ANNAPOLIS, Md., July 24, 2020 /PRNewswire/ -- Severn
Bancorp, Inc. (the Company) (NASDAQ: SVBI), the parent company of
Severn Bank (the Bank), reported net income of $1.7 million for the second quarter ended
June 30, 2020 and $2.3 million for the six months ended
June 30, 2020 compared to
$2.2 million and $4.8 million for the same periods in 2019.
Earnings per share on a fully diluted basis were $0.14 for the second quarter and $0.18 per share for the first six months of 2020,
down from $0.17 and $0.37 per share, respectively, from the second
quarter and first six 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 and other protocols that are designed to avoid
COVID-19.
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 funded 428 PPP loans totaling in excess of
$47 million, and is working diligently with the SBA to qualify
customers to receive PPP loans while they are still available.
Through the first six months of 2020 the Company performed 123
short-term COVID-19 related modifications of loans totaling
$96.6 million.
The Company enjoyed a good second quarter, as its cost of funds
continues to decline and the Company continues to originate a
record volume of residential mortgages. "While it remains difficult
to know what the future will bring in light of the severe economic
impacts occasioned by this pandemic, business continues to be
strong," said Alan J. Hyatt,
President and Chief Executive Officer. "The Company remains
well capitalized and it continues to offer a full range of services
to our customers and our community." Mr. Hyatt said that "while the
portfolio is holding up well, as a measure of conservation, loan
loss reserves have been increased to 1.33% of gross loans [net of
PPP loans], and will continue to be carefully monitored."
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, wearing masks, 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.
Income Statement
Net interest income was $6.6 million for the second quarter ended
June 30, 2020 and $13.4 million for the six months ended
June 30, 2020 compared to
$7.8 million and $15.9 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 zero for the second quarter ended
June 30, 2020 and $750 thousand for the six months ended
June 30, 2020 compared to zero for
the same periods in 2019. The ratio of the allowance for loan
losses to gross loans was 1.24% at June 30,
2020. Excluding PPP loans, the ratio of the allowance for
loan losses to gross loans was 1.33% at June
30, 2020, higher than both the 1.25% at March 31, 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 as well as a decrease in loan volume.
Noninterest income was $3.2
million for the second quarter ended June 30, 2020 and $6.3
million for the six months ended June
30, 2020 compared to $2.6
million and $4.9 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 $7.5
million for the second quarter ended June 30, 2020 and $15.7
million for the six months ended June
30, 2020 compared to $7.5
million and $14.3 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 opening a new branch in
Crofton during the third quarter
of 2019. In addition, there were nonrecurring noninterest expenses
including: legal and professional fees of $325 thousand, loss on sale of OREO property of
$74 thousand, and write-off of
leasehold improvements related to a lease termination of
$76 thousand.
Balance Sheet
Total assets increased nearly
$100 million to $924 million at June 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 $88
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
December 31,
2019
|
$
Change
|
%
Change
|
|
Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
2,023
|
$
2,892
|
$
(869)
|
-30%
|
|
|
Federal funds and
interest bearing deposits in other banks
|
166,447
|
85,301
|
81,146
|
95%
|
|
|
Certificates of
deposit held as investment
|
6,074
|
7,540
|
(1,466)
|
-19%
|
|
|
Investment securities
available for sale, at fair value
|
22,006
|
12,906
|
9,100
|
71%
|
|
|
Investment securities
held to maturity
|
21,310
|
25,960
|
(4,650)
|
-18%
|
|
|
Loans held for sale,
at fair value
|
11,429
|
10,910
|
519
|
5%
|
|
|
Loans
receivable
|
661,372
|
645,685
|
15,687
|
2%
|
|
|
Allowance for loan
losses
|
(8,169)
|
(7,138)
|
(1,031)
|
14%
|
|
|
Accrued interest
receivable
|
2,478
|
2,458
|
20
|
1%
|
|
|
Foreclosed real
estate, net
|
1,010
|
2,387
|
(1,377)
|
-58%
|
|
|
Premises and
equipment, net
|
21,542
|
22,144
|
(602)
|
-3%
|
|
|
Restricted stock
investments
|
2,299
|
2,431
|
(132)
|
-5%
|
|
|
Bank owned life
insurance
|
5,450
|
5,377
|
73
|
1%
|
|
|
Deferred income
taxes, net
|
1,716
|
1,748
|
(32)
|
-2%
|
|
|
Prepaid expenses and
other assets
|
6,676
|
6,318
|
358
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
$
923,663
|
$
826,919
|
$
96,744
|
12%
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
Deposits
|
$
748,916
|
$
661,049
|
$
87,867
|
13%
|
|
|
Borrowings
|
35,000
|
35,000
|
-
|
-
|
|
|
Subordinated
debentures
|
20,619
|
20,619
|
-
|
-
|
|
|
Accounts payable and
accrued expenses
|
12,146
|
4,779
|
7,367
|
154%
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
816,681
|
721,447
|
95,234
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
128
|
128
|
-
|
-
|
|
|
Additional paid-in
capital
|
66,026
|
65,944
|
82
|
0%
|
|
|
Retained
earnings
|
40,723
|
39,445
|
1,278
|
3%
|
|
|
Accumulated
comprehensive income (loss)
|
105
|
(45)
|
150
|
-333%
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
106,982
|
105,472
|
1,510
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders' Equity
|
$
923,663
|
$
826,919
|
$
96,744
|
12%
|
|
|
|
|
|
|
|
|
|
|
Severn Bancorp,
Inc.
