Total gross loans (1) 156,219 14,487 9.27% 151,933 14,094 9.28% - ------------------------------------------------------------------------------------------------------------------ Allowance for credit losses 2,766 2,762 - ------------------------------------------------------------------------------------------------------------------ Total Net loans 153,453 14,487 9.44% 149,171 14,094 9.45% TOTAL INTEREST EARNING ASSETS 219,833 19,185 8.73% 211,498 18,518 8.76% Cash and due from banks 7,152 9,769 Other Assets 8,471 8,817 - ------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 235,456 19,185 8.15% 230,084 18,518 8.05% ================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Savings and NOW 68,957 2,187 3.17% 78,067 2,489 3.19% Money market 29,081 929 3.19% 35,301 1,076 3.05% - ------------------------------------------------------------------------------------------------------------------ Other time deposits 70,382 4,057 5.76% 54,523 2,444 4.48% - ------------------------------------------------------------------------------------------------------------------ TOTAL INT-BEARING DEPOSITS 168,420 7,173 4.26% 167,891 6,009 3.58% - ------------------------------------------------------------------------------------------------------------------ Noninterest-bearing deposits 41,500 39,585 Total deposits 209,920 7,173 3.42% 207,476 6,009 2.90% Borrowed funds 1,549 89 5.75% 1,573 68 4.32% Other liabilities 699 638 - ------------------------------------------------------------------------------------------------------------------ Stockholders' equity 23,288 20,395 - ------------------------------------------------------------------------------------------------------------------ Total liabilities and equity 235,456 7,262 3.08% 230,082 6,077 2.64% ================================================================================================================== NET MARGIN ON INT-EARN ASSETS 219,833 11,923 5.42% 211,498 12,441 5.88% ==================================================================================================================
ASSETS For the Year Ended Dec. 31, 1993 -------------------------------- Avg. Bal. Inc./Exp. Yld/Rate(2) Interest earning assets Money market investments: Federal funds sold 3,807 106 2.78% Interest bearing deposits 171 5 2.92% Investment securities: U.S. Treasury securities a obligations of U.S. gov't agencies 39,328 2,676 6.80% Obligations of States and political subdivisions 18,404 1,696 9.22% - -------------------------------------------------------------------- All other investment securit Total Investments 61,710 4,483 7.26% Loans, net of unearned income Demand, time and lease 31,315 2,582 8.25% Mortgage and construction 82,440 8,168 9.91% Installment and credit card 25,525 2,347 9.19% - -------------------------------------------------------------------- Total gross loans (1) 139,280 13,097 9.40% - -------------------------------------------------------------------- Allowance for credit loss 2,139 - -------------------------------------------------------------------- Total Net loans 137,141 13,097 9.55% TOTAL INTEREST EARNING ASSETS 198,851 17,580 8.84% Cash and due from banks 10,026 Other Assets 8,347 - -------------------------------------------------------------------- TOTAL ASSETS 217,224 17,580 8.09% ==================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Savings and NOW 70,744 2,478 3.50% Money market 36,251 1,212 3.34% - -------------------------------------------------------------------- Other time deposits 55,629 2,587 4.65% - -------------------------------------------------------------------- TOTAL INT-BEARING DEPOSITS 162,624 6,277 3.86% - -------------------------------------------------------------------- Noninterest-bearing deposits 35,730 Total deposits 198,354 6,277 3.16% Borrowed funds 1,010 23 2.28% Other liabilities 645 - -------------------------------------------------------------------- Stockholders' equity 17,215 - -------------------------------------------------------------------- Total liabilities and equity 217,224 6,300 2.90% ==================================================================== NET MARGIN ON INT-EARN ASSETS 198,850 11,280 5.67% ==================================================================== - ------------- (1) Non-accrual loans included (2) Tax equivalent basis 10 Time Deposit information is as follows: 1995 Time Deposits $100,000 or more maturity schedule (dollars in thousands) Three months or less 2,098 Over three through six months 1,893 Over six through 12 months 1,438 Over 12 months 4,416 ----- Total 9,845 ===== A summary of the consolidated investment securities is set forth below: Investment Securities (book value - in thousands)
1995 1994 1993 ---- ---- ---- U.S. Treasury securities 15,071 17,099 18,855 U.S. Government agencies and mortgage-backed 30,235 22,162 20,131 Obligations of states and political subdivisions 27,380 20,471 19,487 Other securities and stock 699 685 0 ------- ------ ------ TOTAL SECURITIES 73,385 60,417 58,473 ======= ====== ====== Maturities Book Value Wt. Avg. Yld. - ---------- ---------- ------------- U.S. Treasury securities Due within one year 3,499 5.32% Due over one to five years 9,252 5.89% Due over five to ten years 2,320 6.10% Due over ten years 0 0.00% ------- -----
Maturities Book Value Wt. Avg. Yld. - -------------------------------------------------------------------------------- Total U.S. Treasury securities 15,071 5.79% U.S. Government agencies and mortgage-backed Due within one year 1,751 6.93% Due over one to five years 8,375 6.77% Due over five to ten years 7,005 7.16% Due over ten years 13,104 7.16% - -------------------------------------------------------------------------------- Total U.S. Gov't agencies and mortgage-backed 30,235 7.04% Obligations of states and political subdivisions Due within one year 990 9.37% Due over one to five years 3,762 8.79% Due over five to ten years 6,727 7.94% Due over ten years 15,901 7.94% - -------------------------------------------------------------------------------- Total states and political subs 27,380 8.32% Other securities and stock Due within one year 699 7.47% Due over one to five years 0 0.00% Due over five to ten years 0 0.00% Due over ten years 0 0.00% - -------------------------------------------------------------------------------- Total other securities and stock 699 7.47% - -------------------------------------------------------------------------------- TOTAL SECURITIES 73,385 7.49% ================================================================================ Concentrations of securities greater than 10% of equity Book Value Market Value ---------- ------------ Maryland SCM's 23,209 23,900 Pennsylvania SCM's 4,171 4,185 The following table provides information on the loan portfolio for the indicated periods.
Loan Portfolio Analysis December 31, Dollars in thousands 1995 1994 1993 1992 1991 $ % $ % $ % $ % $ % ---- - ---- - ---- - ---- - ---- - Mortgage Residential 37,269 24.17% 34,303 21.91% 33,664 23.31% 33,480 25.76% 37,040 33.98% Commercial 46,888 30.41% 39,398 25.16% 39,277 27.20% 35,111 27.02% 28,275 25.94% Construction and land develop 14,265 9.25% 21,014 13.42% 12,372 8.56% 9,264 7.13% 8,252 7.57% Lease Financing 13,242 8.59% 15,598 9.96% 17,774 12.31% 19,497 15.00% 7,661 7.03% Demand and time 13,124 8.51% 12,680 8.10% 12,841 8.89% 10,633 8.18% 8,014 7.35% Installment 29,382 19.06% 33,585 21.45% 28,490 19.73% 21,970 16.91% 19,770 18.13% - ----------------------------------------------------------------------------------------------------------------------------- 154,170 100.00% 156,578 100.00% 144,418 100.00% 129,955 100.00% 109,012 100.00% Allowance for credit losses 3,698 2,764 2,552 1,756 993 - ----------------------------------------------------------------------------------------------------------------------------- Loans, net 150,472 153,814 141,866 128,199 108,019 =============================================================================================================================
12 The maturity and rate repricing distribution of the loan portfolio are as follows: 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Variable rate immediately 35,148 40,448 35,243 27,528 21,000 Due within one year 21,326 20,521 17,781 8,033 15,154 Due over one to five years 48,259 48,716 46,276 39,771 27,944 Due over five years 50,310 47,669 45,899 55,235 45,575 - ---------------------------------------------------------------------------- Total gross loans 155,043 157,354 145,199 130,567 109,673 Deferred origination fees 873 776 781 612 661 - ---------------------------------------------------------------------------- Total Net loans 154,170 156,578 144,418 129,955 109,012 ============================================================================ Information not available by loan category Transaction in the allowance for credit losses were as follows: 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Beginning balance 2,764 2,552 1,755 993 669 Provisions charges to operations 7,925 1,120 1,080 1,000 336 Recoveries Real estate 33 18 1 41 10 Installment 11 20 19 16 68 Credit card & related 0 0 0 0 0 Commercial 26 29 31 3 31 Loans charged off Real estate 1,541 425 98 193 0 Installment 270 29 41 25 35 Credit card & related 194 1 1 7 0 Commercial 5,056 520 194 73 86 - ---------------------------------------------------------------------------- Ending balance 3,698 2,764 2,552 1,755 993 ============================================================================ Average loans 156,219 151,933 139,280 116,782 93,194 Net charge off to total loans 4.48% 0.60% 0.20% 0.19% 0.01% - ---------------------------------------------------------------------------- Nonperforming And Past Due Loans Nonaccrual Loans 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Real estate 756 556 800 925 579 Installment 165 25 15 39 48 Credit card & related 4 0 0 0 0 Commercial 1,120 74 299 43 218 - --------------------------------------------------------------------------- Total Nonaccrual 2,045 655 1,114 1,007 845 - --------------------------------------------------------------------------- Past Due 90 days Real Estate 3,297 2,604 1,602 1,702 1,837 Installment 300 0 0 0 0 Credit card & related 28 5 19 0 0 Commercial 610 310 424 0 0 - --------------------------------------------------------------------------- Total Past Due 90 Days 4,235 2,919 2,045 1,702 1,837 - --------------------------------------------------------------------------- Interest that would have been accrued under the terms of these loans was $191,200 for the year ended December 31, 1995. Loans are placed on non-accrual being 90 days delinquent, however, real estate loans were considered on a case-by-case basis subject to collateral. The bank identified impaired loans of $407,597 as of December 31, 1995. No specific allowance for credit losses related to impaired loans was provided. These loans were identified as impaired near the end of 1995, and no payments were received on these loans in 1995 after they were classified impaired. There were no concentrations of credit not previously disclosed. 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 collectibility of the principal is unlikely. The allowance, based on evaluations of the collectibility 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 take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions and trends that may affect the borrowers' ability to pay. 13 Other Activities The Company also owns all outstanding shares of capital stock of GBB Properties, Inc. ("GBB") another Maryland corporation organized in 1994 which is engaged in the business of acquiring, holding and disposing of real property, typically acquired in connection with foreclosure proceedings (or deed in lieu of foreclosure) instituted by the Bank or acquired in connection with branch expansions by the Bank. No branch expansion occurred in 1995. Employees The Bank currently employs 143 people. Neither the Company nor GBB currently has any employees. ITEM 2. Properties The Bank owns its Banking Operations Center, its Executive Offices, its main banking facility in Glen Burnie, and four (4) branch offices in various communities in Anne Arundel County, Maryland, all of which are unencumbered. The Company owns no real estate at present. GBB currently owns two parcels of real estate obtained from foreclosures by the Bank. The book value of these properties is $285,700. One is a residential property which can be used for certain commercial purposes; GBB has contracted to sell it for $155,000 ($25,500 over its book value). The other consists of office condominiums. GBB also intends to sell this property. The Bank also owns foreclosed real estate having a book value of $143,000. It consists of residential property which the Bank is holding for sale. ITEM 3. Legal Proceedings McCafferty's has commenced an adversary proceeding against the Bank (McCafferty's , Inc. v. Bank of Glen Burnie Adversary Case, Case No. 96-5137-ESD, U.S. Bankr. Ct., D. Md.) on March 20, 1996 in McCafferty's pending Chapter 11 bankruptcy case (In re McCafferty's, Inc., Case No. 96-5-2444-SD, U.S. Bankr. Ct., D. Md.). McCafferty's seeks $5,000,000 in compensatory damages and $50,000,000 in punitive damages. It alleges that the Bank acted in concert with Brian Davis, who was McCafferty's treasurer and chief financial officer, in an unspecified manner to defraud McCafferty's, that the Bank has accepted loan payments from McCafferty's for loans which McCafferty's never signed nor authorized, and that the Bank failed to make a loan it had promised to McCafferty's. The Bank denies any liability and intends to continue contesting the litigation vigorously. The Company does not believe that the outcome of this litigation will have a material adverse effect on its business. The Bank is involved in various other legal actions relating to its business activities. These actions all involve claims for money damages which in the aggregate do not exceed 10% of the Company's consolidated assets. The Company does not believe that any ultimate liability or risk of loss with respect to those actions will materially affect its consolidated financial position. 14 ITEM 4. Submission of Matters to a Vote of Security Holders. The Company did not submit any matters to a vote of its security holders during the fourth quarter of its 1995 fiscal year. However, at its annual stockholders' meeting on March 9, 1995, two slates of candidates ran for election as directors. The winners received the following votes (rounded to the nearest share): Shirley Boyer 448,313 John E. Demyan 448,452 Susan Demyan 448,452 Richard A. Fine 448,452 F. William Kuethe, Jr. 448,452 Frederick W. Kuethe, III 448,452 William N. Scherer, Sr. 448,452 Karen B. Thorwarth 443,315 Neil C. Williams 443,315 The candidates on the losing slate received the following votes (rounded to the nearest share): Theodore L. Bertier, Jr. 287,508 Jan W. Clark 248,830 John E. DeGrange, Sr. 248,830 F. Ward DeGrange, Sr. 198,044 Louis J. Doetsch 246,653 F. Paul Dorr, Jr. 246,653 Carl L. Hein, Jr. 248,830 Henry L. Hein 248,830 Earl G. Walter 248,830 Katherine P. Wellford 246,653 Mary Lou Wilcox ran as an independent candidate, losing with 45,735 votes. The elected directors represented a change from a majority of the directors (including the Company's chief executive officer) previously in position. Prior to the election, the directors who ultimately lost the election filed a lawsuit in the name of the Company against a number of the candidates who ultimately won the election. The suit was settled shortly after the election, with the election results accepted by all parties in interest. (The settlement did not terminate any solicitation conducted with respect to the election.) The Company agreed to pay all legal fees in connection with the case. No wrongdoing was found on the part of any director or candidate. At the March 9, 1995 annual meeting the stockholders also approved the selection of Rowles & Company as independent accountants for the Company and its subsidiaries for its 1995 fiscal year. All shares voting voted in favor of such appointment. 15 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's common equity consists of one class of common stock, par value $10.00 per share. The Company effectuated a six for five stock split on January 3, 1996. The Company's stock is traded in the over-the-counter market and quoted in the pink sheets. The actual range of high and low bid quotations for the common stock, which has been adjusted to give retroactive effect to the stock split, for each full quarterly period during 1994 and 1995, based on actual settlements reported by Legg Mason Wood Walker, the only source of such information available to the Company, are as follows: ================================================================ High Low - ---------------------------------------------------------------- 1st qtr 1994 $30.833 $28.033 - ---------------------------------------------------------------- 2nd qtr 1994 32.292 27.083 - ---------------------------------------------------------------- 3rd qtr 1994 30.000 28.750 - ---------------------------------------------------------------- 4th qtr 1994 29,479 29.479 - ---------------------------------------------------------------- 1st qtr 1995 32.917 28.750 - ---------------------------------------------------------------- 2nd qtr 1995 32.917 31.042 - ---------------------------------------------------------------- 3rd qtr 1995 32.917 32.083 - ---------------------------------------------------------------- 4th qtr 1995 34.375 28.854 ================================================================ As of February 3, 1997, the most recent data for which the Company has information of actual settlements reported by Legg Mason Wood Walker, the reported high and low were $26.00. As of December 31, 1996, the number of record holders of the Company's common stock was 488. Since its inception, the Company has paid quarterly cash dividends on its common stock, except that certain dividends have been paid in stock, rather than cash, to stockholders who participated in the Company's Dividend Reinvestment and Stock Purchase Plan. The per share dividends paid in cash during 1994 and 1995, giving retroactive effect to the stock split, were as follows: 16 ======================================================================= Per Share Dividend - ----------------------------------------------------------------------- 1st qtr 1994 $.167 - ----------------------------------------------------------------------- 2nd qtr 1994 .167 - ----------------------------------------------------------------------- 3rd qtr 1994 .167 - ----------------------------------------------------------------------- 4th qtr 1994 .167 - ----------------------------------------------------------------------- 1st qtr 1995 .175 - ----------------------------------------------------------------------- 2nd qtr 1995 .208 - ----------------------------------------------------------------------- 3rd qtr 1995 .208 - ----------------------------------------------------------------------- 4th qtr 1995 .208 ======================================================================= Pursuant to its Strategic Plan, the Company intends to pay dividends equal to forty percent (40%) of its profits for each quarter. However, dividends remain subject to declaration by the board of directors in its sole discretion and there can be no assurance that the Company will be legally or financially able to make such payments. Payment of dividends may be limited by Federal and state regulations which impose general restrictions on a bank's and bank holding company's right to pay dividends (and to make loans or advances to affiliates which could be used to pay dividends). See "Business." ITEM 6. Selected Financial Data. The following chart presents consolidated selected financial data for the Company and its subsidiaries for each of the fiscal years from and including 1992, during which the Company acquired the outstanding capital stock of the Bank, and for the Bank's 1991 fiscal year. All amounts are expressed in thousands of dollars except per share amounts. Adjustments in dividends and earnings per share have been made to give retroactive effect to stock splits.
