8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event report) May 13, 2019

Severn Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	0-49731	52-1726127
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

200 Westgate Circle, Suite 200, Annapolis, Maryland	21401
(Address of principal executive offices)	(Zip Code)

410-260-2000

(Registrant’s telephone number, including area code)

(Former name or former address, if change since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule  405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule  12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section  13(a)  of the Exchange Act.  ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock Par Value $1.00	SVBI	The NASDAQ Stock Market, LLC

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On May 13, 2019 Severn Bancorp, Inc. issued a press release announcing financial results for the quarter ended March 31, 2019.  A copy of this press release is being furnished as Exhibit 99.1 to this report.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits:

99.1 Press Release of Severn Bancorp, Inc., dated May 13, 2019 announcing financial results for the quarter ended March 31, 2019.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Severn Bancorp, Inc.
Dated: May 14, 2019	By:	/s/ Alan J. Hyatt
		Alan J. Hyatt, President

EX-99.1

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 a 38% Increase in First Quarter Earnings

Annapolis, MD (May 13, 2019) –Severn Bancorp, Inc., (Nasdaq: SVBI) parent company of Severn Bank, today announced net income of $2.6 million for the three months ending March 31, 2019 versus $1.9 million for the same quarter in 2018, which is a 38% increase in earnings. On a diluted per share basis, earnings were $0.20 versus $0.15 for the quarters ended March 31, 2019 and 2018, respectively.

“Earnings look great for this quarter again,” stated Alan J. Hyatt, President and Chief Executive Officer.  Mr. Hyatt continued, “We are pleased with the upward trend in earnings. We have launched an exciting new retail deposit product offering, Kasasa rewards checking and are having success building on relationships with local businesses and business owners. Our community continues to see us as a partner in their success and calls on us for all of their banking needs.”

Net interest income increased 16% during the first quarter of 2019. Net interest income was $8.1 million during the first quarter of 2019 versus $7.0 million during the first quarter of 2018.

Noninterest income increased 26% during the quarter ended March 31, 2019. Noninterest income was $2.3 million for the three months ended March 31, 2019, up from $1.8 million as of March 31, 2018. Growth in mortgage banking revenue, real estate commissions, and deposit fees contributed to the increase.

Noninterest expenses were $6.8 million for the three months ended March 31, 2019 versus $6.1 million for the same period in 2018. The increase is due to several factors, including: higher occupancy costs as a result of the addition of a Wayson’s Corner Branch in the second quarter of 2018; additional staffing due to the added Wayson’s Corner Branch and the addition of a Frederick mortgage production office in the second quarter of 2018; along with higher commissions paid to mortgage loan officers and real estate brokers as a result of increased production in 2019.

Asset quality remains strong with total non-accrual loans to total loans at 0.6% compared to 0.7% as of December 31, 2018. Total non-performing assets to total assets held steady at 0.6% as of March 31, 2019 compared to 0.6% as of December 31, 2018.

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 $885 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 Income Statement

(dollars in thousands, except per share data)

(Unaudited)

Quarter-to-Date income statement results:	Three Months Ended March 31, 2019
	2019		2018		$ Change			% Change
Interest Income
Interest on loans	$	9,167	$	8,371	$	796			10	%
Interest on securities		259		320		(61	)		-19	%
Other interest income		1,117		186		931			501	%
Total interest income		10,543		8,877		1,666			19	%
Interest Expense
Interest on deposits		1,869		1,133		736			65	%
Interest on long term borrowings		589		760		(171	)		-23	%
Total interest expense		2,458		1,893		565			30	%
Net interest income		8,085		6,984		1,101			16	%
Provision for (reversal of) loan losses		0		0		-			0	%
Net interest income after provision for (reversal of) loan losses		8,085		6,984		1,101			16	%
Noninterest Income
Mortgage-banking revenue		720		595		125			21	%
Real Estate Commissions		482		385		97			25	%
Real Estate Management Income		164		183		(19	)		-11	%
Other noninterest income		894		630		264			42	%
Total noninterest income		2,260		1,793		467			26	%
Net interest income plus noninterest income after provision for (reversal of) loan losses		10,345		8,777		1,568			18	%
Noninterest Expense
Compensation and related expenses		4,525		4,278		247			6	%
Net Occupancy & Depreciation		415		344		71			21	%
Net Costs of Foreclosed Real Estate		125		32		93			291	%
Other		1,685		1,493		192			13	%
Total noninterest expense		6,750		6,147		603			10	%
Income before income tax provision		3,595		2,630		965			37	%
Income tax provision		986		745		241			32	%
Net income	$	2,609	$	1,885	$	724			38	%
Net income available to common shareholders	$	2,609	$	1,815	$	794			44	%

