Severn Bancorp, Inc. Reports Strong Third Quarter and Year-To-Date Earnings
Oct 28, 2019, 16:08 ET
ANNAPOLIS, Md., Oct. 28, 2019 /PRNewswire/ -- Severn Bancorp, Inc., (NASDAQ: SVBI), the parent company of Severn Bank, reported net income available to common shareholders of $2.4 million for the third quarter ended September 30, 2019 and $7.2 million for the nine months ended September 30, 2019 versus $2.2 million and $5.9 million for the same periods in 2018. Total assets were down slightly in the third quarter 2019 from the prior quarter to $826 million and also down $148 million from the prior year-end of $974 million at December 31, 2018. Earnings per share on a fully diluted basis were $0.19 for the third quarter and $0.56 per share for the first nine months of 2019, up nicely from $0.17 and $0.46 per share, respectively, from the third quarter and first nine months of 2018.
"Earnings look good again for this quarter," stated Alan J. Hyatt, President and Chief Executive Officer. Mr. Hyatt continued, "We are seeing progress in certain areas such as mortgage lending and commercial banking that are resulting in improved net income figures. We did see an uptick in some non-recurring expenses this quarter, but we always keep efficiency and cost control at the forefront. Those efforts along with the continued focus on developing banking relationships should keep us on the path to continued sustainable profits."
Net interest income increased $304,000, an increase of 4% during the third quarter of 2019. Net interest income was $7.6 million for the three months ending September 30, 2019 versus $7.3 million during the third quarter of 2018. For the nine months ending September 30, 2019, net interest income was $23.6 million versus $21.3 million for September 30, 2018, an increase of $2.3 million or 11%.
Provision for loan losses was negative $500,000 for the three and nine month periods ending September 30, 2019, compared to negative $300,000 for the same periods in 2018. The negative provision is a reversal of previous expense associated with the allowance for loan losses. As a result of a decrease in loan balances from unexpected payoffs, minimal charge-off activity, and stable asset quality, a portion of the unallocated allowance for loan losses was reversed into income.
Non-interest income increased to $2.8 million from $2.3 million during the three months ending September 30, 2019. For the nine months ending September 30, 2019 non-interest income increased by $1.6 million to $7.7 million from $6.1 million at September 30, 2018, or an increase of 26%. Growth in mortgage banking production and deposit fees from medical-use cannabis related accounts contributed significantly to the increase in non-interest income.
Non-interest expenses were $7.7 million for the three months ending September 30, 2019 versus $7.0 million for the same period in 2018. For the nine months ending September 30, 2019, non-interest expenses were $21.9 million versus $19.5 million for the same period in 2018. Non-interest expenses increased for both the three and nine month periods due to several factors, including: accounting and professional fees, severance payments to the former CFO, and higher commissions paid to mortgage loan officers and real estate brokers as a result of increased production in 2019. In addition, contributing to the increase was higher occupancy costs and additional staffing as a result of the opening of a new branch in Crofton in the third quarter of 2019.
Total assets decreased $148 million to $826 million at September 30, 2019 from $974 million at December 31, 2018. The decrease in assets was primarily in federal funds and interest bearing deposits in other banks as well as loans due to unexpected payoffs. Deposits and borrowed funds decreased $122.4 million and $35.0 million, respectively from December 31, 2018 to September 30, 2019. The decrease in deposits was primarily the result of short term, medical-use cannabis related funds that account holders maintained at Severn Bank prior to pursuing other longer term investment opportunities. Management was aware of the short term nature of certain medical-use cannabis related deposits and offset those funds by maintaining short term liquidly to meet any deposit outflows.
About Severn Bank: Founded in 1946, Severn is a full-service community bank offering a wide array of personal and commercial banking products as well as residential and commercial mortgage lending. It offers seven branches located in Annapolis, Edgewater, Severna Park, Lothian/Wayson's Corner, Crofton, and Glen Burnie, Maryland. The bank specializes in exceptional customer service and holds itself and its employees to a high standard of community contribution. Severn is on the Web at www.severnbank.com.
