Both fourth quarter and year-end earnings for 2017 were adversely impacted with the signing into law of the Tax Cuts and Jobs Act (the “Act”) which was enacted on December 22, 2017 and went into effect January 1, 2018.  The Company’s net deferred tax asset was based on the previously enacted federal tax rate of 34%. As a result of the reduction in the maximum corporate income tax rate to 21% under the Act, the Company revalued its net deferred tax asset at December 31, 2017. This resulted in a reduction in the value of the net deferred tax asset of approximately $1.9 million, which is recorded as additional income tax expense in the Company’s statement of operations for the fourth quarter of 2017. Discounting the impact of the one-time deferred tax asset adjustment the Company would have reported net income of $1.5 million or $.12 per diluted share for the fourth quarter of 2017 and net income of $4.7 million or $.38 per diluted share for the year ended December 31, 2017.

 

During 2017 the Company experienced loan growth of $57.9 million which was an increase of 9.48%, and achieved $30.3 million worth of deposit growth. Asset quality continues to improve with non-performing assets decreasing from 1.4% of total assets down to 0.8% year over year. The cost of funds decreased significantly with interest on borrowings decreasing 27.6% quarter over quarter and down 20.65% year over year. Higher cost borrowings also decreased by $15.0 million. The Company saw an improvement in its efficiency ratio to 69.42% from 80.97% quarter over quarter and 75.45% compared to 81.64% year over year.

 

 “Our 2017 story is a good one,” stated Alan J. Hyatt, President and Chief Executive Officer. Mr. Hyatt continued, “We made strong and steady progress each quarter last year. All of the trends are positive and continue to head in the right direction. Loan growth is strong and deposit growth is good. We are building strong community banking relationships and remain committed to serving Anne Arundel County residents and businesses.  More than ever we are dedicated to improving shareholder value and making Severn the premier community bank in the region.”

 

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 approximately $804 million and five branches located in Annapolis, Edgewater and Glen Burnie, and Severna Park, Maryland. The bank specializes in exceptional customer service and holds itself and its employees to a high standard of community contribution. Severn Bank is a trade name used by Severn Savings Bank, FSB. 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, 2016.

 

 

 

Severn Bancorp, Inc.

(dollars in thousands, except per share data)

(Unaudited)

 

		December 31, 2017				December 31, 2016				$ Change				% Change
Balance Sheet Data:
ASSETS
Cash		$	2,382			$	39,396			$	(37,014	)			-93.95	%
Federal funds and Interest bearing deposits in other banks			28,251				27,718				533				1.92	%
Investment securities available for sale			10,119				-				10,119				100.00	%
Investment securities held to maturity			54,303				62,757				(8,454	)			-13.47	%
Loans held for sale			4,530				10,307				(5,777	)			-56.05	%
Loans receivable			668,151				610,278				57,873				9.48	%
Loan valuation allowance			(8,055	)			(8,969	)			914				-10.19	%
Accrued interest receivable			2,640				2,249				391				17.39	%
Foreclosed real estate, net			403				973				(570	)			-58.58	%
Premises and equipment, net			23,139				24,030				(891	)			-3.71	%
Restricted stock investments			4,489				5,103				(614	)			-12.03	%
Bank owned life insurance			5,064				-				5,064				100.00	%
Deferred income taxes			5,302				10,081				(4,779	)			-47.41	%
Prepaid expenses and other assets			4,070				3,562				508				14.26	%
		$	804,788			$	787,485			$	17,303				2.20	%
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits		$	602,228			$	571,946			$	30,282				5.29	%
Borrowings			88,500				103,500				(15,000	)			-14.49	%
Subordinated debentures			20,619				20,619				-				0.00	%
Accounts payable and accrued expenses			2,341				3,490				(1,149	)			-32.92	%
Total Liabilities			713,688				699,555				14,133				2.02	%
Preferred stock			4				4				-				0.00	%
Common stock			122				121				1				0.83	%
Additional paid-in capital			65,137				64,471				666				1.03	%
Retained earnings			25,873				23,334				2,539				10.88	%
Accumulated comprehensive income (loss)			(36	)			-				(36	)			-100.00	%
Total Stockholders' Equity			91,100				87,930				3,170				3.61	%
		$	804,788			$	787,485			$	17,303				2.20	%

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