=================================================================================================================================== For Fiscal Year Ended December 31, - ----------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------------- Net Interest Income $ 11,339 $ 11,868 $ 10,736 $ 8,788 $ 7,182 - ----------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) (1,727) 3,517 3,047 2,284 2,022 - ----------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) Per Share (2.01) 4.22 3.69 2.79 2.47 - ----------------------------------------------------------------------------------------------------------------------------------- Total Assets 246,165 232,935 223,422 203,573 172,120 - ----------------------------------------------------------------------------------------------------------------------------------- Long Term Obligations --- --- --- --- --- - ------------------------------------------------------------------------------------------------------------------------------------ Cash Dividends Declared Per .96 .80 .75 .72 .69 Common Share - ----------------------------------------------------------------------------------------------------------------------------------- Return on Assets -0.73% 1.53% 1.40% 1.23% 1.27% - ----------------------------------------------------------------------------------------------------------------------------------- Return on Equity -7.42% 17.24% 17.70% 15.23% 15.23% - ---------------------------------------------------------------------------------------------------------------------------------- Dividend Payout -47.86% 19.24% 20.38% 25.89% 28.08% - ----------------------------------------------------------------------------------------------------------------------------------- Avg. Equity to Avg. Assets 9.89% 8.86% 7.92% 8.05% 8.32% ===================================================================================================================================
17 ITEM 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operation. Results Of Operation In 1995, the Bank reported a net loss of ($1,678,941) as compared to 1994 net income of $3,516,593. The loss was primarily a result of loan losses related to several large, uncollectible loans. Non-recurring litigation and restructuring costs in 1995 totalled $1,407,641. Total assets grew 5.7% in 1995 with most of this growth in investment securities while gross loans declined by 1.5%. A 6% growth in deposits in 1995 accounted for the growth in assets. The Company and its subsidiaries had a consolidated net loss of $1,726,748 ($2.01 per share) for 1995, a significant change from their 1994 consolidated net income of $3,516,593 ($4.22 per share) and their 1993 consolidated net income of $3,047,112 ($3.69 per share). The change is primarily due to a significant increase in the provision for loan losses of $7,925,000 for 1995 compared to $1,120,000 for 1994 and $1,080,000 for 1993. The increase resulted from provisions being made to charge-off delinquent and non-performing loans. The collectibility of certain loans, significant in aggregate amount, became doubtful during 1995 and the Bank charged-off a significant amount of such loans in 1996. The basic terms of the M.O.U. and possible sanctions should the Bank fail to adhere to it, and certain specific problem loans, are described under "Business." The consolidated net interest income prior to making provision for credit losses decreased by $528,822 (4.5%) from $11,867,959 in 1994 to $11,339,137 in 1995. Net interest income had increased by $1,131,865 (10.5%) from $10,736,094 in 1993. The 1995 decrease is primarily due to an increase in interest expense on deposits which exceeded a slight increase in total interest revenues from lending activities for such period. The movement of deposits from lower yielding savings and money market accounts to higher yielding certificates of deposit resulted in an increase in the Bank's cost of deposits during 1995. In addition, the Bank wrote off approximately $220,000 in interest income during 1995 in connection with its charge-off of certain loans as described above. Increased expenses of the Company and its subsidiaries in 1995 also resulted from $1,407,641 in litigation costs and costs relating to the 1995 directors' election contest. The Bank has obtained insurance reimbursement for approximately $560,000 of this amount and does not expect to have such charges (other than routine litigation costs) in the future. Capital Resources and Liquidity Total deposits increased from $208,565,653 at 1994 year end to $221,120,763 at the end of 1995, an increase of $12,555,110 (6.0%). Total deposits increased by $5,654,923 (2.8%) during 1994 from $202,910,730 at the end of 1993. While deposits have increased over the past two years, the Bank believes that a general downward trend in interest rates paid on deposit accounts has resulted in a trend away from lower yielding deposit products toward higher yielding long term deposits. NOW accounts have remained relatively flat increasing by $472,703 in 1994 and $17,141 in 1995 from $21,800,005 at year end 1993. Over the same period, savings deposits after increasing slightly in 1994 from $52,764,881 in 1993 to $52,830,352 in 1994, declined to $46,752,665 at the end of 1995, a decrease of $6,077,687 (11.5%). Meanwhile, both certificates of deposit over $100,000 and other time deposits (made up of certificates of deposit less than $100,000 and individual retirement accounts) increased by $2,040,197 (26.1%) and $17,788,337 (34.4%), respectively in 1995. In 1994 certificates of deposit over $100,000 increased by $1,274,178 (19.5%) from $6,530,466 in 1993 and other time deposits increased by $4,250,550 (9.0%) from $47,445,457 in 1993. The Bank's cash and cash equivalents (cash plus federal funds sold) as of December 31, 1995 ($9,450,021) was roughly the same as at December 31, 1994 ($9,606,316), which, in turn, was only 66.5% of the December 31, 1993 total of $14,435,017. The aggregate market value of investment securities held by the Bank as of December 31, 1995 was $74,690,073, compared to $59,024,129 as of December 31, 1994, a $15,665,944 (26.5%) increase. The reason for the large increase in investment securities during 1995 was the 6.0% increase in deposits coupled with declining loan demand. The market value of the Bank's investment securities as of December 31, 1994 had decreased by $2,436,148 (4.1%) from their December 31, 1993 total. 18 The Bank may draw on a $26,000,000 line of credit from The Federal Home Loan Bank of Atlanta. As of December 31, 1994 $1,500,000 was outstanding under this line. No amounts were outstanding at the end of either 1995 or 1993. The Bank's net loans decreased by $3,342,654 (2.2%) from $153,814,422 in 1994 to $150,471,768 in 1995. The 1994 net loan total increased by $11,948,629 (8.4%) from $141,865,793 in 1993. The variations are largely due to an increase in construction and land development loans in 1994 followed by a reduction in such loans in 1995. Residential and commercial mortgage loans increased during 1995 whereas lease financings and installment loans decreased. The Bank has determined to decrease its equipment and automobile lease based lending because of the difficulties in monitoring the financial condition of the clients of lease company borrowers. ITEM 8. Financial Statements And Supplementary Data. The response to this Item is set forth at the end of this report. ITEM 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure. On April 11, 1996 the Company's board of directors decided not to reengage Rowles & Company to review the Company's consolidated financial statements for its 1996 fiscal year. Such accountants report on the Company's consolidated financial statements for each of its prior two fiscal years did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. There were no disagreements between the Company and Rowles & Company. On June 27, 1996, the Company's board of directors decided to engage Trice & Geary LLC to perform such function and Trice & Geary LLC was so engaged on August 16, 1996. ITEM 10. Directors And Executive Officers Of The Registrant. Set forth below is information about the directors, executive officers and significant employees of the Company, the Bank and GBB. Unless indicated otherwise, the positions stated for each individual are positions held in the Company and in each of its subsidiaries. NAME: AGE: DIRECTOR SINCE: Theodore L. Bertier 68 1997 Retired since 1993. Manager of design and drafting department of Westinghouse Electric Corp. prior to retirement. 19 Shirley Boyer 60 1995 Owner/Manager of a large number of residential properties in Anne Arundel County, Maryland. Thirteen years experience in banking (1954-1967) in positions from Teller to Assistant Branch Manager. Thomas Clocker 62 1995 Owner/Operator of Angel's Food Market in Pasadena, Maryland since 1960. Charter member of and assisted in founding Pasadena Business Association. Community involvement including local charities, schools, church, scout groups and athletic programs. John E. Demyan 49 1990 Chairman of the Board since 1995. Director of the Company and the Bank from 1990 through 1994. Completed Maryland Banking School in 1994. Owner/Manager of commercial and residential properties in northern Anne Arundel County, Maryland. Alan E. Hahn 62 1997 Retired information systems manager. Charles L. Hein 75 1997 Retired clergyman. Purchaser and restorer of residential properties. Mortgagee of residential properties. F. William Kuethe, Jr. 64 1995 President and Chief Executive Officer of the Company and the Bank since 1995. Director of the Bank from 1960 through 1989. Former President - Glen Burnie Mutual Savings Bank. Licensed appraiser and real estate broker. Banking experience from 1960 to present at all levels. Frederick W. Kuethe, III 37 1995 Vice President of the Company since 1995. Director of the Bank since 1988. Software design and systems integration - Westinghouse Electric Corporation since 1981 to present. Chairman of Data Processing Committee for Bank. Son of F. William Kuethe, Jr. Eugene P. Nepa 67 1997 Retired engineer. William N. Scherer, Sr. 74 1995 Attorney specializing in wills and estates. Formerly accountant and tax specialist. 20 Karen B. Thorwarth 40 1995 Manager, Yacht Department - Basil-Voges, Inc. of Annapolis, Maryland. Licensed insurance agent specializing in underwriting and marketing private pleasure yacht insurance. Member - Annapolis Yacht Club. Mary Lou Wilcox 49 1997 Elementary school teacher. Dorothy A. Abel 55 Secretary of the Company since 1995. Vice President and Secretary of the Bank since 1990. John E. Porter 43 Treasurer and Chief Financial Officer of the Company since 1995. Vice President, Treasurer and Chief Financial Officer of the Bank since 1990. Secretary/Treasurer of GBB since 1995. Michael L. Derr 46 Vice President Operations of the Bank since 1992. Assistant Vice President Operations of the Bank since 1989. Robert J. Riedel 55 Vice President of the Bank since 1990. Michael Livingston 43 Chief Lending Officer of the Bank since 1996. Regional Vice President and commercial loan officer with Citizens Bank from March 1993 until April 1996. Comptroller with Land Services Group from April 1992 through January 1993. ITEM 11. Executive Compensation. General The following chart sets forth the compensation paid by the Company and the Bank to F. William Kuethe, Jr., their chief executive officer since March 9, 1995, and to Jan W. Clark, their chief executive officer prior to Mr. Kuethe, during the years indicated. 21 SUMMARY COMPENSATION TABLE
Long Term Compensation - ----------------------------------------------------------------------------------------------------------------- Annual Compensation Awards ----------------------------------------------------------------------------- (a) (b) (c) (d) (e) (f) (g) (h) - ----------------------------------------------------------------------------------------------------------------------------------- Other Annual Restricted Securities All Other Compen- Stock Underlying Compen- Name and Principal Salary ($) Bonus sation Award(s) Options/ sation Position Year ($) ($) SARs (#) ($) - ----------------------------------------------------------------------------------------------------------------------------------- F. William Kuethe, Jr. 1995 $ 65,538 $ 7,500 $ 250 1 --- 250 $ 16,904 2 Chief Executive Officer 1994 1,500 --- --- --- 35,109 3 1993 1,350 250 1 --- 250 36,818 4 Jan W. Clark 1995 16,093 --- 438 5 --- --- $ 68,543 6 Former Chief Executive 1994 $109,574 $15,000 --- --- 940 29,001 7 Officer 1993 93,506 15,000 250 5 --- 833 26,386 8 ===================================================================================================================================
Stock Option Plans During 1995, all employees of the Company, including its prior chief executive officer, received the right to purchase five shares of the Company's common stock, at a per share price at 15% below the market price for such shares on the date of - -------- 1 F. William Kuethe, Jr.'s "Other Annual Compensation" consisted solely of the differences between the exercise price of director stock options exercised by him during the respective years and the fair market value of the shares at the time of exercise as determined by information furnished by Legg Mason Wood Walker. 2 F. William Kuethe, Jr.'s "All Other Compensation" in 1995 consisted of $1,240 in paid insurance premiums, $8,400 in directors' fees and $7,264 in appraisal fees. 3 F. William Kuethe, Jr.'s "All Other Compensation" in 1994 consisted of $22,655 in directors' fees, and $12,454 in appraisal fees. 4 F. William Kuethe, Jr.'s "All Other Compensation" in 1993 consisted of $23,659 in directors' fees and $13,159 in appraisal fees. 5 Jan Clark's "Other Annual Compensation" consisted solely of the differences between the exercise price of director stock options exercised by him during the respective years and the fair market value of the shares at the time of exercise as determined by information furnished by Legg Mason Wood Walker. 6 The Company agreed to pay Jan W. Clark a severance payment of $143,345 payable in installments through March 16, 1997. $58,678 of this was paid in 1995 and is included in his "All Other Compensation" for such year. His "All Other Compensation" in 1995 also consisted of paid insurance premiums of $984, directors' fees of $3,750 and profit-sharing plan contributions of $5,171. 7 Jan W. Clark's "All Other Compensation" in 1994 consisted of paid insurance premiums of $6,314, directors' fees of $14,300 and profit-sharing plan contributions of $8,387. 8 Jan W. Clark's "All Other Compensation" in 1993 consisted of paid insurance premiums of $5,188, directors' fees of $14,090, and profit-sharing plan contributions of $7,078. 22 grant, for every $1,000 of salary and bonus paid during the preceding year. The rights were granted on July 1, 1995 and could be exercised at any time through September 30, 1996. The plan was suspended in June, 1996 and no options have been granted thereunder since 1995. Options for 583 shares were granted to Mr. Clark in 1993 and for 690 shares in 1994 under this plan. The Company maintains a director stock purchase plan pursuant to which directors may purchase the Company's common stock at its fair market value on the date an option is granted. At December 31, 1995, there were 17,700 shares of common stock reserved for issuance under the plan. No options are currently outstanding under this plan. Options for 3,600 shares were exercised in 1995 at prices of $28.33 to $31.67 per share. All of the options granted to Mr. Kuethe, and options for 250 shares granted to Mr. Clark in each of 1993 and 1994 were granted under the directors' stock purchase plan. The following table sets forth information concerning the award of stock options to the individuals named in the Summary Compensation Table during the 1995 fiscal year.
==================================================================================================================================== Option/SAR Grants in Last Fiscal Year - ------------------------------------------------------------------------------------------------------------------------------------ Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants for Option Term - ------------------------------------------------------------------------------------------------------------------------------------ (a) (b) (c) (d) (e) (f) (g) Number of Securities % of total Underlying Options/ Exercise Options/ SARs Granted or Base Market SARs to Employees Price Price Name Granted (#) in Fiscal Year ($/Sh) ($/Sh) Expiration Date 5% ($) 10% ($) - ------------------------------------------------------------------------------------------------------------------------------------ F. William Kuethe, Jr. 250 9.1% $38.00 $38.00 July 1, 1996 $475.00 $950.00 - ------------------------------------------------------------------------------------------------------------------------------------ Jan W. Clark ====================================================================================================================================
23 The following table sets forth information concerning the exercise of stock options by such individuals during the 1995 fiscal year:
================================================================================================================================ Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values - -------------------------------------------------------------------------------------------------------------------------------- (a) (b) (c) (d) (e) Number of Securities Value of Unexercised Underlying Unexercised In-the Money Options/SARs at Options/SARs at FY-End (#) FY-End ($) Shares Acquired on Exercisable/ Exercisable/ Name Exercise (#) Value Realized ($) Unexercisable Unexercisable - -------------------------------------------------------------------------------------------------------------------------------- F. William Kuethe, Jr. 250 $ 254 --- --- - -------------------------------------------------------------------------------------------------------------------------------- Jan W. Clark 690 $4,592 --- --- 250 389 --- --- ================================================================================================================================
The realized value determination is based on the average of the last reported sales prior to the exercise of the options and the first reported sales thereafter. Pension Plan Information The Bank maintains a pension plan for substantially all employees pursuant to which benefits are based on the employee's average rate of earnings and years of service. A participant's pension is based on the average amount of his annual earnings for his five most highly paid consecutive years during the ten years immediately preceding his retirement. His pension is determined by multiplying 2% of the "covered" portion of this amount and .65% of any additional portion by the lesser of the number of his years of service or 20. The "covered" portion is his social security taxable wage basis taken over a period of up to 35 years. The following table shows the estimated annual benefits payable upon retirement in specified compensation and years of service classifications based on the assumption that the "covered" portion equals $65,400 (the current maximum salary subject to social security tax) for all employees receiving more than such amount and that the highest salary payable is $100,000 per annum. Currently, no employee earns this much and the Bank does not anticipate that any employee will in the foreseeable future. ================================================================================ PENSION PLAN TABLE - -------------------------------------------------------------------------------- Years of Service - -------------------------------------------------------------------------------- Remuneration 5 10 15 20 - -------------------------------------------------------------------------------- 10,000 1,000 2,000 3,000 4,000 - -------------------------------------------------------------------------------- 20,000 2,000 4,000 6,000 8,000 - -------------------------------------------------------------------------------- 30,000 3,000 6,000 9,000 12,000 - -------------------------------------------------------------------------------- 40,000 4,000 8,000 12,000 16,000 - -------------------------------------------------------------------------------- 50,000 5,000 10,000 15,000 20,000 - -------------------------------------------------------------------------------- 60,000 6,000 12,000 18,000 24,000 - -------------------------------------------------------------------------------- 70,000 6,690 13,379 20,069 26,758 - -------------------------------------------------------------------------------- 80,000 7,015 14,029 21,044 28,058 - -------------------------------------------------------------------------------- 90,000 7,340 14,679 22,019 29,358 - -------------------------------------------------------------------------------- 100,000 7,665 15,329 22,994 30,658 ================================================================================ 24 The total compensation covered by the pension plan for the year ended December 31, 1995 was $2,617,791. 2.5% of the covered compensation represents compensation paid to F. William Kuethe, Jr. His credited years of service is one year. 0.6% of the covered compensation represents compensation paid to Jan W. Clark. Benefits under the pension plan are not subject to deduction for social security payments or other offsets. Directors' Fees Each director receives a $600 fee for attending each meeting of the board of directors or of committees of the board. During 1995, $94,625 was paid in directors' fees. Compensation Committee A compensation committee of directors approved by the board sets director compensation. The board sets the compensation of the chief executive officer. The chief executive officer sets the compensation of the other executive officers. Executive officers are placed at certain grade levels with the salary range of each grade level established by the compensation committee, subject to board approval, based on comparable salaries paid by similar financial institutions. Within such range, an individual's salary is based on a performance review conducted by the board or president, as indicated above. Bonuses are discretionary and largely based on the Bank's financial performance. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. The following table provides information as of December 31, 1996 concerning ownership of the Company's common stock (which constitutes its only class of equity securities) by any individual or group known to the Company to be the beneficial owner of more than 5% of its common stock, each of its directors, 25 each of the individuals listed in the Summary Compensation Table, included with Item 11 above and all executive officers and directors as a group. Each person listed has sole voting and sole investment power with respect to the shares listed across from his name except as noted otherwise. ================================================================================ Name and Address of Account And Nature of Percent of Class Beneficial Owner Beneficial Ownership (If 1% or more) - -------------------------------------------------------------------------------- Ethel Webster 167,517 18.95% 104 W. Pasadena Road Pasadena, MD - -------------------------------------------------------------------------------- John E. Demyan 73,107 1/ 8.27% 1/ 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- F. William Kuethe, Jr. 46,482 2/ 5.26% 2/ 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Theodore L. Bertier 6,479 3/ 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Shirley Boyer 4,212 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Thomas Clocker 371 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Alan E. Hahn 1,658 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Charles L. Hein 36,442 4/ 4.12% 4/ 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Frederick W. Kuethe, III 9,735 5/ 1.10% 5/ 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Eugene P. Nepa 22,877 2.59% 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- William N. Scherer, Sr. 2,432 6/ 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Karen B. Thorwarth 500 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Mary Lou Wilcox 317 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Jan W. Clark 2 101 Crain Highway, S.E. Glen Burnie, MD 21061 - -------------------------------------------------------------------------------- Cede & Co. 49,018 5.55% - -------------------------------------------------------------------------------- All directors and executive 171,036 19.35% officers as a group ================================================================================ - --------------------------- 1/ Includes 3,000 shares owned by John Demyan's spouse as to which he disclaims beneficial ownership. 2/ F. William Kuethe, Jr. has shared voting and shared investment power with respect to 20,097 of these shares. 3/ Theodore L. Bertier has shared voting and shared investment power with respect to 679 of these shares. 4/ Charles L. Hein has shared voting and shared investment power with respect to 23,570 of these shares. 5/ Frederick W. Kuethe, III has shared voting and shared investment power with respect to 9,637 of these shares. 