ANNAPOLIS, Md., Oct. 22, 2020 /PRNewswire/ -- Severn
Bancorp, Inc. (the Company) (NASDAQ: SVBI), the parent company of
Severn Bank (the Bank), reported net income of $1.9 million for the third quarter ended
September 30, 2020 and $4.2 million for the nine months ended
September 30, 2020 compared to
$2.4 million and $7.2 million for the same periods in 2019.
Earnings per share on a fully diluted basis were $0.15 for the third quarter and $0.33 per share for the first nine months of
2020, down from $0.19 and
$0.56 per share, respectively, from
the third quarter and first nine months of 2019.
Response to COVID-19
The Company continues to monitor
the impact of the COVID-19 pandemic. Its goal is to keep employees
and customers safe. To that end, some employees are working
remotely and those who are on-site are practicing appropriate
social distancing, wearing masks, and following other protocols
that are designed to avoid COVID-19 exposure while keeping
customers and employees safe.
The Company is closely monitoring the effects of the pandemic on
our loan and deposit customers. Our management team is focused on
assessing the risks in our loan portfolio and working with
customers to minimize losses. We have implemented loan programs to
allow customers who were required to close or reduce their business
operations to temporarily defer loan principal and interest
payments. The Company is also participating in the SBA Paycheck
Protection Program (PPP) to help disburse loans to our business
customers to provide them with additional working capital.
Additionally, through the first nine months of 2020 the Company
performed 141 short-term COVID-19 related modifications of loans
totaling $98.6 million. Subsequent to
modification, 43 loans totaling $27.4
million have resumed making regular payments.
"The Company had a respectable third quarter. The continued high
volume of residential mortgage originations and the growth of
commercial relationships has contributed to earnings. The
Bank continues to be a strong resource to the local business
community, while originating a record amount of residential
mortgages in this low interest rate environment," said Alan J. Hyatt, President and Chief Executive
Officer. "It remains difficult to say how the economy will be
impacted in the future by this pandemic, and we will continue to be
vigilant," Mr. Hyatt said.
Income Statement
Net interest income was $6.5 million for the third quarter ended
September 30, 2020 and $19.9 million for the nine months ended
September 30, 2020 compared to
$7.6 million and $23.6 million for the same periods in 2019. The
decreases in interest income was driven by lower volumes of earning
assets, particularly from significantly lower interest rates earned
on medical-use cannabis related deposits that were invested in fed
funds or interest bearing deposits with other banks and earned
higher interest income during 2019. Also, loan interest income
decreased from lower average loan volumes as well as lower yielding
PPP loans, which was slightly offset by a reduction in interest
expense from lower deposit rates and less reliance on
borrowings.
Provision expense was $100
thousand for the third quarter ended September 30, 2020 and $850 thousand for the nine months ended
September 30, 2020 compared to a
negative provision of $500 thousand
for the same periods in 2019. The ratio of the allowance for loan
losses to gross loans was 1.31% at September
30, 2020. Excluding PPP loans, the ratio of the allowance
for loan losses to gross loans was 1.41% at September 30, 2020, higher than both the 1.33% at
June 30, 2020 and the 1.11% at
December 31, 2019. The primary
drivers of the increased percentage of the allowance to total
loans, excluding PPP loans, were increases in qualitative factors
from the impact of the COVID-19 pandemic, decrease in loan volume
from payoffs, and net recoveries during the
quarter.
Noninterest income was $4.7
million for the third quarter ended September 30, 2020 and $11.0 million for the nine months ended
September 30, 2020 compared to
$2.8 million and $7.7 million for the same periods in 2019. Growth
in mortgage banking production continued to contribute
significantly to the increases in noninterest income.
Noninterest expense was $8.4
million for the third quarter ended September 30, 2020 and $24.1 million for the nine months ended
September 30, 2020 compared to
$7.7 million and $21.9 million for the same periods in 2019. There
were higher commissions paid to mortgage loan officers from
increased production and higher occupancy and staffing costs as a
result of one full year of a new branch in Crofton being open.
