EX-99.1 2 ex99_1.htm EXHIBIT 99.1

Exhibit 99.1


FOR IMMEDIATE RELEASE
Contact:
 
Marc S. Winkler
 
Interim Chief Financial Officer
 
Email: mwinkler@severnbank.com
 
Phone: 410.260.2000

Severn Bancorp, Inc. Announces Second Quarter Earnings

Annapolis, MD (July 26, 2019) – Severn Bancorp, Inc., (Nasdaq: SVBI) parent company of Severn Bank, today announced net income of $2.2 million for the three months ending June 30, 2019 versus $1.9 million for the same quarter in 2018. On a diluted per share basis, earnings were $0.17 versus $0.15 for the quarters ending June 30, 2019 and 2018, respectively.

Net income for the six months ending June 30, 2019 was $4.8 million versus $3.8 million for June 30, 2018, an increase of 26%. On a diluted per share basis, earnings were $0.37 versus $0.30 for the six months ending June 30, 2019 and 2018 respectively, an increase of 23%.

“Earnings are respectable again for the second quarter of this year,” stated Alan J. Hyatt, President and Chief Executive Officer. Mr. Hyatt continued, “We are pleased with the continued upward trajectory of the company’s earnings. Our quarterly results were boosted by increased residential mortgage production and a continued push on the commercial banking front. We have our sights set on building even deeper ties in the community and serving the residents and businesses with unrivaled personal local banking and service.”

Net interest income increased $918,000, an increase of 13% during the second quarter of 2019. Net interest income was $7.8 million for the three months ending June 30, 2019 versus $6.9 million during the second quarter of 2018. For the six months ending June 30, 2019, net interest income was $15.9 million versus $13.9 million for June 30, 2018, an increase of $2.0 million or 15%.

Non-interest income increased to $2.6 million from $2.1 million during the three months ending June 30, 2019. For the six months ending June 30, 2019 non-interest income increased by $1.0 million to $4.9 million from $3.9 million at June 30, 2018, or an increase of 26%. Growth in mortgage banking production and deposit fees for medical-use cannabis related accounts contributed to the increase non-interest income.
 
Non-interest expenses were $7.5 million for the three months ending June 30, 2019 versus $6.4 million for the same period in 2018. The increase is due to several factors, including: higher expenses for accounting and professional fees related to SOX Section 404 compliance, severance payment to the former CFO and higher commissions paid to mortgage loan officers and real estate brokers as a result of increased production in 2019.

For the six months ending June 30, 2019, non-interest expenses were $14.3 million versus $12.5 million for the same period in 2018. Several factors contributed to higher expenses, including accounting and professional fees related to SOX Section 404 compliance, severance payment to the former CFO and higher commissions paid to mortgage loan officers and real estate brokers as a result of increased production in 2019. In addition, contributing to the increase for the first six months of 2019 was higher occupancy costs and additional staffing as a result of the opening of the Lothian Branch in the second quarter of 2018 and the addition of the Frederick mortgage production office in the second quarter of 2018.

Total assets deceased $112 million to $862.1 million at June 30, 2019 from $974.2 million to December 31, 2018. The decrease in assets was primarily in federal funds and interest bearing deposits in other banks. Deposits and borrowed funds decreased $94.1 million and $25.0 million, respectively from December 31, 2018 to June 30, 2019. The decrease in deposits was the result of short term, medical-use cannabis related funds that account holders maintained at Severn Bank prior to pursuing to investment opportunities. Management was 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 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 $862 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, 2018.
 

Severn Bancorp, Inc.
Consolidated Balance Sheet
(dollars in thousands, except per share data)
(Unaudited)

   
June 30, 2019
    
December 31, 2018
    
$ Change
    
% Change
  
Balance Sheet Data:
                        
                         
ASSETS
                        
Cash
  
$
3,644
    
$
2,880
    
$
764
      
27
%
Federal funds and interest bearing deposits in other banks
    
73,693
      
185,460
      
(111,767
)
    
-60
%
Certificates of deposit held as investment
    
7,540
      
8,780
      
(1,240
)
    
-14
%
Investment securities available for sale, at fair value
    
11,031
      
11,978
      
(947
)
    
-8
%
Investment securities held to maturity
    
33,562
      
38,912
      
(5,350
)
    
-14
%
Loans held for sale, at fair value
    
17,987
      
9,686
      
8,301
      
86
%
Loans receivable
    
679,573
      
682,349
      
(2,776
)
    
0
%
Allowance for loan losses
    
(8,093
)
    
(8,044
)
    
(49
)
    