Severn Bancorp, Inc.

Consolidated Balance Sheet

(dollars in thousands, except per share data)

(Unaudited)

	March 31, 2019			December 31, 2018			$ Change			% Change
Balance Sheet Data:
ASSETS
Cash	$	3,276		$	2,880		$	396			14	%
Federal funds and interest bearing deposits in other banks		109,825			185,460			(75,635	)		-41	%
Certificates of deposit held as investment		8,780			8,780			0			0	%
Investment securities available for sale, at fair value		10,992			11,978			(986	)		-8	%
Investment securities held to maturity		35,793			38,912			(3,119	)		-8	%
Loans held for sale, at fair value		6,660			9,686			(3,026	)		-31	%
Loans receivable		674,220			682,349			(8,129	)		-1	%
Allowance for loan losses		(8,085	)		(8,044	)		(41	)		1	%
Accrued interest receivable		2,632			2,848			(216	)		-8	%
Foreclosed real estate, net		1,601			1,537			64			4	%
Premises and equipment, net		22,483			22,745			(262	)		-1	%
Restricted stock investments		2,856			3,766			(910	)		-24	%
Bank owned life insurance		5,264			5,225			39			1	%
Deferred income taxes, net		2,159			2,363			(204	)		-9	%
Prepaid expenses and other assets		6,587			3,748			2,839			76	%
	$	885,043		$	974,233		$	(89,190	)		-9	%
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits	$	709,873		$	779,506		$	(69,633	)		-9	%
Borrowings		48,500			73,500			(25,000	)		-34	%
Subordinated debentures		20,619			20,619			-			0	%
Accounts payable and accrued expenses		5,223			2,155			3,068			142	%
Total Liabilities		784,215			875,780			(91,565	)		-10	%
Common stock		128			128			-			0	%
Additional paid-in capital		65,662			65,538			124			0	%
Retained earnings		35,087			32,860			2,227			7	%
Accumulated comprehensive income (loss)		(49	)		(73	)		24			-33	%
Total Stockholders' Equity		100,828			98,453			2,375			2	%
	$	885,043		$	974,233		$	(89,190	)		-9	%

Severn Bancorp, Inc.

Selected Financial Data

(dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended March 31, 2019
	2019			2018
Per Share Data:
Basic earnings per share	$	0.20		$	0.15
Diluted earnings per share	$	0.20		$	0.15
Average basic shares outstanding		12,773,259			12,241,554
Average diluted shares outstanding		12,857,643			12,334,637
Tangible Book Value Per Share	$	7.81		$	7.46
Performance Ratios:
Return on average assets		1.14	%		0.94	%
Return on average equity		10.47	%		8.11	%
Net interest margin		3.65	%		3.66	%
Efficiency ratio*		64.04	%		69.67	%

	March 31, 2019			December 31, 2018
Asset Quality Data:
Non-accrual loans	$	3,795		$	4,656
Foreclosed real estate		1,601			1,537
Total non-performing assets		5,396			6,193
Total non-accrual loans to total loans		0.6	%		0.7	%
Total non-accrual loans to total assets		0.4	%		0.5	%
Allowance for loan losses		8,085			8,044
Allowance for loan losses to total loans		1.2	%		1.2	%
Allowance for loan losses to total non-accrual loans		213.0	%		172.8	%
Total non-performing assets to total assets		0.6	%		0.6	%
Non-accrual troubled debt restructurings (included above)		443			446
Performing troubled debt restructurings		10,618			10,698
Loan to deposit ratio		95.0	%		87.5	%

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