8-K

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)  
January 29, 2019

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)

(Former name or former address, if change since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ 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))

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 January 29, 2019 Severn Bancorp, Inc. issued a press release announcing financial results for the quarter ended December 31, 2018.  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 January 29, 2019 announcing financial results for the quarter and year ended December 31, 2018.

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: January 31, 2019	By:	/s/ Alan J. Hyatt
		Alan J. Hyatt, President

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE	Contact:
	Paul B. Susie
	Chief Financial Officer &
	Executive Vice President
	Email: psusie@severnbank.com
	Phone: 410.260.2000

Severn Bancorp, Inc. Announces Year End Earnings

Annapolis, MD (January 29, 2019) –Severn Bancorp, Inc., (Nasdaq: SVBI) parent company of Severn Bank, today announced net income of $2.6 million for the three months ending December 31, 2018 versus a net loss of $349 thousand for the same quarter in 2017. On a diluted per share basis, earnings were $0.20 versus $(0.03) for the quarters ended December 31, 2018 and 2017, respectively. Net income for the year ended December 31, 2018 was $8.6 million, a 204% increase over net income of $2.8 million for the year ended December 31, 2017. For the years ended December 31, 2018 and 2017, diluted earnings per share were $0.67 and $0.21, respectively.

“Earnings for the quarter showed significant year over year improvement,” stated Alan J. Hyatt, President and Chief Executive Officer.  Mr. Hyatt continued, “We are seeing results from planning and activities we have put in place to grow the company and build new relationships. We are working on many exciting projects for 2019 in order to continue the positive trend.  Every action we are taking is dedicated to making Severn Bank the best it can be and increasing shareholder value. ”

Net interest income increased 17% during the fourth quarter of 2018. Net interest income was $7.8 million during the fourth quarter of 2018 versus $6.7 million during the fourth quarter of 2017. For the years ended December 31, 2018 and 2017, net interest income was $29.1 million and $24.6 million, respectively.

Noninterest income increased 61% during the quarter ended December 31, 2018. Noninterest income was $2.4 million for the three months ended December 31, 2018, up from $1.5 million as of December 31, 2017. For the year ended December 31, 2018, noninterest income was $8.8 million. This represents a 68% increase over the $5.2 million reported for the fourth quarter of 2017. Growth in mortgage banking revenue, title services, and deposit fees contributed to the increase.

Noninterest expenses were $6.9 million for the three months ended December 31, 2018 versus $5.6 million for the same period in 2017. For the year ended December 31, 2018, noninterest expenses were $26.6 million, which is an increase of 17% over the same period in 2017. The increase is primarily due to higher commissions paid to mortgage loan officers as a result of increased production.

About Severn Bank: Founded in 1946, Severn 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 has assets of $974 million and six branches located in Annapolis, Edgewater, Severna Park, Lothian/Wayson’s Corner 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 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. Severn’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 Severn’s general market area, federal and state regulation, competition and other factors detailed from time to time in Severn’s filings with the Securities and Exchange Commission (the “SEC”), including “Item 1A. Risk Factors” contained in Severn’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Severn Bancorp, Inc.

Consolidated Income Statement

(dollars in thousands, except per share data)

(Unaudited)

Quarterly income statement results:	Three Months Ended December 31, 2018
	2018		2017			$ Change			% Change
Interest Income
Interest on loans	$	9,146	$	8,026		$	1,120			13.95	%
Interest on securities		276		305			(29	)		-9.51	%
Other interest income		800		199			601			302.01	%
Total interest income		10,222		8,530			1,692			19.84	%
Interest Expense
Interest on deposits		1,750		1,113			637			57.23	%
Interest on long term borrowings		671		749			(78	)		-10.41	%
Total interest expense		2,421		1,862			559			30.02	%
		.		.			.
Net interest income		7,801		6,668			1,133			16.99	%
Provision for (reversal of) loan losses		0		0			-			0.00	%
Net interest income after provision for (reversal of) loan losses		7,801		6,668			1,133			16.99	%
Noninterest Income
Mortgage-banking revenue		591		357			234			65.55	%
Real Estate Commissions		554		400			154			38.50	%
Real Estate Management Income		147		162			(15	)		-9.26	%
Other noninterest income		1,083		558			525			94.09	%
Net noninterest income		2,375		1,477			898			60.80	%
Net interest income plus noninterest income after provision for (reversal of) loan losses		10,176		8,145			2,031			24.94	%
Noninterest expenses
Compensation and related expenses		4,460		4,016			444			11.06	%
Net Occupancy & Depreciation		404		344			60			17.44	%
Net Costs of Foreclosed Real Estate		62		(33	)		95			287.88	%
Other		1,925		1,295			630			48.65	%
Total noninterest expenses		6,851		5,622			1,229			21.86	%
Income before income tax provision		3,325		2,523			802			31.79	%
Income tax provision		724		2,872			(2,148	)		-74.79	%
Net income	$	2,601	$	(349	)	$	2,950			845.27	%
Net income available to common shareholders	$	2,601	$	(419	)	$	3,020			720.76	%

Severn Bancorp, Inc.

