Sevier County Bank Main Branch Location

SCB | Third Quarter 2020 Report

For Immediate Release

Contact:

John M. Presley
Executive Chairman
(865) 774-4772
JPresley@BankSCB.com

or

Bobby R. Stoffle
President and CEO
(865) 774-4813
BStoffle@BankSCB.com


Sevier County Bancshares, Inc.

Reports Consolidated Net Income of $957,006 and Core Earnings of $968,045 for the Third Quarter of 2020

November 5, 2020, Sevierville, Tennessee — Sevier County Bancshares, Inc. (the “Company”) (Pink Sheets: SVRH) parent company to Sevier County Bank (the “Bank”) reported today its financial results for the third quarter of 2020.  For the three months ended September 30, 2020, the Company had a consolidated net income of $957,006, or $0.23 per share (wt. avg. outstanding (“WAO”), compared to a consolidated net income of $309,085, or $0.21 per share for the same period in 2019, representing a 210% increase in net income available to common shareholders in the third quarter of 2020 compared to the third quarter of 2019. Consolidated core earnings (after-tax net income, excluding legacy OREO expenses, loan loss provision (net of actual charge-offs) and other non-recurring expenses, including vesting of certain executive benefits) for the three months ended September 30, 2020 were $968,045, or $0.23 per WAO share.

Earnings

Consolidated income for the nine months ended September 30, 2020 was $1,020,887, or $0.25 per WAO share compared to consolidated net loss of $2,178,008, or ($1.48) per share for the same period of 2019; additionally, core earnings for the nine months ended September 30, 2020 are $2,176,571, or $0.53 per WAO share compared to $1,945,118, or $1.32 per share of core earnings for the same period of 2019.

Factors contributing to the Company’s consolidated net income for the nine months ended September 30, 2020 include:

  • Holding and other costs net of income related to legacy OREO for the nine months ended September 30, 2020 resulted in a loss of $169,688, compared to a $4,052,313 loss for the same period of 2019, primarily from the year over year cost savings from the $3.2 million decrease in foreclosed asset holdings and sales of foreclosed property resulting in a $111,410 disposition gain for the nine months ended September 30, 2020, compared to $3,464,991 in losses on OREO disposals for the same period of 2019.
  • Total Bank income (excluding legacy OREO Charges), which includes interest income and fee income, of $10,330,600, compared to $10,104,737 for the same period last year, a $225,863 or 2% increase.
  • Total Bank operating expenses (excluding loan provision, non-recurring executive benefits and OREO-related items) for the nine months ended September 30, 2020 of $7,878,592, compared to $8,165,371 for the same period of 2019, a $286,779 or 4% decrease.
  • Bad debt provision of $410,000 for the nine months ended September 30, 2020, compared to $0 for the same period of 2019.
  • Deferred tax benefit recognition of $1,119,887 for the nine months ended September 30, 2020, compared to $0 for the same period of 2019.

Balance Sheet

Total Assets at the Bank as of September 30, 2020, were $394,983,746 compared to $325,968,682 at September 30, 2019, an increase of $69 million or 21%.

Factors contributing to the growth of the Bank and Company and other items of interest include:

  • Total Deposits increased to $358,664,942 at September 30, 2020, compared to $293,350,823 at September 30, 2019, a $65.3 million or 22% increase.
  • Total Company Equity Capital increased to $28,597,789 at September 30, 2020, compared to $27,914,780 at September 30, 2019, a $683,009 or 2% increase.
  • Total Bank Equity Capital increased to $32,644,459 at September 30, 2020, compared to $30,689,904 at September 30, 2019, a $1.9 million or 6% increase.
  • Total Loans increased to $248,473,815 at September 30, 2020, from $222,304,203 at September 30, 2019, a $26.2 million or 12% increase. $7.6 million of the increase consisted of SBA PPP funded loans.
  • Investment securities increased to $68,416,281 at September 30, 2020, compared to $32,131,945 at September 30, 2019, a $36.3 million or 113% increase.
  • Cash and due from Banks increased to $57,166,968 at September 30, 2020, compared to $55,651,092 at September 30, 2019, a $1.5 million or 3% increase.

Asset Quality

Total OREO balance at September 30, 2020 dramatically decreased to $256,800 compared to $3,424,525 at September 30, 2019, primarily due to dispositions. Total past due loans at September 30, 2020 were $2,319,733, or 1% of total loans, primarily due to one lending relationship ($2.2 million).
 
