ANNAPOLIS, Md., April 27, 2020 /PRNewswire/ -- Severn Bancorp,
Inc. (the Company) (NASDAQ: SVBI), the parent company of Severn
Bank (the Bank), reported net income available to common
shareholders for the first quarter ended March 31, 2020 of $565
thousand versus $2.6 million
for the first quarter of 2019. Earnings per share on a fully
diluted basis were $0.04 versus
$0.20 for the quarters ended
March 31, 2020 and 2019,
respectively.
Response to COVID-19
The COVID-19 pandemic has already
impacted the local economy in the Annapolis and greater Anne Arundel County area. Federal, state, and
local stay-at-home orders were enacted in our markets in
March 2020 causing many businesses to
close and workers to be furloughed or lose jobs. Essential purpose
entities such as medical professionals, food and agricultural
businesses, and transportation and logistical businesses were
exempted from the closures; however, unemployment rates are
increasing in our markets.
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. To date,
the Company has processed 185 applications, almost 100% of the
applications submitted, totaling approximately $36 million,
and is working diligently with the SBA to qualify customers to
receive PPP loans. Many employees worked 20 hours straight up until
the very last viable applicant was submitted as the SBA portal
closed.
"We have provided Payroll Protection Program loans to our local
business community as aggressively as possible," said Alan J. Hyatt, President and Chief Executive
Officer, "knowing these loans provide lifelines to businesses and
their employees. This Company remains committed to the local
economy during these challenging times. We respect and admire the
commitment others are making in the fight against COVID-19,
including first responders, health care workers, and those
providing other essential services. We are also grateful to
Governor Hogan for the outstanding leadership he is providing in
the State of Maryland."
The Company has also taken measures to protect the health and
safety of its customers and employees by encouraging remote work
arrangements to the extent possible, adjusting banking center
hours, and implementing operational measures to promote social
distancing. Management is closely monitoring credit metrics and
performing stress testing on the Bank's loan portfolio. Additional
resources have been shifted to credit administration to closely
analyze higher risk segments within the loan portfolio, monitor and
track loan payment deferrals and customer liquidity, and provide
timely reporting to management and the board of directors. Based on
the Company's capital and liquidity levels, conservative
underwriting policies, loan concentration diversification, and
geographical marketplace, management expects to be able to manage
the economic risks and uncertainties associated with the COVID-19
pandemic and remain well capitalized.
"These are difficult times, and our Company is holding up well,"
said Hyatt.
Income Statement
Net interest income in the first
quarter 2020 decreased $1.3 million
or 16% to $6.8 million compared to
the first quarter of 2019. Less first 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 quarter 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.
Provision expense in the first quarter 2020 was $750 thousand compared to zero for the first
quarter of 2019. In anticipation of the potential negative effects
of the COVID-19 pandemic on our loan portfolio, adjustments were
made to the allowance for loan losses increasing factors related to
economic conditions, lending policies and procedures, and industry
conditions.
Noninterest income in the first quarter 2020 increased
$765 thousand or 34% to $3.0 million from the first quarter of 2019.
Growth in mortgage banking production contributed significantly to
the increases in noninterest income.
Noninterest expense in the first quarter 2020 increased
$1.5 million or 22% to $8.3 million from the first quarter of 2019.
Nonrecurring noninterest expenses increased due to several factors,
including: legal and professional fees of $280 thousand, loss on sale of OREO property of
$74 thousand, and write-off of
leasehold improvements related to a lease termination during the
quarter of $76 thousand. In addition,
there were higher commissions paid to mortgage loan officers from
increased production and higher occupancy and staffing costs as a
result of opening a new branch in Crofton during the third quarter of 2019.
Balance Sheet
Total assets increased more than
$30 million to $857 million at March 31,
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 held for sale from high production
during the quarter. Deposits also increased by $29 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. 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
Income Statements
|
(dollars in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Year-to-Date
income statement results:
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
2020
|
2019
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
loans
|
$
8,338
|
$
9,167
|
$
(829)
|
-9%
|
|
Interest on
securities
|
219
|
259
|
(40)
|
-15%
|
|
Other interest
income
|
359
|
1,117
|
(758)
|
-68%
|
|
|
|
|
|
|
|
|
|
Total interest
income
|
8,916
|
10,543
|
(1,627)
|
-15%
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
deposits
|
1,797
|
1,869
|
(72)
|
-4%
|
|
Interest on long term
borrowings
|
364
|
589
|
(225)
|
-38%
|
|
|
|
|
|
|
|
Total interest
expense
|
2,161
|
2,458
|
(297)
|
-12%
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
6,755
|
8,085
|
(1,330)
|
-16%
|
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
750
|
-
|
750
|
100%
|
|
|
|
|
|
|
|
|
|
Net interest income
after provision for loan losses
|
6,005
|
8,085
|
(2,080)
|
-26%
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-banking
revenue
|
1,634
|
720
|
914
|
127%
|
|
Real Estate
Commissions
|
310
|
482
|
(172)
|
-36%
|
|
Real Estate
Management Income
|
165
|
164
|
1
|
1%
|
|
Other noninterest
income
|
916
|
894
|
22
|
3%
|
|
|
|
|
|
|
|
|
|
Total noninterest
income
|
3,025
|
2,260
|
765
|
34%
|
|
|
|
|
|
|
|
|
|
Net interest income
plus noninterest income after provision for loan losses
|
9,030
|
10,345
|
(1,315)
|
-13%
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
related expenses
|
5,461
|
4,525
|
936
|
21%
|
|
Net Occupancy &
Depreciation
|
518
|
415
|
103
|
25%
|
|
Net Costs of
Foreclosed Real Estate
|
74
|
125
|
(51)
|
-41%
|
|
Other
|
|
2,199
|
1,685
|
514
|
31%
|
|
|
|
|
|
|
|
|
|
Total noninterest
expense
|
8,252
|
6,750
|
1,502
|
22%
|
|
|
|
|
|
|
|
|
|
Income before income
tax provision
|
778
|
3,595
|
(2,817)
|
-78%
|
|
|
|
|
|
|
|
|
|
Income tax
provision
|
213
|
986
|
(773)
|
-78%
|
|
|
|
|
|
|
|
|
|
Net income
|
$
565
|
$
2,609
|
$
(2,044)
|
-78%
|
|
Net income available
to common shareholders
|
$
565
|
$
2,609
|
$
(2,044)
|
-78%
|
Severn Bancorp,
Inc.
