svbi20201022_8k.htm
false 0000868271 0000868271 2020-10-22 2020-10-22
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C.  20549
 
FORM 8-K
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
 
Date of Report (Date of earliest event report):
October 22, 2020
 
 
Severn Bancorp, Inc.
(Exact name of registrant as specified in its charter)
 
Maryland
0-49731
52-1726127
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification Number)
 
200 Westgate Circle, Suite 200, Annapolis, Maryland
 
21401
(Address of principal executive offices)
 
(Zip Code)
 
410-260-2000
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name or former address, if change since last report)
 
 
Check the appropriate box below if the Form8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
SVBI
 
The Nasdaq Stock Market LLC
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
 

 
Item 2.02
Results of Operations and Financial Condition
 
On October 22, 2020 Severn Bancorp, Inc. issued a press release announcing financial results for the quarter ended September 30, 2020.  A copy of this press release is being furnished as Exhibit 99.1 to this report.
 
Item 9.01
Financial Statements and Exhibits
 
(d) Exhibits:
 
99.1 Press Release of Severn Bancorp, Inc., dated October 22, 2020 announcing financial results for the quarter ended September 30, 2020.
 
104 - Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 
 

 
Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Severn Bancorp, Inc.
 
 
 
Dated:  October 23, 2020
By: 
/s/Vance W. Adkins
 
 
Vance W. Adkins
 
 
Executive Vice President & Chief Financial Officer
 
 
ex_208325.htm

Exhibit 99.1

 

logo.jpg

   
For Immediate Release    Contact:
 

Vance Adkins

Chief Financial Officer

Email: vadkins@severnbank.com

Phone: 410.260.2000

 

Severn Bancorp, Inc. Announces Third Quarter Earnings

 

Annapolis, MD, October 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

 

 
v3.20.2
Document And Entity Information
Oct. 22, 2020
Document Information [Line Items]  
Entity, Registrant Name Severn Bancorp, Inc.
Document, Type 8-K
Document, Period End Date Oct. 22, 2020
Entity, Incorporation, State or Country Code MD
Entity, File Number 0-49731
Entity, Tax Identification Number 52-1726127
Entity, Address, Address Line One 200 Westgate Circle, Suite 200
Entity, Address, City or Town Annapolis
Entity, Address, State or Province MD
Entity, Address, Postal Zip Code 21401
City Area Code 410
Local Phone Number 260-2000
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock
Trading Symbol SVBI
Security Exchange Name NASDAQ
Entity, Emerging Growth Company false
Amendment Flag false
Entity, Central Index Key 0000868271