Severn Bancorp, Inc. Announces Annual Earnings – Strong Noninterest Income Growth

Annapolis, MD, January 27, 2020 (PRNewswire) – Severn Bancorp, Inc., (NASDAQ: SVBI), the parent company of Severn Bank, reported net income available to common shareholders for the 2019 year of $8.4 million vs. $8.5 million for the 2018 year. Net Income available to common shareholders for fourth quarter was $1.2 million vs. $2.6 million for the fourth quarter of 2018. Total assets were up slightly in the fourth quarter 2019 from the prior quarter to $827 million, but down $147 million from the prior year-end of $974 million at December 31, 2018. Earnings per share on a fully diluted basis were $0.09 for the fourth quarter and $0.65 per share for the year ended December 31, 2019 vs. $0.20 and $0.67 per share, respectively, for the same periods in 2018.

“At first glance some of the year-end financial results may seem concerning,” stated Alan J. Hyatt, President and Chief Executive Officer. Mr. Hyatt continued, “The Bank experienced significant payoffs in outstanding loans. We also saw a large reduction in short term investor deposits that affected earnings. However, the balance sheet reflects significant strength and will allow the Bank to grow assets. Additional top-notch team members have been added to the lending team to help us achieve this loan growth. ”

Net interest income in the fourth quarter 2019 decreased $873 thousand to $6.9 million from the fourth quarter of 2018 with a $1.5 million increase or 5% to $30.5 million for the 2019 year vs. $29.1 million earned for the 2018 fiscal year. Less fourth quarter interest income was generated from lower volumes of earning assets, particularly from significantly lower medical-use cannabis related deposits that earned overnight interest income during the first half of 2019. Also, loan interest income decreased from lower loan volumes, which was slightly offset by a reduction in interest expense from less reliance on borrowings.

Noninterest income in the fourth quarter 2019 increased $202 thousand to $2.6 million from the fourth quarter of 2018 with a $1.8 million increase or 22% to $10.3 million for the 2019 year vs. $8.4 million in 2018. Growth in mortgage banking production and deposit fees from medical-use cannabis related accounts contributed significantly to the increases in noninterest income.

Noninterest expenses in the fourth quarter 2019 increased $877 thousand to $7.7 million from the fourth quarter of 2018 with a $3.4 million increase or 13% to $29.7 million for the 2019 year vs. $26.2 million in 2018. Non-interest expenses increased for both periods due to several factors, including: accounting and professional fees, severance payments 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 was higher occupancy costs and additional staffing as a result of opening a new branch in Crofton in the third quarter of 2019.

Total assets decreased $147 million to $827 million at December 31, 2019 from $974 million at December 31, 2018. The decrease in assets was primarily in federal funds and interest bearing deposits in other banks as well as loans due to unexpected payoffs. Deposits and borrowed funds decreased $118 million and $39 million, respectively from December 31, 2018 to December 31, 2019. The decrease in deposits was primarily the result of short term, medical-use cannabis related funds that account holders maintained at Severn Bank prior to pursuing other longer term 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.

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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 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 is on the Web at www.severnbank.com.
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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.