Severn Bancorp, Inc. Announces Quarterly Loss Resulting from Activities to Clean Up Balance Sheet

  Severn Bancorp, Inc. Announces Quarterly Loss Resulting from Activities to
                            Clean Up Balance Sheet

PR Newswire

ANNAPOLIS, Md., Oct. 21, 2013

ANNAPOLIS, Md., Oct. 21, 2013 /PRNewswire/ --Severn Bancorp, Inc., ("the
Company") (Nasdaq: SVBI) parent company of Severn Savings Bank, FSB (" the
Bank"), today announced a net loss of $20,548,000 or $(2.08) per share for the
third quarter of 2013 compared to net income of $674,000 or $.03 per share for
the third quarter of 2012 and compared to net income of $232,000or $(.01) per
share, for the quarter ended June 30, 2013. Earnings per share is calculated
using net income available for common shareholders, which is net income less
preferred stock dividends.

The approximately $20 million loss can be attributed to decisions that the
Company's senior management has made to clean up the Bank's balance sheet,
return to profitability and to position the Company for future growth. A
portion of the loss, approximately $10 million, is a pre-tax loss resulting
from the sale of non-performing and underperforming loans. The loans sold
included approximately $11.7 million of non-accruing loans, $6.6 million of
performing troubled debt restructuring ("TDRs"), and $14.9 million of
classified and other loans. As a result of the sale the Company has
significantly improved its asset quality ratios. The ratio of the Company's
total non-accrual loans to net loans improved to 3.8% at September 30, 2013
compared to 6.0% at June 30, 2013. The Company's ratio of non-performing
assets to total assets improved to 4.5% compared to 6.1% at June 30, 2013.

The Company also announced that, based on its review of all available
evidence, and after consideration of the losses recorded on the loan sale,
that it has taken a charge to earnings in the quarter ended September 30, 2013
of approximately $13 million related to its deferred tax asset valuation
allowance. The deferred tax asset valuation allowance may, in accordance with
the requirements of generally accepted accounting principles, be reversed in
future periods, depending upon the Company's financial position and results of
operations in the future, among other factors, and, in such event, may be
available to increase future earnings. The Company will continue to have the
benefit of the net operating loss carryforward relating to the deferred tax
asset, and will have the ability to utilize the carryforward against future
federal and state income taxes. Also included in the reported loss are
ongoing costs of approximately $1.8 million associated with the management of
non-performing loans.

The Bank's regulatory capital will continue to exceed all applicable
requirements at September 30, 2013 after giving effect to the items described
herein.

"While we are not at all happy about the results for this quarter, we are very
comfortable with our decision to take action to clean up our books," stated
Alan J. Hyatt, president and chief executive officer. Mr. Hyatt continued,
"Improving asset quality and strengthening our balance sheet has been a top
priority. Management and our board have made the bold choice to take necessary
steps to formulate a stronger company. The process of clean-up may continue
into the fourth quarter to a lesser degree, but we will be ready to start 2014
as an energized and invigorated company dedicated to providing excellent
banking products and services to the residents of Anne Arundel County." 

About Severn Savings 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 $815 million and
four branches located in Annapolis, Edgewater 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, 2012

.

