PR Newswire | Apr 23, 2021 04:05PM EDT

04/23 15:05 CDT

Severn Bancorp, Inc. Announces First Quarter Earnings ANNAPOLIS, Md., April 23, 2021

ANNAPOLIS, Md., April 23, 2021 /PRNewswire/ -- Severn Bancorp, Inc. (the Company) (NASDAQ: SVBI), the parent company of Severn Bank (the Bank), reported net income of $3.9 million for the first quarter ended March 31, 2021 compared to $565 thousand for the first quarter of 2020. Earnings per share on a fully diluted basis were $0.30 compared to $0.04 for the quarters ended March 31, 2021 and 2020, respectively.

Reaction to COVID-19Protocols remain in place for employees and customers concerning the impact of the COVID-19 pandemic. They include remote working, social distancing, wearing masks, appointment-only branch banking, and following other protocols that are designed to avoid COVID-19 exposure.

Our management team remains focused on assessing the risks in our loan portfolio and working with customers to minimize losses. The Company has also continued to participate in the SBA Paycheck Protection Program (PPP) to assist our business customers.

"The Company started 2021 with robust earnings. Residential mortgage lending remained strong and asset quality also was very good, which resulted in a reversal of $750,000 from the allowance for loan and lease losses, after contributing that same amount during the first quarter of 2020," said Alan J. Hyatt, President and Chief Executive Officer. "Severn continues to grow local banking relationships as it prepares to join forces with Shore United Bank, anticipated to happen later this year," Mr. Hyatt said.

Income StatementNet interest income in the first quarter 2021 increased $903 thousand or 13% to $7.7 million compared to $6.8 million for the first quarter of 2020. The year over year increase in net interest income was driven by a significant reduction in interest expense from lower deposit rates and less reliance on borrowings.

The Company recorded a reversal of provision of $(750) thousand for the first quarter ended March 31, 2021 compared to a provision of $750 thousand for the first quarter of 2020. The ratio of the allowance for loan losses to gross loans was 1.31% at March 31, 2021 compared to 1.35% at December 31, 2020 and 1.25% at March 31, 2020. Excluding PPP loans, the ratio of the allowance for loan losses to gross loans was 1.40% at March 31, 2021 compared to 1.42% at December 31, 2020. The primary drivers of a slight improvement in certain metrics underlying our qualitative factor adjustments and continued strong asset quality metrics. The reversal of provision in the first quarter of 2021 and the decline in the balance of the allowance for loan losses as compared to year end 2020 was also attributable to a decline in total loans, net of PPP loans, which are excluded from the allowance due to their underlying guarantees.

Noninterest income in the first quarter of 2021 increased $2.7 million or 90% to $5.8 million compared to $3.0 million for the first quarter of 2020. Growth in mortgage banking production contributed significantly to the increase in noninterest income.

Noninterest expense in the first quarter of 2021 increased $554 thousand or 7% to $8.8 million compared to $8.3 million for the first quarter of 2020. The largest increase was attributable to higher commissions paid to mortgage loan officers from increased production.

Balance SheetTotal assets increased $160 million to $1.1 billion at March 31, 2021 from $953 million at December 31, 2020. The increase in assets was primarily in federal funds and interest bearing deposits in other banks as well an increased bond portfolio and higher loans held for sale. Deposits also increased by $158 million from December 31, 2020. 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 liquidity to meet any deposit outflows.

About Severn BankFounded 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 StatementsIn 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, 2020.

Severn Bancorp, Inc.Consolidated Balance Sheets(dollars in thousands)(Unaudited)

March 31, 2021 December 31, 2020 $ Change % Change

Balance Sheet Data:

ASSETS

Cash $ 6,248 $ 4,819 $ 1,429 30%

Federal funds and interest bearing deposits 250,847 151,790 99,057 65% in other banks

Certificates of deposit 3,330 3,580 (250) -7% held as investment

Investment securities available for sale, at 132,698 65,098 67,600 104% fair value