1
%
Accrued interest receivable
    
2,605
      
2,848
      
(243
)
    
-9
%
Foreclosed real estate, net
    
1,430
      
1,537
      
(107
)
    
-7
%
Premises and equipment, net
    
22,452
      
22,745
      
(293
)
    
-1
%
Restricted stock investments
    
2,857
      
3,766
      
(909
)
    
-24
%
Bank owned life insurance
    
5,303
      
5,225
      
78
      
1
%
Deferred income taxes, net
    
2,167
      
2,363
      
(196
)
    
-8
%
Prepaid expenses and other assets
    
6,361
      
3,748
      
2,613
      
70
%
                                 
   
$
862,112
    
$
974,233
    
$
(112,121
)
    
-12
%
                                 
LIABILITIES AND STOCKHOLDERS EQUITY
                                
Deposits
  
$
685,416
    
$
779,506
    
$
(94,090
)
    
-12
%
Borrowings
    
48,500
      
73,500
      
(25,000
)
    
-34
%
Subordinated debentures
    
20,619
      
20,619
      
-
      
0
%
Accounts payable and accrued expenses
    
4,886
      
2,155
      
2,731
      
127
%
 
                                
Total Liabilities
  
$
759,421
    
$
875,780
      
(116,359
)
    
-13
%
                                 
Preferred stock
    
-
      
-
      
-
      
-
  
Common stock
    
128
      
128
      
-
      
0
%
Additional paid-in capital
    
65,696
      
65,538
      
158
      
0
%
Retained earnings
    
36,878
      
32,860
      
4,018
      
12
%
Accumulated comprehensive income (loss)
    
(11
)
    
(73
)
    
62
      
-85
%
                                 
Total Stockholders' Equity
    
102,691
      
98,453
      
4,238
      
4
%
                                 
   
$
862,112
    
$
974,233
    
$
(112,121
)
    
-12
%

Severn Bancorp, Inc.
Consolidated Income Statement
(dollars in thousands, except per share data)
(Unaudited)

Quarterly income statement results:
  
Three Months Ended June 30,
              
   
2019
    
2018
    
$ Change
    
% Change
  
                         
Interest Income
                        
                         
Interest on loans
  
$
9,226
    
$
8,516
    
$
710
      
8
%
Interest on securities
    
241
      
307
      
(66
)
    
-21
%
Other interest income
    
757
      
178
      
579
      
325
%
                                 
Total interest income
    
10,224
      
9,001
      
1,223
      
14
%
                                 
Interest Expense
                                
                                 
Interest on deposits
    
1,898
      
1,274
      
624
      
49
%
Interest on long term borrowings
    
481
      
800
      
(319
)
    
-40
%
                                 
Total interest expense
    
2,379
      
2,074
      
305
      
15
%
                                 
Net interest income
    
7,845
      
6,927
      
918
      
13
%
                                 
Provision for (reversal of) loan losses
    
-
      
-
      
-
      
-
  
                                 
Net interest income after provision for (reversal of) loan losses
    
7,845
      
6,927
      
918
      
13
%
                                 
Noninterest Income
                                
                                 
Mortgage-banking revenue
    
1,087
      
635
      
452
      
71
%
Real Estate Commissions
    
378
      
360
      
18
      
5
%
Real Estate Management Fees
    
162
      
187
      
(25
)
    
-13
%
Other noninterest income
    
988
      
886
      
102
      
12
%
                                 
Total noninterest income
    
2,615
      
2,068
      
547
      
26
%
                                 
Net interest income plus noninterest income after provision for (reversal of) loan losses
    
10,460
      
8,995
      
1,465
      
16
%
                                 
Noninterest Expense
                                
                                 
Compensation and related expenses
    
4,909
      
4,420
      
489
      
11
%
Net Occupancy & Depreciation
    
389
      
391
      
(2
)
    
-1
%
Net Costs of Foreclosed Real Estate
    
24
      
(18
)
    
42
      
-233
%
Other
    
2,191
      
1,560
      
631
      
40
%
                                 
Total noninterest expense
    
7,513
      
6,353
      
1,160
      
18
%
                                 
Income before income tax provision
    
2,947
      
2,642
      
305
      
12
%
                                 
Income tax provision
    
771
      
724
      
47
      
6
%
                                 
Net income
  
$
2,176
    
$
1,918
    
$
258
      
13
%
Net income available to common shareholders
  
$
2,176
    
$
1,918
    
$
258
      
13
%
 
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,
              
   
2019
    
2018
    
$ Change
    
% Change
  
                         
Interest Income
                        
                         
Interest on loans
  
$
18,393
    
$
16,887
    
$
1,506
      
9
%
Interest on securities
    
500
      
627
      
(127
)
    