The following table reflects details related to asset quality and the allowance for loan losses (in thousands):
 


Equity

The following tables illustrate graphically the Equity Capital narrative in the Balance Sheet discussion above.

As of September 30, 2020, the Bank is well-capitalized for all regulatory capital ratios.

The decrease in the capital ratios for the nine months ended September 30, 2020, resulted from steep growth in average total assets, combined with recognition of various non-recurring costs (discussed above) and the income effect from the precipitous drop in interest rates combined with the Bank’s high liquidity position.

Other Significant Events

1. During and especially near the end of March 2020, the local economy was increasingly negatively impacted by the global COVID-19 pandemic, as all non-essential businesses were closed and people encouraged to quarantine at home to slow the spread of the disease. Many businesses furloughed employees, at least temporarily offsetting years of positive employment trends and both fixed income and equity markets incurred volatility. The government issued safeguards to lessen any permanent impact to the economy, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. While businesses began to reopen at the beginning of June, continuous Bank evaluation and monitoring of the impact of the pandemic is ongoing. Steps taken by Bank leadership in regard to COVID-19 include:
 
  • Increased frequency of applicable channels of communication focused on COVID-19 issues, including Tennessee Bankers CEO forum, Executive Team, cross-discipline Management Leadership Team, Employee Open Forums, peer bank information sharing and interdisciplinary informational on-line forums, especially as related to human resource, asset-liability management and Small Business Association (SBA) loan programs.
  • Implementation of customer and employee safety measures, including remote employment where feasible and internal distancing of mission critical employees in conjunction with our Business Continuity Plan.
  • Various sanitization and distancing measures, including hand sanitizer stations at key areas throughout facilities, separation of operational areas and following CDC protocols.
  • Implementation of employee face mask requirements in the presence of customers and in all situations not conducive to social distancing. Customers entering SCB are also requested to wear a face mask, provided if necessary, when inside the lobbies.
  • Customer and community support consistent with regulatory and treasury guidelines, including temporary loan relief concessions and assisting customers applying for Paycheck Protection Program loans.
  • President Stoffle and Lead Director Wade participated on Governor Lee’s Economic Recovery Bank Working Group.

2. The Bank originated 144 SBA Paycheck Protection Program (PPP) loans totaling $7,552,851. Deferred fee income from these loans totaled $377,643, accreted over 24 months or until loan forgiveness, with $83,168 recognized as of September 30, 2020. 
 
3. As of June 30, 2020, the Bank provided COVID-19 related relief on 89 loans totaling 89,342,000. The relief was in the form of interest-only payments for 120 days on $69,482,000 or 77.8% of the modifications granted. As of September 30, 2020, only seven loans covering three relationships are receiving continued COVID-19 related relief, all in the form of full interest-only payments through December 2020; the other 82 loans have returned to regular payment schedules.
 
4. During September 2020, the Bank sold two of foreclosed properties a modest gain.
 
5. On July 16, 2020, SCB implemented its new relationship banking model to all branches as a new phase of retail banking and marketing strategy.
 

Subsequent Events

1. On October 21, 2020, the Bank received regulatory permission to open a Loan Production Office (LPO) in Glen Allen, Virginia (Richmond, Virginia Market).
 

2. On October 29, 2020, the Bank signed a lease on a banking space in the Richmond market, with plans to open a LPO in early November.

Readers are cautioned that this press release contains unaudited financial information and may include forward-looking statements made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current knowledge, assumptions, and analyses, which it believes are appropriate in the circumstances regarding future events, and may address issues that involve significant risks including, but not limited to: changes in interest rates; changes in accounting principles, policies, or guidelines; significant changes in general economic, competitive, and business conditions; significant changes in or additions to laws and regulatory requirements; and significant changes in securities markets. Additionally, such aforementioned uncertainties, assumptions, and estimates, may cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. 

About Sevier County Bank

Sevier County Bank, the oldest continuously operating business in Sevier County, is a full- service community bank that has served Sevierville and the surrounding area since 1909. Currently at $350 million in assets and with six branch locations, Sevier County Bank offers a full array of banking products and services geared towards the needs of the businesses and citizens in our markets. For more information, visit bankscb.com.