SEVERN BANCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 30, 2018

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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 Third Quarter Earnings

Annapolis, MD (October 29, 2018) – Severn Bancorp, Inc., (Nasdaq: SVBI) parent company of Severn Bank, today announced net income of $2.2 million for the three months ending September 30, 2018 versus $1.3 million for the same quarter in 2017. This is an increase of 72% year over year for the period. On a diluted per share basis, earnings were $0.17 versus $0.10 for the quarters ended September 30, 2018 and 2017, respectively. Net income for the nine months ended September 30, 2018 was $6.0 million, an 89% increase over net income of $3.2 million for the same nine month period in 2017.

“We are pleased to report continued growth in earnings,” stated Alan J. Hyatt, President and Chief Executive Officer.  Mr. Hyatt continued, “We have seen growth in our net interest income as well as our fee based income streams. We paid dividends the past three quarters and hope to continue that trend. We remain focused on continuous improvement in our operations, exploring new products and markets, and enhancing long term shareholder value.”

Net interest income increased 16% during the third quarter of 2018. Net interest income was $7.3 million during the third quarter of 2018 versus $6.3 million during the third quarter of 2017. Net interest margin improved to 3.65% for the three months ending September 30, 2018 from 3.38% for the same period in 2017. Net interest income increased to $21.3 million for the first nine months of 2018 from $17.9 million for the same time frame in 2017.

Non-interest income increased 68% during the quarter ended September 30, 2018. Non-interest income was $2.3 million for the three months ended September 30, 2018, up from $1.4 million as of September 30, 2017. For the nine months ended September 30, 2018, non-interest income was $6.4 million. This represents a 70% increase over the $3.8 million reported for the third quarter of 2017. Severn Bank experienced a significant increase in mortgage banking revenue of 122% in the third quarter of 2018 versus the third quarter of 2017. Year to date mortgage banking revenue saw an increase of 71% for the first nine months of 2018 versus 2017. The company also saw significant increases in fees on deposit accounts, which is included in other non-interest income.

Non-interest expenses were $7.0 million for the three months ended September 30, 2018 versus $5.5 million for the same period in 2017. For the nine months ended September 30, 2018, non-interest expenses were $19.7 million, which is an increase of 16% 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 $889 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 September 30,
              
   
2018
    
2017
    
$ Change
    
% Change
  
                         
Interest Income
                        
                         
Interest on loans
  
$
8,844
    
$
7,742
    
$
1,102
      
14.23
%
Interest on securities
    
293
      
330
      
(37
)
    
-11.21
%
Other interest income
    
423
      
167
      
256
      
153.29
%
                                 
Total interest income
    
9,560
      
8,239
      
1,321
      
16.03
%
                                 
Interest Expense
                                
                                 
Interest on deposits
    
1,531
      
1,011
      
520
      
51.43
%
Interest on long term borrowings
    
684
      
897
      
(213
)
    
-23.75
%
                                 
Total interest expense
    
2,215
      
1,908
      
307
      
16.09
%
 
                                
Net interest income
    
7,345
      
6,331
      
1,014
      
16.02
%
                                 
Provision for (reversal of) loan losses
    
(300
)
    
0
      
(300
)
    
100.00
%
                                 
Net interest income after provision for (reversal of) loan losses
    
7,645
      
6,331
      
1,314
      
20.76
%
                                 
Non-interest Income
                                
                                 
Mortgage-banking revenue
    
740
      
334
      
406
      
121.56
%
Real Estate Commissions
    
408
      
311
      
97
      
31.19
%
Real Estate Management Income
    
157
      
197
      
(40
)
    
-20.30
%
Other non-interest income
    
1,039
      
557
      
482
      
86.54
%
                                 
Net non-interest income
    
2,344
      
1,399
      
945
      
67.55
%
                                 
Net interest income plus non-interest income after provision for (reversal of) loan losses
    
9,989
      
7,730
      
2,259
      
29.22
%
                                 
Non-Interest Expenses
                                
                                 
Compensation and related expenses
    
4,661
      
3,288
      
1,373
      
41.76
%
Net Occupancy & Depreciation
    
416
      
354
      
62
      
17.51
%
Net Costs of Foreclosed Real Estate
    
7
      
126
      
(119
)
    
