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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-24047

GLEN BURNIE BANCORP

(Exact name of registrant as specified in its charter)

Maryland

    

52-1782444

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

101 Crain Highway, S.E.

Glen Burnie, Maryland

21061

(Address of principal executive offices)

(Zip Code)

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

Inapplicable

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  No

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

Large accelerated filer

Accelerated filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00 per share

GLBZ

The NASDAQ Stock Market LLC

The number of shares of the registrant’s common stock outstanding as of August 3, 2021, was 2,851,070.

GLEN BURNIE BANCORP AND SUBSIDIARY

TABLE OF CONTENTS

Page

Part I.

FINANCIAL INFORMATION

Item 1.

Financial Statements:

Consolidated Balance Sheets: As of June 30, 2021 (unaudited) and December 31, 2020 (audited)

3

Consolidated Statements of Income (Loss): Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

4

Consolidated Statements of Comprehensive Income (Loss): Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

5

Consolidated Statements of Changes in Stockholders’ Equity: Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

6

Consolidated Statements of Cash Flows: Six Months Ended June 30, 2021 and 2020 (unaudited)

7

Notes to Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

43

Item 4.

Controls and Procedures

43

Part II.

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

44

Item 4.

Mine Safety Disclosures

44

Item 5.

Other Information

44

Item 6.

Exhibits

46

SIGNATURES

47

- 2 -

PART I – FINANCIAL INFORMATION

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

GLEN BURNIE BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

June 30, 

December 31, 

2021

2020

(unaudited)

(audited)

ASSETS

Cash and due from banks

$

2,223

$

2,117

Interest-bearing deposits in other financial institutions

 

24,545

 

34,976

Cash and Cash Equivalents

 

26,768

 

37,093

Investment securities available for sale, at fair value

 

157,591

 

114,049

Restricted equity securities, at cost

1,062

1,199

Loans, net of deferred fees and costs

 

234,871

 

253,772

Less: Allowance for credit losses(1)

(2,887)

(1,476)

Loans, net

231,984

252,296

Real estate acquired through foreclosure

575

Premises and equipment, net

 

3,716

 

3,853

Bank owned life insurance

 

8,258

 

8,181

Deferred tax assets, net

1,004

142

Accrued interest receivable

 

1,304

 

1,302

Accrued taxes receivable

 

258

 

116

Prepaid expenses

 

407

 

318

Other assets

 

422

 

362

Total Assets

$

432,774

$

419,486

LIABILITIES

Noninterest-bearing deposits

$

143,254

$

132,626

Interest-bearing deposits

 

225,630

 

216,994

Total Deposits

 

368,884

 

349,620

Short-term borrowings

 

25,237

 

29,912

Defined pension liability

296

285

Accrued expenses and other liabilities

 

2,962

 

2,576

Total Liabilities

397,379

382,393

STOCKHOLDERS' EQUITY

Common stock, par value $1, authorized 15,000,000 shares, issued and outstanding 2,848,170 and 2,842,040 shares as of June 30, 2021 and December 31, 2020, respectively.

 

2,848

 

2,842

Additional paid-in capital

 

10,700

 

10,640

Retained earnings

 

22,104

 

23,071

Accumulated other comprehensive (loss) gain

 

(257)

540

Total Stockholders' Equity

35,395

37,093

Total Liabilities and Stockholders' Equity

$

432,774

$

419,486

(1) Effective January 1, 2021, the Company applied ASU 2016-13, Financial Instruments – Credit Losses (“ASC 326”), such that the allowance calculation is based on current expected credit loss methodology (“CECL”). Prior to January 1, 2021, the calculation was based on incurred loss methodology. See Note 5 “Loans Receivable and Allowance for Losses on Loans” for details.

See accompanying notes to unaudited consolidated financial statements.

- 3 -

GLEN BURNIE BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share amounts)

(unaudited)

    

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

INTEREST INCOME

 

  

 

  

 

  

 

  

 

Interest and fees on loans

$

2,568

$

2,980

$

5,205

$

6,051

Interest and dividends on securities

698

317

1,203

698

Interest on deposits with banks and
federal funds sold

 

24

 

39

 

43

 

86

Total Interest Income

 

3,290

 

3,336

 

6,451

 

6,835

INTEREST EXPENSE

 

  

 

  

 

  

 

  

Interest on deposits

 

158

 

289

 

325

 

614

Interest on short-term borrowings

 

116

 

109

 

232

 

235

Total Interest Expense

 