Balance Sheet
Total assets increased $112 million to $939
million at September 30, 2020
from $827 million at December 31, 2019. The increase in assets was
primarily in federal funds and interest bearing deposits in other
banks as well as loans receivable from PPP originations. Deposits
also increased by $122 million from
December 31, 2019. The increase in
deposits was primarily the result of short term, medical-use
cannabis related funds that account holders maintain at the Bank
prior to pursuing other longer term investment opportunities as
well as PPP loans to customers who had not yet withdrawn the funds.
Management is 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 Bank 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 Bank 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. The
Company'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 the Company's general market area,
federal and state regulation, competition, the rapidly changing
uncertainties related to the Covid-19 pandemic including, but not
limited to, the potential adverse effect of the pandemic on the
economy, our employees and customers, and our financial
performance, and other factors detailed from time to time in the
Company's filings with the Securities and Exchange Commission (the
"SEC"), including "Item 1A. Risk Factors" contained in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2019.
Severn Bancorp,
Inc.
|
Consolidated
Balance Sheets
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
December 31,
2019
|
$
Change
|
%
Change
|
Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$
3,315
|
$
2,892
|
$
423
|
15%
|
|
Federal funds and
interest bearing deposits in other banks
|
140,508
|
85,301
|
55,207
|
65%
|
|
Certificates of
deposit held as investment
|
4,828
|
7,540
|
-2,712
|
-36%
|
|
Investment securities
available for sale, at fair value
|
54,205
|
12,906
|
41,299
|
320%
|
|
Investment securities
held to maturity
|
19,709
|
25,960
|
-6,251
|
-24%
|
|
Loans held for sale,
at fair value
|
21,722
|
10,910
|
10,812
|
99%
|
|
Loans
receivable
|
660,315
|
645,685
|
14,630
|
2%
|
|
Allowance for loan
losses
|
(8,675)
|
(7,138)
|
-1,537
|
22%
|
|
Accrued interest
receivable
|
2,521
|
2,458
|
63
|
3%
|
|
Foreclosed real
estate, net
|
1,010
|
2,387
|
-1,377
|
-58%
|
|
Premises and
equipment, net
|
21,273
|
22,144
|
-871
|
-4%
|
|
Restricted stock
investments
|
1,661
|
2,431
|
-770
|
-32%
|
|
Bank owned life
insurance
|
5,484
|
5,377
|
107
|
2%
|
|
Deferred income
taxes, net
|
1,407
|
1,748
|
-341
|
-20%
|
|
Prepaid expenses and
other assets
|
10,636
|
6,318
|
4,318
|
68%
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
$
939,919
|
$
826,919
|
$
113,000
|
14%
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
|
|
|
|
|
Deposits
|
$
783,238
|
$
661,049
|
$
122,189
|
18%
|
|
Borrowings
|
20,000
|
35,000
|
(15,000)
|
-43%
|
|
Subordinated
debentures
|
20,619
|
20,619
|
-
|
0%
|
|
Accounts payable and
accrued expenses
|
6,785
|
4,779
|
2,006
|
42%
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
830,642
|
721,447
|
109,195
|
15%
|
|
|
|
|
|
|
|
|
|
Common
stock
|
128
|
128
|
-
|
0%
|
|
Additional paid-in
capital
|
66,060
|
65,944
|
116
|
0%
|
|
Retained
earnings
|
42,108
|
39,445
|
2,663
|
7%
|
|
Accumulated
comprehensive income (loss)
|
(19)
|
(45)
|
26
|
-58%
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
108,277
|
105,472
|
2,805
|
3%
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders' Equity
|
$
938,919
|
$
826,919
|
$
112,000
|
14%
|
Severn Bancorp,
Inc.