-94.44
%
Other non-interest expense
    
1,956
      
1,753
      
203
      
11.58
%
                                 
Total non-interest expenses
    
7,040
      
5,521
      
1,519
      
27.51
%
                                 
Income before income tax provision
    
2,949
      
2,209
      
740
      
33.50
%
 
                                
Income tax provision
    
784
      
950
      
(166
)
    
-17.47
%
                                 
Net income
  
$
2,165
    
$
1,259
    
$
906
      
71.96
%
Net income available to common shareholders
  
$
2,165
    
$
1,189
    
$
976
      
82.09
%

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

Year-to-Date income statement results:
  
Nine Months Ended September 30,
              
   
2018
    
2017
    
$ Change
    
% Change
  
                         
Interest Income
                        
                         
Interest on loans
  
$
25,731
    
$
22,267
    
$
3,464
      
15.56
%
Interest on securities
    
920
      
927
      
(7
)
    
-0.76
%
Other interest income
    
787
      
498
      
289
      
58.03
%
                                 
Total interest income
    
27,438
      
23,692
      
3,746
      
15.81
%
                                 
Interest Expense
                                
                                 
Interest on deposits
    
3,938
      
2,924
      
1,014
      
34.66
%
Interest on long term borrowings
    
2,244
      
2,844
      
(600
)
    
-21.10
%
                                 
Total interest expense
    
6,182
      
5,768
      
414
      
7.17
%
                                 
Net interest income
    
21,256
      
17,924
      
3,332
      
18.59
%
                                 
Provision for (reversal of) loan losses
    
(300
)
    
(650
)
    
350
      
-53.85
%
                                 
Net interest income after provision for (reversal of) loan losses
    
21,556
      
18,574
      
2,982
      
16.06
%
                                 
Non-interest Income
                                
                                 
Mortgage-banking revenue
    
1,970
      
1,150
      
820
      
71.30
%
Real Estate Commissions
    
1,154
      
959
      
195
      
20.33
%
Real Estate Management Income
    
527
      
513
      
14
      
2.73
%
Other non-interest income
    
2,754
      
1,140
      
1,614
      
141.58
%
                                 
Net non-interest income
    
6,405
      
3,762
      
2,643
      
70.26
%
                                 
Net interest income plus non-interest income after provision for (reversal of) loan losses
    
27,961
      
22,336
      
5,625
      
25.19
%
                                 
Non-Interest Expenses
                                
                                 
Compensation and related expenses
    
13,359
      
10,719
      
2,640
      
24.63
%
Net Occupancy & Depreciation
    
1,150
      
1,015
      
135
      
13.30
%
Net Costs of Foreclosed Real Estate
    
21
      
166
      
(145
)
    
-87.35
%
Other non-interest expense
    
5,210
      
5,120
      
90
      
1.76
%
   
                               
Total non-interest expenses
    
19,740
      
17,020
      
2,720
      
15.98
%
                                 
Income before income tax provision
    
8,221
      
5,316
      
2,905
      
54.66
%
                                 
Income tax provision
    
2,252
      
2,150
      
102
      
4.75
%
                                 
Net income
  
$
5,969
    
$
3,166
    
$
2,803
      
88.55
%
Net income available to common shareholders
  
$
5,899
    
$
2,956
    
$
2,943
      
99.56
%

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

 
  
September 30, 2018
    
December 31, 2017
    
$ Change
    
% Change
  
Balance Sheet Data:
                        
 
                        
ASSETS
                        
Cash
  
$
2,160
    
$
2,382
    
$
(222
)
    
-9.32
%
Federal funds and Interest bearing deposits in other banks
    
89,156
      
19,471
    
$
69,685
      
357.89
%
Certificates of deposit held as investment
    
8,780
      
8,780
    
$
-
      
0.00
%
Investment securities available for sale, at fair value
    
11,950
      
10,119
    
$
1,831
      
18.09
%
Investment securities held to maturity
    
43,108
      
54,303
    
$
(11,195
)
    
-20.62
%
Loans held for sale, at fair value
    
9,023
      
4,530
    
$
4,493
      
99.18
%
Loans receivable
    
689,712
      
668,151
    
$
21,561
      
3.23
%
Allowance for loan losses
    
(8,056
)
    