6/ William N. Scherer, Sr. has shared voting and shared investment power with respect to 2,367 of these shares. 26 ITEM 13. Certain Relationships and Related Transactions The executive officers and directors of the Bank enter into loan transactions with the Bank in the ordinary course of business. Loans to them are made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with unrelated borrowers and the Bank does not believe that they involve more than the normal risk of collectibility or present other unfavorable features. At December 31, 1995, 1994, and 1993, the amounts of such loans outstanding were $2,878,742, $685,613, and $535,347, respectively. The election in 1995 of new directors having outstanding loans is the main reason for the increase in 1995. 27 PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8K. Exhibit List 3.1 Articles of Incorporation 3.2 By-Laws 10.1 Glen Burnie Bancorp Stockholder Purchase Plan 10.2 Glen Burnie Bancorp Dividend Reinvestment and Stock Purchase Plan 10.3 Glen Burnie Bancorp Director Stock Purchase Plan 10.4 Glen Burnie Bancorp Employee Stock Purchase Plan 10.5 The Bank of Glen Burnie Pension Plan 11 Statement re computation of per share earnings 16 Letter re: change in certifying public accountant 21 Subsidiaries of the registrant 27 Financial Data Schedule The Company did not file any report on Form 8-K during the last quarter of its 1995 fiscal year. 28 Signatures Pursuant to the requirements of Section 13 or 15(d) 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. (Registrant): Glen Burnie Bancorp By (Signature and Title): [F. William Kuethe, Jr.] ---------------------------------- Signature Chief Executive Officer, President Date: 3/27/97 F. William Kuethe, Jr. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title): [John E. Porter] ---------------------------------- Signature Chief Financial Officer Date: 3/27/97 John E. Porter By (Signature and Title): [Beatrice S. McQuarrie] ---------------------------------- Signature Principal Accounting Officer Date: 3/27/97 Beatrice S. McQuarrie By (Signature and Title): [Alan E. Hahn] ---------------------------------- Signature Director, Alan E. Hahn Date: 3/27/97 By (Signature and Title): [Theodore L. Bertier, Jr.] ---------------------------------- Director, Theodore L. Bertier, Jr. Date: 3/27/97 By (Signature and Title): [Karen Thorwarth] ---------------------------------- Director, Karen Thorwarth Date: 3/27/97 29 By (Signature and Title): [Mary L. Wilcox] ---------------------------------- Director, Mary L. Wilcox Date: 3/27/97 By (Signature and Title): [Thomas Clocker] ---------------------------------- Director, Thomas Clocker Date: 3/27/97 By (Signature and Title): [William N. Scherer, Sr.] ---------------------------------- Director, William N. Scherer, Sr. Date: 3/27/97 By (Signature and Title): [Charles L. Hein] ---------------------------------- Director, Charles L. Hein Date: 3/27/97 By (Signature and Title): [F. W. Kuethe, III] ---------------------------------- Director, F.W. Kuethe, III Date: 3/27/97 By (Signature and Title): [Shirley E. Boyer] ---------------------------------- Director, Shirley E. Boyer Date: 3/27/97 By (Signature and Title): [Eugene P. Nepa] ---------------------------------- Director, Eugene P. Nepa Date: 3/27/97 30 Glen Burnie Bancorp and Subsidiaries Table of Contents Page Report of independent auditors F-1 Financial statements Consolidated balance sheets F-2 Consolidated statements of income F-3 Consolidated statements of changes in stockholders' equity F-4 Consolidated statements of cash flows F-5-6 Notes to consolidated financial statements F-7-21 Report of Independent Auditors The Board of Directors and Stockholders Glen Burnie Bancorp and Subsidiaries Glen Burnie, Maryland We have audited the accompanying consolidated balance sheets of Glen Burnie Bancorp and Subsidiaries as of December 31, 1995, 1994, and 1993, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Glen Burnie Bancorp and Subsidiaries as of December 31, 1995, 1994, and 1993, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 11 to the financial statements, the Company changed its method of accounting for postretirement health care benefits in 1995. Baltimore, Maryland March 8, 1996 F-1
Glen Burnie Bancorp and Subsidiaries Consolidated Balance Sheets - ------------------------------------------------------------------------------------------------------------------- December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $ 9,450,021 $ 7,806,316 $ 10,235,017 Federal funds sold - 1,800,000 4,200,000 Securities available for sale 68,597,172 3,273,076 - Securities held to maturity (market value of $6,092,901, $55,751,053 and $61,460,277) 6,001,675 57,128,637 58,473,048 Ground rents 269,825 269,825 269,825 Loans, less allowance for credit losses of $3,698,271, $2,763,874, and $2,552,355 150,471,768 153,814,422 141,865,793 Bank premises and equipment 4,248,830 4,661,344 4,711,994 Other real estate owned 432,926 417,993 475,985 Accrued interest receivable 2,154,599 2,236,803 1,958,063 Prepaid income taxes 3,164,915 277,636 136,541 Deferred income taxes 263,860 778,818 829,590 Other assets 1,109,145 469,862 265,845 ------------ ------------- ------------ $246,164,736 $232,934,732 $223,421,701 ============ ============ ============ Liabilities and Stockholders' Equity Deposits Noninterest-bearing $ 45,147,023 $ 41,081,119 $ 37,868,118 Interest-bearing 175,973,740 167,484,534 165,042,612 ------------ ------------ ------------ Total deposits 221,120,763 208,565,653 202,910,730 Short-term borrowings 1,757,722 2,226,568 1,269,261 Dividend payable 218,208 169,987 157,384 Accrued interest payable 229,715 186,823 181,513 Other liabilities 2,300,942 108,668 286,236 ------------ ------------ ------------ 225,627,350 211,257,699 204,805,124 ------------ ------------ ------------ Stockholders' equity Common stock, par value $10.00 per share; authorized 5,000,000 shares; issued and outstanding 727,366 shares in 1995, 708,083 shares in 1994, and 583,402 shares in 1993 7,273,664 7,080,834 5,834,024 Stock dividend to be distributed 1,454,719 - - Surplus 5,917,043 5,450,852 5,290,979 Retained earnings 5,146,724 9,154,546 7,491,574 Net unrealized gain (loss) on securities available for sale, net of income taxes 745,236 (9,199) - ------------- ------------- ------------- 20,537,386 21,677,033 18,616,577 ------------- ------------- ------------- $246,164,736 $232,934,732 $223,421,701 ============ ============ ============
The accompanying notes are an integral part of these financial statements. F-2
Glen Burnie Bancorp and Subsidiaries Consolidated Statements of Income - ------------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Interest revenue Loans, including fees $14,475,876 $14,085,642 $13,091,166 U.S. Treasury securities 987,119 1,037,453 1,136,624 U.S. Government agency securities 1,599,850 1,450,536 1,539,051 State and municipal securities 1,261,886 1,218,119 1,158,832 Federal funds sold 138,678 101,537 105,947 Other 137,296 51,814 4,679 ----------- ----------- ----------- Total interest revenue 18,600,705 17,945,101 17,036,299 ----------- ----------- ----------- Interest expense Deposits 7,172,845 6,008,866 6,277,686 Other 88,723 68,276 22,519 ----------- ----------- ----------- Total interest expense 7,261,568 6,077,142 6,300,205 ----------- ----------- ----------- Net interest income 11,339,137 11,867,959 10,736,094 Provision for credit losses 7,925,000 1,120,000 1,080,000 ----------- ----------- ----------- Net interest income after provision for credit losses 3,414,137 10,747,959 9,656,094 ----------- ----------- ----------- Other operating revenue Service charges on deposit accounts 948,021 956,643 1,002,953 Other fees and commissions 449,567 480,019 400,131 Gains on investment securities 506,695 78,169 5,406 ----------- ----------- ----------- Total other revenue 1,904,283 1,514,831 1,408,490 ----------- ----------- ----------- Other expenses Salaries 2,954,742 2,831,455 2,626,476 Employee benefits 1,182,490 1,156,763 1,050,334 Occupancy 465,732 484,738 486,742 Furniture and equipment 741,602 645,707 615,222 Restructuring and litigation charges 1,407,641 - - Other operating 1,987,405 2,020,773 1,937,610 ----------- ----------- ----------- Total other expenses 8,739,612 7,139,436 6,716,384 ----------- ----------- ----------- Income (loss) before income taxes and cumulative effect of a change in accounting method (3,421,192) 5,123,354 4,348,200 Income taxes (benefit) (1,694,444) 1,606,761 1,328,919 ----------- ----------- ----------- Income (loss) before cumulative effect of a change in accounting method (1,726,748) 3,516,593 3,019,281 Cumulative effect of a change in the method of accounting for income taxes - - 27,831 ----------- ----------- ----------- Net income (loss) $(1,726,748) $ 3,516,593 $ 3,047,112 =========== =========== =========== Earnings per share Income (loss) before cumulative effect of a change in accounting method $ (2.01) $ 4.22 $ 3.66 Cumulative effect of a change in the method of accounting for income taxes - - .03 ----------- ----------- ----------- Net income (loss) $ (2.01) $ 4.22 $ 3.69 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-3
Glen Burnie Bancorp and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity Net unrealized gain (loss) on Common stock securities --------------------------- Retained available Shares Par value Surplus earnings for sale ------ --------- ------- -------- -------- Balance, December 31, 1992 568,769 $5,687,690 $4,963,204 $5,065,481 $ - Net income - - - 3,047,112 - Issuance of shares for employee and director stock purchase plans 8,068 80,680 170,726 - - Cash dividends, $.75 per share - - - (621,019) - Dividends reinvested 6,565 65,654 157,049 - - ------- ---------- ---------- ---------- ------- Balance, December 31, 1993 583,402 5,834,024 5,290,979 7,491,574 - Unrealized gain on securities available for sale at January 1, 1994 - - - - 132,529 Net income - - - 3,516,593 - Stock split effected in the form of 20% stock dividend 117,705 1,177,053 - (1,177,053) - Issuance of shares for employee and director stock purchase plans 4,605 46,050 96,247 - - Shares retired (10,558) (105,580) (237,574) - - Cash dividends, $.80 per share - - - (676,568) - Dividends reinvested 12,929 129,287 301,200 - - Change in unrealized (loss) on securities available for sale - - - - (141,728) ------- ---------- ---------- ---------- -------- Balance, December 31, 1994 708,083 7,080,834 5,450,852 9,154,546 (9,199) Net loss - - - (1,726,748) - Issuance of shares for employee and director stock purchase plans 8,488 84,880 191,174 - - Cash dividends, $.96 per share - - - (826,355) - Dividends reinvested 10,795 107,950 275,017 - - Stock split effected in the form of 20% stock dividend 145,472 1,454,719 - (1,454,719) - Change in unrealized gain on securities available for sale - - - - 754,435 ------- ---------- ---------- ---------- -------- Balance, December 31, 1995 872,838 $8,728,383 $5,917,043 $5,146,724 $745,236 ======= ========== ========== ========== ========
The accompanying notes are an integral part of these financial statements. F-4
Glen Burnie Bancorp and Subsidiaries Consolidated Statements of Cash Flows - ------------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities Interest received $ 18,637,384 $ 17,654,147 $ 17,115,168 Fees and commissions received 1,397,588 1,436,662 1,403,084 Interest paid (7,218,676) (6,071,832) (6,310,764) Cash paid to suppliers and employees (7,785,480) (6,934,724) (6,099,518) Income taxes paid (1,152,564) (1,691,297) (1,662,725) ------------ ------------ ------------ 3,878,252 4,392,956 4,445,245 ------------ ------------ ------------ Cash flows from investing activities Proceeds from disposal of securities Maturity of securities held to maturity 10,266,038 11,405,887 8,836,375 Maturity of securities available for sale 500,000 - - Sales of securities available for sale 20,109,830 2,530,156 - Purchases of securities held to maturity (493,391) (12,512,137) (12,385,767) Purchases of securities available for sale (41,033,354) (3,282,257) - Loans made to customers, net of principal collected (3,064,585) (12,222,908) (19,973,503) Loans purchased (1,730,000) (4,170,190) (2,751,250) Loans sold - 2,776,000 7,547,887 Sales of real estate 588,747 553,922 291,043 Purchases of premises, equipment, software, and intangibles (1,144,983) (478,025) (453,415) ------------ ------------ ------------ (16,001,698) (15,399,552) (18,888,630) ------------ ------------ ------------ Cash flows from financing activities Net increase in deposits 12,555,110 5,654,923 16,552,513 Increase (decrease) in short-term borrowings (468,846) 957,307 288,921 Dividends paid (778,134) (663,965) (611,515) Dividends reinvested 382,967 430,487 222,703 Shares of stock issued 276,054 142,297 251,406 Shares of stock retired - (343,154) - ------------ ------------ ------------ 11,967,151 6,177,895 16,704,028 ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents (156,295) (4,828,701) 2,260,643 Cash and cash equivalents at beginning of year 9,606,316 14,435,017 12,174,374 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 9,450,021 $ 9,606,316 $ 14,435,017 ============ ============ ============
The accompanying notes are an integral part of these financial statements. F-5
Glen Burnie Bancorp and Subsidiaries Consolidated Statements of Cash Flows (Continued) - ------------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------- Reconciliation of net income to net cash provided by operating activities Net income (loss) $(1,726,748) $ 3,516,593 $ 3,047,112 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 583,530 536,605 515,380 Provision for credit losses 7,925,000 1,120,000 1,080,000 Provisions for other losses 136,800 123,000 10,000 Deferred income taxes 40,272 56,559 (377,805) Losses (gains) on sale of assets, net (509,982) (139,646) 53,744 Amortization of premiums and accretion of discounts, net (18,997) (7,131) 7,785 Decrease (increase) in Accrued interest receivable 82,204 (278,740) (98,297) Prepaid income taxes and other assets (2,943,020) (356,943) (59,268) Increase (decrease) in Accrued interest payable 42,892 5,310 (10,559) Deferred loan origination fees (26,529) (5,083) 169,381 Other liabilities 292,830 (177,568) 107,772 ----------- ----------- ----------- $ 3,878,252 $ 4,392,956 $ 4,445,245 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-6 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies The accounting and reporting policies reflected in the financial statements conform to generally accepted accounting principles and to general practices within the banking industry. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of commitments and contingent liabilities at the date of the financial statements and revenues and expenses during the year. Actual results could differ from those estimates. Principles of consolidation The consolidated financial statements include the accounts of Glen Burnie Bancorp (the Company) and its subsidiaries, The Bank of Glen Burnie (the Bank) and GBB Properties, Inc. Intercompany balances and transactions have been eliminated. The Parent Only financial statements of the Company account for the subsidiaries using the equity method of accounting. Business The Bank provides credit and deposit services to individuals and businesses located in Anne Arundel County and surrounding areas of central Maryland. Cash equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. Investment securities In 1994, the Bank adopted Statement No. 115 of the Financial Accounting Standards Board (FASB), Accounting for Certain Investments in Debt and Equity Securities. Management has reviewed its portfolio and classified securities as held to maturity or available for sale. Securities which management has the intent and ability to hold to maturity are recorded at amortized cost which is cost adjusted for amortization of premiums and accretion of discounts to maturity. Securities held to meet liquidity needs or which may be sold before maturity are classified as available for sale and carried at fair value with unrealized gains and losses included in stockholders' equity on an after tax basis. Gains and losses on disposal are determined using the specific-identification method. Loans Loans are stated at the current amount of unpaid principal, less deferred origination fees and the allowance for credit losses. Interest on loans is accrued based on the principal amounts outstanding. Origination fees are amortized to income over the terms of loans. Origination costs have been measured and determined by management to be immaterial to the financial statements. The accrual of interest is discontinued when management believes, after considering business conditions and collection efforts, that collection is doubtful. Allowance for credit losses The allowance for credit losses represents an amount which, in management's judgment will be adequate to absorb possible losses on existing loans and other extensions of credit that may become uncollectible. Management's judgment in determining the adequacy of the allowance is based on evaluations of the collectibility of loans. These evaluations take into consideration such factors as the volume and quality of the loan portfolio and current economic conditions that may affect the borrowers' ability to pay. Actual loan performance may differ from management's estimates. Management classifies loans as impaired when collection of contractual obligations, including principal and interest, is doubtful. F-7 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Ground rents Ground rents are recorded at cost. Bank premises and equipment Bank premises and equipment are recorded at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the assets using the straight-line and accelerated methods. Other real estate owned Real estate acquired through foreclosure is recorded at the lower of cost or fair market value on the date acquired. Losses incurred at the time of acquisition of the property are charged to the allowance for credit losses. Subsequent reductions in the estimated carrying value of the property and other expenses of owning the property are included in other operating expense. Software and intangible assets Costs incurred in the organization of the Company are being amortized over five years. Computer software is recorded at cost, and amortized over three to five years. A deposit acquisition premium is recorded at cost, and amortized over ten years. Amortization is computed using the straight-line method. Income taxes The provision for income taxes includes taxes payable for the current year and deferred income taxes. The Bank recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been reported differently in the financial statements and tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Per share data Earnings per share are determined by dividing net income by the weighted average number of shares of common stock outstanding, giving retroactive effect to stock dividends declared. Weighted average shares were 861,116 for 1995, 833,849 for 1994, and 826,244 for 1993. Dividends per share are restated giving retroactive effect to stock dividends declared. 2. Cash and Equivalents Cash and due from banks includes money market mutual fund accounts of $1,457,693, $1,253,540, and $173,996, at December 31, 1995, 1994, and 1993, respectively. The Bank normally carries balances with another bank that exceed the federally insured limit. Average balances carried in excess of the limit were $4,010,911 for 1995, $6,663,893 for 1994, and $7,169,579 for 1993. The Bank sold federal funds, on a secured basis, to the same bank that averaged $2,416,318 for 1995, $2,798,922 for 1994, and $3,807,077 for 1993. Banks are required to carry noninterest-bearing cash reserves of specified percentages of deposit balances. The Bank's normal balances of cash on hand and on deposit with other banks are sufficient to satisfy the reserve requirements. F-8
Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 3. Investment Securities Investment securities are summarized as follows: Amortized Unrealized Unrealized Market December 31, 1995 cost gains losses value ----------------------- -------------- -------------- -------------- ---------- Available for sale U. S. Treasury $10,067,337 $ 142,506 $ 7,845 $10,201,998 U. S. Government agency 26,187,078 287,223 3,601 26,470,700 Mortgage-backed 3,049,947 92,520 - 3,142,467 State and municipal 27,379,975 732,408 29,076 28,083,307 ----------- ----------- ---------- ----------- 66,684,337 1,254,657 40,522 67,898,472 Federal Home Loan Bank stock 698,700 - - 698,700 ------------ -------------- --------- ------------ $67,383,037 $1,254,657 $ 40,522 $68,597,172 =========== ========== ========= =========== Held to maturity U. S. Treasury $ 5,003,789 $ 84,106 $ 3,750 $ 5,084,145 U. S. Government agency 997,886 10,870 - 1,008,756 ----------- ----------- ---------- ----------- $ 6,001,675 $ 94,976 $ 3,750 $ 6,092,901 =========== =========== ========== =========== December 31, 1994 ----------------- Available for sale U. S. Treasury $ 1,494,530 $ 4,272 $ 24,102 $ 1,474,700 U. S. Government agency 500,000 - - 500,000 State and municipal 608,832 5,678 834 613,676 ------------ ----------- ------------ ------------ 2,603,362 9,950 24,936 2,588,376 Federal Home Loan Bank stock 684,700 - - 684,700 ------------ ------------- -------------- ------------ $ 3,288,062 $ 9,950 $ 24,936 $ 3,273,076 =========== =========== =========== =========== Held to maturity U. S. Treasury $15,604,747 $ 18,616 $ 590,301 $15,033,062 U. S. Government agency 19,767,888 40,982 700,178 19,108,692 Mortgage-backed 1,894,261 19,336 45,941 1,867,656 State and municipal 19,861,741 414,704 534,802 19,741,643 ----------- ------------ ------------ ----------- $57,128,637 $ 493,638 $ 1,871,222 $55,751,053 =========== =========== =========== =========== December 31, 1993 ----------------- U. S. Treasury $18,855,022 $ 615,160 $ - $19,470,182 U. S. Government agency 18,476,871 642,457 10,374 19,108,954 Mortgage-backed 1,653,810 113,962 - 1,767,772 State and municipal 19,487,345 1,628,615 2,591 21,113,369 ----------- ---------- ------------- ----------- $58,473,048 $3,000,194 $ 12,965 $61,460,277 =========== ========== ============ ===========
In 1995, the FASB granted a one-time opportunity to reclassify securities. The Bank reclassified a majority of its securities from held to maturity to available for sale. F-9
Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 3. Investment Securities (Continued) Contractual maturities at December 31, 1995, 1994, and 1993, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Available for sale Held to maturity Amortized Market Amortized Market December 31, 1995 cost value cost value --------------------------- -------------- --------------- -------------- ------------ Due within one year $ 6,239,463 $ 6,272,876 $ - $ - Due over one to five years 16,130,873 16,449,969 5,258,197 5,328,052 Due over five to ten years 15,308,097 15,747,636 743,478 764,849 Due over ten years 25,955,957 26,285,524 - - Mortgage-backed, due in monthly installments 3,049,947 3,142,467 - - ----------- ------------ -------------- ---------- $66,684,337 $67,898,472 $6,001,675 $6,092,901 =========== =========== ========== ========== December 31, 1994 ----------------- Due within one year $ 499,490 $ 503,750 $ 6,598,185 $ 6,604,743 Due over one to five years 1,495,040 1,470,950 34,059,243 33,071,197 Due over five to ten years - - 9,926,296 9,730,426 Due over ten years 608,832 613,676 4,650,652 4,477,031 Mortgage-backed, due in monthly installments - - 1,894,261 1,867,656 ------------- ------------ ----------- ----------- $ 2,603,362 $ 2,588,376 $57,128,637 $55,751,053 =========== =========== =========== =========== December 31, 1993 ----------------- Due within one year $ 7,089,159 $ 7,163,994 Due over one to five years 31,347,218 32,776,360 Due over five to ten years 13,308,887 14,252,018 Due over ten years 5,073,974 5,500,133 Mortgage-backed, due in monthly installments 1,653,810 1,767,772 ------------ ------------ $58,473,048 $61,460,277 ============ ===========
Proceeds from sales of investments prior to maturity were $20,338,033 during 1995 and $2,530,156 during 1994. Gains of $563,764 and losses of $72,482, were realized on those sales for 1995. Gains of $62,385 and losses of $18,738 were realized on those sales for 1994. There were no sales of investments prior to maturity for 1993. At December 31, 1995, 1994, and 1993, securities with an amortized cost of $3,004,119, $2,500,000, and $1,600,162, were pledged as collateral for government deposits and short-term borrowings. The investment securities include obligations of the State of Maryland and its subdivisions with an amortized cost of $18,839,735, $20,217,039, and $19,233,538, at December 31, 1995, 1994, and 1993. F-10 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued)
4. Loans Major categories of loans are as follows: 1995 1994 1993 --------------- --------------- ---------- Mortgage Residential $ 37,269,279 $ 34,302,680 $ 33,664,092 Commercial 46,888,141 39,397,909 39,276,953 Construction and land development 14,264,761 21,014,457 12,372,074 Lease financing 13,241,832 15,597,789 17,773,635 Demand and time 13,123,542 12,680,512 12,841,248 Installment 29,382,484 33,584,949 28,490,146 ------------- ------------- ------------ 154,170,039 156,578,296 144,418,148 Allowance for credit losses 3,698,271 2,763,874 2,552,355 ------------- ------------- ------------ Loans, net $150,471,768 $153,814,422 $141,865,793 ============ ============ ============