Severn Bancorp, Inc.
Selected Financial Data
(dollars in thousands, except per share data)
(Unaudited)
                    For the Three Months Ended
                    September   June 30,    March 31,   December    September
                    30,                                 31,         30,
                    2013        2013        2013        2012        2012
Summary Operating
Results:
 Interest income    $      $      $      $      $    
                     8,321     8,574     8,913     9,412      9,104
 Interest expense   2,301       2,364       2,315       2,587       3,027
   Net interest     6,020       6,210       6,598       6,825       6,077
   income
 Provision for loan 12,200      300         320         300         -
 losses
   Net interest
   income (loss)
   after provision
         for loan   (6,180)     5,910       6,278       6,525       6,077
         losses
 Non-interest       1,312       1,881       1,572       1,478       1,039
 income
 Non-interest       7,504       7,470       6,785       5,815       5,961
 expense
 Income (loss)
 before income tax  (12,372)    321         1,065       2,188       1,155
 provision
 Income tax         8,176       89          444         914         481
 provision
   Net income       $      $      $      $      $    
   (loss)           (20,548)       232      621    1,274       
                                                                    674
Per Share Data:
 Basic earnings     $      $      $      $      $    
 (loss) per share     (2.08)   (0.01)    0.03     0.09     
                                                                    0.03
 Diluted earnings   $      $      $      $      $    
 (loss) per share     (2.08)   (0.01)    0.03     0.09     
                                                                    0.03
 Common stock       $      $      $      $      $    
 dividends per                                  
 share              -           -           -           -             -
 Average basic      10,066,679  10,066,679  10,066,679  10,066,679  10,066,679
 shares outstanding
 Average diluted    10,113,402  10,108,470  10,100,454  10,066,679  10,066,679
 shares outstanding
Performance Ratios:
 Return on average  -2.45%      0.03%       0.07%       0.14%       0.08%
 assets
 Return on average  -19.07%     0.21%       0.57%       1.19%       0.63%
 equity
 Net interest       3.21%       3.29%       3.47%       3.33%       3.09%
 margin
 Efficiency ratio*  83.70%      76.42%      72.01%      63.70%      71.19%
         The efficiency ratio is general and administrative
   *     expenses as a percentage of net interest income plus
         non-interest income
                    As of
                    September   June 30,    March 31,   December    September
                    30,                                 31,         30,
                    2013        2013        2013        2012        2012
Balance Sheet Data:
 Total assets       $      $      $      $      $    
                    815,198     839,053     849,598     852,118      862,628
 Total loans        608,769     642,801     653,595     669,187     688,405
 receivable
 Allowance for loan (12,270)    (12,765)    (15,465)    (17,478)    (23,180)
 losses
   Net loans        596,499     630,036     638,130     651,709     665,225
 Deposits           580,915     583,271     593,900     599,394     609,772
 Borrowings         115,000     115,000     115,000     115,000     115,000
 Stockholders'      88,496      109,313     109,349     108,996     108,004
 equity
 Bank's Tier 1 core
 capital to total   13.0%       14.9%       14.8%       14.6%       14.1%
 assets
 Book value per     $      $      $      $      $    
 share                6.14     8.21     8.22     8.18     
                                                                    8.08
Asset Quality Data:
 Non-accrual loans  $      $      $      $      $    
                     22,771     37,537     35,064     37,495      42,596
 Foreclosed real    13,877      13,297      14,895      11,441      13,801
 estate
   Total
   non-performing   36,648      50,834      49,959      48,936      56,397
   assets
 Total non-accrual  3.8%        6.0%        5.5%        5.8%        6.4%
 loans to net loans
 Total non-accrual
 loans to total     2.8%        4.5%        4.1%        4.4%        4.9%
 assets
 Allowance for loan 12,270      12,765      15,465      17,478      23,180
 losses
 Allowance for loan
 losses to total    2.0%        2.0%        2.4%        2.6%        3.4%
 loans
 Allowance for loan
 losses to total
   non-accrual      53.9%       34.0%       44.1%       46.6%       54.4%
   loans
 Total
 non-performing     4.5%        6.1%        5.9%        5.7%        6.5%
 assets to total
 assets
 Non-accrual
 troubled debt      4,750       5,908       6,774       5,635       12,574
 restructurings
 (included above)
 Performing
 troubled debt      39,548      45,851      46,607      56,448      51,230
 restructurings



SOURCE Severn Bancorp, Inc.

Website: http://www.severnbank.com
Contact: Thomas G. Bevivino, Chief Operating Officer & Executive Vice
President, Email: tbevivino@severnbank.com, Phone: 410.260.2000
 
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