274

 

398

 

557

 

849

Net Interest Income

 

3,016

 

2,938

 

5,894

 

5,986

(Release) provision for credit losses

 

(67)

 

487

 

(471)

 

407

Net interest income after release/provision

 

3,083

 

2,451

 

6,365

 

5,579

NONINTEREST INCOME

 

  

 

  

 

  

 

  

Service charges on deposit accounts

 

37

 

38

 

77

 

94

Other fees and commissions

 

190

 

151

 

359

 

311

Gain on securities sold/redeemed

 

 

 

1

Income on life insurance

 

39

 

39

 

77

 

78

Gains on sale of OREO

14

14

Total Noninterest Income

 

280

 

228

 

527

 

484

NONINTEREST EXPENSE

 

  

 

  

 

  

 

  

Salary and benefits

 

1,588

 

1,597

 

3,218

 

3,302

Occupancy and equipment expenses

304

295

606

626

Legal, accounting and other professional fees

183

252

395

504

Data processing and item processing services

248

184

505

417

FDIC insurance costs

40

48

83

99

Advertising and marketing related expenses

24

19

45

44

Loan collection costs

22

21

28

88

Telephone costs

 

54

 

43

 

131

 

90

Other expenses

 

329

 

348

 

610

 

676

Total Noninterest Expenses

 

2,792

 

2,807

 

5,621

 

5,846

Income (loss) before income taxes

 

571

 

(128)

 

1,271

 

217

Income tax expense (benefit)

 

91

 

(32)

 

197

 

43

NET INCOME (LOSS)

$

480

$

(96)

$

1,074

$

174

Basic and diluted net income (loss) per share of common stock

$

0.17

$

(0.03)

$

0.38

$

0.06

See accompanying notes to unaudited consolidated financial statements.

- 4 -

GLEN BURNIE BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

Net income (loss)

$

480

$

(96)

$

1,074

$

174

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Net unrealized gain (loss) on securities available for sale:

 

 

Net unrealized gain (loss) on securities during the period

2,247

568

(1,327)

1,485

Income tax (expense) benefit relating to item above

 

(619)

 

(156)

 

365

 

(408)

Reclassification adjustment for gain on sales of securities included in net income

 

 

 

 

(1)

Net effect on other comprehensive income (loss)

 

1,628

 

412

 

(962)

 

1,076

Net unrealized gain (loss) on interest rate swaps:

Net unrealized gain (loss) on interest rate swap during the period

88

(78)

228

(774)

Income tax (expense) benefit relating to item above

(24)

21

(63)

213

Net effect on other comprehensive income (loss)

64

(57)

165

(561)

Other comprehensive income (loss)

1,692

355

(797)

515

Comprehensive income

$

2,172

$

259

$

277

$

689

See accompanying notes to unaudited consolidated financial statements.

- 5 -

GLEN BURNIE BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)

    

Accumulated

Additional

Other

Common

Paid-in

Retained

Comprehensive

Stock

Capital

Earnings

(Loss) Income

Total

Balance, December 31, 2019

 

$

2,827

$

10,525

$

22,537

$

(209)

$

35,680

Net income

 

 

 

 

174

 

 

174

Cash dividends, $0.20 per share

 

 

 

 

(566)

 

 

(566)

Dividends reinvested under

dividend reinvestment plan

 

 

7

 

57

 

 

 

64

Other comprehensive income

 

 

 

 

 

515

 

515

Balance, June 30, 2020

 

$

2,834

$

10,582

$

22,145

$

306

$

35,867

Accumulated

Additional

Other

Common

Paid-in

Retained

Comprehensive

Stock

Capital

Earnings

Income (Loss)

Total

Balance, December 31, 2020

 

$

2,842

$

10,640

$

23,071

$

540

$

37,093

Net income

 

 

 

 

1,074

 

 

1,074

Cash dividends, $0.20 per share

 

 

 

 

(569)

 

 

(569)

Dividends reinvested under

dividend reinvestment plan

 

 

6

 

60

 

 

 

66

Transition adjustment pursuant to adoption

of ASU 2016-13

(1,472)

(1,472)

Other comprehensive loss

 

 

 

 

 

(797)

 

(797)

Balance, June 30, 2021

 

$

2,848

$

10,700

$

22,104

$

(257)

$

35,395

See accompanying notes to unaudited consolidated financial statements.