|
Consolidated
Income Statement
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Quarterly income
statement results:
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
2020
|
2019
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
loans
|
$
8,078
|
$
9,226
|
$
(1,148)
|
-12%
|
|
Interest on
securities
|
216
|
241
|
(25)
|
-10%
|
|
Other interest
income
|
67
|
757
|
(690)
|
-91%
|
|
|
|
|
|
|
|
|
|
Total interest
income
|
8,361
|
10,224
|
(1,863)
|
-18%
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
deposits
|
1,383
|
1,898
|
(515)
|
-27%
|
|
Interest on long term
borrowings
|
333
|
481
|
(148)
|
-31%
|
|
|
|
|
|
|
|
|
|
Total interest
expense
|
1,716
|
2,379
|
(663)
|
-28%
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
6,645
|
7,845
|
(1,200)
|
-15%
|
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Net interest income
after provision for loan losses
|
6,645
|
7,845
|
(1,200)
|
-15%
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-banking
revenue
|
1,990
|
1,087
|
903
|
83%
|
|
Real Estate
Commissions
|
130
|
378
|
(248)
|
-66%
|
|
Real Estate
Management Income
|
155
|
162
|
(7)
|
-4%
|
|
Other noninterest
income
|
962
|
988
|
(26)
|
-3%
|
|
|
|
|
|
|
|
|
|
Total noninterest
income
|
3,237
|
2,615
|
622
|
24%
|
|
|
|
|
|
|
|
|
|
Net interest income
plus noninterest income after provision for loan losses
|
9,882
|
10,460
|
(578)
|
-6%
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
related expenses
|
5,171
|
4,909
|
262
|
5%
|
|
Net Occupancy &
Depreciation
|
445
|
389
|
56
|
14%
|
|
Net Costs of
Foreclosed Real Estate
|
16
|
24
|
(8)
|
-33%
|
|
Other
|
|
1,855
|
2,191
|
(336)
|
-15%
|
|
|
|
|
|
|
|
|
|
Total noninterest
expense
|
7,487
|
7,513
|
(26)
|
0%
|
|
|
|
|
|
|
|
|
|
Income before income
tax provision
|
2,395
|
2,947
|
(552)
|
-19%
|
|
|
|
|
|
|
|
|
|
Income tax
provision
|
658
|
771
|
(113)
|
-15%
|
|
|
|
|
|
|
|
|
|
Net income
|
$
1,737
|
$
2,176
|
$
(439)
|
-20%
|
Severn Bancorp,
Inc.