The Bank makes loans to customers located primarily in Anne Arundel County and surrounding areas of central Maryland. Although the loan portfolio is diversified, its performance will be influenced by the economy of the region. The maturity and rate repricing distribution of the loan portfolio are as follows:
1995 1994 1993 --------------- --------------- --------- Variable rate immediately $ 35,148,040 $ 40,448,637 $ 35,243,050 Due within one year 21,326,466 20,520,984 17,781,365 Due over one to five years 48,258,718 48,715,788 46,275,618 Due over five years 50,309,892 47,668,693 45,899,004 ------------ ------------- ------------- 155,043,116 157,354,102 145,199,037 Deferred fees and discount 873,077 775,806 780,889 -------------- -------------- -------------- $154,170,039 $156,578,296 $144,418,148 ============ ============ ============
Transactions in the allowance for credit losses were as follows:
Beginning balance $ 2,763,874 $ 2,552,355 $ 1,755,385 Provision charged to operations 7,925,000 1,120,000 1,080,000 Recoveries 70,047 67,663 50,627 ------------- ------------- -------------- 10,758,921 3,740,018 2,886,012 Loans charged off 7,060,650 976,144 333,657 ------------- ------------- ------------- Ending balance $ 3,698,271 $ 2,763,874 $ 2,552,355 ============ ============ ============
Management has identified impaired loans of $407,597 as of December 31, 1995. No specific allowance for losses related to impaired loans has been provided. These loans were identified as impaired near the end of 1995, and no payments have been received on these loans since they were classified impaired. F-11 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 4. Loans (Continued) Loans on which the accrual of interest has been discontinued amounted to $2,374,643, $654,568, and $1,113,701, at December 31, 1995, 1994, and 1993, respectively. Interest that would have been accrued under the terms of these loans was $191,200, $38,469, and $182,495, at December 31, 1995, 1994, and 1993, respectively. Principal balances of loans past due 90 days or more, including past due nonaccrual loans, are as follows: 1995 1994 1993 ----------- ------------- --------- Demand and time $ 293,462 $ 199,873 $ 339,108 Mortgage 3,258,164 2,486,348 2,094,193 Installment 1,459,411 845,494 615,184 Lease financing 1,269,102 41,912 110,886 ---------- ----------- ----------- $6,280,139 $3,573,627 $3,159,371 ========== ========== ========== 5. Credit Commitments Outstanding loan commitments, unused lines of credit and letters of credit are as follows
1995 1994 1993 ----------- ------------ -------- Loan commitments Construction and land development $3,145,000 $ 2,354,000 $ 3,105,000 Other mortgage loans 703,000 1,181,900 2,141,747 Lease financing 395,000 750,000 - ----------- ------------ ---------- $4,243,000 $ 4,285,900 $ 5,246,747 ========== =========== =========== Unused lines of credit Home-equity lines $ 2,678,990 $ 2,561,861 $ 2,579,440 Commercial lines 13,430,907 18,424,323 18,217,753 Unsecured consumer lines 2,419,052 1,886,600 1,696,982 ----------- ------------ ----------- $18,528,949 $22,872,784 $22,494,175 =========== =========== =========== Letters of credit $ 4,297,760 $ 4,467,523 $ 4,276,619 =========== =========== ===========
Loan commitments and lines of credit are agreements to lend to a customer as long as there is no violation of any condition to the contract. Loan commitments generally have interest rates fixed at current market amounts, fixed expiration dates, and may require payment of a fee. Lines of credit generally have variable interest rates. Such lines do not represent future cash requirements because it is unlikely that all customers will draw upon their lines in full at any time. Letters of credit are commitments issued to guarantee the performance of a customer to a third party. The Bank's exposure to credit loss in the event of nonperformance by the customer is the contractual amount of the commitment. Loan commitments, lines of credit and letters of credit are made on the same terms, including collateral, as outstanding loans. An allowance of $108,000 has been provided to record a possible loss on a letter of credit. F-12 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued)
6. Bank Premises and Equipment A summary of bank premises and equipment is as follows: Useful lives 1995 1994 1993 ------------- ------------ ------------ -------- Land $ 509,803 $ 896,170 $ 896,170 Bank buildings 5-50 years 3,494,122 3,467,732 3,357,690 Construction in progress 29,019 65,024 175,771 Equipment and fixtures 5-30 years 3,430,771 3,037,146 2,890,047 ---------- ----------- ---------- 7,463,715 7,466,072 7,319,678 Accumulated depreciation 3,214,885 2,804,728 2,607,684 ---------- ---------- ---------- $4,248,830 $4,661,344 $4,711,994 ========== ========== ==========
Depreciation expense was $533,197, $511,919, and $449,426, for 1995, 1994, and 1993, respectively. Amortization of software and intangible assets was $50,332, $24,686, and $15,954 for 1995, 1994, and 1993, respectively. The Bank leases the South Crain Branch. Minimum obligations under the lease are $23,460 per year until the lease expires on June 30, 2000. The Bank is also required to pay maintenance costs. Rent expense was $11,681 for 1995. 7. Short-term borrowings Short-term borrowings are as follows:
1995 1994 1993 ---------- ---------- ---------- Notes payable - U.S. Treasury $ 282,722 $ 726,568 $1,269,261 Federal funds purchased 975,000 - - Securities sold under repurchase agreement 500,000 - - Federal Home Loan Bank notes - 1,500,000 - ---------- ---------- ---------- $1,757,722 $2,226,568 $1,269,261 ========== =========== ==========
The Bank may borrow up to $26 million under a line of credit with the Federal Home Loan Bank. The line of credit is secured by a floating lien on the Bank's residential mortgage loans and by investment securities with an amortized cost of $3,004,119 at December 31, 1995. Notes payable to the U.S. Treasury are federal treasury tax and loan deposits accepted by the Bank from its customers to be remitted on demand to the Federal Reserve Bank. The Bank pays interest on these balances at a slight discount to the federal funds rate. The Bank also has available lines of credit, less amounts currently outstanding, of $1,000,000 in overnight federal funds and $2,000,000 in short-term secured credit from another bank. F-13 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 8. Deposits Major classifications of interest-bearing deposits are as follows:
1995 1994 1993 --------------- --------------- ---------- NOW and SuperNOW $ 22,289,849 $ 22,272,708 $ 21,800,005 Money market 27,602,041 32,880,823 36,501,803 Savings 46,752,665 52,830,352 52,764,881 Certificates of deposit, $100,000 or more 9,844,841 7,804,644 6,530,466 Other time deposits 69,484,344 51,696,007 47,445,457 ------------- ------------- ------------- $175,973,740 $167,484,534 $165,042,612 ============ ============ ============
Certificates of deposit $100,000 or more mature as follows:
1995 1994 1993 ------------- ------------- --------- Three months or less $2,097,599 $3,315,755 $2,266,140 Three through 12 months 3,331,546 3,047,900 1,970,334 Over 12 months 4,415,696 1,440,989 2,293,992 ---------- ----------- ----------- $9,844,841 $7,804,644 $6,530,466 ========== ========== ==========
Interest expense associated with certificates of deposit of $100,000 or more was $394,092, $312,993, and $298,594, for the years ended December 31, 1995, 1994, and 1993, respectively. 9. Other Operating Expenses Other operating expenses include the following:
1995 1994 1993 ------------ ------------ -------- Professional services $ 329,849 $ 245,932 $ 151,751 Stationery, printing, and supplies 278,366 235,500 241,708 Postage and delivery 253,253 201,094 187,134 FDIC assessment 237,565 455,250 420,481 Directors fees and expenses 133,202 159,518 195,963 Marketing 118,948 97,671 112,089 Data processing 97,608 92,237 74,830 Correspondent bank services 78,631 53,285 44,423 Telephone 49,021 38,598 49,257 Liability insurance 45,075 48,405 51,424 Losses and expenses on real estate owned 23,733 107,553 102,323 Other 342,154 285,730 306,227 ----------- ----------- ----------- $1,987,405 $2,020,773 $1,937,610 ========== ========== ==========
F-14 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 10. Pension and Profit Sharing Plans The Bank has a defined benefit pension plan covering substantially all of the employees. Benefits are based on the employee's average rate of earnings for the five consecutive years before retirement. The Bank's funding policy is to contribute annually the maximum amount that can be deducted for income tax purposes, determined using the frozen entry age actuarial cost method. Assets of the plan are held in a trust fund principally comprised of growth and income mutual funds managed by another bank. The following table sets forth the financial status of the plan:
1995 1994 1993 ------------- ------------ -------- Accumulated benefit obligation Vested $2,183,088 $2,003,059 $1,839,440 Nonvested 63,366 98,277 59,410 ----------- ----------- ----------- $2,246,454 $2,101,336 $1,898,850 ========== ========== ========== Plan assets at fair value $3,399,653 $2,767,215 $2,771,950 Projected benefit obligation 3,365,078 3,085,573 2,709,239 ---------- ---------- ---------- Plan assets in excess of (less than) projected benefit obligation 34,575 (318,358) 62,711 Unrecognized prior service cost 199,924 225,521 251,118 Unrecognized net (gain) loss (6,440) 332,303 (74,306) Unamortized net asset from transition (73,012) (85,181) (97,350) ---------- ---------- ---------- Prepaid pension expenses included in other assets $ 155,047 $ 154,285 $ 142,173 ========== ========== ========== Net pension expense includes the following: Service cost $ 177,998 $ 175,424 $ 143,683 Interest cost 256,958 232,123 198,606 Actual return on assets (577,586) 96,951 (292,053) Net amortization and deferral 364,911 (314,269) 96,846 ---------- ---------- ---------- Net pension expense $ 222,281 $ 190,229 $ 147,082 ========== ========== ========== Assumptions used in the accounting for net pension expense were: Discount rates 8.5% 8.5% 8.5% Rate of increase in compensation levels 6.5% 6.5% 6.5% Long-term rate of return on assets 8.5% 8.5% 8.5%
The Bank has a defined contribution retirement plan qualifying under Section 401(k) of the Internal Revenue Code that is funded through a profit sharing agreement and voluntary employee contributions. The Bank's contributions to the plan are determined annually by the Board of Directors. The plan covers substantially all employees. The Bank's contributions to the plan, included in expenses, for 1995, 1994, and 1993 were $165,100, $154,900, and $141,700, respectively. F-15 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 11. Postretirement Health Care Benefits The Bank provides health care benefits to employees who retire at age 65. The plan is funded only by the Bank's monthly payments of insurance premiums due. The following table sets forth the financial status of the plan at December 31, 1995: Accumulated postretirement benefit obligation Retirees $185,057 Other active participants, not fully eligible 482,922 -------- 667,979 Unrecognized transition obligation 535,126 -------- Accrued postretirement benefit cost $132,853 ======== Net postretirement benefit expense for 1995 includes the following: Service cost $ 55,885 Interest cost 56,778 Amortization of unrecognized transition obligation 33,399 -------- Net postretirement benefit expense $146,062 ======== Assumptions used in the accounting for net postretirement benefit expense were: Health care cost trend rate 8.0% Discount rate 8.5% If the assumed health care cost trend rate were increased to 9.0%, the total of the service and interest cost components of net periodic postretirement health care benefit cost would increase by $28,808, and the accumulated postretirement benefit obligation would increase by $161,117. 12. Litigation and Restructuring Charges In 1995, two opposing groups ran for election to the Board of Directors. The Company incurred legal expenses and entered into a severance agreement with a former executive officer in connection with this restructuring at costs totaling $687,841. The Company also incurred losses of $719,800 to settle the claim of a borrower who asserted damages for discrimination. These nonrecurring charges are included in operating expenses for 1995. 13. Contingencies The Bank is involved in various legal actions arising from normal business activities. Management believes that the ultimate liability or risk of loss resulting from these actions will not materially affect the Bank's financial position. F-16 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 14. Income Taxes The components of income tax expense (benefit) are as follows: 1995 1994 1993 ----------- ----------- -------- Current Federal $ (1,494,542 $1,204,547 $1,310,228 State (240,172) 345,654 368,665 ------------ ---------- ---------- (1,734,714) 1,550,201 1,678,893 Deferred 40,270 56,560 (349,974) ------------ ---------- ---------- $ (1,694,444) $1,606,761 $1,328,919 ============ ========== ========== The components of the deferred tax expense (benefits) are as follows: Depreciation $ (5,786) $ (1,155) $ 8,705 Discount accretion (7,465) 4,714 6,820 Provision for credit losses 149,670 (107,971) (301,872) Deferred loan origination fees (16,343) 150,535 (81,619) Deferred compensation plans (79,806) 10,437 17,992 ---------- --------- --------- $ 40,270 $ 56,560 $(349,974) ========== ========= ========= As of January 1, 1993, the Company recorded a tax credit of $27,831, or $0.03 per share resulting from the adoption of FASB Statement No. 109. This amount represents the net increase in the deferred tax asset as of that date, and is included in the consolidated statements of income as the cumulative effect of an accounting change. The components of the net deferred tax asset (liability) are as follows:
1995 1994 1993 ------------ ------------ --------- Deferred tax assets Allowance for credit losses $ 837,382 $ 987,052 $ 879,081 Deferred loan origination fees 138,285 121,942 272,477 Unrealized loss on securities available for sale - 5,788 - Deferred compensation and benefit plans 87,543 7,443 13,202 ----------- ------------ ----------- 1,063,210 1,122,225 1,164,760 ---------- ---------- ---------- Deferred tax liabilities Depreciation 245,201 250,987 252,142 Discount accretion 25,370 32,835 28,121 Prepaid pension contributions 59,879 59,585 54,907 Unrealized gain on securities available for sale 468,899 - - ----------- ----------- --------- 799,349 343,407 335,170 ----------- ----------- ----------- Net deferred tax asset $ 263,861 $ 778,818 $ 829,590 ========== ========== ==========
F-17 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 14. Income Taxes (Continued) The differences between the federal income tax computed at the statutory rate of 34 percent and the income taxes for the Company are reconciled as follows:
1995 1994 1993 ------------ ------------ -------- Income (loss) before income taxes $(3,421,192) $ 5,123,354 $ 4,348,200 =========== =========== =========== Taxes computed at federal income tax rate $(1,163,205) $ 1,741,940 $ 1,478,388 Increase (decrease) resulting from Tax-exempt income (384,915) (377,591) (359,031) State income taxes, net of federal benefit (154,710) 237,724 201,452 Nondeductible expenses 8,386 4,688 8,110 ------------- ------------- ------------ $(1,694,444) $ 1,606,761 $ 1,328,919 =========== =========== ===========
15. Capital Standards The Federal Reserve Board and the Federal Deposit Insurance Corporation have adopted risk-based capital standards for banking organizations. These standards require minimum ratios of capital to risk-based assets of 4 percent for Tier 1 capital and 8 percent for total capital. Tier 1 capital consists of stockholders' equity, excluding the unrealized net gain or loss, after applicable income taxes, on investment securities available for sale, and total capital includes a limited amount of the allowance for credit losses. In calculating risk-weighted assets, specified risk percentages are applied to each category of asset and off-balance sheet items. The Company and the Bank must also maintain minimum capital leverage ratios of 3 to 5 percent of Tier 1 capital to average total assets. The standard is based on a discretionary evaluation of the Bank's risk profile by the Federal Reserve and the FDIC. A bank is considered well capitalized if it has minimum Tier 1 and total risk-based capital ratios of 6 percent and 10 percent, respectively, and a minimum leverage ratio of 5 percent. The Company's capital ratios, capital balances, and risk-weighted assets at December 31 were as follows:
1995 1994 1993 -------------- -------------- --------- Risk-based ratios Tier 1 capital 12.4% 14.0% 13.0% Total risk-based capital 13.7% 15.3% 14.3% Leverage ratio (approximated using year-end assets) 7.8% 9.3% 8.3% Capital balances Tier 1 $ 19,261,115 $ 21,686,232 $ 18,616,577 Total 21,226,040 23,624,870 20,409,840 Risk-weighted assets 154,987,000 154,393,000 142,697,000
F-18 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 16. Parent Company Financial Information The balance sheets and statements of income for Glen Burnie Bancorp (Parent Only) are presented below:
Balance Sheets - -------------------------------------------------------------------------------------------------------------- December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- Assets Cash $ 264,757 $ - $ 174,463 Investment in The Bank of Glen Burnie 20,478,884 21,718,390 18,201,804 Investment in GBB Properties, Inc. - 1,899 - Land - 384,700 384,700 Other assets 27,142 16,582 12,994 ----------- ----------- ----------- Total assets $20,770,783 $22,121,571 $18,773,961 =========== =========== =========== Liabilities and stockholders' equity Dividend payable $ 218,208 $ 169,987 $ 157,384 Due to affiliates 15,189 274,551 - ----------- ----------- ----------- 233,397 444,538 157,384 ----------- ----------- ----------- Stockholders' equity Common stock 7,273,664 7,080,834 5,834,024 Stock dividend to be distributed 1,454,719 - - Surplus 5,917,043 5,450,852 5,290,979 Retained earnings 5,146,724 9,154,546 7,491,574 Net unrealized gain (loss) on securities available for sale, net of income taxes 745,236 (9,199) - ----------- ----------- ----------- Total stockholders' equity 20,537,386 21,677,033 18,616,577 ----------- ----------- ----------- Total liabilities and stockholders' equity $20,770,783 $22,121,571 $18,773,961 =========== =========== ===========
Statements of Income - -------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- Dividend from subsidiaries $ 315,000 $ - $ 160,000 Expenses 61,775 7,060 9,136 ------------ ----------- ----------- Income before income taxes and equity in undistributed net income of subsidiaries 253,225 (7,060) 150,864 Income tax benefit 21,056 5,970 - Equity in undistributed net income of subsidiaries (2,001,029) 3,517,683 2,896,248 ------------ ------------ ----------- Net income (loss) $ (1,726,748) $ 3,516,593 $ 3,047,112 ============ =========== ===========
F-19 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 17. Fair Value of Financial Instruments The estimated fair values of the Company's financial instruments are as follows:
December 31, 1995 December 31, 1994 ------------------------------ ------------------------------ Carrying Fair Carrying Fair amount value amount value ------ ----- ------ ----- Financial assets Cash and due from banks $ 9,450,021 $ 9,450,021 $ 7,806,316 $ 7,806,316 Federal funds sold - - 1,800,000 1,800,000 Investment securities 74,598,847 74,690,073 60,401,713 59,024,129 Variable rate loans 35,148,040 35,148,040 40,448,637 40,448,637 Accrued interest receivable 2,154,599 2,154,599 2,236,803 2,236,803 Financial liabilities Noninterest-bearing deposits $ 45,147,023 $ 45,147,023 $ 41,081,119 $ 41,081,119 Variable rate deposits 96,644,555 96,644,555 107,983,883 107,983,883 Short-term borrowings 1,757,722 1,757,722 2,226,568 2,226,568 Interest and dividend payable 447,923 447,923 356,810 356,810
The fair values of investment securities are estimated using a matrix that considers yield to maturity, credit quality, and marketability. This method of valuation is permitted by the FASB, but may not be indicative of net realizable or liquidation values. It is not practicable to estimate the fair value of loans with fixed maturities, deposit liabilities with fixed maturities, or outstanding credit commitments. The Company does not presently have available resources to estimate fair values based on quoted prices or discounted cash flows for individual accounts or groups of accounts. Maturities and weighted-average interest rates on loans and deposits with fixed maturities are as follows:
December 31, 1995 December 31, 1994 ---------------------- --------------------- Amount Rate Amount Rate ------ ---- ------ ---- Loans Maturing within one year $ 21,326,466 8.7% $ 20,520,984 8.7% Maturing over one to five years 48,258,718 9.0% 48,715,788 8.8% Maturing over five years 50,309,892 9.1% 47,668,693 9.3% ------------- ------------ $119,895,076 $116,905,465 ============ ============ Deposits Maturing within three months $ 17,035,145 5.7% $ 13,342,709 4.0% Maturing over three to six months 16,598,147 5.8% 12,985,504 4.8% Maturing over six months to one year 13,014,695 5.7% 12,643,752 5.0% Maturing over one to five years 32,681,198 6.5% 20,528,686 5.8% ------------- ------------- $ 79,329,185 $ 59,500,651 ============ ============
F-20 Glen Burnie Bancorp and Subsidiaries Notes to Consolidated Financial Statements (Continued) 18. Related Party Transactions The executive officers and directors of the Bank enter into loan transactions with the Bank in the ordinary course of business. These loans were made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with unrelated borrowers. At December 31, 1995, 1994, and 1993, the amounts of such loans outstanding were $2,878,742, $685,613, and $535,347, respectively. 19. Stockholders' Equity Employees who have completed one year of service are eligible to participate in the employee stock purchase plan. The plan allows employees to purchase stock at 85 percent of the fair market value. At December 31, 1995, there were 31,980 shares of common stock reserved for issuance under the plan. Options for 4,555 of those shares are outstanding, at $26.92 per share, expiring October 1, 1996. Options for 6,586 shares were exercised in 1995 at prices of $24.08 to $26.92 per share. The director stock purchase plan allows directors to purchase stock at the fair market value on the date an option is granted. At December 31, 1995, there were 17,700 shares of common stock reserved for issuance under the plan. Options for 300 of those shares are outstanding at $31.67 per share, expiring October 1, 1997. Options for 3,600 shares were exercised in 1995 at prices of $28.33 to $31.67 per share. The dividend reinvestment and stock purchase plan allows participating stockholders to invest their cash dividends in stock at 95 percent of the fair market value on the dividend payment date. At December 31, 1995, there were 105,190 shares of common stock reserved for issuance under the plan. The number of shares and prices per share have been retroactively adjusted for stock dividends declared. The Board of Directors may suspend or discontinue any of the plans at its discretion. 