|
Consolidated
Income Statements
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Quarterly income
statement results:
|
Three Months Ended
September 30,
|
|
|
|
|
|
|
2020
|
2019
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
loans
|
$
7,601
|
$
9,146
|
$
(1,545)
|
-17%
|
|
Interest on
securities
|
272
|
224
|
48
|
21%
|
|
Other interest
income
|
68
|
484
|
(416)
|
-86%
|
|
|
|
|
|
|
|
|
|
Total interest
income
|
7,941
|
9,854
|
-1,913
|
-19%
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
deposits
|
1,142
|
1,732
|
(590)
|
-34%
|
|
Interest on long term
borrowings
|
269
|
473
|
(204)
|
-43%
|
|
|
|
|
|
|
|
|
|
Total interest
expense
|
1,411
|
2,205
|
-794
|
-36%
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
6,530
|
7,649
|
-1,119
|
-15%
|
|
|
|
|
|
|
|
|
|
Provision for
(reversal of) loan losses
|
100
|
-500
|
600
|
-120%
|
|
|
|
|
|
|
|
|
|
Net interest income
after provision for loan losses
|
6,430
|
8,149
|
-1,719
|
-21%
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-banking
revenue
|
2,922
|
1,108
|
1,814
|
164%
|
|
Real Estate
Commissions
|
416
|
430
|
(14)
|
-3%
|
|
Real Estate
Management Income
|
150
|
144
|
6
|
4%
|
|
Other noninterest
income
|
1,225
|
1,131
|
94
|
8%
|
|
|
|
|
|
|
|
|
|
Total noninterest
income
|
4,713
|
2,813
|
1,900
|
68%
|
|
|
|
|
|
|
|
|
|
Net interest income
plus noninterest income after provision for loan losses
|
11,143
|
10,962
|
181
|
2%
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
related expenses
|
6,046
|
5,065
|
981
|
19%
|
|
Net Occupancy &
Depreciation
|
385
|
379
|
6
|
2%
|
|
Net Costs of
Foreclosed Real Estate
|
-48
|
105
|
(153)
|
-146%
|
|
Other
|
|
1,979
|
2,121
|
(142)
|
-7%
|
|
|
|
|
|
|
|
|
|
Total noninterest
expense
|
8,362
|
7,670
|
692
|
9%
|
|
|
|
|
|
|
|
|
|
Income before income
tax provision
|
2,781
|
3,292
|
-511
|
-16%
|
|
|
|
|
|
|
|
|
|
Income tax
provision
|
883
|
911
|
(28)
|
-3%
|
|
|
|
|
|
|
|
|
|
Net income
|
$
1,898
|
$
2,381
|
$
(483)
|
-20%
|
Severn Bancorp,
Inc.
|
Consolidated
Income Statements
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Year-to-Date
income statement results:
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
2020
|
2019
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
loans
|
$
24,017
|
$
27,539
|
$
(3,522)
|
-13%
|
|
Interest on
securities
|
707
|
724
|
(17)
|
-2%
|
|
Other interest
income
|
494
|
2,358
|
(1,864)
|
-79%
|
|
|
|
|
|
|
|
|
|
Total interest
income
|
25,218
|
30,621
|
-5,403
|
-18%
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
deposits
|
4,322
|
5,499
|
(1,177)
|
-21%
|
|
Interest on long term
borrowings
|
966
|
1,543
|
(577)
|
-37%
|
|
|
|
|
|
|
|
|
|
Total interest
expense
|
5,288
|
7,042
|
-1,754
|
-25%
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
19,930
|
23,579
|
-3,649
|
-15%
|
|
|
|
|
|
|
|
|
|
Provision for
(reversal of) loan losses
|
850
|
-500
|
1,350
|
-270%
|
|
|
|
|
|
|
|
|
|
Net interest income
after provision for loan losses