Consolidated Income Statement

(dollars in thousands, except per share data)

(Unaudited)

Year-to-Date income statement results:	Year Ended December 31, 2018
	2018			2017			$ Change			% Change
Interest Income
Interest on loans	$	34,877		$	30,294		$	4,583			15.13	%
Interest on securities		1,196			1,233			(37	)		-3.00	%
Other interest income		1,587			697			890			127.69	%
Total interest income		37,660			32,224			5,436			16.87	%
Interest Expense
Interest on deposits		5,688			4,037			1,651			40.90	%
Interest on long term borrowings		2,915			3,593			(678	)		-18.87	%
Total interest expense		8,603			7,630			973			12.75	%
		.			.			.
Net interest income		29,057			24,594			4,463			18.15	%
Provision for (reversal of) loan losses		(300	)		(650	)		350			-53.85	%
Net interest income after provision for (reversal of) loan losses		29,357			25,244			4,113			16.29	%
Noninterest Income
Mortgage-banking revenue		2,561			1,507			1,054			69.94	%
Real Estate Commissions		1,707			1,358			349			25.70	%
Real Estate Management Income		674			675			(1	)		-0.15	%
Other noninterest income		3,838			1,698			2,140			126.03	%
Net noninterest income		8,780			5,238			3,542			67.62	%
Net interest income plus noninterest income after provision for (reversal of) loan losses		38,137			30,482			7,655			25.11	%
Noninterest expenses
Compensation and related expenses		17,819			14,734			3,085			20.94	%
Net Occupancy & Depreciation		1,555			1,358			197			14.51	%
Net Costs of Foreclosed Real Estate		83			132			(49	)		-37.12	%
Other		7,134			6,418			716			11.16	%
Total noninterest expenses		26,591			22,642			3,949			17.44	%
Income before income tax provision		11,546			7,840			3,706			47.27	%
Income tax provision		2,977			5,022			(2,045	)		-40.72	%
Net income	$	8,569		$	2,818		$	5,751			204.08	%
Net income available to common shareholders	$	8,499		$	2,538		$	5,961			234.87	%

Severn Bancorp, Inc.

Consolidated Balance Sheet

(dollars in thousands, except per share data)

(Unaudited)

	December 31, 2018			December 31, 2017			$ Change			% Change
Balance Sheet Data:
ASSETS
Cash	$	2,880		$	2,382		$	498			20.91	%
Federal funds and interest bearing deposits in other banks		185,460			19,471			165,989			852.49	%
Certificates of deposit held as investment		8,780			8,780			0			0.00	%
Investment securities available for sale, at fair value		11,978			10,119			1,859			18.37	%
Investment securities held to maturity		38,912			54,303			(15,391	)		-28.34	%
Loans held for sale, at fair value		10,561			4,530			6,031			133.13	%
Loans receivable		681,474			668,151			13,323			1.99	%
Allowance for loan losses		(8,044	)		(8,055	)		11			-0.14	%
Accrued interest receivable		2,848			2,640			208			7.88	%
Foreclosed real estate, net		1,537			403			1,134			281.39	%
Premises and equipment, net		22,745			23,139			(394	)		-1.70	%
Restricted stock investments		3,766			4,489			(723	)		-16.11	%
Bank owned life insurance		5,225			5,064			161			3.18	%
Deferred income taxes, net		2,363			5,302			(2,939	)		-55.43	%
Prepaid expenses and other assets		3,748			4,069			(321	)		-7.89	%
	$	974,233		$	804,787		$	169,446			21.05	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits	$	779,506		$	602,228		$	177,278			29.44	%
Borrowings		73,500			88,500			(15,000	)		-16.95	%
Subordinated debentures		20,619			20,619			-			0.00	%
Accounts payable and accrued expenses		2,155			2,340			(185	)		-7.91	%
Total Liabilities		875,780			713,687			162,093			22.71	%
Preferred stock		-			4			(4	)		-100.00	%
Common stock		128			122			6			4.92	%
Additional paid-in capital		65,538			65,137			401			0.62	%
Retained earnings		32,860			25,872			6,988			27.01	%
Accumulated comprehensive income (loss)		(73	)		(35	)		(38	)		108.57	%
Total Stockholders' Equity		98,453			91,100			7,353			8.07	%
	$	974,233		$	804,787		$	169,446			21.05	%

Severn Bancorp, Inc.

Selected Financial Data

(dollars in thousands, except per share data)

(Unaudited)

	Year Ended December 31, 2018						Three Months Ended December 31, 2018
	2018			2017			2018			2017
Per Share Data:											.
Basic earnings per share	$	0.68		$	0.21		$	0.21		$	(0.03	)
Diluted earnings per share	$	0.67		$	0.21		$	0.20		$	(0.03	)
Average basic shares outstanding		12,585,961			12,160,983			12,719,772			12,425,245
Average diluted shares outstanding		12,697,620			12,277,736			12,835,186			12,425,245
Performance Ratios:
Return on average assets		1.03	%		0.36	%		1.20	%		-0.17	%
Return on average equity		9.48	%		3.21	%		10.70	%		-1.59	%
Net interest margin		3.66	%		3.32	%		3.75	%		3.53	%
Efficiency ratio*		70.06	%		75.45	%		66.72	%		69.42	%

	December 31, 2018			December 31, 2017
Asset Quality Data:
Non-accrual loans	$	4,657		$	5,710
Foreclosed real estate		1,537			403
Total non-performing assets		6,194			6,113
Total non-accrual loans to total loans		0.7	%		0.9	%
Total non-accrual loans to total assets		0.5	%		0.7	%
Allowance for loan losses		8,044			8,055
Allowance for loan losses to total loans		1.2	%		1.2	%
Allowance for loan losses to total
non-accrual loans		172.7	%		141.1	%
Total non-performing assets to total assets		0.6	%		0.8	%
Non-accrual troubled debt restructurings (included above)		446			820
Performing troubled debt restructurings		10,698			13,714
Loan to deposit ratio		87.4	%		110.9	%

* This non-GAAP financial measure is calculated as noninterest expenses less OREO expenses divided by net interest income plus noninterest income