|
Consolidated
Income Statement
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Year-to-Date
income statement results:
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2020
|
2019
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
loans
|
$
16,416
|
$
18,393
|
$
(1,977)
|
-11%
|
|
Interest on
securities
|
435
|
500
|
(65)
|
-13%
|
|
Other interest
income
|
426
|
1,874
|
(1,448)
|
-77%
|
|
|
|
|
|
|
|
|
|
Total interest
income
|
17,277
|
20,767
|
(3,490)
|
-17%
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
deposits
|
3,180
|
3,767
|
(587)
|
-16%
|
|
Interest on long term
borrowings
|
697
|
1,070
|
(373)
|
-35%
|
|
|
|
|
|
|
|
|
|
Total interest
expense
|
3,877
|
4,837
|
(960)
|
-20%
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
13,400
|
15,930
|
(2,530)
|
-16%
|
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
750
|
-
|
750
|
100%
|
|
|
|
|
|
|
|
|
|
Net interest income
after provision for loan losses
|
12,650
|
15,930
|
(3,280)
|
-21%
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-banking
revenue
|
3,624
|
1,807
|
1,817
|
101%
|
|
Real Estate
Commissions
|
440
|
860
|
(420)
|
-49%
|
|
Real Estate
Management Income
|
320
|
326
|
(6)
|
-2%
|
|
Other noninterest
income
|
1,878
|
1,882
|
(4)
|
0%
|
|
|
|
|
|
|
|
|
|
Total noninterest
income
|
6,262
|
4,875
|
1,387
|
28%
|
|
|
|
|
|
|
|
|
|
Net interest income
plus noninterest income after provision for loan losses
|
18,912
|
20,805
|
(1,893)
|
-9%
|
|
|
|
|
|
|
|
|
Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
related expenses
|
10,632
|
9,434
|
1,198
|
13%
|
|
Net Occupancy &
Depreciation
|
963
|
804
|
159
|
20%
|
|
Net Costs of
Foreclosed Real Estate
|
90
|
149
|
(59)
|
-40%
|
|
Other
|
|
4,054
|
3,876
|
178
|
5%
|
|
|
|
|
|
|
|
|
|
Total noninterest
expense
|
15,739
|
14,263
|
1,476
|
10%
|
|
|
|
|
|
|
|
|
|
Income before income
tax provision
|
3,173
|
6,542
|
(3,369)
|
-51%
|
|
|
|
|
|
|
|
|
|
Income tax
provision
|
871
|
1,757
|
(886)
|
-50%
|
|
|
|
|
|
|
|
|
|
Net income
|
$
2,302
|
$
4,785
|
$
(2,483)
|
-52%
|
|
|
|
|
|
|
|
|
Severn Bancorp,
Inc.
|
Selected Financial
Data
|
(dollars in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
Three Months Ended
June 30,
|
|
|
|
|
2020
|
2019
|
|
2020
|
2019
|
Per Share
Data:
|
|
|
|
|
.
|
|
Basic earnings per
share
|
$
0.18
|
$
0.37
|
|
$
0.14
|
$
0.17
|
|
Diluted earnings per
share
|
$
0.18
|
$
0.37
|
|
$
0.14
|
$
0.17
|
|
Average basic shares
outstanding
|
12,812,808
|
12,774,191
|
|
12,812,976
|
12,775,123
|
|
Average diluted
shares outstanding
|
12,834,348
|
12,859,980
|
|
12,818,556
|
12,862,291
|
|
|
|
|
|
|
|
|
|
Performance
Ratios:
|
|
|
|
|
|
|
Return on average
assets
|
0.54%
|
1.04%
|
|
0.81%
|
0.95%
|
|
Return on average
equity
|
4.30%
|
9.50%
|
|
6.51%
|
8.56%
|
|
Net interest
margin
|
3.30%
|
3.60%
|
|
3.22%
|
3.55%
|
|
Efficiency
ratio*
|
79.59%
|
67.83%
|
|
75.60%
|
71.59%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
December 31,
2019
|
|
|
|
Asset Quality
Data:
|
|
|
|
|
|
|
Non-accrual
loans
|
$
6,245
|
$
4,242
|
|
|
|
|
Foreclosed real
estate
|
1,010
|
2,387
|
|
|
|
|
|
Total non-performing
assets
|
7,255
|
6,629
|
|
|
|
|
Total non-accrual
loans to total loans
|
0.94%
|
0.66%
|
|
|
|
|
Total non-accrual
loans to total assets
|
0.68%
|
0.51%
|
|
|
|
|
Allowance for loan
losses
|
8,169
|
7,138
|
|
|
|
|
Allowance for loan
losses to total loans
|
1.24%
|
1.11%
|
|
|
|
|
Allowance for loan
losses to loans, net of PPP loans
|
1.32%
|
1.11%
|
|
|
|
|
Allowance for loan
losses to total
|
|
|
|
|
|
|
|
non-accrual
loans
|
130.8%
|
168.3%
|
|
|
|
|
Total non-performing
assets to total assets
|
0.79%
|
0.80%
|
|
|
|
|
Non-accrual troubled
debt restructurings (included above)
|
82
|
85
|
|
|
|
|
Performing troubled
debt restructurings
|
8,131
|
8,858
|
|
|
|
|
Loan to deposit
ratio
|
88.3%
|
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.