Investment securities 14,516 15,943 (1,427) -9% held to maturity

Loans held for sale, at 50,124 36,299 13,825 38% fair value

Loans receivable 621,512 642,882 (21,370) -3%

Allowance for loan losses (8,135) (8,670) 535 -6%

Accrued interest 2,439 2,576 (137) -5% receivable

Foreclosed real estate, 1,010 1,010 - 0% net

Premises and equipment, 20,653 20,940 (287) -1% net

Restricted stock 970 1,236 (266) -22% investments

Bank owned life insurance 5,550 5,517 33 1%

Deferred income taxes, 882 1,145 (263) -23% net

Prepaid expenses and 10,325 8,388 1,937 23% other assets

Total Assets $ 1,112,969 $ 952,553 $ 160,416 17%

LIABILITIES ANDSTOCKHOLDERS EQUITY

Deposits $ 964,096 $ 806,456 $ 157,640 20%

Borrowings 10,000 10,000 - 0%

Subordinated debentures 20,619 20,619 - 0%

Accounts payable and 7,181 5,831 1,350 23% accrued expenses

Total Liabilities 1,001,896 842,906 158,990 19%

Common stock 129 128 1 1%

Additional paid-in 66,359 66,251 108 0% capital

Retained earnings 46,485 43,216 3,269 8%

Accumulated comprehensive (1,900) 52 (1,952) -3,750% income (loss)

Total Stockholders' 111,073 109,647 1,426 1% Equity

Total Liabilities and $ 1,112,969 $ 952,553 $ 160,416 17% Stockholders' Equity

Severn Bancorp, Inc.Consolidated Income Statements(dollars in thousands)(Unaudited)

Quarterly income statement Three Months Ended March 31,results:

2021 2020 $ % Change Change

Interest Income

Interest on loans $ 8,244 $ 8,338 $ (94) -1%

Interest on securities 292 219 73 33%

Other interest income 73 359 (286) -80%

Total interest income 8,609 8,916 (307) -3%

Interest Expense

Interest on deposits 784 1,797 (1,013) -56%

Interest on long term 167 364 (197) -54% borrowings

Total interest expense 951 2,161 (1,210) -56%

Net interest income 7,658 6,755 903 13%

Provision for (reversal (750) 750 (1,500) -200% of) loan losses

Net interest income after provision for (reversal 8,408 6,005 2,403 40% of) loan losses

Noninterest Income

Mortgage-banking revenue 4,396 1,634 2,762 169%

Real Estate Commissions 161 310 (149) -48%

Real Estate Management - 165 (165) -100% Income

Other noninterest income 1,202 916 286 31%

Total noninterest income 5,759 3,025 2,734 90%

Net interest income plus noninterest income after 14,167 9,030 5,137 57% provision for (reversal of) loan losses

Noninterest Expense

Compensation and related 6,222 5,461 761 14% expenses

Net Occupancy & 471 518 (47) -9% Depreciation

Net Costs of Foreclosed 2 74 (72) -97% Real Estate

Other 2,111 2,199 (88) -4%

Total noninterest expense 8,806 8,252 554 7%

Income before income tax 5,361 778 4,583 589% provision

Income tax provision 1,450 213 1,237 581%

Net income $ 3,911 $ 565 $ 3,346 592%

Severn Bancorp, Inc.Selected Financial Data(dollars in thousands, except per share data)(Unaudited)

Three Months Ended March 31,

2021 2020

Per Share Data:

Basic earnings per share $ 0.30 $ 0.04

Diluted earnings per share $ 0.30 $ 0.04

Average basic shares outstanding 12,847,418 12,812,642

Average diluted shares outstanding 12,901,485 12,850,141

Performance Ratios:

Return on average assets 1.52% 0.27%

Return on average equity 14.42% 2.11%

Net interest margin 3.08% 3.38%

Efficiency ratio* 65.61% 83.62%

March 31, 2021 December 31, 2020

Asset Quality Data:

Non-accrual loans $ 1,283 $ 4,380

Foreclosed real estate $ 1,010 $ 1,010

Total non-performing assets $ 2,293 $ 5,390

Total non-accrual loans to total 0.21% 0.68% loans

Total non-accrual loans to total 0.12% 0.46% assets

Allowance for loan losses $ 8,135 $ 8,670

Allowance for loan losses to total 1.31% 1.35% loans

Allowance for loan losses to loans, 1.40% 1.42% net of PPP loans

Allowance for loan losses to total

non-accrual loans 634.1% 197.9%

Total non-performing assets to total 0.21% 0.57% assets

Non-accrual troubled debt $ 159 $ 163 restructurings (included above)

Performing troubled debt $ 6,411 $ 6,589 restructurings

Loan to deposit ratio 64.5% 79.7%

* 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.