20. Regulatory Matters The FDIC has advised management that it will ask the Bank to agree to a Memorandum of Understanding that management will correct violations of law, improve loan administration and loan loss accounting methods, improve loan collections, improve information to the board of directors, adopt a strategic plan and budget, and maintain adequate capital. F-21 Exhibit Index Page No. 3.1 Articles of Incorporation ___ 3.2 By-Laws ___ 10.1 Glen Burnie Bancorp Stockholder Purchase Plan ___ 10.2 Glen Burnie Bancorp Dividend Reinvestment and ___ Stock Purchase Plan 10.3 Glen Burnie Bancorp Director Stock Purchase Plan ___ 10.4 Glen Burnie Bancorp Employee Stock Purchase Plan ___ 10.5 The Bank of Glen Burnie Pension Plan ___ 11 Statement re computation of per share earnings ___ 16 Letter re: change in certifying public accountant ___ 21 Subsidiaries of the registrant ___ 27 Financial Data Schedule ___ EX-3.1 2 ARTICLES OF INCORPORATION EXHIBIT 3.1 ARTICLES OF INCORPORATION OF GLEN BURNIE BANCORP THIS IS TO CERTIFY: ARTICLE ONE: I, the undersigned, Henry L. Hein, whose post office address is 101 Crain Highway, SE, Glen Burnie, Maryland 21061, being at least eighteen (18) years of age, hereby form a corporation under and by virtue of the General Laws of the State of Maryland. ARTICLE TWO: The name of the Corporation which is hereinafter called The Corporation is: GLEN BURNIE BANCORP ARTICLE THREE: The purposes for which the Corporation is formed are as follows: (a) To engage in the business of a bank holding company, as allowed under applicable Federal Statutes and the rules and regulations of the Federal Reserve Board. (b) To acquire, hold, own, sell, assign, exchange, transfer or otherwise dispose of or deal in and with any of the shares of capital stock and other securities and interest issued or created by any banking institution or association organized under the laws of the United States of America, any state, other political subdivision or any foreign government, or any other firm or corporation to the extent permitted by applicable laws or regulations. (c) To do any acts necessary or advisable for their preservation, protection, improvement and enhancement in value. (d) To do anything permitted by Section 2-103 of the Corporations and Associations Articles of the Annotated Code of Maryland as amended from time to time. ARTICLE FOUR: The post office address of the principal office of The Corporation in this State is: 101 Crain Highway, SE Glen Burnie, MD 21061 The name and post office address of the resident agent of The Corporation in this State is: Henry L. Hein 101 Crain Highway, SE Glen Burnie, MD 21061 ARTICLE FIVE: The total number of shares of capital stock which The Corporation has authority to issue is five million (5,000,000) with a par value of Ten Dollars ($10.00) per share. The total par value of the shares shall be Fifty Million Dollars ($50,000,000.00). ARTICLE SIX: The number of directors of the Corporation shall not be less than five (5) nor more than thirty (30), the exact number of directors to be fixed from time to time in the manner provided in the By-Laws. The names of the directors who shall act until the first annual meeting or until their successors are duly elected and qualify are: Theodore L. Bertier, Jr., Jan W. Clark, F. Ward DeGrange, Sr., John E. DeGrange, Sr., John E. Demyan, Louis J. Doetsch, F. Pall Dorr, Jr., Carl. L. Hein, Jr., Henry L. Hein, Frederick W. Kuethe, III, Murray D. O'Malley, William A. Pumphrey, Jr., Edward M. Webster, Katherine P. Wellford. ARTICLE SEVEN: The affirmative vote of the holders of not less than 80% of the outstanding shares of stock of The Corporation entitled to vote shall be required for the approval or authorization with respect to the following: (a) The amendment of Articles of Incorporation. - 2 - (b) The consolidation of the Corporation with one or more corporations to form a new consolidated corporation. (c) The merger of the Corporation with another corporation or the merger of one or more corporations into The Corporation. (d) The sale, lease, exchange or other transfer of all, or substantially all, of the property and assets of The Corporation, including its good will. (e) The participation of The Corporation in a share-exchange (as defined in the Corporation & Associations Article of the Annotated Code of Maryland, the stock of which is to be acquired. (f) The voluntary liquidation, dissolution or winding up of The Corporation. ARTICLE EIGHT: (a) As used in this Article any word or words that are defined in Section 2-418 of the Corporations and Associations Article of the Annotated Code of Maryland, (the "indemnification section") as amended from time to time, shall have the same meaning as provided in the "indemnification section". (b) The Corporation shall indemnify a present or former director or officer of the Corporation in connection with a proceeding to the fullest extent permitted by and in accordance with the indemnification section. (c) With respect to any corporate representative other than a present or former director, the Corporation may indemnify such corporate representative in connection with a proceeding to the fullest extent permitted by and in accordance with the indemnification section; provided, however, that to the extent a corporate representative other than a present or former director or officer successfully defends on the - 3 - merits or otherwise, any proceeding referred to in Subsection (b) or (c) of the indemnification section or any claim, issue or matter raised in such proceeding, the corporation shall not indemnify such corporate representative other than a present or former director of officer of the indemnification section, unless until it shall have been determined and authorized in specific case by (a) an affirmative vote at a duly constituted meeting at a majority of the Board of Directors who were not parties to the proceeding or (b) an affirmative vote, at a duly constituted meeting of a majority of all the votes cast by stockholders who were not parties to the proceedings, an indemnification of such corporate representative other than a present or former director of officer is proper in the circumstances. ARTICLE NINE: The duration of the corporation shall be perpetual. IN WITNESS WHEREOF, I have signed these Articles of Incorporation this 20th day of December, 1990. [/s/ Barbara Elswick] [/s/ Henry L. Hein] (SEAL) - --------------------- -------------------------- Witness HENRY L. HEIN STATE OF MARYLAND, COUNTY OF ANNE ARUNDEL, to wit: I HEREBY CERTIFY, that on this 20th day of December, 1990, before me, the Subscriber, a Notary Public, in and for the State and County aforesaid, personally appeared HENRY L. HEIN and he made oath in due form of law that the foregoing Articles of Incorporation to be his act. AS WITNESS my hand and Notarial Seal. [/s/ Barbara Elswick] ---------------------------- Notary Public My Commission Expires: 8/1/92 - 4 - EX-3.2 3 BY-LAWS FOURTH DRAFT 2/5/93 EXHIBIT 3.2 BY-LAWS OF GLEN BURNIE BANCORP ARTICLE I OFFICES The principal office of the corporation shall be at 101 Crain Highway, SE, Glen Burnie, Anne Arundel County, State of Maryland. The corporation may also have offices at such other places within the State of Maryland as the Board of Directors may from time to time determine or the business of the corporation may require, provided permission is obtained from applicable regulators. ARTICLE II STOCKHOLDERS 1. Place of Meetings Meetings of stockholders shall be held at the principal office of the corporation or at such place within the State of Maryland as the Board of Directors shall authorize. 2. Annual Meeting The Annual Meeting of the Stockholders shall be held on the second Thursday of March at 2:00 p.m. in each year if not a legal holiday, and, if a legal holiday, then on the next business day following at the same hour, when the stockholders shall elect a board and transact such other business as may 1 properly come before the meeting. In the event of extremely inclement weather, an act of God, or other emergency situations, the meeting may be postponed from day to day until said situation is alleviated. 3. Special Meetings A special meeting of the stockholders may be called at any time by the Chairman of the Board of Directors, the President, a majority of the Board of Directors then serving or at the request in writing by.stockholders entitled to cast at least twenty five percent (25%) of all the votes entitled to be cast at the meeting. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at a special meeting shall be confined to the purposes stated in the notice. Notice of special meetings shall be given by the Secretary not less than ten (10) nor more then ninety (90) days before the date of such meeting in writing to each stockholder entitled to vote at the meeting. 4. Fixing Record Date For the purpose of making any proper determination with respect to stockholders including which stockholders are entitled to: a) notice of a meeting; b) vote at a meeting; c) receipt of a dividend; d) be alloted other rights, the stock transfer books of the corporation may be closed for a period-not to exceed twenty (20) days. The record date shall not be more than ninety (90) days before the date on which the action requiring the determination will be taken or less than ten (10) 2 days before the date of the meeting. The Board of Directors may choose the record date, however if no record date is fixed, it shall be determined in accordance with the provisions of the Corporations & Associations Article of the Annotated Code of Maryland as it may be amended from time to time. 5. Notice of Meeting of Stockholders Written notice of each meeting of stockholders shall state the purpose of purposes for which the meeting is called, the place, date and hour of the meeting and unless it is the annual meeting, 'shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice shall be given either personally or by mail to each stockholder entitled to vote at such meeting, not less than ten (10) nor more than thirty (30) days before the date of the meeting. If action is proposed to be taken that might entitle stockholders to payment for their shares, the notice shall include a statement of that purpose and to that effect. If mailed,'the notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the stockholder at the stockholder's address as it appears on the record of stockholders, or, if the stockholder has filed.with the Secretary a written request that any notices be mailed to some other address, then directed to such other address. 6. Waivers Notice of any meeting need not be given to any stockholder who signs a waiver of notice, in person or by proxy, 3 whether before or after the meeting. The attendance of any stockholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by the stockholder. 7. Quorum of Stockholders Unless the Articles of Incorporation provides otherwise, the holders of a majority of the shares entitled to vote thereat shall constitute a quorum at a meeting of stockholders for the transaction of any business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders. The stockholders present may adjourn the meeting despite the absence of a quorum. 8. Proxies Every stockholder entitled to vote at a meeting of stockholders or to express consent or dissent without a meeting may authorize another person or persons to act for that stockholder by proxy. Every proxy must be signed by the stockholder or the stockholder's attorney-in-fact. Proxies shall not be valid after the meeting for which they are granted or continuation thereof and the purposes therein contained. Every proxy shall be revocable at the pleasure of the stockholder executing it, except .,as otherwise provided by law. 4 9. Qualification of Voters Every stockholder of record shall be entitled at every meeting of stockholders to one (1) vote for every share standing in that stockholders name on the record of stockholders. 10. Vote of Stockholders Except as otherwise required by statute or by the Articles of Incorporation: a) Directors shall be elected by a plurality of the votes cast at a meeting of stockholders by the holders of shares entitled to vote in the election; b) The affirmative vote of the holders of not less than 80% of the outstanding shares of stock of the corporation entitled to vote shall be required for the approval or authorization with respect to the following: 1) The amendment of Articles of Incorporation. 2) The consolidation of the corporation with one or more corporations to form a new consolidated corporation. 3) The merger of the corporation with another corporation or the merger of one or more corporations into the corporation. 4) The sale, lease, exchange or other transfer of all, or substantially all, of the property and assets of the corporation, including its goodwill. 5) The participation of the corporation in a share-exchange (as defined in the Corporations & Associations 5 Article of the Annotated Code of Maryland) the stock of which is to be acquired. 6) The voluntary liquidation, dissolution or winding up of the corporation. c) All other corporate action shall be authorized by a majority of the votes cast. 11. Written Consent of Stockholders. Any action that may be taken by vote may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all the outstanding shares entitled to vote thereon or signed by such lessor number of holders as may be provided for in the Articles of Incorporation. ARTICLE III DIRECTORS 1. Board of Directors Subject to any provision-in the Articles of Incorporation, the business of the corporation shall be managed by its Board of Directors, each of whom shall be a citizen of the United States and the State of Maryland and be at least the age of majority-and be stockholders with sufficient shares to qualify under the provisions Section 3-403 of the Financial Institutions Article of the Annotated Code of Maryland as it may be amended from time to time. Former Directors may be elected by the Board of Directors to an honorary position of Director Emeritus, however 6 such Directors will not have a vote and will not be required to attend regular Board of Directors meetings. The Directors Emeritus will receive such compensation as the Board of Directors may determine. 2. Number of Directors The property, business and affairs of this corporation shall be managed by a Board of not less than nine (9) Directors, nor more than sixteen (16), who shall hold office for one (1) year or until their successors are elected and qualify. However, two (2) of the directorships may be left vacant to be filled at the discretion of the Board of Directors. Directors appointed under this provision shall hold office until the next Annual Meeting where they will be subject to election by the stockholders for another term, if the stockholders wish to fill all directorships. The number of directors to serve each year shall be determined at the Annual Meeting of the Stockholders of the corporation. 3. Election and Term of Directors At each Annual Meeting of Stockholders, the stockholders shall elect Directors to hold office until the next Annual Meeting. Each Director shall hold office until the expiration of the term for which he or she is elected and until his or her successor has been elected and qualified or until his or her prior resignation or removal. 7 4. Vacancies Any vacancy on the Board of Directors may be filled by the Board of Directors. A Director elected to fill a vacancy caused by resignation, death or removal shall be elected to hold office for the unexpired term of his or her predecessor. 5. Removal of Directors The stockholders may remove the entire Board of Directors or any individual Director from office by an affirmative vote of eighty.percent (80%) of all votes entitled to be cast at an election of Directors. In case the Board or any one or more Directors be so removed, new Directors may be elected at the same meeting. The Board of Directors may remove a Director for cause or physical disability of long duration by a vote of eighty percent (80%) of the members then serving on the Board of Directors. 6. Resignation A Director may resign at any time by giving written notice to the Board, the President, the Treasurer or Secretary of the corporation. Unless-otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Board or such officer and the acceptance of the resignation shall not be necessary to make it effective. 7. Quorum of Directors At all meetings of the Board of Directors, a majority of the Directors serving shall be necessary and 8 sufficient to constitute a quorum for the transaction of business, and every act of the majority of the Directors present at a meeting at which a quorum is present, shall be regarded as the act of the Board of Directors, unless a greater number is required by law or under the provisions of these By-Laws. In absence of a quorum, a majority of the Directors present may adjourn from day to day until the time fixed for the next regular meeting of the Board of Directors or until a quorum shall attend. 8. Action of the Board of Directors Unless otherwise required by law, the vote of a majority of the Directors present at-the time of the vote, if a quorum is present at such time, shall be the act of the.Board of Directors. Each Director present shall have one vote regardless of the number of shares that Director may hold. 9. Place and Time of Board Meetings The Board of Directors may hold its meetings at the office of the corporation or at such other place, within the State of Maryland, as it may from time to time determine. 10. Regular Annual Meeting A regular Annual Meeting of-the Board of Directors shall be held immediately following the Annual Meeting of the Stockholders at the place of such Annual Meeting of Stockholders. 11. Notice of Meetings of the Board, Adjournment Regular meetings of the Board of Directors may be held without written notice at such time and place as it shall from time to time determine. Special meetings of the Board of 9 Directors shall be held upon notice to the Directors and may be called by the President upon three (3) days notice to each Director either personally or by mail, or by wire. Special meetings shall be called by the President or by the Secretary, and/or the Treasurer in a like manner on written request of two (2) Directors. Notice of a meeting need not be given to any Director who submits a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior thereto or at its commencement, the lack of notice. 12. Chairman The Chairman of the Board of Directors shall preside at all meetings of the Board of Directors and the stockholders of the corporation. The Chairman shall be an ex officio member of all standing committees. The Chairman's main duties shall consist of relations between the Board of Directors and the Officers and the Board of Directors and the stockholders.: Also, the Chairman may exercise such other and further authority as the Board of Directors may, from time to time, delegate to the Chairman. 13. Compensation The Board of Directors shall provide for compensation to be paid to Directors, Committee members and the Secretary attending meetings of the Board and any Committees. 10 ARTICLE IV OFFICERS 1. Offices, Election, Term, The officers of the corporation shall consist of: President (who may also be Chairman of the Board of Directors), Vice Presidents, Secretary and Treasurer. All of said officers shall be elected by the Board of Directors. New Officer positions may be created and filled by the Board of Directors at any regular or special Board meeting. 2. President The President shall be the Chief Executive Officer of the corporation. The President shall carry into.effect all legal directions of the Executive Committee and the Board of Directors and shall at all times exercise general supervision over the interests, affairs, and operations of the corporation and perform all duties with reference thereto or incident t o office of President. Also, the President may perform such duties as the Board of Directors may designate from time to time. The President shall be an ex officio member of all standing Committees. 3. Vice President During the absence or disability of the President, the Vice President shall have all the duties and powers and functions of the President. 11 The Vice President shall perform such duties as may be prescribed by the Board of Directors from time to time. 4. Assistant Vice President The Board of Directors may appoint an Assistant Vice President or more than one Assistant Vice President. Each Assistant Vice President shall have power to perform all duties of the Vice President in the absence or disability of the Vice President and shall have such other powers and shall perform such other duties as may be assigned by the Board of Directors or the President. 5. Treasurer The Treasurer shall have custody of all the funds and securities of the corporation, and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. The Treasurer shall deposit all monies and other valuables in the name and to the credit of the corporation in such depository or depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements. The Treasurer shall render to the President and the Broad of Directors, whenever either of them so request, an account of all transactions as Treasurer and of the financial condition of the corporation. 12 The Treasurer shall perform all the duties generally incident to the office of Treasurer, subject to the control of the Board of Directors and the President. During the absence or disability of the Treasurer, the Board of Directors may select an Acting Treasurer to serve, who shall have all the powers and functions of the Treasurer. The Acting Treasurer would serve until, in the judgment of the Board of Directors, the Treasurer could return to duty. 6. Secretary The Secretary shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors' or the President and attest the same. In general, the Secretary shall perform all duties generally incident to the office of Secretary, subject to the control of the Board of Directors and the President. During the absence or disability of the Secretary, the Board of Directors may elect an Acting Secretary to serve, who shall have all the powers and duties of the Secretary. The Acting Secretary will serve until, in the judgment of the Board of Directors, the Secretary could return to duty. 7. Counsel The Board of Directors shall have the power to appoint a Counsel. The Counsel of this corporation shall have such powers and perform such duties as the Board of Directors shall prescribe. 13 ARTICLE V CERTIFICATES FOR SHARES 1. Certificates The shares of the corporation shall-be represented by certificates unless represented by book entries (Statement of Account). They shall be numbered and entered in the books of the corporation as they are issued. They shall exhibit the holder's name and the number of shares and shall be signed by the officers designated in these By-Laws, and shall bear the corporate seal. The President and Secretary, shall sign all certificates of stock and shall have power to make any and all transfers of the stock of this corporation which may be authorized. In the absence of the President the Vice President shall perform the duties and in the absence of the Secretary the Assistant Secretary shall perform these duties in reference to said certificates. 2. Lost or Destroyed Certificates The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by corporation alleged to have been lost or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as 14 it shall require and/or give the corporation a bond in such sum and with such surety or sureties as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. 3. Transfer of Shares a. Upon surrender to the corporation or the transfer agent of the corporation.of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person or persons entitled thereto, and cancel the old certificate. Every such transfer shall be entered on the transfer book of the corporation which shall be kept at its principal office. No,transfer shall be-made within twenty (20) days next preceding the Annual Meeting of the Stockholders. b. The corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of Maryland. 4. Transfer Books The Board of Directors may prescribe a period hot exceeding twenty (20) days prior to any-meeting of the 15 stockholders, during which time no transfer of stock on the books of the corporation may be made. ARTICLE VI DIVIDENDS The Board of Directors, at their discretion, may, when the surplus profits justify, declare dividends (or distribution of surplus profits) to the holders of shares of capital stock. ARTICLE VII INVESTMENTS, LOANS AND EXPENDITURES The funds of this corporation may be invested, loaned or expended in such manner and oft such terms as the Board of Directors or Executive Committee may determine, subject to applicable State and Federal laws and regulations. To acquire, hold, own, sell, assign, exchange, transfer or otherwise dispose of or deal in and with any of the shares of capital stock and other securities and interest issued or created by any banking institution or association organized under the laws of the United States of America, any state, other political subdivision,or any foreign government, or any other firm or corporation to the extent Permitted by applicable laws or regulations. 16 ARTICLE VIII CORPORATE SEAL The seal of the corporation shall be circular in form and bear the name of the corporation, the year of its organization and the words "Corporate Seal - Maryland." The seal may be used by causing it to be impressed directly on the instrument or writing to be sealed or upon adhesive substance affixed thereto. The seal on the certificates for shares or on any corporate obligation for the payment of money may be a facsimile, engraved, or printed. ARTICLE IX EXECUTION OF INSTRUMENTS All corporate instruments and document, except stock certificates, shall be signed or countersigned, executed, verified or acknowledged by such officer or officers or other person or persons as the Board of Directors may from time to time designate. ARTICLE X FISCAL YEAR The fiscal year shall begin the first day of January in each year and end on the following 31st day of December in each year. 17 ARTICLE XI REFERENCES TO CERTIFICATE OF INCORPORATION AND ARTICLES OF INCORPORATION Reference to the Certificate of Incorporation and the Articles of Incorporation in these By-Laws shall include all amendments thereto or changes thereof unless specifically exempted. ARTICLE XII BY-LAW CHANGES 1. Amendment, Reveal, Adoption, Election of Directors Except as otherwise provided in the Articles of Incorporation, the By-Laws may be amended by the stockholders of the corporation by an affirmative vote of eighty (80%) of all the votes entitled to be cast on the matter. The By-Laws may be amended or repealed at any Special Meeting called for that purpose or at any regular Annual Meeting, provided however that notice, as required, is given to all stockholders entitled to said notice. ARTICLE XIII INDEMNIFICATION OF OFFICERS AND DIRECTORS As used in this Article XIII, any word or words defined in Section 2-418 of the Corporations & Associations Article,of the Annotated Code of Maryland, as amended from time to time, (the 18 Indemnification Section) shall have the same meaning as provided in the Indemnification Section. The corporation may indemnify and advance expenses to a Director, officer, employee, Committee member of the Corporation in connection with a proceeding to the fullest extent permitted by and in accordance with the Indemnification Section. ARTICLE XIV PUBLICATION OF NOTICE TO STOCKHOLDERS Notice of the time, place and purpose of such meeting shall be given by publication in at least one (1) newspaper published. in Anne Arundel County, Maryland, not less than ten (10) days prior to the meeting, in which said notice shall set forth the time and place of said meeting and also the fact that the meeting is an Annual Meeting and that the annual election of directors will then be held. ARTICLE XV ANNUAL REPORT OF THE PRESIDENT At every Annual Meeting of the Stockholders, the President shall submit full reports of the financial condition of the corporation and the results of its operations during the preceding year. 19 ARTICLE XVI INSPECTORS OF ELECTION At the meeting, the Chairman of the meeting shall appoint two (2) or more persons to act as inspectors of election. However, the failure to appoint such inspectors shall not in any way affect the validity of the election or other proceedings, taken at the meeting. 