Mon Jan 27, 2020 4:05pm EST

ANNAPOLIS, Md., Jan. 27, 2020 /PRNewswire/ -- Severn Bancorp, Inc., (NASDAQ: SVBI), the parent company of Severn Bank, reported net income available to common shareholders for the 2019 year of $8.4 million vs. $8.5 million for the 2018 year. Net Income available to common shareholders for fourth quarter was $1.2 million vs. $2.6 million for the fourth quarter of 2018. Total assets were up slightly in the fourth quarter 2019 from the prior quarter to $827 million, but down $147 million from the prior year-end of $974 million at December 31, 2018.  Earnings per share on a fully diluted basis were $0.09 for the fourth quarter and $0.65 per share for the year ended December 31, 2019 vs. $0.20 and $0.67 per share, respectively, for the same periods in 2018.

"At first glance some of the year-end financial results may seem concerning," stated Alan J. Hyatt, President and Chief Executive Officer.  Mr. Hyatt continued, "The Bank experienced significant payoffs in outstanding loans. We also saw a large reduction in short term investor deposits that affected earnings. However, the balance sheet reflects significant strength and will allow the Bank to grow assets. Additional top-notch team members have been added to the lending team to help us achieve this loan growth."

Net interest income in the fourth quarter 2019 decreased $873 thousand to $6.9 million from the fourth quarter of 2018 with a $1.5 million increase or 5% to $30.5 million for the 2019 year vs. $29.1 million earned for the 2018 fiscal year. Less fourth quarter interest income was generated from lower volumes of earning assets, particularly from significantly lower medical-use cannabis related deposits that earned overnight interest income during the first half of 2019. Also, loan interest income decreased from lower loan volumes, which was slightly offset by a reduction in interest expense from less reliance on borrowings.

Noninterest income in the fourth quarter 2019 increased $202 thousand to $2.6 million from the fourth quarter of 2018 with a $1.8 million increase or 22% to $10.3 million for the 2019 year vs. $8.4 million in 2018. Growth in mortgage banking production and deposit fees from medical-use cannabis related accounts contributed significantly to the increases in noninterest income.

Noninterest expenses in the fourth quarter 2019 increased $877 thousand to $7.7 million from the fourth quarter of 2018 with a $3.4 million increase or 13% to $29.7 million for the 2019 year vs. $26.2 million in 2018. Non-interest expenses increased for both 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 opening a new branch in Crofton in the third quarter of 2019.

Total assets decreased $147 million to $827 million at December 31, 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 $118 million and $39 million, respectively from December 31, 2018 to December 31, 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 Income Statement

(dollars in thousands, except per share data)

(Unaudited)









Quarterly income statement results:

Three Months Ended December 31, 







2019

2018

$ Change

% Change









Interest Income














Interest on loans

$                         8,662

$                     9,146

$               (484)

-5%


Interest on securities 

206

276

(70)

-25%


Other interest income

321

800

(479)

-60%










Total interest income

9,189

10,222

(1,033)

-10%









Interest Expense














Interest on deposits

1,851

1,750

101

6%


Interest on long term borrowings

410

671

(261)

-39%










Total interest expense

2,261

2,421

(160)

-7%










Net interest income

6,928

7,801

(873)

-11%










Provision for (reversal of) loan losses

0

0

-

0%










Net interest income after provision for (reversal of) loan losses

6,928

7,801

(873)

-11%









Noninterest Income














Mortgage-banking revenue

833

591

242

41%


Real Estate Commissions

544

554

(10)

-2%


Real Estate Management Income

157

147

10

7%


Other noninterest income

1,043

1,083

(40)

-4%










Total noninterest income

2,577

2,375

202

9%










Net interest income plus noninterest income after provision for (reversal of) loan losses

9,505

10,176

(671)

-7%









Noninterest Expense














Compensation and related expenses

5,239

4,460

779

17%


Net Occupancy & Depreciation

520

404

116

29%


Net Costs of Foreclosed Real Estate

(82)

62

(144)

-232%


Other


2,051

1,925

126

7%










Total noninterest expense

7,728

6,851

877

13%










Income before income tax provision 

1,777

3,325

(1,548)

-47%










Income tax provision 

569

724

(155)

-21%










Net income

$                         1,208

$                     2,601

$             (1,393)

-54%


Net income available to common shareholders

$                         1,208

$                     2,601

$             (1,393)

-54%

 

 

Severn Bancorp, Inc.