- 6 -

GLEN BURNIE BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

    

    

Six Months Ended June 30, 

    

2021

    

2020

Cash flows from operating activities:

 

  

 

  

 

Net income

$

1,074

$

174

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

Depreciation, amortization, and accretion of premises and equipment

 

213

 

193

Amortization, and accretion of investment securities available for sale

845

108

(Release) allowance for credit losses

 

(471)

 

407

Gain on disposals of assets, net

 

(14)

 

Increase in cash surrender value of bank owned life insurance

 

(77)

 

(78)

Decrease in ground rents

 

 

3

Increase in accrued interest receivable

 

(2)

 

(265)

Net (increase) decrease in other assets

 

(292)

 

206

Net decrease in accrued expenses and other liabilities

 

258

 

704

Net cash provided by operating activities

 

1,534

 

1,452

Cash flows from investing activities:

 

  

 

  

Redemptions and maturities of investment securities available for sale

 

10,505

 

8,230

Purchases of investment securities available for sale

 

(56,219)

 

(19,900)

Net sale of Federal Home Loan Bank stock

 

137

 

238

Net decrease (increase) in loans

 

19,209

 

(305)

Proceeds from sale of real estate acquired through foreclosure

 

589

 

Purchases of premises and equipment

(165)

(388)

Net cash used in investing activities

 

(25,944)

 

(12,125)

Cash flows from financing activities:

 

  

 

  

Net increase in deposits

 

19,264

 

20,497

(Decrease) increase in short term borrowings

(4,676)

12,367

Cash dividends paid

 

(569)

 

(566)

Common stock dividends reinvested

 

66

 

64

Net cash provided by financing activities

 

14,085

 

32,362

Net (decrease) increase in cash and cash equivalents

 

(10,325)

 

21,689

Cash and cash equivalents at beginning of year

 

37,093

 

13,290

Cash and cash equivalents at end of year

$

26,768

$

34,979

Supplemental Disclosures of Cash Flow Information:

 

  

 

  

Interest paid on deposits and borrowings

$

559

$

890

Net income taxes paid (refunded)

340

(1,176)

Net (decrease) increase in unrealized appreciation on available for sale securities

 

(1,327)

 

1,485

Net decrease (increase) in unrealized depreciation on swaps

228

(774)

See accompanying notes to unaudited consolidated financial statements.

- 7 -

GLEN BURNIE BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATIONAL

Nature of Business

Glen Burnie Bancorp (the “Company”) is a bank holding company organized in 1990 under the laws of the State of Maryland. The Company owns all the outstanding shares of capital stock of The Bank of Glen Burnie (the “Bank”), a commercial bank organized in 1949 under the laws of the State of Maryland (the “State”). The Bank provides financial services to individuals and corporate customers located in Anne Arundel County and surrounding areas of Central Maryland, and is subject to competition from other financial institutions. The Bank is also subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

NOTE 2 – BASIS OF PRESENTATION

In management’s opinion, the accompanying unaudited consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim period reporting, reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial position at June 30, 2021 and December 31, 2020, the results of operations for the three- and six-month periods ended June 30, 2021 and 2020, and the statements of cash flows for the six-month periods ended June 30, 2021 and 2020. The operating results for the three- and six-month periods ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021 or any future interim period. The consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2021. The unaudited consolidated financial statements for June 30, 2021 and 2020, the consolidated balance sheet at December 31, 2020, and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Summary of Significant Accounting Policies

The significant accounting policies used in preparation of the Company's consolidated financial statements are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020. Other than the adoption of the current expected credit loss (“CECL”) methodology discussed below, there have not been any significant changes in the Company's significant accounting policies.

Allowance for Credit Losses – Loans Receivable

Effective January 1, 2021, the Company applied ASU 2016-13, Financial Instruments - Credit Losses ("ASC 326"), such that the allowance calculation is based on CECL methodology. Prior to January 1, 2021, the calculation was based on incurred loss methodology. See Note 7 "Recent Accounting Pronouncements" and Note 5 "Loans Receivable and Allowance for Loan Losses" for details. The Company maintains an allowance for credit losses (“ACL”) for the expected credit losses of the loan portfolio as well as unfunded loan commitments. The amount of ACL is based on ongoing, quarterly assessments by management. The CECL methodology requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) and replaces the incurred loss methodology’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.

The ACL consists of the allowance for loan losses and the reserve for unfunded commitments. The estimate of expected credit losses under the CECL methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not

- 8 -

exist over the period that historical experience was based for each loan type. Finally, we consider forecasts about future economic conditions or changes in collateral values that are reasonable and supportable.

