Severn Bancorp Inc. announced it lost about $4 million on the recent sale of $15 million of underperforming loans as it continues to clean up its balance sheet.
The loss will apear as a pre-tax charge in the fourth quarter earnings for the parent of Severn Savings Bank, the Annapolis-based company said.
The savings bank sold loans with a book value of about $15 million, including $12 million of non-performing loans, for $11 million. The non-performing loans were primarily residential.
The latest sale follows one in September when it sold $33 million of underperforming loans for $23 million, resulting in a one-time loss of about $10 million.
Severn said it also has written down and sold certain foreclosed properties, expecting to reduce its balance of foreclosed property to below $10 million as of Dec. 31.
"Both sales represent material reductions in our non-performing loans, significantly reducing the resources that have been necessary to manage non-performing loans," stated Alan J. Hyatt, Severn's president and CEO.
"The sales enhance our efforts to focus on improving earnings and increasing profitability," Hyatt said. "We have worked very hard the past few years managing problem loans since the economy faltered. It was time for a quicker resolution to the issues that were impeding progress for the bank. Management and the board made the decision to do what needed to be done to clean up the bank's balance sheet and position the company for growth in 2014 and beyond."
Severn Savings Bank operates out of four branches in Anne Arundel County and has assets of about $820 million.