20 EX-10.1 4 STOCKHOLDER PURCHASE PLAN EXHIBIT 10.1 GLEN BURNIE BANCORP STOCKHOLDER PURCHASE PLAN 1. Purposes: The purposes of this Plan are: (a) To encourage eligible stockholders to acquire additional shares of common stock in the Corporation. (b) To furnish existing stockholders with incentive to increase their investment in the Corporation. (c) To provide additional capital for the growth and stability of the Corporation. 2. Definitions: The following words or terms used herein have the following meaning: (a) The word "Corporation" means Glen Burnie Bancorp, a Maryland chartered bank holding company. (b) The "Plan" shall mean this Glen Burnie Bancorp Stockholders Purchase Plan. (c) "Board" shall mean the Board of Directors of Glen Burnie Bancorp. (d) "Shares," "Stock" or,"Common Stock" shall mean shares of $10.00 par value common stock of Glen Burnie Bancorp. (e) The "Committee' shall mean the committee appointed by the Board to administer the Plan. (f) "Option" shall mean the right of a Stockholder to purchase Common Stock under the Plan. (g) "Date of Grant" shall mean, in respect of any Option, the date on which the Board grants the Option under the Plan. (h) "Date of Exercise" shall mean the date upon which the Stockholder completes the payment requirement of the Option and is entitled to delivery of the Shares so purchased, which date shall in no event be later than three (3) months after the Date of Grant. (i) "Option Period" shall mean the period commencing upon the Date of Grant and ending on the earlier of the date of exercise or the expiration of the option. (j) "Purchase Price" shall mean fair market value, as determined by the latest trade through Legg Mason Wood Walker. (k) "Stockholder" shall mean any Stockholder eligible under this Plan as hereinafter defined in paragraph three. 3. Eligibility: Any Stockholder of The Bank of Glen Burnie who wishes to participate may do so under the the terms of this Plan. 4. Stocks: The Stock subject to the Options shall be shares of Glen Burnie Bancorp authorized but unissued ($10.00 par value per share). The aggregate number of shares on which Options may be issued shall not exceed One Hundred Thousand (100,000) shares of Common Stock at any one time. Shares optioned and not exercised shall continue to be available for inclusion in any subsequent Options that may be granted under the Plan. In no event may any Stockholder be granted Options for more than stock of a value of $3,000.00 per quarter or less than a minimum of $50.00 in stock The number of shares represented by this Plan will be adjusted for stock splits and stock dividends subsequent to the date the Plan is adopted. 5. Administration: The Stockholders Purchase Plan shall be administrated by a Committee including at least three members, namely, Chairman of the Board of Directors, the Chief Executive Officer of the Corporation and one member of the Board of Directors other than the above named, who is elected annually by the Board of Directors at the organizational meeting. A majority of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Subject to the express provisions of the Plan, the Committee shall also have the power and authority to construe and interpret the Plan and the respective option agreements entered into thereunder, and to make all other determinations necessary or advisable for administering the Plan. 6. Procedure for Grant and Acceptance of Options: An Eligible Stockholder shall be notified, in writing, by Glen Burnie Bancorp of the Grant of any Option or Options. If any eligible Stockholder elects to exercise the Option within the option period, he may invest no less than $50.00 nor more than $3,000.00 in the purchase of additional shares of stock. If there is not sufficient stock remaining in the Plan to meet the demand of all eligible Stockholders, the remaining stock will be prorated among the Stockholders in proportion to the amount that they requested. For the purposes of this Plan all persons listed on a Certificate of Stock shall be counted as one Stockholder. 7. Option Price: The purchase price of the shares, under any Option granted pursuant to this Plan, shall be The Fair Market Value of the stock on the date upon which such Option is granted. 8. Method of Payment: The option Price shall be paid in full at the time an Option is exercised under the Plan. Promptly after the exercise of an Option and the full payment of the Option Price, the Participant shall be entitled to the issuance of a stock certificate evidencing ownership of such Stock. A participant shall have none of the rights of a Stockholder with respect to shares under option as provided in the Plan until shares are issued, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 9. Options to Purchase Shares not Transferable: Options granted to an Eligible Stockholder under the Plan are exercisable during such Eligible Stockholders' lifetime, up to the limitation in paragraph 6, only by the Stockholder, such Options may not be sold, transferred (other than by will or the laws of descent and distribution), pledged, or otherwise disposed or encumbered with the exceptions to the provisions in paragraph 11 of this Plan. 10. Amendment and Termination: The Board of Directors may terminate, amend, or revise the Plan with respect to any shares on which Options have been granted. Neither the Board nor the Committee may, without the consent of the holder of an Option, alter or impair any Option previously granted under the Plan, except as authorized herein. No such revision or amendment shall change the number of shares subject to the Plan or permit granting of Options under the Plan to persons other than the Stockholders of Glen Burnie Bancorp. 11. Death: If an Eligible Stockholder dies without having fully exercised his Options under this Plan, the executors or administrators, or legatees or heirs of the estate shall have the right to exercise such Options to the extent that such deceased Stockholder was entitled to exercise the Options on the date of death. 12. Commencement of Plan: The Plan shall not take effect until approved by the Board of Directors in accordance with the approval given at the March 14, 1996 Annual meeting of Stockholders. 13. Governmental Approvals or Consents: The Plan and any Options granted thereunder are subject to any governmental approvals or consent that may be or become applicable in connection therewith. The Board may make such changes in the Plan and include such terms in any Option granted under the Plan as may be necessary or desirable, in the opinion of counsel of Glen Burnie Bancorp, to comply with the rules or regulations of any governmental authority, or to be eligible for tax benefits under the Internal Revenue Code or laws of any State. 14. Preemptive Rights: Glen Burnie Bancorp stock has preemptive rights that allow Shareholders to maintain an existing percentage of ownership in the Corporation. The adoption of this Plan affects the Shareholders of the Corporation because there is some dilution of their percentage of ownership. Therefore, this Plan would be an exception to normal preemptive rights. EX-10.2 5 DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN EXHIBIT 10.2 GLEN BURNIE BANCORP DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN The stockholders of Glen Burnie Bancorp, hereinafter referred to as "the Corporation," have approved this Dividend Reinvestment and Stock Purchase Plan. The Plan relates to 100,000 authorized but unissued shares of common stock of the Corporation. The Plan is intended to provide holders of stock who participate with a convenient and economical method of increasing their equity ownership in the Corporation by purchasing additional shares of stock without payment of any brokerage commission, service charges or any fees. The approved Plan is as follows: 1. NATURE OF THE PLAN The purpose of this Plan is to provide stockholders with a convenient and economical method of increasing their equity ownership in the Corporation. The Plan allows the stockholders to elect and become participants in the Plan and thereafter receive their dividends, if and when declared by the Board of Directors, in the form of stock in lieu of cash distributions. The holders of stock who do not participate will continue to receive cash dividends in the usual manner, if and when declared. 2. ELIGIBILITY All record holders of common stock are eligible to participate in the Plan. The right to participate in the Plan is not transferrable. Stockholders who reside in jurisdictions in which it is unlawful for the Corporation to permit their participation are not eligible to participate in the Plan. The Corporation also reserves the right to exclude a stockholder who resides in a foreign country or in a jurisdiction which requires registration or qualification of the stock or of the Corporation's directors, officers or other employees as agents in connection with sales pursuant to Plan. An eligible stockholder may join the Plan by signing the election form and returning it to the Plan Administrator. Stockholders may become participants at any time. Any stockholder who does not elect to participate in the Plan will continue to receive any dividends declared by the Board of Directors in cash (or in stock if the Board of Directors declares a stock dividend for all stockholders). A stockholder already participating in the Plan will continue to participate until such stockholder gives notice to the Corporation in the manner prescribed herein that he wishes to withdraw from the Plan. 3. CREDITING OF ACCOUNTS If the Stockholder Authorization Form signed by a stockholder entitled to a dividend is received by the Corporation before the Declaration Date for the next dividend payment, the participant shall receive his next dividend payment in the form of stock under the Plan. The participant shall thereafter continue to receive any dividends on his common stock as stock under the Plan until he withdraws from participation in the Plan or the shares are transferred of record to a new owner. The participant's account GLEN BURNIE BANCORP DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Page 2 shall be credited with such stock on the payable date, which shall be the date cash dividends are actually paid to stockholders as of the Record Date. Nothing in this Section shall be construed as providing any assurance that dividends will be declared by the Corporation in the future. 4. ADMINISTRATION OF THE PLAN The Glen Burnie Bancorp administers the Plan for participants, keeps records, sends statements of accounts to participants and performs other duties relating to the Plan. All correspondence relating to the Plan should be directed to: President Glen Burnie Bancorp 107 Crain Highway, S.E. Glen Burnie, Maryland 21061 The Plan Administrator receives the participants' dividend payments and invests such amounts in additional shares of common stock, maintains continuing records of each participant's account, and advises participants as to all transactions in and the status of their accounts. The Plan Administrator acts in the capacity of agent for the participants. All notices from the Plan Administrator to a participant will be addressed to the participant at the last address of record with the Plan Administrator. The mailing of a notice to a participant's last address of record will satisfy the Plan Administrator's duty of giving notice to such participant. Therefore, participants must promptly notify the Plan Administrator of any change of address. Neither the Plan Administrator, the participants' nominee or nominees, nor Glen Burnie Bancorp shall have any responsibility beyond the exercise of ordinary care for any reasonable and prudent actions taken or omitted pursuant to the Plan including, without limitation, any claim for liability arising out of failure to terminate a participant's account upon such participant's death or adjudicated incompetency prior to receipt of notice in writing of such death or adjudicated incompetency, nor shall they have any duties, responsibilities or liabilities except such as are expressly set forth in the Plan. All transactions in connection with the Plan shall be governed by the laws of the State of Maryland, and by any applicable federal tax or security laws. 5. STATEMENT OF ACCOUNTS OF PARTICIPANTS AND OTHER DISCLOSURE OF INFORMATION As soon as practicable after each payment date, each participant will receive a statement of his account. GLEN BURNIE BANCORP DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Page 3 These statements of a participant's account should be retained by the participant as an ongoing statement of his account under the Plan and for income tax purposes. In addition to such statements of account, each participant will receive all disclosure statements, otherwise sent to stockholders, including the annual report, notices of stockholder meetings, and proxy statements of the Corporation. 6. EXPENSES OF ADMINISTRATION Participants will not be charged brokerage or commission fees or service charges in connection with purchases of shares of common stock under the Plan. All administrative expenses of the Plan will be paid by the Corporation. 7. DIVIDENDS OF STOCK CREDITED UNDER THE PLAN Any portion of the dividends which have been credited to a participant's account will be paid as stock under the provisions of this Plan. 8. CERTIFICATES FOR STOCK Certificates will be issued to a participant for whole shares of common stock in the participant's account (1) Upon the participant's written request to the Corporation at its principal office, (2) if the participant withdraws from the Plan, or (3) if the Corporation terminates the Plan. Requests will be handled by the Corporation without charge. Any remaining whole or fractional shares will continue to be held in the participant's account. No certificate for a fractional share will be issued; under the Plan, dividends on a fractional share will be credited to a participant's account. Withdrawal of shares in the form of a certificate in no way affects dividend reinvestment. 9. WITHDRAWAL FROM THE PLAN Participation in the Plan is entirely voluntary, and a participant may request to withdraw from the Plan at any time by notifying the Corporation in writing in its Principal Office. Upon withdrawal from the Plan, the participant will receive certificates for full shares of common stock then held in his account. Any fractional shares in the participant's account shall be redeemed by the Corporation for cash in an amount equal to the fraction of a whole share times the "fair market value" of the common stock as determined under the provisions of the Plan at the last Declaration Date prior to the date of withdrawal. GLEN BURNIE BANCORP DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Page 4 If the request to withdraw is received on or after the Declaration Date for a dividend payment and the withdrawing participant has previously elected to receive dividend payments in the form of stock, any dividend paid on the corresponding payable date will be credited to the withdrawing participant's account as stock in accordance with the provisions of the Plan. The request to withdraw will then be processed promptly following such payable date. Thereafter, all dividends will be paid in cash (or in stock dividends if so declared by the Board of Directors on all common stock) to the stockholder who withdraws from the Plan. A stockholder may elect again to become a participant at any time subsequent to withdrawal from the Plan. If a participant disposes of any or all of his shares of common stock registered in his name other than shares credited to the participant's account under the Plan, the shares of common stock credited under the Plan shall continue to be administered under the provisions of the Plan unless the participant notifies the Corporation of his withdrawal from the Plan. 10. PURCHASE PRICE OF SHARES The "Purchase Price" shall mean fair market value, the amount equal to the latest trade by Legg Mason Wood Walker, but in no event less than One Hundred Twenty percent (120%) of book value at the end of the most recent fiscal year unless the Board of Directors in its discretion determines otherwise. 11. FEDERAL TAX INFORMATION A participant who has cash dividends reinvested in additional shares of common stock under the provisions of the Plan will be treated for federal income tax purposes (under the Code) as having received a cash dividend in an amount equal to the "fair market value" (determined under the Plan) of all full and fractional shares credited to the participant's account. The participant's tax basis (under the Code) in the shares credited under the Plan will be an amount equal to such shares 'fair market value' as determined under this Plan. A participant will also realize gains or loss upon receipt, following termination of participation in the Plan, of a cash payment for any fractional share interests credited to the Participant's account. The amount of any such gain or loss will be the difference between the amount that the participant received for the shares or fractional share interests and the tax basis thereof. To the extent distributions by Glen Burnie Bancorp to its stockholders are treated as made from the Corporation's earnings and profits, the distribution under the Plan will be taxable as a dividend. The tax basis of any shares acquired through the Plan will be the fair market value as of the Dividend Payable Date. The holding period for shares acquired through the Plan will begin on the day after the Dividend Payable Date. GLEN BURNIE BANCORP DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Page 5 The tax consequences as set forth above are for informational purposes only and should not be relied upon as a legal or accounting opinion in regard to a particular participant's circumstances. Each stockholder considering participating in the Plan is urged to consult his own tax and financial advisors as to federal, state and other tax consequences of participating in the Plan based upon his particular facts and circumstances. 12. TERMINATION BY THE CORPORATION Although the Corporation intends to continue the Plan in the future, the Board of Directors reserves the right to amend, suspend or modify the Plan at any time. However, the Plan can not be permanently terminated unless the stockholders at a regular or special meeting vote to terminate said Plan. Written notice of any such amendment, suspension, modification or termination will be sent to the participants within thirty (30) days following any such action. The Corporation also may adopt reasonable procedures for administration of the Plan. 13. PREEMPTIVE RIGHTS The existing stockholders of the Corporation have the right to maintain their existing percentage of ownership. The existing stockholder has a right to purchase new stock in the proportion that the number of shares held by him bears to the whole number, before the increase. Existing stockholders who do not participate in the Plan will have some dilution of their percentage ownership. Therefore, the adoption of the Plan by the stockholders is an exception to the normal preemptive rights. 14. USE OF PROCEEDS The net proceeds from the sale of the common stock offered pursuant to the Plan will be used for general corporate purposes including investments or extensions of credit. 15. SECURITIES AND EXCHANGE COMMISSION INFORMATION The securities referred to in the Plan have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of any prospectus. The securities offered hereby are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality. This Plan will not take effect until all necessary regulatory approvals are obtained. EX-10.3 6 DIRECTOR STOCK PURCHASE PLAN EXHIBIT 10.3 GLEN BURNIE BANCORP DIRECTOR STOCK PURCHASE PLAN 1.Purposes: The purposes of this Plan are: (a) To encourage eligible Directors of Glen Burnie Bancorp to acquire ownership of common stock. The Corporation wishes to encourage the sense of proprietorship on the part of the Directors, who will be largely responsible for the continued growth of the Corporation. (b) To recognize past valuable services of the Directors. (c) To furnish such Director with further incentive to develop and promote the business and financial success of the Corporation. (d) To induce each Director to continue in the service of the Corporation by providing a means whereby such Director may be given an opportunity to purchase additional stock in the Corporation. (e) To provide additional capital for the growth and stability of the bank. 2. Definitions: The following words or terms used herein have the following meaning: (a) The word "Corporation" means Glen Burnie Bancorp, a Maryland chartered bank holding company. (b) The "Plan" shall mean this Glen Burnie Bancorp Director Stock Purchase Plan. (c) "Board" shall mean the Board of Directors of Glen Burnie Bancorp. (d) "Shares", "Stock" or "Common Stock" shall mean shares of $10.00 par value common stock of Glen Burnie Bancorp. (e) The "Committee" shall mean the committee appointed by the Board to administer the Plan. (f) "Option" shall mean the right of a Director to purchase Common Stock under the Plan. (g) "Date of Grant" shall mean, in respect of any Option, the date on which the Board grants the Option under the Plan. (h) "Date of Exercise" shall mean the date upon which the Director completes the payment requirement of the Option and is entitled to delivery of the Shares so purchased, which date shall in no event be later than twelve (12) months after the Date of Grant. (i) "Option Period" shall mean the period commencing upon the Date of Grant and ending on the earlier of the date of exercise or the expiration of the option. (j) "Purchase Price" shall mean fair market value, as determined by the latest trade through Legg Mason Wood Walker. (k) "Director" shall mean any Director eligible under this Plan as hereinafter defined in paragraph three. GLEN BURNIE BANCORP DIRECTOR STOCK PURCHASE PLAN Page 2 3. Eligibility: Any Director, Advisory Director or Director Emeritus in good standing currently serving on the Board of Directors as of the date of grant shall be eligible to participate in the Director Stock Purchase Plan. 4. Stock: The Stock subject to the Options shall be shares of Glen Burnie Bancorp authorized but unissued ($10.00 par value per share). The aggregate number of shares on which Options may be issued shall not exceed twenty thousand (20,000) shares of Common Stock at any one time. Shares optioned and not exercised shall continue to be available for inclusion in any subsequent Options that may be granted under the Plan. In no event may any one Director be granted Options for more than two hundred and fifty (250) shares of Stock in any single grant. The number of shares represented by this Plan will be adjusted for stock splits and stock dividends subsequent to the date the Plan is adopted. 5. Administration: The Stock Purchase Plan shall be administered by the Employee Compensation and Benefits Committee including at least three members, namely, the Chairman of the Board of Directors, the Chief Executive Officer of the Corporation, and an active Director other than the above named, who is elected annually by the Board of Directors at the organizational meeting. A majority of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Subject to the express provisions of the Plan, the Committee shall also have the power and authority to construe and interpret the Plan and the respective option agreements entered into thereunder, and to make all other determinations necessary or advisable for administering the Plan. 6. Procedure for Grant and Acceptance of Option: An Eligible Director shall be notified, in writing, by Glen Burnie Bancorp of the Grant of any Option or Options. If any eligible Director elects to exercise the Option within the option period, he may purchase the number of Shares specified in the Option, or a lesser number, but in no event less than fifty (50) shares. GLEN BURNIE BANCORP DIRECTOR STOCK PURCHASE PLAN Page 3 7. Option Price: The purchase price of the shares, under any Option granted pursuant to this Plan, shall be the Fair Market Value of the stock on the date upon which such Option is granted. 