Forward Looking Statements
In addition to the historical information contained herein, this press release contains forward-looking statements that involve risks and uncertainties that may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. The forward-looking statements contained herein include, but are not limited to, those with respect to management's determination of the amount of loan loss reserve and statements about the economy. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "would," "could," "should," "guidance," "potential," "continue," "project," "forecast," "confident," and similar expressions are typically used to identify forward-looking statements. Severn's operations and actual results could differ significantly from those discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences include, but are not limited to, changes in the economy and interest rates both in the nation and in Severn's general market area, federal and state regulation, competition and other factors detailed from time to time in Severn's filings with the Securities and Exchange Commission (the "SEC"), including "Item 1A. Risk Factors" contained in Severn's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Severn Bancorp, Inc. |
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Consolidated Balance Sheet |
|||||||
(dollars in thousands, except per share data) |
|||||||
(Unaudited) |
|||||||
September 30, 2019 |
December 31, 2018 |
$ Change |
% Change |
||||
Balance Sheet Data: |
|||||||
ASSETS |
|||||||
Cash |
$ 2,478 |
$ 2,880 |
$ (402) |
-14% |
|||
Federal funds and interest bearing deposits in other banks |
62,775 |
185,460 |
(122,685) |
-66% |
|||
Certificates of deposit held as investment |
7,540 |
8,780 |
(1,240) |
-14% |
|||
Investment securities available for sale, at fair value |
9,029 |
11,978 |
(2,949) |
-25% |
|||
Investment securities held to maturity |
30,302 |
38,912 |
(8,610) |
-22% |
|||
Loans held for sale, at fair value |
17,587 |
9,686 |
7,901 |
82% |
|||
Loans receivable |
660,879 |
682,349 |
(21,470) |
-3% |
|||
Allowance for loan losses |
(7,431) |
(8,044) |
613 |
-8% |
|||
Accrued interest receivable |
2,514 |
2,848 |
(334) |
-12% |
|||
Foreclosed real estate, net |
1,873 |
1,537 |
336 |
22% |
|||
Premises and equipment, net |
22,384 |
22,745 |
(361) |
-2% |
|||
Restricted stock investments |
2,431 |
3,766 |
(1,335) |
-35% |
|||
Bank owned life insurance |
5,341 |
5,225 |
116 |
2% |
|||
Deferred income taxes, net |
1,902 |
2,363 |
(461) |
-20% |
|||
Prepaid expenses and other assets |
6,315 |
3,748 |
2,567 |
69% |
|||
$ 825,919 |
$ 974,233 |
$ (148,314) |
-15% |
||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|||||||
Deposits |
$ 657,154 |
$ 779,506 |
$ (122,352) |
-16% |
|||
Borrowings |
38,498 |
73,500 |
(35,002) |
-48% |
|||
Subordinated debentures |
20,619 |
20,619 |
- |
0% |
|||
Accounts payable and accrued expenses |
5,029 |
2,155 |
2,874 |
133% |
|||
Total Liabilities |
721,300 |
875,780 |
(154,480) |
-18% |
|||
Preferred stock |
- |
- |
- |
0% |
|||
Common stock |
128 |
128 |
- |
0% |
|||
Additional paid-in capital |
65,744 |
65,538 |
206 |
0% |
|||
Retained earnings |
38,750 |
32,860 |
5,890 |
18% |
|||
Accumulated comprehensive income (loss) |
(3) |
(73) |
70 |
-96% |
|||
Total Stockholders' Equity |
104,619 |
98,453 |
6,166 |
6% |
|||
$ 825,919 |
$ 974,233 |
$ (148,314) |
-15% |
||||
Severn Bancorp, Inc. |
|||||||
Consolidated Income Statement |
|||||||
(dollars in thousands, except per share data) |
|||||||
(Unaudited) |
|||||||
Quarterly income statement results: |
Three Months Ended September 30, |
||||||
2019 |
2018 |
$ Change |
% Change |
||||
Interest Income |
|||||||
Interest on loans |
$ 9,146 |
$ 8,844 |
$ 302 |
3% |
|||
Interest on securities |
224 |
293 |
(69) |
-24% |
|||
Other interest income |
484 |
423 |
61 |
14% |
|||
Total interest income |
9,854 |
9,560 |
294 |
3% |
|||
Interest Expense |
|||||||
Interest on deposits |
1,732 |
1,531 |
201 |
13% |
|||
Interest on long term borrowings |
473 |
684 |
(211) |
-31% |
|||
Total interest expense |
2,205 |
2,215 |
(10) |
0% |
|||
Net interest income |
7,649 |
7,345 |
304 |
4% |
|||
Provision for (reversal of) loan losses |
(500) |
(300) |
(200) |
67% |
|||
Net interest income after provision for (reversal of) loan losses |
8,149 |
7,645 |
504 |
7% |
|||
Noninterest Income |
|||||||
Mortgage-banking revenue |
1,108 |
740 |
368 |
50% |
|||
Real Estate Commissions |
430 |
408 |
22 |
5% |
|||
Real Estate Management Income |
144 |
157 |
(13) |
-8% |
|||
Other noninterest income |
1,131 |
1,039 |
92 |
9% |
|||
Total noninterest income |
2,813 |
2,344 |
469 |
20% |
|||