-20
%
Other interest income
    
1,874
      
364
      
1,510
      
415
%
                                 
Total interest income
    
20,767
      
17,878
      
2,889
      
16
%
                                 
Interest Expense
                                
                                 
Interest on deposits
    
3,767
      
2,407
      
1,360
      
57
%
Interest on long term borrowings
    
1,070
      
1,560
      
(490
)
    
-31
%
                                 
Total interest expense
    
4,837
      
3,967
      
870
      
22
%
                                 
Net interest income
    
15,930
      
13,911
      
2,019
      
15
%
                                 
Provision for (reversal of) loan losses
    
-
      
-
      
-
      
-
  
                                 
Net interest income after provision for (reversal of) loan losses
    
15,930
      
13,911
      
2,019
      
15
%
                                 
Noninterest Income
                                
                                 
Mortgage-banking revenue
    
1,807
      
1,230
      
577
      
47
%
Real Estate Commissions
    
860
      
745
      
115
      
15
%
Real Estate Management Fees
    
326
      
370
      
(44
)
    
-12
%
Other noninterest income
    
1,882
      
1,516
      
366
      
24
%
                                 
Total noninterest income
    
4,875
      
3,861
      
1,014
      
26
%
                                 
Net interest income plus noninterest income after provision for (reversal of) loan losses
    
20,805
      
17,772
      
3,033
      
17
%
                                 
Noninterest Expense
                                
                                 
Compensation and related expenses
    
9,434
      
8,698
      
736
      
8
%
Net Occupancy & Depreciation
    
804
      
735
      
69
      
9
%
Net Costs of Foreclosed Real Estate
    
149
      
14
      
135
      
964
%
Other
    
3,876
      
3,053
      
823
      
27
%
                                 
Total noninterest expense
    
14,263
      
12,500
      
1,763
      
14
%
 
                                
Income before income tax provision
    
6,542
      
5,272
      
1,270
      
24
%
                                 
Income tax provision
    
1,757
      
1,469
      
288
      
20
%
                                 
Net income
  
$
4,785
    
$
3,803
    
$
982
      
26
%
Net income available to common shareholders
  
$
4,785
    
$
3,733
    
$
1,052
      
28
%
 
Severn Bancorp, Inc.
Selected Financial Data
(dollars in thousands, except per share data)
(Unaudited)

   
Six Months Ended June 30, 2019
    
Three Months Ended June 30, 2019
  
   
2019
    
2018
    
2019
    
2018
  
Per Share Data:
                      
.
  
Basic earnings per share
  
$
0.37
    
$
0.30
    
$
0.17
    
$
0.15
  
Diluted earnings per share
  
$
0.37
    
$
0.30
    
$
0.17
    
$
0.15
  
Average basic shares outstanding
    
12,774,191
      
12,463,132
      
12,775,123
      
12,684,711
  
Average diluted shares outstanding
    
12,859,980
      
12,559,069
      
12,862,291
      
12,781,037
  
                                 
Performance Ratios:
                                
Return on average assets
    
1.04
%
    
0.95
%
    
0.95
%
    
0.95
%
Return on average equity
    
9.50
%
    
9.04
%
    
8.56
%
    
8.12
%
Net interest margin
    
3.60
%
    
3.62
%
    
3.55
%
    
3.57
%
Efficiency ratio*
    
67.83
%
    
70.26
%
    
71.59
%
    
71.23
%
                                 
                                 
   
June 30, 2019
    
December 31, 2018
                  
Asset Quality Data:
                                
Non-accrual loans
  
$
4,887
    
$
4,656
                  
Foreclosed real estate
    
1,430
      
1,537
                  
Total non-performing assets
    
6,317
      
6,193
                  
Total non-accrual loans to total loans
    
0.7
%
    
0.7
%
                
Total non-accrual loans to total assets
    
0.6
%
    
0.5
%
                
Allowance for loan losses
    
8,093
      
8,044
                  
Allowance for loan losses to total loans
    
1.2
%
    
1.2
%
                
Allowance for loan losses to total non-accrual loans
    
165.6
%
    
172.8
%
                
Total non-performing assets to total assets
    
0.7
%
    
0.6
%
                
Non-accrual troubled debt restructurings (included above)
    
422
      
446
                  
Performing troubled debt restructurings
    
10,537
      
10,698
                  
Loan to deposit ratio
    
99.1
%
    
87.5
%
                

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