Portfolio segment is defined as the level at which the Company develops and documents a systematic methodology to determine its ACL. The Company has designated three loan portfolio segments: loans secured by real estate, commercial and industrial loans, and consumer loans. These loan portfolio segments are further disaggregated into classes, which represent loans of similar type, risk characteristics, and methods for monitoring and assessing credit risk. The loans secured by real estate portfolio segment is disaggregated into five classes: construction and land, farmland, family residential, multifamily, and commercial. The commercial and industrial loan portfolio segment is disaggregated into two classes: commercial and industrial, and SBA guaranty. The risk of loss for the commercial and industrial loan portfolio segment is generally most indicated by the credit risk rating assigned to each borrower. Commercial and industrial loan risk ratings are determined by experienced senior credit officers based on specific facts and circumstances and are subject to periodic review by an independent internal team of credit specialists. The consumer loan portfolio segment is disaggregated into two classes: consumer and automobile. The risk of loss for the consumer loan portfolio segment is generally most indicated by delinquency status and general economic factors. Each of the three loan portfolio segments may also be further segmented based on risk characteristics.

For most of our loan portfolio classes, the historical loss experience is determined using the Average Charge-Off Method. This method pools loans into groups (“cohorts”) sharing similar risk characteristics and tracks each cohort’s net charge-offs over the lives of the loans. The Average Charge-Off Method uses historical values by period to calculate losses and then applies the historical average to future balances over the life of the account. The historical loss rates for each cohort are then averaged to calculate an overall historical loss rate which is applied to the current loan balance to arrive at the quantitative baseline portion of the allowance for credit losses for the respective loan portfolio class. For certain loan portfolio classes, the Company determined there was not sufficient historical loss information to calculate a meaningful historical loss rate using the average charge-off methodology. For any such loan portfolio class, peer group history contributes to the Company’s weighted average loss history. The peer group data is included in the weighted average loss history that is developed for each loan pool.

The Company also considers qualitative adjustments to the historical loss rate for each loan portfolio class. The qualitative adjustments for each loan class consider the conditions over the period from which historical loss experience was based and are split into two components: 1) asset or class specific risk characteristics or current conditions at the reporting date related to portfolio credit quality, remaining payments, volume and nature, credit culture and management, business environment or other management factors; and 2) reasonable and supportable forecast of future economic conditions and collateral values.

The Company performs a quarterly asset quality review which includes a review of forecasted gross charge-offs and recoveries, nonperforming assets, criticized loans, risk rating migration, delinquencies, etc. The asset quality review is performed by management and the results are used to consider a qualitative overlay to the quantitative baseline.

When management deems it to be appropriate, the Company establishes a specific reserve for individually evaluated loans that do not share similar risk characteristics with the loans included in each respective loan pool. These individually evaluated loans are removed from their respective pools and typically represent collateral dependent loans but may also include other non-performing loans or troubled debt restructurings (“TDRs”).

Allowance for Credit Losses – Held-to-Maturity Debt Securities

For held-to-maturity (“HTM”) debt securities, the Company is required to utilize a CECL methodology to estimate expected credit losses. The Company does not own any HTM debt securities. Therefore, the Company did not record an allowance for credit losses for these types of securities.

Allowance for Credit Losses – Available-for-Sale Debt Securities

The impairment model for available-for-sale (“AFS”) debt securities differs from the CECL methodology applied for HTM debt securities because AFS debt securities are measured at fair value rather than amortized cost. Although ASC

- 9 -

326 replaced the legacy other-than-temporary impairment (“OTTI”) model with a credit loss model, it retained the fundamental nature of the legacy OTTI model. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities where neither of the criteria are met, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited to the amount that the fair value is less than the amortized cost basis. Any remaining discount that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Under the new guidance, an entity may no longer consider the length of time fair value has been less than amortized cost. Changes in the allowance for credit losses are recorded as a provision (or release) for credit losses. Losses are charged against the allowance when management believes the collectability of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. As of January 1, 2021, the Company determined that the unrealized loss positions in AFS securities were not the result of credit losses, and therefore, an allowance for credit losses was not recorded.

