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-19
Protocols 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 Statement
Net 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 Sheet
Total 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 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, 2020.
Severn Bancorp, Inc. | ||||||||||
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 in other banks | 250,847 | 151,790 | 99,057 | 65% | ||||||
Certificates of deposit held as investment | 3,330 | 3,580 | (250) | -7% | ||||||
Investment securities available for sale, at fair value | 132,698 | 65,098 | 67,600 | 104% | ||||||
Investment securities held to maturity | 14,516 | 15,943 | (1,427) | -9% | ||||||
Loans held for sale, at fair value | 50,124 | 36,299 | 13,825 | 38% | ||||||
Loans receivable | 621,512 | 642,882 | (21,370) | -3% | ||||||
Allowance for loan losses | (8,135) | (8,670) | 535 | -6% | ||||||
Accrued interest receivable | 2,439 | 2,576 | (137) | -5% | ||||||
Foreclosed real estate, net | 1,010 | 1,010 | - | 0% | ||||||
Premises and equipment, net | 20,653 | 20,940 | (287) | -1% | ||||||
Restricted stock investments | 970 | 1,236 | (266) | -22% | ||||||
Bank owned life insurance | 5,550 | 5,517 | 33 | 1% | ||||||
Deferred income taxes, net | 882 | 1,145 | (263) | -23% | ||||||
Prepaid expenses and other assets | 10,325 | 8,388 | 1,937 | 23% | ||||||
Total Assets | $ | 1,112,969 | $ | 952,553 | $ | 160,416 | 17% | |||
LIABILITIES AND STOCKHOLDERS 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 accrued expenses | 7,181 | 5,831 | 1,350 | 23% | ||||||
Total Liabilities | 1,001,896 | 842,906 | 158,990 | 19% | ||||||
Common stock | 129 | 128 | 1 | 1% | ||||||
Additional paid-in capital | 66,359 | 66,251 | 108 | 0% | ||||||
Retained earnings | 46,485 | 43,216 | 3,269 | 8% | ||||||
Accumulated comprehensive income (loss) | (1,900) | 52 | (1,952) | -3,750% | ||||||
Total Stockholders' Equity | 111,073 | 109,647 | 1,426 | 1% | ||||||
Total Liabilities and Stockholders' Equity | $ | 1,112,969 | $ | 952,553 | $ | 160,416 | 17% | |||
Severn Bancorp, Inc. | ||||||||||
Quarterly income statement results: | Three Months Ended March 31, | |||||||||
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 borrowings | 167 | 364 | (197) | -54% | ||||||
Total interest expense | 951 | 2,161 | (1,210) | -56% | ||||||
Net interest income | 7,658 | 6,755 | 903 | 13% | ||||||
Provision for (reversal of) loan losses | (750) | 750 | (1,500) | -200% | ||||||
Net interest income after provision for (reversal of) loan losses | 8,408 | 6,005 | 2,403 | 40% | ||||||
Noninterest Income | ||||||||||
Mortgage-banking revenue | 4,396 | 1,634 | 2,762 | 169% | ||||||
Real Estate Commissions | 161 | 310 | (149) | -48% | ||||||
Real Estate Management Income | - | 165 | (165) | -100% | ||||||
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 provision for (reversal of) loan losses | 14,167 | 9,030 | 5,137 | 57% | ||||||
Noninterest Expense | ||||||||||
Compensation and related expenses | 6,222 | 5,461 | 761 | 14% | ||||||
Net Occupancy & Depreciation | 471 | 518 | (47) | -9% | ||||||
Net Costs of Foreclosed Real Estate | 2 | 74 | (72) | -97% | ||||||
Other | 2,111 | 2,199 | (88) | -4% | ||||||
Total noninterest expense | 8,806 | 8,252 | 554 | 7% | ||||||
Income before income tax provision | 5,361 | 778 | 4,583 | 589% | ||||||
Income tax provision | 1,450 | 213 | 1,237 | 581% | ||||||
Net income | $ | 3,911 | $ | 565 | $ | 3,346 | 592% | |||
Severn Bancorp, Inc. | |||||||
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 loans | 0.21% | 0.68% | |||||
Total non-accrual loans to total assets | 0.12% | 0.46% | |||||
Allowance for loan losses | $ | 8,135 | $ | 8,670 | |||
Allowance for loan losses to total loans | 1.31% | 1.35% | |||||
Allowance for loan losses to loans, net of PPP loans | 1.40% | 1.42% | |||||
Allowance for loan losses to total | |||||||
non-accrual loans | 634.1% | 197.9% | |||||
Total non-performing assets to total assets | 0.21% | 0.57% | |||||
Non-accrual troubled debt restructurings (included above) | $ | 159 | $ | 163 | |||
Performing troubled debt restructurings | $ | 6,411 | $ | 6,589 | |||
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.