Severn Bancorp, Inc. Reports Strong Third Quarter and Year-To-Date Earnings

News provided by

Severn Bancorp, Inc.

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.

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

SOURCE Severn Bancorp, Inc.