Off-Balance-Sheet Credit Exposures

The only material off-balance-sheet credit exposures are unfunded loan commitments, which had a combined balance of $31.8 million on June 30, 2021. The reserve for unfunded commitments is recognized as a liability (other liabilities in the consolidated statements of financial condition), with adjustments to the reserve recognized through provision for credit losses in the consolidated statements of income. The reserve for unfunded commitments represents the expected lifetime credit losses on off-balance sheet obligations such as commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments that are unconditionally cancellable by the Company. The reserve for unfunded commitments is determined by estimating future draws, including the effects of risk mitigation actions, and applying the expected loss rates on those draws. Loss rates are estimated by utilizing the same loss rates calculated for the allowance for credit losses related to the respective loan portfolio class.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, The Bank of Glen Burnie. Consolidation resulted in the elimination of all intercompany accounts and transactions.

Cash Flow Presentation

In the statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks, Federal Home Loan Bank of Atlanta (“FHLB Atlanta”) overnight deposits, and federal funds sold. Generally, federal funds are sold for one-day periods.

Reclassifications

Certain items in the 2020 consolidated financial statements have been reclassified to conform to the 2021 classifications. The reclassifications had no effect on previously reported results of operations or retained earnings.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for credit losses (the “ACL”); the fair value of financial instruments,

- 10 -

such as loans and investment securities; benefit plan obligations and expenses; and the valuation of deferred tax assets and liabilities.

NOTE 3 – EARNINGS PER SHARE

Basic earnings per common share (“EPS”) is computed by dividing net income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average common shares outstanding, plus the effect of common stock equivalents (for example, stock options computed using the treasury stock method).

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

    

Basic and diluted earnings per share:

Net income

$

479,657

$

(96,000)

$

1,073,650

$

173,793

Weighted average common shares outstanding

 

2,847,191

 

2,832,974

 

2,845,493

 

2,831,174

Basic and dilutive net income per share

$

0.17

$

(0.03)

$

0.38

$

0.06

Diluted earnings per share calculations were not required for the three- and six-month period ended June 30, 2021 and 2020, as there were no stock options outstanding.

NOTE 4 – INVESTMENT SECURITIES

Investment securities are accounted for according to their purpose and holding period. Trading securities are those that are bought and held principally for the purpose of selling them in the near term. The Company held no trading securities at June 30, 2021 or December 31, 2020. Available-for-sale investment securities, comprised of debt and mortgage-backed securities, are those that may be sold before maturity due to changes in the Company's interest rate risk profile or funding needs, and are reported at fair value with unrealized gains and losses, net of taxes, reported as a component of other comprehensive income. Held-to-maturity investment securities are those that management has the positive intent and ability to hold to maturity and are reported at amortized cost. The Company held no held-to-maturity securities at June 30, 2021 or December 31, 2020.

Realized gains and losses are recorded in noninterest income and are determined on a trade date basis using the specific identification method. Interest and dividends on investment securities are recognized in interest income on an accrual basis. Premiums and discounts are amortized or accreted into interest income using the interest method over the expected lives of the individual securities.

- 11 -

The following table summarizes the amortized cost and estimated fair value of the Company’s investment securities portfolio at June 30, 2021 and December 31, 2020:

    

At June 30, 2021

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Fair

(dollars in thousands)

Cost

Gains

Losses

Value

Collateralized mortgage obligations

$

25,240

$

324

$

(117)

$

25,447

Agency mortgage-backed securities

32,573

659

(188)

33,044

Municipal securities

41,926

877

(116)

42,687

Corporate securities

1,500

(4)

1,496

U.S. Government agency securities

55,984

71

(1,138)

54,917

Total securities available for sale

$

157,223

$

1,931

$

(1,563)

$

157,591

    

At December 31, 2020

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Fair

(dollars in thousands)

Cost

Gains

Losses

Value

Collateralized mortgage obligations

$

24,261

$

396

$

(14)

$

24,643

Agency mortgage-backed securities

26,072

 

886

 

(10)

 

26,948

Municipal securities

28,675

740

(2)

29,413

Corporate securities

U.S. Government agency securities

33,346

9

(310)

33,045

Total securities available for sale

$

112,354

$

2,031

$

(336)

$

114,049

The gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2021 and December 31, 2020 are as follows:

June 30, 2021

Less than 12 months

12 months or more

Total

Securities available for sale:

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

    

Value

    

Loss

    

Value

    

Loss

    

Value

    

Loss

(dollars in thousands)

Collateralized mortgage obligations

 

$

4,184

 

$

(108)

 

$

1,048

$

(9)

 

$

5,232

 

$

(117)

Agency mortgage-backed securities

6,753

(182)

227

(6)

6,980

(188)

Municipal securities

6,717

(116)