Consolidated Income Statement

(dollars in thousands, except per share data)

(Unaudited)









Year-to-Date income statement results:

Year Ended December 31, 







2019

2018

$ Change

% Change









Interest Income














Interest on loans

$                       36,201

$                   34,877

$              1,324

4%


Interest on securities 

930

1,196

(266)

-22%


Other interest income

2,679

1,587

1,092

69%










Total interest income

39,810

37,660

2,150

6%









Interest Expense














Interest on deposits

7,350

5,688

1,662

29%


Interest on long term borrowings

1,953

2,915

(962)

-33%










Total interest expense

9,303

8,603

700

8%










Net interest income

30,507

29,057

1,450

5%










Provision for (reversal of) loan losses

(500)

(300)

(200)

67%










Net interest income after provision for (reversal of) loan losses

31,007

29,357

1,650

6%









Noninterest Income














Mortgage-banking revenue

3,748

2,561

1,187

46%


Real Estate Commissions

1,834

1,707

127

7%


Real Estate Management Income

627

674

(47)

-7%


Other noninterest income

4,056

3,487

569

16%










Total noninterest income

10,265

8,429

1,836

22%










Net interest income plus noninterest income after provision for (reversal of) loan losses

41,272

37,786

3,486

9%









Noninterest Expense














Compensation and related expenses

19,738

17,819

1,919

11%


Net Occupancy & Depreciation

1,703

1,555

148

10%


Net Costs of Foreclosed Real Estate

172

83

89

107%


Other


8,048

6,783

1,265

19%










Total noninterest expense

29,661

26,240

3,421

13%










Income before income tax provision 

11,611

11,546

65

1%










Income tax provision 

3,237

2,977

260

9%










Net income

$                         8,374

$                     8,569

$               (195)

-2%


Net income available to common shareholders

$                         8,374

$                     8,499

$               (125)

-1%

 

 

Severn Bancorp, Inc.

Consolidated Balance Sheet

(dollars in thousands, except per share data)

(Unaudited)





















December 31, 2019

December 31, 2018

$ Change

% Change

Balance Sheet Data:













ASSETS







Cash


$                         2,892

$                     2,880

$                   12

0%


Federal funds and interest bearing deposits in other banks

85,301

185,460

(100,159)

-54%


Certificates of deposit held as investment

7,540

8,780

(1,240)

-14%


Investment securities available for sale, at fair value

12,906

11,978

928

8%


Investment securities held to maturity

25,960

38,912

(12,952)

-33%


Loans held for sale, at fair value

10,910

9,686

1,224

13%


Loans receivable

645,685

682,349

(36,664)

-5%


Allowance for loan losses

(7,138)

(8,044)

906

-11%


Accrued interest receivable 

2,458

2,848

(390)

-14%


Foreclosed real estate, net

2,387

1,537

850

55%


Premises and equipment, net

22,144

22,745

(601)

-3%


Restricted stock investments

2,431

3,766

(1,335)

-35%


Bank owned life insurance

5,377

5,225

152

3%


Deferred income taxes, net

1,747

2,363

(616)

-26%


Prepaid expenses and other assets

6,319

3,748

2,571

69%













$                     826,919

$                  974,233

$         (147,314)

-15%









LIABILITIES AND STOCKHOLDERS EQUITY






Deposits

$                     661,049

$                  779,506

$         (118,457)

-15%


Borrowings

35,000

73,500

(38,500)

-52%


Subordinated debentures

20,619

20,619

-

0%


Accounts payable and accrued expenses

4,779

2,155

2,624

122%










 Total Liabilities

721,447

875,780

(154,333)

-18%










Common stock

128

128

0

0%


Additional paid-in capital

65,944

65,538

406

1%


Retained earnings

39,445

32,860

6,585

20%


Accumulated comprehensive income (loss)

(45)

(73)

28

-38%










 Total Stockholders' Equity

105,472

98,453

7,019

7%













$                     826,919

$                  974,233

$         (147,314)

-15%

 

Severn Bancorp, Inc.

Selected Financial Data

(dollars in thousands, except per share data)

(Unaudited)














Year Ended December 31, 


Three Months Ended December 31, 





2019

2018


2019

2018

Per Share Data:







Basic earnings per share

$                          0.66

$                       0.68


$                          0.09

$                       0.21


Diluted earnings per share

$                          0.65

$                       0.67


$                          0.09

$                       0.20


Average basic shares outstanding

12,780,980

12,585,961


12,798,480

12,719,772


Average diluted shares outstanding

12,855,351

12,697,620


12,859,916

12,835,186










Performance Ratios:







Return on average assets

0.92%

1.03%


0.54%

1.20%


Return on average equity

8.16%

9.00%


4.60%

10.70%


Net interest margin

3.50%

3.66%


3.26%

3.75%


Efficiency ratio*

72.33%

69.78%


82.17%

66.72%























December 31, 2019

December 31, 2018




Asset Quality Data:







Non-accrual loans

$                         4,241

$                     4,657





Foreclosed real estate

2,387

1,537






Total non-performing assets

6,628

6,194





Total non-accrual loans to total loans

0.66%

0.68%





Total non-accrual loans to total assets

0.51%

0.48%





Allowance for loan losses

7,138

8,044





Allowance for loan losses to total loans

1.11%

1.18%





Allowance for loan losses to total








non-accrual loans

168.3%

172.7%





Total non-performing assets to total assets

0.80%

0.64%





Non-accrual troubled debt restructurings (included above)

85

446





Performing troubled debt restructurings

8,858

10,698





Loan to deposit ratio

97.7%

87.4%













*

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.