Net interest income plus noninterest income after provision for (reversal of) loan losses |
10,962 |
9,989 |
973 |
10% |
|||
Noninterest Expense |
|||||||
Compensation and related expenses |
5,065 |
4,661 |
404 |
9% |
|||
Net Occupancy & Depreciation |
379 |
416 |
(37) |
-9% |
|||
Net Costs of Foreclosed Real Estate |
105 |
7 |
98 |
1400% |
|||
Other |
2,121 |
1,956 |
165 |
8% |
|||
Total noninterest expense |
7,670 |
7,040 |
630 |
9% |
|||
Income before income tax provision |
3,292 |
2,949 |
343 |
12% |
|||
Income tax provision |
911 |
784 |
127 |
16% |
|||
Net income |
$ 2,381 |
$ 2,165 |
$ 216 |
10% |
|||
Net income available to common shareholders |
$ 2,381 |
$ 2,165 |
$ 216 |
10% |
|||
Severn Bancorp, Inc. |
|||||||
Consolidated Income Statement |
|||||||
(dollars in thousands, except per share data) |
|||||||
(Unaudited) |
|||||||
Year-to-Date income statement results: |
Nine Months Ended September 30, |
||||||
2019 |
2018 |
$ Change |
% Change |
||||
Interest Income |
|||||||
Interest on loans |
$ 27,539 |
$ 25,731 |
$ 1,808 |
7% |
|||
Interest on securities |
724 |
920 |
(196) |
-21% |
|||
Other interest income |
2,358 |
787 |
1,571 |
200% |
|||
Total interest income |
30,621 |
27,438 |
3,183 |
12% |
|||
Interest Expense |
|||||||
Interest on deposits |
5,499 |
3,938 |
1,561 |
40% |
|||
Interest on long term borrowings |
1,543 |
2,244 |
(701) |
-31% |
|||
Total interest expense |
7,042 |
6,182 |
860 |
14% |
|||
Net interest income |
23,579 |
21,256 |
2,323 |
11% |
|||
Provision for (reversal of) loan losses |
(500) |
(300) |
(200) |
67% |
|||
Net interest income after provision for (reversal of) loan losses |
24,079 |
21,556 |
2,523 |
12% |
|||
Noninterest Income |
|||||||
Mortgage-banking revenue |
2,915 |
1,970 |
945 |
48% |
|||
Real Estate Commissions |
1,290 |
1,153 |
137 |
12% |
|||
Real Estate Management Income |
470 |
527 |
(57) |
-11% |
|||
Other noninterest income |
3,013 |
2,472 |
541 |
22% |
|||
Total noninterest income |
7,688 |
6,122 |
1,566 |
26% |
|||
Net interest income plus noninterest income after provision for (reversal of) loan losses |
31,767 |
27,678 |
4,089 |
15% |
|||
Noninterest Expense |
|||||||
Compensation and related expenses |
14,499 |
13,359 |
1,140 |
9% |
|||
Net Occupancy & Depreciation |
1,183 |
1,151 |
32 |
3% |
|||
Net Costs of Foreclosed Real Estate |
254 |
21 |
233 |
1110% |
|||
Other |
5,997 |
4,926 |
1,071 |
22% |
|||
Total noninterest expense |
21,933 |
19,457 |
2,476 |
13% |
|||
Income before income tax provision |
9,834 |
8,221 |
1,613 |
20% |
|||
Income tax provision |
2,668 |
2,253 |
415 |
18% |
|||
Net income |
$ 7,166 |
$ 5,968 |
$ 1,198 |
20% |
|||
Net income available to common shareholders |
$ 7,166 |
$ 5,898 |
$ 1,268 |
21% |
|||
Severn Bancorp, Inc. |
||||||||
Selected Financial Data |
||||||||
(dollars in thousands, except per share data) |
||||||||
(Unaudited) |
||||||||
Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||
2019 |
2018 |
2019 |
2018 |
|||||
Per Share Data: |
. |
|||||||
Basic earnings per share |
$ 0.56 |
$ 0.47 |
$ 0.19 |
$ 0.17 |
||||
Diluted earnings per share |
$ 0.56 |
$ 0.46 |
$ 0.19 |
$ 0.17 |
||||
Average basic shares outstanding |
12,775,104 |
12,541,032 |
12,776,911 |
12,695,136 |
||||
Average diluted shares outstanding |
12,853,812 |
12,651,260 |
12,841,679 |
12,832,633 |
||||
Performance Ratios: |
||||||||
Return on average assets |
1.04% |
0.98% |
1.05% |
1.03% |
||||
Return on average equity |
9.38% |
9.03% |
9.15% |
8.98% |
||||
Net interest margin |
3.58% |
3.63% |
3.53% |
3.65% |
||||
Efficiency ratio* |
69.33% |
70.99% |
72.31% |
72.59% |
||||
September 30, 2019 |
December 31, 2018 |
|||||||
Asset Quality Data: |
||||||||
Non-accrual loans |
$ 4,333 |
$ 4,656 |
||||||
Foreclosed real estate |
1,873 |
1,537 |
||||||
Total non-performing assets |
6,206 |
6,193 |
||||||
Total non-accrual loans to total loans |
0.66% |
0.68% |
||||||
Total non-accrual loans to total assets |
0.52% |
0.48% |
||||||
Allowance for loan losses |
7,431 |
8,044 |
||||||
Allowance for loan losses to total loans |
1.12% |
1.18% |
||||||
Allowance for loan losses to total |
||||||||
non-accrual loans |
171.5% |
172.8% |
||||||
Total non-performing assets to total assets |
0.75% |
0.64% |
||||||
Non-accrual troubled debt restructurings (included above) |
292 |
446 |
||||||
Performing troubled debt restructurings |
9,023 |
10,698 |
||||||
Loan to deposit ratio |
100.6% |
87.5% |
||||||
* |
This non-GAAP financial measure is calculated as noninterest expenses less OREO expenses divided by net interest income plus noninterest income |
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SOURCE Severn Bancorp, Inc.