(8,055
)
  
$
(1
)
    
0.01
%
Accrued interest receivable
    
2,689
      
2,640
    
$
49
      
1.86
%
Foreclosed real estate, net
    
285
      
403
    
$
(118
)
    
-29.28
%
Premises and equipment, net
    
22,931
      
23,139
    
$
(208
)
    
-0.90
%
Restricted stock investments
    
3,866
      
4,489
    
$
(623
)
    
-13.88
%
Bank owned life insurance
    
5,186
      
5,064
    
$
122
      
2.41
%
Deferred income taxes, net
    
3,248
      
5,302
    
$
(2,054
)
    
-38.74
%
Prepaid expenses and other assets
    
5,287
      
4,069
    
$
1,218
      
29.93
%
 
                                
 
  
$
889,325
    
$
804,787
    
$
84,538
      
10.50
%
 
                                
LIABILITIES AND STOCKHOLDERS EQUITY
                                
Deposits
  
$
694,177
    
$
602,228
    
$
91,949
      
15.27
%
Borrowings
    
73,500
      
88,500
      
(15,000
)
    
-16.95
%
Subordinated debentures
    
20,619
      
20,619
      
-
      
0.00
%
Accounts payable and accrued expenses
    
5,149
      
2,340
      
2,809
      
120.04
%
 
                                
Total Liabilities
    
793,445
      
713,687
      
79,758
      
11.18
%
 
                                
Preferred stock
    
-
      
4
      
(4
)
    
-100.00
%
Common stock
    
127
      
122
      
5
      
4.10
%
Additional paid-in capital
    
65,216
      
65,137
      
79
      
0.12
%
Retained earnings
    
30,643
      
25,872
      
4,771
      
18.44
%
Accumulated comprehensive income (loss)
    
(106
)
    
(35
)
    
(71
)
    
202.86
%
 
                                
Total Stockholders' Equity
    
95,880
      
91,100
      
4,780
      
5.25
%
 
                                
 
  
$
889,325
    
$
804,787
    
$
84,538
      
10.50
%

Severn Bancorp, Inc.
Selected Financial Data
(dollars in thousands, except per share data)
(Unaudited)

 
  
Nine Months Ended September 30,
    
Three Months Ended September 30,
  
 
  
2018
    
2017
    
2018
    
2017
  
Per Share Data:
               .      
 
 Basic earnings per share
  
$
0.47
    
$
0.24
    
$
0.17
    
$
0.10
  
 Diluted earnings per share
  
$
0.47
    
$
0.24
    
$
0.17
    
$
0.10
  
 Average basic shares outstanding
    
12,541,032
      
12,140,689
      
12,695,136
      
12,172,586
  
 Average diluted shares outstanding
    
12,651,260
      
12,248,214
      
12,832,633
      
12,323,572
  
 
                                
Performance Ratios:
                                
 Return on average assets
    
0.98
%
    
0.53
%
    
1.03
%
    
0.63
%
 Return on average equity
    
9.03
%
    
4.80
%
    
8.98
%
    
5.69
%
 Net interest margin
    
3.63
%
    
3.25
%
    
3.65
%
    
3.38
%
 Efficiency ratio*
    
71.29
%
    
77.72
%
    
72.59
%
    
69.79
%

 
  
September 30, 2018
    
December 31, 2017
  
Asset Quality Data:
            
Non-accrual loans
  
$
5,730
    
$
5,710
  
Foreclosed real estate
    
285
      
403
  
Total non-performing assets
    
6,016
      
6,113
  
Total non-accrual loans to total loans
    
0.8
%
    
0.9
%
Total non-accrual loans to total assets
    
0.6
%
    
0.7
%
Allowance for loan losses
    
8,056
      
8,055
  
Allowance for loan losses to total loans
    
1.2
%
    
1.2
%
Allowance for loan losses to total non-accrual loans
    
140.6
%
    
141.1
%
Total non-performing assets to total assets
    
0.7
%
    
0.8
%
Non-accrual troubled debt restructurings (included above)
    
997
      
819
  
Performing troubled debt restructurings
    
11,271
      
13,713
  
Loan to deposit ratio
    
99.4
%
    
110.9
%

*
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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