|
Consolidated
Balance Sheets
|
(dollars in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
December 31,
2019
|
$
Change
|
%
Change
|
Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$
1,989
|
$
2,892
|
$
(903)
|
-31%
|
|
Federal funds and
interest bearing deposits in other banks
|
113,647
|
85,301
|
28,346
|
33%
|
|
Certificates of
deposit held as investment
|
7,540
|
7,540
|
-
|
0%
|
|
Investment securities
available for sale, at fair value
|
18,842
|
12,906
|
5,936
|
46%
|
|
Investment securities
held to maturity
|
22,737
|
25,960
|
(3,223)
|
-12%
|
|
Loans held for sale,
at fair value
|
21,996
|
10,910
|
11,086
|
102%
|
|
Loans
receivable
|
635,950
|
645,685
|
(9,735)
|
-2%
|
|
Allowance for loan
losses
|
(7,918)
|
(7,138)
|
(780)
|
11%
|
|
Accrued interest
receivable
|
2,275
|
2,458
|
(183)
|
-7%
|
|
Foreclosed real
estate, net
|
1,684
|
2,387
|
(703)
|
-29%
|
|
Premises and
equipment, net
|
21,731
|
22,144
|
(413)
|
-2%
|
|
Restricted stock
investments
|
2,299
|
2,431
|
(132)
|
-5%
|
|
Bank owned life
insurance
|
5,414
|
5,377
|
37
|
1%
|
|
Deferred income
taxes, net
|
1,691
|
1,748
|
(57)
|
-3%
|
|
Prepaid expenses and
other assets
|
7,478
|
6,318
|
1,160
|
18%
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
857,355
|
$
826,919
|
$
30,436
|
4%
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
|
|
|
|
|
Deposits
|
$
690,212
|
$
661,049
|
$
29,164
|
4%
|
|
Borrowings
|
35,000
|
35,000
|
-
|
0%
|
|
Subordinated
debentures
|
20,619
|
20,619
|
-
|
0%
|
|
Accounts payable and
accrued expenses
|
5,803
|
4,779
|
1,024
|
21%
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
751,634
|
721,447
|
30,187
|
4%
|
|
|
|
|
|
|
|
|
|
Common
stock
|
128
|
128
|
-
|
0%
|
|
Additional paid-in
capital
|
65,992
|
65,944
|
48
|
0%
|
|
Retained
earnings
|
39,497
|
39,445
|
52
|
0%
|
|
Accumulated
comprehensive income (loss)
|
104
|
(45)
|
149
|
-330%
|
|
|
|
|
|
|
|
|
|
Total stockholders'
Equity
|
105,721
|
105,472
|
249
|
0%
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
857,355
|
$
826,919
|
$
30,436
|
4%
|
Severn Bancorp,
Inc.
|
Selected Financial
Data
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2020
|
2019
|
Per Share
Data:
|
|
|
|
Basic earnings per
share
|
$
0.04
|
$
0.20
|
|
Diluted earnings per
share
|
$
0.04
|
$
0.20
|
|
Average basic shares
outstanding
|
12,812,642
|
12,773,259
|
|
Average diluted
shares outstanding
|
12,850,141
|
12,857,643
|
|
|
|
|
|
|
Performance
Ratios:
|
|
|
|
Return on average
assets
|
0.27%
|
1.13%
|
|
Return on average
equity
|
2.11%
|
10.47%
|
|
Net interest
margin
|
3.38%
|
3.65%
|
|
Efficiency
ratio*
|
83.62%
|
64.04%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
December 31,
2019
|
Asset Quality
Data:
|
|
|
|
Non-accrual
loans
|
$
7,246
|
$
4,242
|
|
Foreclosed real
estate
|
1,684
|
2,387
|
|
Total non-performing
assets
|
$
8,930
|
$
6,629
|
|
Total non-accrual
loans to total loans
|
1.14%
|
0.66%
|
|
Total non-accrual
loans to total assets
|
0.85%
|
0.51%
|
|
Allowance for loan
losses
|
$
7,918
|
$
7,138
|
|
Allowance for loan
losses to total loans
|
1.25%
|
1.11%
|
|
Allowance for loan
losses to total
|
|
|
|
non-accrual
loans
|
109.3%
|
168.3%
|
|
Total non-performing
assets to total assets
|
1.04%
|
0.80%
|
|
Non-accrual troubled
debt restructurings (included above)
|
$
85
|
$
85
|
|
Performing troubled
debt restructurings
|
$
8,786
|
$
8,858
|
|
Loan to deposit
ratio
|
92.1%
|
97.7%
|
|
|
|
|
|
|
*
|
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.