8. Method of Payment: The Option Price shall be paid in full at the time an Option is exercised under the Plan. Promptly after the exercise of an Option and the full payment of the Option Price, the Participant shall be entitled to the issuance of a stock certificate evidencing ownership of such Stock. A participant shall have none of the rights of a shareholder with respect to shares under option as provided in the Plan until shares are issued, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 9. Options to Purchase Shares not Transferable: Options granted to an Eligible Director under the Plan are exercisable during such Eligible Directors' lifetime, up to the limitation in paragraph 6, only by the Director; such Options may not be sold, transferred (other than by will or the laws of descent and distribution), pledged, or otherwise disposed or encumbered. 10. Amendment and Termination: The Board of Directors may terminate, amend, or revise the Plan with respect to any shares, on which Options have not been granted. Neither the Board nor the Committee may, without the consent of the holder of an Option, alter or impair any Option previously granted under the Plan, except as authorized herein. No such revision or amendment shall change the number of shares subject to the Plan or permit granting of Options under the Plan to persons other than the Directors of Glen Burnie Bancorp. 11. Death: If a Director dies during the term of office, or after having retired, and without having fully exercised open Options, the executors or administrators, or legatees or heirs, of the estate shall have the right to exercise such Options to the extent that such deceased Director was entitled to exercise the Options on the date of death; provided, however, that in no event shall the Options be exercisable more than twelve (12) months from the date they were granted, or within nine (9) months after Letters of Administration are issued. GLEN BURNIE BANCORP DIRECTOR STOCK PURCHASE PLAN Page 4 12. Commencement of Plan: The Plan shall not take effect until approved by the Board of Directors in accordance with the approval given at the March 11, 1993 stockholders' meeting. 13. Governmental Approvals or Consents: The Plan and any Options granted thereunder are subject to any governmental approvals or consent that may be or become applicable in connection therewith. The Board may make such changes in the Plan and include such terms in any Option granted under the Plan as may be necessary or desirable, in the opinion of counsel of Glen Burnie Bancorp, to comply with the rules or regulations of any governmental authority, or to be eligible for tax benefits under the Internal Revenue Code or laws of any State. 14. Preemptive Rights: Glen Burnie Bancorp stock has preemptive rights that allow shareholders to maintain an existing percentage of ownership in the Corporation. The adoption of this plan affects the shareholders of the Corporation because there is some dilution of their percentage of ownership. Therefore, this plan would be an exception to normal preemptive rights. EX-10.4 7 EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 10.4 THE BANK OF GLEN BURNIE EMPLOYEE STOCK PURCHASE PLAN 1. PURPOSES The purpose of this Plan is to encourage eligible employees of The Bank of Glen Burnie and its subsidiaries to acquire ownership of Common Stock. This Plan is intended to constitute an "Employee Stock Purchase Plan" within the meaning of Section 423 of the Internal Revenue Code. 2. DEFINITIONS The following words or terms used herein have the following meaning: (a) The "Plan" shall mean this Employee Stock Purchase Plan. (b) "Board" shall mean the Board of Directors of The Bank of Glen Burnie. (c) "Shares" "Stock" or "Common Stock" shall mean shares of $10.00 par value common stock of The Bank of Glen Burnie. (d) The "Committee" shall mean the committee appointed by the Board to administer the Plan. (e) "Employee" shall mean any employee of The Bank of Glen Burnie whose. (f) "Option" shall mean the right of an Employee to purchase Common Stock under the Plan. (g) "Date of Grant" shall mean, in respect of any Option, the date on which the Board grants the Option under the Plan. (h) "Date of Exercise" shall mean the date upon which the Employee completes the payment requirement of the Option and is entitled to delivery of the Shares so purchased, which date shall in no event be later than 27 months after the Date of Grant. (i) "Option Period" shall mean the period commencing upon the Date of Grant and ending on the Date of Exercise. (j) "Fair Market Value" shall mean a figure equivalent to the but in no event less than % of year-end book value. (k) "Annual Pay" shall mean the Employee's annual compensation for the year immediately preceding the Date of Grant as determined from payroll records. 3. ELIGIBILITY Eligible Employee shall mean any Employee as that term is defined in Section 2(e) above who has completed one year or more of employment with The Bank of Glen Burnie on the initial Date of Grant of any Options under the Plan. Each employee who completes one year of employment after the initial Date of Grant shall become an Eligible Employee with respect to any subsequent Grant of Options on the date on which he completes such one year of employment. THE BANK OF GLEN BURNIE EMPLOYEE STOCK PURCHASE PLAN (Continued) 4. STOCK The Stock subject to the Options shall be shares of The Bank of Glen Burnie authorized but unissued ($10.00 par value per share). The aggregate number of Shares which may be issued under Options shall not exceed shares of such Common Stock; (except for adjustments under Section 5). Shares optioned and not accepted, or if accepted, not purchased, shall continue to be available for inclusion in any subsequent Options that may be granted under the Plan. 5. GRANT OF OPTIONS The Board shall grant to Eligible Employees Options to purchase such numbers of Shares and at such time or times as it shall determine, subject to the limitations of Section 3 and 4 and subject to the following additional limitations. (a) All Eligible Employees shall enjoy equal rights and privileges under the plan, and the number of shares granted under Option shall bear a uniform relationship to compensation. (b) No Eligible Employee shall be granted an option if, immediately after such Option were granted, such Eligible Employee would own Stock possessing 5% or more of the total combined voting power or value of all classes of stock of The Bank of Glen Burnie. In determining whether the Stock ownership of an Eligible Employee exceeds this 5% limit, the rules of Section 425(d) of the Internal Revenue Code (relating to attribution of stock ownership) shall apply, and Stock which the Eligible Employee may purchase under outstanding Options (whether or not such Options qualify for the special tax treatment of Section 421(a) for the Internal Revenue Code) shall be treated as Stock owned by the Eligible Employee. (c) No Eligible Employee shall be granted an Option which permits his right to purchase Stock under all such plans of The Bank of Glen Burnie to accrue at a rate which exceeds in any one calendar year $25,000 of the Fair Market Value of the Stock determined as of the date the Option is granted. With respect to any Option, the Board will specify the number of Shares to be made available, the Date of Grant, the terms of the Option, and such terms and conditions not inconsistent with this Plan as may be necessary or appropriate, provided that in no event shall the terms of the Option extend more than 27 months from the Date of Grant. In the event of a recapitalization or reclassification affecting Common Stock, the number of Shares which may thereafter be issued under the Plan, the number of Shares under Option at such time, and the Option price will be appropriately adjusted as determined by the Board. THE BANK OF GLEN BURNIE EMPLOYEE STOCK PURCHASE PLAN (Continued) 6. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee, which shall consist of not less than three members of the Board who are not eligible to participate in the Plan, one of whom shall be designated as Chairman. The Committee is vested with full authority to make, administer, and interpret such equitable rules and regulations regarding the Plan as it may deem advisable, subject to the terms of the Plan. Its determinations as to the interpretation and operation of the Plan shall be final and conclusive. The Committee may act by a majority vote at a regular or special meeting or by decision reduced to writing and signed by a majority of the Committee without a meeting. Members of the Committee shall be named by the Board. Vacancies shall be filled by the Board. 7. PROCEDURE FOR GRANT AND ACCEPTANCE OF OPTION An Eligible Employee shall be notified by The Bank of Glen Burnie of the Grant of any Option or Options to him. In order to participate in the Plan, the Eligible Employee must sign an Acceptance of Option on a form provided by The Bank of Glen Burnie showing the number of Shares that he elects to purchase, and must deliver it within 30 days after the date appearing on the form to the Secretary or other officer designated in the Option. If an eligible employee elects to accept the option, he must accept an Option to purchase the number of Shares specified in his Option, or a lesser number of shares but in no event less than shares. Shares optioned and not accepted, or if accepted, not purchased, shall continue to be available for inclusion in any subsequent Options that may be granted under the Plan. 8. PURCHASE PRICE The purchase price per Share will be an amount equal to the lesser of % of the Fair Market Value of such Share on the Date of Grant or % of the Fair Market Value of such Share on the Date of Exercise; provided, however, and subject to the foregoing, in no event shall the purchase price be less than book value per Share unless the Board in its discretion so determines. 9. METHOD OF PAYMENT Payment for Shares under Options accepted pursuant to the Plan shall be made in a lump sum payment within the term specified by the committee which in no case will be longer than 27 months. THE BANK OF GLEN BURNIE EMPLOYEE STOCK PURCHASE PLAN (Continued) 9. METHOD OF PAYMENT (Continued) The Date of Exercise for options accepted under this Plan shall be the date of the lump sum payment. Notwithstanding anything to the contrary herein set forth, an Eligible Employee who has accepted an option may at any time prior to the expiration of 30 days after his termination of employment with The Bank of Glen Burnie but in no event after the expiration of a period of 27 months from the Date of Grant, prepay the outstanding amount due. For purposes of this Section, an Eligible Employee shall not be deemed to have terminated his employment while he is on military leave, sick leave, furlough, lay-off, or other bona fide leave of absence (including but not limited to temporary employment by the Government) if the period of such leave of absence does not exceed 90 days, or if longer, so long as his right to reemployment with The Bank of Glen Burnie is guaranteed by law or by contract. Where the period of leave exceeds 90 days and where the Eligible Employee's right to reemployment not guaranteed either by law or by contract, such Eligible Employee will be deemed to have terminated his employment on the 91st day of such leave. Notwithstanding anything to the contrary herein set forth, no Options granted under the Plan may be exercised prior to such date as may be fixed by the Board of Directors. 10. RIGHTS AS STOCKHOLDER An Eligible Employee will become a stockholder with respect to Shares for which payment has been completed at the Date of Exercise. An Eligible Employee will not have any rights as a stockholder with respect to Shares under Option as provided in the Plan until he has become a stockholder as provided in the Plan. A certificate for the Shares purchased will be issued as soon as practicable after an Eligible Employee becomes a stockholder. 11. OPTIONS TO PURCHASE SHARES NOT TRANSFERABLE Options granted to an Eligible Employee under the plan are exercisable, during such Eligible Employee's lifetime, only by him; such Options may not be sold, transferred (other than by will or the laws of descent and distribution), pledged, or otherwise disposed of or encumbered. THE BANK OF GLEN BURNIE EMPLOYEE STOCK PURCHASE PLAN (Continued) 12. CANCELLATION OF ACCEPTANCE OF OPTION At any time prior to, but in no event following, his Date of Exercise, an Eligible Employee who has elected to purchase Shares may cancel his Acceptance of Option as to any or all of such Shares by written notice of cancellation delivered to the officer designated to receive his Acceptance of Option. If an Eligible Employee cancels his Acceptance of option as to only a part of the Shares, he shall make the required payment as provided in Section 9 above with respect to the number of Shares for which his Acceptance of Option is not cancelled. 13. EFFECT OF FAILURE TO MAKE PAYMENTS WHEN DUE Subject to other provisions of the Plan permitting postponement, The Bank of Glen Burnie may treat the failure by an Eligible Employee to make any payment as a cancellation of his Acceptance of Option. In that event, the Eligible Employee will be notified of such cancellation by mailing notice to him at his last known business or home address. 14. RETIREMENT If the employment of an Eligible Employee is terminated by retirement prior to the end of the Option Period, and such Eligible Employee may elect to pay for his Shares within months of his termination of employment by retirement, but in no event later than 27 months after the Date of Grant. The Date of Exercise with respect to his Option shall be the date of such lump sum payment. 15. DEATH If the employment of an Eligible Employee is terminated by death prior to the end of the Option Period, the executors or administrators of such deceased Eligible Employee or any person or persons who shall have acquired the Option directly from such deceased Eligible Employee by bequest or inheritance may elect, at any time within months after such Eligible Employee's death, but in no event after the expiration of a period of 27 months after the Date of Grant (1) to pay the amount due, or (2) to cancel the Eligible Employee's Acceptance of Option in accordance with the provisions of Section 12. In the event an election is made to pay the amount due, the Date of Exercise, with respect to the deceased Eligible Employee's Option, shall be the date on which such payment is made. THEN BANK OF GLEN BURNIE EMPLOYEE STOCK PURCHASE PLAN (Continued) 16. APPLICATION OF FUNDS All funds received by The Bank of Glen Burnie in payment for Shares purchased under the Plan may be used for any valid corporate purpose. 17. NOTICE OF DISPOSITION BY ELIGIBLE EMPLOYEE Any Eligible Employee who shall dispose of any Shares received under the Plan within the later of two years from Date of Grant or one year from Date of Exercise shall notify the Cashier of The Bank of Glen Burnie as to the date of disposition, the sale price (if any), and number of Shares involved. 18. COMMENCEMENT OF PLAN The Plan shall not take effect until approved by the holders of the majority of the Shares of the Common Stock of The Bank of Glen Burnie present, in person or by proxy, and entitled to vote at a duly held stockholders' meeting, which approval must occur within the period beginning twelve months before and ending twelve months after the date the Plan is adopted by the Board. 19. GOVERNMENTAL APPROVALS OR CONSENTS The Plan and any Options granted thereunder are subject to any governmental approvals or consent that may be or become applicable in connection therewith. The Board may make such changes in the Plan and include such terms in any Option granted under the Plan as may be necessary or desirable, in the opinion of counsel of The Bank of Glen Burnie to comply with the rules or regulations of any governmental authority, or to be eligible for tax benefits under the Internal Revenue Code or the laws of any state. 20. AUTHORITY TO AMEND, SUSPEND, OR TERMINATE PLAN The Board may, insofar as permitted by law, from time to time, with respect to any Shares at any time not subject to Options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that, without the approval of the holders of the majority of the outstanding Shares of Common stock of The Bank of Glen Burnie no such revision or amendment shall change the number of Shares subject to the Plan or permit granting of Options under the Plan to persons other than the employees of The Bank of Glen Burnie. Furthermore, the Plan may not, without the approval of the holders of the majority of the outstanding Shares of the Common Stock of The Bank of Glen Burnie be amended in any manner that will cause Options issued under it to fail to meet the requirements of an Employee Stock Purchase Plan as defined in Section 423 of the Internal Revenue Code. 21. EMPLOYMENT RIGHTS NOT CONFERRED BY PLAN Neither the establishment nor any continuance of the Plan, nor the granting of Options thereunder, shall be construed as conferring any legal rights upon any Eligible Employee or other employee for a continuation of employment, nor shall such establishment, continuance or granting of Options interfere with the rights of The Bank of Glen Burnie to discharge any Eligible Employee or other employee. THE BANK OF GLEN BURNIE EMPLOYEE STOCK PURCHASE PLAN (Continued) 20. AUTHORITY TO AMEND, SUSPEND, OR TERMINATE PLAN The Board may, insofar as permitted by law, from Lime to time, with respect to any Shares at any time not subject to Options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that, without the approval of the holders of the majority of the outstanding Shares of Common stock of The Bank of Glen Burnie no such revision or amendment shall change the number of Shares subject to the Plan or permit granting of options under the Plan to persons other than the employees of The Bank of Glen Burnie. Furthermore, the Plan may not, without the approval of the holders of the majority of the outstanding Shares of the Common Stock of The Bank of Glen Burnie be amended in any manner that will cause Options issued under it to fail to meet the requirements of an Employee Stock Purchase Plan as defined in Section 423 of the Internal Revenue Code. 21. EMPLOYMENT RIGHTS NOT CONFERRED BY PLAN Neither the establishment nor any continuance of the Plan, nor the granting of Options thereunder, shall be construed as conferring any legal rights upon any Eligible Employee or other employee for a continuation of employment, nor shall such establishment, continuance or granting of Options interfere with the rights of The Bank of Glen Burnie to discharge any Eligible Employee or other employee. EX-10.5 8 PENSION PLAN EXHIBIT 10.5 ANNUAL REVIEW AND ACTUARIAL VALUATION THE BANK OF GLEN BURNIE PENSION PLAN as of January 1, 1996 TABLE OF CONTENTS INTRODUCTION AND HIGHLIGHTS PAGE COVER LETTER..........................................................1-2 EXECUTIVE SUMMARY.....................................................3-4 ASSET INFORMATION INVESTMENT FUND STATEMENT AND SUMMARY OF ASSETS................................................... 5-6 VALUATION RESULTS CALCULATION OF THE UNFUNDED ACTUARIAL LIABILITY AND NORMAL COST.............................. 7 SCHEDULE OF REQUIRED AMORTIZATIONS FOR FUNDING STANDARD ACCOUNT......................................... 8 SCHEDULE OF 10 YEAR AMORTIZATION BASES.............................. 9 CALCULATION OF THE FULL FUNDING LIMITATION.......................... 10-11 DEVELOPMENT OF THE CONTRIBUTION RANGE FOR FUNDING PURPOSES............................................. 12 DEVELOPMENT OF QUARTERLY CONTRIBUTION............................... 13 FUNDING STANDARD ACCOUNT............................................ 14 ACCOUNTING INFORMATION INFORMATION REQUIRED UNDER FASB #35................................. 15 INFORMATION REQUIRED UNDER FASB #87................................. 16-17 BASIS OF VALUATION ACTUARIAL BASIS..................................................... 18-19 SUMMARY OF PLAN PROVISIONS.......................................... 20-25 SUMMARY OF EMPLOYEE DATA............................................ February 29, 1996 Retirement Plan Committee The Bank of Glen Burnie P.O. Box 70 Glen Burnie, Maryland 21060-0070 Re: The Bank of Glen Burnie Pension Plan - Annual Review and Actuarial Valuation Dear Committee Members: This report presents the results of the annual review and actuarial valuation of The Bank of Glen Burnie Pension Plan prepared for the 1996 Plan Year and sets forth the contribution required for the plan year ending December 31, 1996. The valuation was performed on the basis of employee census data submitted by The Bank of Glen Burnie and upon investment fund data submitted by the Trustee, First National Bank of Maryland. Turner Pension Consultants, LLC has been retained by The Bank of Glen Burnie to perform this valuation on behalf of plan participants. The report has been prepared in accordance with generally accepted actuarial principles and practices. The actuarial assumptions that have been used are reasonably related to the experience of the plan and to reasonable expectations and represent the enrolled actuary's best estimate of anticipated experience under the plan. This report reflects the following: - The minimum funding requirement for 1996 increased from $113,263 (4.7% of prior year's compensation) to $120,824 (4.6% of prior year's compensation). - No quarterly contributions are required for the 1996 plan year. - The maximum deductible contribution for fiscal year ending December 31, 1996 is $233,910 (8.9% of prior year's compensation) compared to $223,043 (9.2% of prior year's compensation) for the previous year. To be deductible, the contribution must be deposited prior to the due date of the Bank's federal tax return. - As was the case in the past, the Bank of Glen Burnie Pension Plan is not "top-heavy" for plan year beginning January 1, 1996. 1 - On September 18, 1995, the Bank of Glen Burnie purchased a branch of First Union Bank. The employees of this branch (Eberhardt, Fitzpatrick, Knopp, Sutton and Youngbar) have received credit for benefit accrual from September 18, 1995. They have received eligibility and vesting credit from their date of hire with First Union. After you have had an opportunity to review this report, please call if you have any questions or wish to review and discuss the valuation. Respectfully Submitted, TURNER PENSION CONSULTANTS, LLC Deborah G. Turner Director Pension Consulting Services Richard M. Skidmore Senior Plan Administrator 2 THE BANK OF GLEN BURNIE PENSION PLAN
EXECUTIVE SUMMARY January 1, 1995 January 1, 1996 % Change --------------- --------------- -------- Participant Information Number of Participants: Active 102 112 Retired 15 16 Terminated Vested 13 10 --- --- Total 130 138 6.2% Annual Compensation of Active Participants (Prior Year) 2,411,791 2,617,791 8.5% Average Annual Compensation of Active Participants (Prior Year) 23,645 23,373 (1.2%) Asset Information Market Value 2,767,215 3,399,653 22.9% Actuarial Asset Value 2,810,109 3,271,643 16.4% Cost Value 2,853,002 3,143,634 10.2% Funding Information Normal Cost 173,634 183,696 5.8% Funding Standard Account Credit Balance 107,196 110,257 2.9% Contribution Range for Payment at the End of the Plan Year: Maximum Deductible Deposit 223,043 233,910 4.9% As a % of Proper Year's Compensation 9.2% 8.9% Minimum Funding Requirement 113,263 120,824 6.7% As a % of Proper Year's Compensation 4.7% 4.6% Accounting Information
3 THE BANK OF GLEN BURNIE PENSION PLAN
EXECUTIVE SUMMARY (continued) January 1, 1995 January 1, 1996 % Change --------------- --------------- -------- Accounting Information FASB #35 Value of Accumulated Plan Benefits: Vested 2,167,522 2,364,935 9.1% Non-Vested 54,938 68,766 25.2% Total 2,222,460 2,433,701 9.5% Interest Rate 8.0% 8.0% FASB #87 Pension Expense 222,281 225,728 1.6% Fiscal Year Ending 12/31/95 12/31/96 Discount Rate 8.5% 8.5% Long Term Rate 8.5% 8.5%
4 THE BANK OF GLEN BURNIE PENSION PLAN
INVESTMENT FUND STATEMENT AS OF DECEMBER 31, 1995 Market Value of Fund as of January 1, 1995 $2,767,214.90* Receipts Employer Contribution for 1995 Plan $223,043.00 Year Reimbursement of Trustees Fees 0.00 Rebate of Investment Advisory Fee 15,251.00 Interest and Dividends 219,142.87 Realized Gain/(Loss) 7,477.57 Unrealized Gain/(Loss) 341,806.86 Receipts from MONY 2,461.68 -------- Total Receipts $809,182.98 Benefit Payments (including Federal $170,653.30 tax withheld) Trustee Fees 6,091.38 -------- Total Disbursement $176,744.68 Excess of Receipts over $ 632,438.30 Disbursements Market Value of Fund as of $3,399,653.20* December 31, 1995
* Asset value non-inclusive of Mutual Of New York contract value. 5 THE BANK OF GLEN BURNIE PENSION PLAN
SUMMARY OF ASSETS AS OF DECEMBER 31, 1995 Cost Value Market Value ---------- ------------ Cash Equivalents $ 97,918.75 3.11%$ 97,918.75 2.88% Accrued Income 26,557.57 0.84% 26,557.57 0.78% Contribution Receivable 0.00 0.00% 0.00 0.00% Equity Investments 2,836,679.72 90.24% 3,074,018.96 90.42% Fixed Income Investments 182,477.57 5.81% 201,157.92 5.92% ------------- ------------- Total Assets $3,143,633.61 100.00% $3,399,653.20 100.00% ------------- ------------- Actuarial Value of Assets (Average of Costs and Market Values) $3,271.643 ---------- Asset value non-inclusive of MONY contract value.
