Maryland Bank Discloses Extensive Involvement in Cannabis Industry

Severn Bank (NASDAQ: SVBI), an FDIC-insured holding company based Annapolis with five branches in Anne Arundel County, revealed that it is serving the cannabis industry in a substantial manner. The company filed its annual 10-K report with the SEC today, discussing its involvement with medical cannabis providers for the first time after beginning to provide banking services in 2017 to growers, processors and dispensaries.

The SEC filing explained its diligence process:

We do a deep upfront due diligence review of a medical-use cannabis business before the business is on-boarded, including a site visit and confirmation that the business is properly licensed by the state of Maryland.  Throughout the relationship, we continue monitoring the business, including site visits, to ensure that the medical-use cannabis business continues to meet our stringent requirements, including maintenance of required licenses.  We perform periodic financial reviews of the business and monitor the business in accordance with Bank Secrecy Act (“BSA”) and State Commission requirements.

The bank ended the year with $19.2 million in cannabis industry deposits, or 3.2% of its total deposits, and accepted over $45 million in deposits during 2017. While it’s not unusual for community banks to accept deposits from cannabis operators, Severn Bank has made loans to its medical cannabis customers as well, ending the year with $11.9 million (1.8% of all loans) on its books. Severn includes expansion of its medical cannabis customer base as one of seven components of its growth strategy.

Not surprisingly, Severn Bank included substantial risk disclosures, with the cannabis-related risks leading this section of the filing:

Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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