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How Should Investors Feel About Severn Bancorp, Inc.'s (NASDAQ:SVBI) CEO Pay?

Simply Wall St

Alan Hyatt is the CEO of Severn Bancorp, Inc. (NASDAQ:SVBI). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Severn Bancorp

How Does Alan Hyatt's Compensation Compare With Similar Sized Companies?

According to our data, Severn Bancorp, Inc. has a market capitalization of US$82m, and paid its CEO total annual compensation worth US$515k over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$423k. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO total compensation to be US$605k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Severn Bancorp stands. On a sector level, around 58% of total compensation represents salary and 42% is other remuneration. It's interesting to note that Severn Bancorp pays out a greater portion of remuneration through salary, in comparison to the wider industry.

So Alan Hyatt receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance. You can see a visual representation of the CEO compensation at Severn Bancorp, below.

NasdaqCM:SVBI CEO Compensation April 1st 2020

Is Severn Bancorp, Inc. Growing?

On average over the last three years, Severn Bancorp, Inc. has shrunk earnings per share by 1.5% each year (measured with a line of best fit). In the last year, its revenue is up 9.2%.

In the last three years the company has failed to grow earnings per share. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Severn Bancorp, Inc. Been A Good Investment?

Given the total loss of 7.9% over three years, many shareholders in Severn Bancorp, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

Alan Hyatt is paid around what is normal for the leaders of comparable size companies.

The company isn't growing EPS, and shareholder returns have been disappointing. Few would argue that it's wise for the company to pay any more, before returns improve. Looking into other areas, we've picked out 3 warning signs for Severn Bancorp that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.