6 THE BANK OF GLEN BURNIE PENSION PLAN CALCULATION OF THE UNFUNDED ACTUARIAL LIABILITY AS OF JANUARY 1, 1996 (1) Unfunded Actuarial Liability as of 01/01/95 $179,750 (2) Plus: Normal Cost 173,634 (3) Plus: Interest on (1) and (2) at 8% 28,269 (4) Less: Contributions Paid or Accrued 223,043 (5) Less: Interest on Contributions Paid 477 ------- (6) Unfunded Actuarial Liability as of 01/01/96 158,133 CALCULATION OF THE NORMAL COST AS OF JANUARY 1, 1996 (1) Actuarial Present Value of Future Benefits: $5,431,333 (2) Less: Actuarial Value of Assets 3,271,643 (3) Less: Unfunded Actuarial Liability 158,133 (4) Actuarial Present Value of Future Normal Costs 2,001,557 [(1) - (2) - (3)] (5) Actuarial Present Value of Future Compensation 31,401,300 (6) Normal Cost Accrual Rate [(4)/(5)] (% of Projected Annual Compensation) 6.37% (7) Projected Annual Compensation of Active Participants 2,883,769 ---------- (8) Normal Cost [(6) x (7)] $ 183,696 7 THE BANK OF GLEN BURNIE PENSION PLAN SCHEDULE OF REQUIRED AMORTIZATIONS FOR FUNDING STANDARD ACCOUNT AS OF JANUARY 1, 1996
Plan Year Date Payment Last Initial Scheduled Years Charges Established Period Payment Amount Balance Remaining Payment - ------- ----------- ------ ------- ------ ------- --------- ------- Initial Unfunded Accrued Liability 01/01/77 30 2006 $111,232 $ 68,903 11 $ 8,937 Change in Actuarial Assumptions and Plan Amendment 01/01/84 30 2013 9,057 7,579 18 749 Plan Amendment 01/01/85 30 2014 3,487 2,994 19 288 Plan Amendment 01/01/88 30 2117 45,369 41,285 22 3,748 Change in Actuarial Assumptions 01/01/88 10 1997 16,318 4,375 2 2,273 Plan Amendment 01/01/89 30 2018 3,259 3,015 23 269 Plan Amendment 01/01/91 30 2020 94,061 89,330 25 7,749 Plan Amendment 01/01/93 30 2021 383 370 26 31 Change in Actuarial Assumptions 01/01/93 10 2002 139,094 107,922 7 19,194 -------- -------- ---- -------- Total Charges $422,260 $325,773 $ 43,238 ======== ======== ======== Credits Plan Amendment 01/01/94 30 2023 $ 58,391 $ 57,318 28 $ 4,803 -------- -------- -------- Total Credits $ 58,391 $ 57,318 $ 4,803 ======== ======== ======== Net Amortization Payment on January 1, 1996 $ 38,435 ========
8 THE BANK OF GLEN BURNIE PENSION PLAN 10-YEAR AMORTIZATION BASES FOR THE TAXABLE YEAR ENDING DECEMBER 31, 1996
Date Initial Prior 01/01/96 Limited Charges Established Amount Payment Balance Adjustment - ------- ----------- ------ ------- ------- ---------- Change in Actuarial Assumptions and Plan Amendment 01/01/84 $ 9,057 $ 0 $ 0 $ 0 Plan Amendment 01/01/85 3,487 0 0 0 Plan Amendment 01/01/88 45,369 6,913 16,805 6,316 Change in Actuarial Assumptions 01/01/88 16,318 2,455 6,130 2,243 Plan Amendment 01/01/89 3,259 483 1,553 441 Plan Amendment 01/01/91 94,061 13,898 64,138 12,698 Plan Amendment 01/01/92 383 57 297 52 Change in Actuarial Assumptions 01/01/93 139,094 21,008 119,100 19,194 -------- -------- -------- -------- Total Charges $311,028 $ 44,814 $208,023 $ 40,944 ======== ======== ======== ======== Credits Plan Amendment 01/01/94 $ 58,391 $ 8,819 $ 49,890 $ 8,057 -------- -------- -------- -------- Total Credits $ 58,391 $ 8,819 $ 49,890 $ 8,057 ======== ======== ======== ======== Net Amortization Payment on January 1 $ 35,995 $158,133 $ 32,887 Interest to December 31 $ 2,631 Net Amortization Payment on December 31 $ 35,518
9 THE BANK OF GLEN BURNIE PENSION PLAN CALCULATION OF THE FULL FUNDING LIMITATION FOR THE PLAN YEAR ENDING DECEMBER 31, 1996 The maximum deductible contribution permitted under a defined benefit plan is subject to two special "full funding limitation" tests which measure the funded status of the plan. The first test limits the deductible contribution to an amount needed to fully fund the expected accrued liability by the end of the year. The accrued liability projected to the end of the year is a function of the actuarial cost method being used to determine plan contributions and is computed using the valuation interest rate of 8%. It will usually exceed the true liability for benefits accrued under the plan since it reflects any pre-funding of benefits which the actuarial cost method may generate. One such example of pre-funding is the recognition of expected future salary increases in determining current contribution levels. The application of this test is as follows: (1) Actuarial Accrued Liability as of 1/1/96 $3,424,053 (2) Entry Age Normal Cost for 1996 219,684 (3) Interest on (1) and (2) at 8% 291,499 (4) Expected Pension Payments during 1996 132,800 (5) Interest on (4) at 8% 5,755 -------- (6) Expected Accrued Liability on 12/31/96 3,796,861 (1)+(2)+(3)-(4)-(5) (7) Lesser of Actuarial Asset Value or Market Value of Assets as of 1/1/96 3,271,643 (8) Expected Earnings from (7) at 8% 261,731 (9) Expected Distributions during 1996 132,800 (10) Expected Earnings on (9) at 8% 5,755 (11) Expected Assets on 12/31/96 (7)+(8)-(9)-(10) 3,394,819 (12) Full Funding Limitation (6)-(11) $ 402,042 10 THE BANK OF GLEN BURNIE PENSION PLAN CALCULATION OF THE FULL FUNDING LIMITATION FOR THE PLAN YEAR ENDING DECEMBER 31, 1996 (continued) The second test limits the deductible contribution to an amount needed to increase plan assets to 150% of the "current liability". The "current liability" is the actual value of benefits accumulated as of the valuation date. The interest rate used to compute the "current liability" must also fall within an allowable range which is based on a weighted average of the rates of interest on 30 year Treasury securities over the preceding four years. The rate selected for the current year was 7.5 %. This test is shown below: (13) Current Liability as of 1/1/96 (including benefits accruing during year) $2,803,455 (14) Interest on (13) at 7.5% 210,259 (15) Expected Pension Payments during 1996 132,800 (16) Interest on (15) at 7.5% 5,395 (17) Expected Current Liability on 12/31/96 (13)+(14)-(15)-(16) $2,875,519 (18) 150% Expected Current Liability 4,313,279 (19) Expected Assets on 12/31/96 from (11) 3,394,819 (20) 150% Full Funding Limitation (18)-(19) $918,460 The combined result of these two tests is as follows: (21) Full Funding Limitation as of 12/31/96 Lesser of (12) or (20) $402,042 11 THE BANK OF GLEN BURNIE PENSION PLAN DEVELOPMENT OF THE CONTRIBUTION RANGE FOR FUNDING PURPOSES Minimum Funding Requirement for the Plan Year Beginning January 1, 1996 (a) Normal Cost $ 183,696 (b) Net Amortization Charges to the Funding Standard Account 38,435 (c) Funding Standard Account Credit Balance 110,257 (d) Full Funding Limitation 402,042 (e) Minimum Required Contribution Payable at the End of the Plan Year = [(a)+(b)-(c)] x 1.08, not to exceed (d) 120,824 Maximum Deductible Contribution for the Employer Fiscal Year Ending December 31, 1996 (a) Normal Cost $ 183,696 (b) Net Amortization Charges for Maximum Deduction Purposes with Interest to the end of the Fiscal Year 35,518 (c) Interest on Normal Cost to the end of the Fiscal Year (a) x 8% 14,696 (d) Maximum Amortization Contribution = (a)+(b)+(c) 233,910 (e) Full Funding Limitation 402,042 (f) Minimum Required Contribution Payable at the End of the Plan Year 120,824 (g) Maximum Deductible Contribution = lesser of (d) or (e), but not less than (f) 233,910 12 THE BANK OF GLEN BURNIE PENSION PLAN DEVELOPMENT OF QUARTERLY CONTRIBUTION REQUIREMENT (a) Current Liability as of 1/1/95 $2,371,131 (b) Actuarial Value of Assets as of 1/1/95 2,810,109 (c) Funded Current Liability Percentage as of 1/1/95 (b)/(a) 119% Since (c) is at least 100%, no quarterly contributions are required for 1996. 13 THE BANK OF GLEN BURNIE PENSION PLAN FUNDING STANDARD ACCOUNT FOR THE PLAN YEAR ENDED DECEMBER 31, 1995 ERISA requires that each defined benefit pension plan meet or exceed certain minimum funding standards in order to enhance the security of each employee's benefits. The device by which it is determined whether the standards are met is the "funding standard account". Any excess of credits over charges is a credit balance which is carried forward and may be used to reduce future funding requirements. Any excess of charges over credits is a funding deficiency which is subject to the excise tax penalties prescribed by ERISA. The operation of the funding standard account for the plan year ended December 31, 1995 is shown below: Charges Prior Year Funding Deficiency $ 0 Normal Cost 173,634 Amortization Charges (Balance beginning of year $344,881) 43,238 Interest 17,350 Interest on Late Quarterly Contributions 0 -------- Total Charges $234,222 Credits Prior Year Credit Balance 107,196 Employer Contribution 223,043 Amortization Credits (Balance beginning of year $57,875) 4,803 Interest 9,437 ------- Total Credits $344,479 Credit Balance $110,257 14 INFORMATION REQUIRED UNDER FASB #35 ACCOUNTING AND REPORTING FOR DEFINED BENEFIT PLANS
1. The most recent valuation was performed as of January 1, 1996. 2. The actuarial present value of accumulated plan benefits as of 12/31/95 is shown below: Vested Benefits Participants currently receiving payments $1,180,021 Other participants 1,184,914 Total vested benefits 2,364,935 Nonvested Benefits 68,766 ---------- Total actuarial present value of accumulated plan benefits $2,433,701 3. The plan had net assets available for benefits as of 12/31/95 (excluding MONY contracts) of $3,399,653. 4. An interest rate of 8% was used to determine the actuarial present value of accumulated plan benefits as of December 31, 1994 and December 31, 1995. 5. Changes in the actuarial present value of accumulated plan benefits during the past year are shown below: Actuarial present value of accumulated plan benefits as of 12/31/94 $2,222,460 Increase/(decrease) during the year attributable to: Benefits accumulated (including gains and losses) $ 208,925 Interest 170,508 Benefits paid (168,192) Net increase/(decrease) 211,241 ---------- Actuarial present value of accumulated plan benefits as of 12/31/95 $2,433,701
15 INFORMATION REQUIRED UNDER FASB #87 EMPLOYERS' ACCOUNTING FOR PENSION PLANS
1. The pension expense for employer fiscal year ending December 31, 1996 is as follows: Service Cost $208,566 Interest Cost 286,590 Expected return on assets (282,856) Net amortization and deferral 13,428 ------- Net periodic pension cost $225,728 Note: The net periodic pension cost shown above may change if a significant event occurs prior to the end of the period, such as a plan amendment, which would require an additional measurement. 2. The components of the net amortization and deferral charge are as follows: Amortization of unrecognized net obligation/ (asset) at transition $(12,169) Amortization of unrecognized prior service cost 25,597 Amortization of unrecognized net (gain)/loss 0 -------- Net amortization and deferral $13,428 3. A reconciliation of the Plan's funded position is as follows: 12/31/95 1/1/96 -------- ------ Actuarial present value of benefit obligations: Vested benefit obligation $2,183,088 $2,222,897 ---------- ---------- Accumulated benefit obligation 2,246,454 2,286,079 ---------- ---------- Projected benefit obligation 3,365,078 3,443,582 Plan assets at fair value 3,399,653 3,399,653 ---------- ---------- Projected benefit obligation (in excess of) or lesser than Plan assets 34,575 (43,929) Unrecognized net (gain) or loss (6,440) 72,064 Unrecognized prior service cost 199,924 199,924 Unrecognized net obligation or (asset) (73,012) (73,012) at transition ------ ------ Prepaid or (accrued) pension cost $155,047 $155,047 ------- -------
16 INFORMATION REQUIRED UNDER FASB #87 EMPLOYERS' ACCOUNTING FOR PENSION PLANS (continued) 4. The significant assumptions used to determine the net pension expense for the current period are as follows: Discount Rate 8.5% Long Term Rate 8.5% Salary Growth Rate 6.5% 5. The initial obligation or (asset) at transition is being amortized over a period of 13 years from January 1, 1989 which represents the average future service of employees expected to receive benefits under the plan computed as of that date. 6. Unrecognized (gains) or losses which exceed 10% of the greater of plan assets at fair value or the projected benefit obligation are amortized over the average future service of employees expected to receive benefits under the plan computed as of the applicable measurement date. 7. The unrecognized prior service cost arising January 1, 1991 is being amortized over 12.810683 years. This is the average future years of service for employees expected to receive benefits as of that date. 8. The measurement date used to determine pension expense and disclosure information is December 31. 17 THE BANK OF GLEN BURNIE PENSION PLAN ACTUARIAL BASIS Valuation of Liabilities A. Description of Actuarial Cost Method This valuation was performed using the frozen entry age actuarial cost method (frozen initial liability method). Under this method, the contribution equals the sum of the amount necessary to amortize the frozen actuarial liabilities over a period of years and the normal cost of the plan. The frozen actuarial liability as of January 1, 1977 was equal to the actuarial accrued liability on that date as determined under the entry age normal actuarial cost method. Additional liability bases were created since then due to changes in assumptions and plan amendments. In the absence of any further changes in plan benefits or actuarial assumptions, these frozen actuarial liabilities will remain unchanged in future valuations. However in the future, as contributions are made to amortize the frozen actuarial liabilities, the unfunded frozen actuarial liabilities will decrease until they reach zero. The normal cost is calculated in the aggregate (i.e. the actuarial present values of projected benefits and future compensation are totaled for all participants before the normal cost is calculated). The normal cost accrual rate for the current group of participants should remain approximately level from year to year. Changes in the characteristics of the group due to new entrants, differences between actuarial assumptions and actual experience, changes in actuarial assumptions, and changes in plan provisions will lead to changes in the normal cost accrual rate. B. Actuarial Assumptions Interest For Funding Purposes 8% compounded annually. The current liability used to determine the full funding limitation was based on a 7.5% rate. For Purposes of FASB #35 8% compounded annually. For Purposes of FASB #87 8.5% discount rate 8.5% long term rate 18 THE BANK OF GLEN BURNIE PENSION PLAN Salary Increases 6.5% per year. The ratio of a participant's salary at normal retirement date to his salary at selected ages is as follows: Age 25 40 55 Ratio 12.42 4.83 1.88 Social Security Projected in accordance with the escalator provisions of the 1977 Social Security Amendments: Wage Base and Earnings Indexing Increment 5.50% Consumer Price Index Incremen 4.50% Mortality 1983 Group Annuity Mortality Table. Withdrawal Table T-5 of the Actuary's Pension Handbook with a 5-year setback for female rate; representative rates are: Age 25 40 55 Male 7.72% 5.15% .94% Female 7.94% 6.28% 2.56% Retirement Age All participants are assumed to retire on their normal retirement date. New Entrants None assumed. Excluded Employees No participants are excluded from the valuation. Rehire of Terminated Employees No rehire of terminated employees assumed. Expenses Plan administrative expenses are assumed to be paid by the employer outside the trust. Asset Valuation Average of cost and market values. In no event will the actuarial value of assets be less than 80% nor more than 120% of market value. The assumptions have not changed since the previous valuation. 19 THE BANK OF GLEN BURNIE PENSION PLAN SUMMARY OF PLAN PROVISIONS GENERAL TYPE OF PLAN Defined Benefit Pension Plan PLAN SPONSOR The Bank of Glen Burnie PLAN ADMINISTRATOR Retirement Plan Committee TRUSTEE First National Bank of MD. IDENTIFICATION NUMBERS EMPLOYER 52-0575023 ADMINISTRATOR 52-1078472 TRUST 52-0057503 PLAN 001 EFFECTIVE DATE OF PLAN October 15, 1959. EFFECTIVE DATE OF MOST RECENT AMENDMENT January 1, 1994. ENTRY DATE January 1. VALUATION DATE January 1. PLAN YEAR January 1 through December 31. FISCAL YEAR December 31. 20 THE BANK OF GLEN BURNIE PENSION PLAN DEFINITIONS COMPENSATION Total compensation paid or accrued for the plan year exclusive of overtime or bonuses. Amounts in excess of $150,000 not considered for years prior to 1994. Beginning in 1995, the maximum compensation limit will increase by a cost-of-living adjustment. AVERAGE COMPENSATION Average of highest five consecutive years of compensation out of the last ten years. COVERED COMPENSATION The 35-year average of the Social Security Taxable Wage Bases ending with the year in which the participant reaches Social Security Normal Retirement Age. SOCIAL SECURITY NORMAL Year of Birth Age RETIREMENT AGE ------------- --- Prior to 1/1/38 65 1/1/38 - 12/31/54 66 On or after 1/1/55 67 YEAR OF SERVICE Plan year during which an employee completes at least 1,000 hours of service. ELIGIBILITY AND PARTICIPATION ELIGIBILITY REQUIREMENTS Minimum age: 20-1/2; Maximum age: none; Service requirement: Six months; Must be nonunion. RE-HIRES Enter immediately if prior participant except if not vested and pre-break service is less than the length of break in which case, treated as new employee. If not prior participant, must meet eligibility requirements, for which purpose, pre-termination service counted. 21 THE BANK OF GLEN BURNIE PENSION PLAN FUNDING OF PLAN CONTRIBUTIONS Company contributions: Amount required to meet annual funding standards of IRS, as determined by plan actuary. Participant contributions: None required but allowed, up to 10% of annual compensation to all plans for all years in plan (subject to non-discrimination test for highly compensated employees). PLAN BENEFITS LOAN PROVISIONS None. ROLLOVER CONTRIBUTIONS Not Permitted. FORFEITURES Used to reduce employer contributions. NORMAL RETIREMENT Eligibility at termination of employment BENEFIT after age 65. Formula: 2% of average compensation plus .65% of average compensation in excess of covered compensation, all multiplied by years of service up to 20 years. Benefit computed as life annuity. Benefit reduced by MONY paid up annuity. 22 THE BANK OF GLEN BURNIE PENSION PLAN EARLY RETIREMENT BENEFITS Eligibility after participant completes ten years of service and reaches age 55. Formula: Normal retirement benefit computed using years of service and average compensation at termination of employment. Actuarial reduction for early payment. Benefit is reduced by 1/144th for each month during the first five years, and 1/288th for each month during the next five years, with actuarial reduction thereafter, for early payment. DEFERRED RETIREMENT Benefits deferred to actual BENEFITS retirement and increased for deferred payment beyond age 65. Increase for later payment equal to the greater of the benefit calculated at normal retirement date and actuarially increased to actual retirement, or benefit calculated at actual retirement date with continued credit for salary increases and service beyond age 65. DISABILITY BENEFITS Eligibility upon total and permanent disability. Commencement of benefits at cessation of long term disability benefits. Formula: Benefits computed in same manner as early retirement benefits. TERMINATION OF EMPLOYMENT BENEFITS Vesting Schedule: Percent Years of Service Vested ---------------- ------ Less than 5 years 0% 5 or more years 100% 23 THE BANK OF GLEN BURNIE PENSION PLAN TERMINATION OF Service prior to break in service is EMPLOYMENT BENEFITS (cont.) excluded where participant is re-employed after a break in service exceeding the length of prior service (but only where not vested). Benefit commencement date: Normal retirement date, unless the value of the benefit is less than $10,000 in which case, a lump sum is paid; however, participant approval required for deferral past age 55 if ten years of service completed at termination of employment. DEATH BENEFITS If death occurs after becoming vested, surviving spouse entitled to 50% of amount payable to participant under joint and 50% survivor option determined as of date of death. If death occurs after normal retirement date but before benefit commenced, surviving spouse or other named beneficiary entitled to full value of accrued benefit determined as of date of death. PAYMENT OF BENEFITS JOINT AND SURVIVOR BENEFITS Normal form of benefit unless participant elects otherwise. Benefit is the actuarial equivalent of the normal form of benefit (life only). Applies to all married participants at benefit commencement date. OTHER OPTIONS Range of options are available: lump sum (if value is under $10,000), installment payments, and annuity options. Benefit option payments based on UP84 at 8%. 24 THE BANK OF GLEN BURNIE PENSION PLAN TOP HEAVY PROVISIONS (Apply only if Plan becomes top-heavy) NORMAL RETIREMENT Minimum Benefit: 2% of compensation BENEFITS multiplied by top-heavy years of service to a maximum of 10 years. TERMINATION OF EMPLOYMENT Vesting Schedule: Percent Years of Service Vested ---------------- ------ Less than 2 years 0% 2 years 20% 3 years 40% 4 years 60% 5 years or more 100% 25 EX-11 9 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 Statement Re: Computation Of Per Share Earnings Per share earnings have been computed by dividing net income by the weighted average of shares outstanding. Shares issued or retired during a period are weighted by the fraction of the period in which they were outstanding. The weighted number of these shares is added to or deducted from the number of shares outstanding at the beginning of the period to obtain the weighted average number of shares outstanding during the period. EX-16 10 CHANGE OF CERTIFYING ACCOUNTANT EXHIBIT 16 ROWLES & Company LLC Certified Public Accountants Securities and Exchange Commission Washington, D.C. 20545 On April 11, 1996, our appointment as auditors for Glen Burnie Bancorp was terminated. We have read the statement concerning changes in registrant's certifying accountant contained in its Form 10-K, item 9, for the year ended December 31, 1995, and we agree with such statement. Rowles & Company, LLP March 24, 1997 101 E. Chesapeake Avenue, Suite 300, Baltimore, Maryland 21286 410-583-6990 FAX 410-583-7061 EX-21 11 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 Subsidiaries of Glen Burnie Bancorp The Bank of Glen Burnie, a Maryland corporation GBB Properties, Inc., a Maryland corporation EX-27 12 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the 1995 Audited Consolidated Financial Statements of Glen Burnie Bancorp and its subsidiaries and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 9,450 1,458 0 0 68,597 6,002 6,093 154,170 3,698 246,165 221,121 1,758 2,749 0 0 0 7,274 13,263 246,165 14,476 4,125 0 18,601 7,163 7,262 11,339 7,925 507 8,740 (3,421) (1,727) 0 0 (1,727) (2.01) (2.01) 8.73 2,375 3,905 0 408 2,764 7,061 70 3,698 3,698 0 0
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