|
19,080
|
24,079
|
-4,999
|
-21%
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-banking
revenue
|
6,546
|
2,915
|
3,631
|
125%
|
|
Real Estate
Commissions
|
856
|
1,290
|
(434)
|
-34%
|
|
Real Estate
Management Income
|
470
|
470
|
-
|
0%
|
|
Other noninterest
income
|
3,103
|
3,013
|
90
|
3%
|
|
|
|
|
|
|
|
|
|
Total noninterest
income
|
10,975
|
7,688
|
3,287
|
43%
|
|
|
|
|
|
|
|
|
|
Net interest income
plus noninterest income after provision for loan losses
|
30,055
|
31,767
|
-1,712
|
-5%
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
related expenses
|
16,678
|
14,499
|
2,179
|
15%
|
|
Net Occupancy &
Depreciation
|
1,348
|
1,183
|
165
|
14%
|
|
Net Costs of
Foreclosed Real Estate
|
42
|
254
|
(212)
|
-83%
|
|
Other
|
|
6,033
|
5,997
|
36
|
1%
|
|
|
|
|
|
|
|
|
|
Total noninterest
expense
|
24,101
|
21,933
|
2,168
|
10%
|
|
|
|
|
|
|
|
|
|
Income before income
tax provision
|
5,954
|
9,834
|
-3,880
|
-39%
|
|
|
|
|
|
|
|
|
|
Income tax
provision
|
1,754
|
2,668
|
(914)
|
-34%
|
|
|
|
|
|
|
|
|
|
Net income
|
$
4,200
|
$
7,166
|
$
(2,966)
|
-41%
|
Severn Bancorp,
Inc.
|
Selected Financial
Data
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
Three Months Ended
September 30,
|
|
|
|
|
2020
|
2019
|
|
2020
|
2019
|
Per Share
Data:
|
|
|
|
|
.
|
|
Basic earnings per
share
|
$
0.33
|
$
0.56
|
|
$
0.15
|
$
0.19
|
|
Diluted earnings per
share
|
$
0.33
|
$
0.56
|
|
$
0.15
|
$
0.19
|
|
Average basic shares
outstanding
|
12,812,864
|
12,775,104
|
|
12,812,976
|
12,776,911
|
|
Average diluted
shares outstanding
|
12,829,710
|
12,853,812
|
|
12,820,534
|
12,841,679
|
|
|
|
|
|
|
|
|
|
Performance
Ratios:
|
|
|
|
|
|
|
Return on average
assets
|
0.65%
|
1.04%
|
|
0.85%
|
1.05%
|
|
Return on average
equity
|
5.21%
|
9.38%
|
|
7.01%
|
9.14%
|
|
Net interest
margin
|
3.21%
|
3.58%
|
|
3.05%
|
3.53%
|
|
Efficiency
ratio*
|
77.85%
|
69.33%
|
|
74.80%
|
72.31%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
December 31,
2019
|
|
|
|
Asset Quality
Data:
|
|
|
|
|
|
|
Non-accrual
loans
|
$
5,832
|
$
4,242
|
|
|
|
|
Foreclosed real
estate
|
$
1,010
|
$
2,387
|
|
|
|
|
Total non-performing
assets
|
$
6,842
|
$
6,629
|
|
|
|
|
Total non-accrual
loans to total loans
|
0.88%
|
0.66%
|
|
|
|
|
Total non-accrual
loans to total assets
|
0.62%
|
0.51%
|
|
|
|
|
Allowance for loan
losses
|
$
8,675
|
$
7,138
|
|
|
|
|
Allowance for loan
losses to total loans
|
1.31%
|
1.11%
|
|
|
|
|
Allowance for loan
losses to loans, net of PPP loans
|
1.41%
|
1.11%
|
|
|
|
|
Allowance for loan
losses to total
|
|
|
|
|
|
|
non-accrual
loans
|
149%
|
168%
|
|
|
|
|
Total non-performing
assets to total assets
|
0.73%
|
0.80%
|
|
|
|
|
Non-accrual troubled
debt restructurings (included above)
|
$
80
|
$
85
|
|
|
|
|
Performing troubled
debt restructurings
|
$
7,878
|
$
8,858
|
|
|
|
|
Loan to deposit
ratio
|
84%
|
98%
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
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.