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UNITED STATES
SECURITES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003

OR

[ ]        TRANSITION REPORT PURUSANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                                       to      
Commission file number    0-49731                                                                                                                    

SEVERN BANCORP, INC.
(Exact name of registrant as specified in its charter)

Maryland
52-1726127
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

1919 A West Street, Annapolis, Maryland
21401
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code
410-268-4554
 

(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes          X             No                         

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to distribution of securities under a plan confirmed by a court.
Yes                No                           

APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, par value $0.01 per share, 4,159,092 shares outstanding at October 6, 2003.


     

SEVERN BANCORP, INC.
Table of Contents


PART I – FINANCIAL INFORMATION
1
Item 1.
Financial Statements
1
 
 
 
 
Consolidated Statements of Financial Condition as of September 30, 2003
 
 
(Unaudited) and December 31, 2002
1
 
Consolidated Statements of Operations (Unaudited)
3
 
Consolidated Statements of Cash Flows (Unaudited)
4
 
Notes to Consolidated Financial Statements (Unaudited)
7
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
10
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
16
 
 
 
Item 4.
Controls and Procedures
16
 
 
 
PART II – OTHER INFORMATION
16
 
 
 
Item 1.
Legal Proceedings
16
 
 
 
Item 2.
Changes in Securities and Use of Proceeds
16
 
 
 
Item 3.
Defaults Upon Senior Securities
16
 
 
 
Item 4.
Submission of Matters of a Vote of Security Holders
16
 
 
 
Item 5.
Other Information
16
 
 
 
Item 6.
Exhibits and Reports on Form 8-K
16
 
 
 
SIGNATURES
17
 
 
 
EXHIBIT 99.1 CERTIFICATION OF ALAN J. HYATT
18
 
 
 
EXHIBIT 99.1 CERTIFICATION OF CECELIA LOWMAN
19
 
 
 
EXHIBIT 99.2 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
20
 
 
 
EXHIBIT 99.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
20
    
  i   

PART I– FINANCIAL INFORMATION

Item 1. Financial Statements

SEVERN BANCORP, INC. AND SUBSIDIARIES
Annapolis, Maryland

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

   

  September 30, 2003

    

December 30, 2003

  
ASSETS
 
(Unaudited)
    
 
  
             
Cash
 
$
2,369,845
 
$
3,756,640
 
Interest bearing deposits in other banks
   
633,167
   
4,190,768
 
Federal funds
   
17,807,053
   
10,712,827
 
Investment securities, held to maturity
   
6,000,000
   
4,000,000
 
Mortgage backed securities held to maturity
   
6,273,661
   
5,661,304
 
Loans held for sale
   
6,875,399
   
17,481,301
 
Loans receivable, net
   
477,408,388
   
401,343,360
 
Accrued interest receivable - loans
   
2,823,187
   
2,465,187
 
- mortgage backed securities
   
26,843
   
22,327
 
- investments
   
30,945
   
61,911
 
Foreclosed real estate, net
   
--
   
223,911
 
Premises and equipment, at cost, less
   
 
    
 
  
accumulated depreciation
   
5,270,146
   
4,737,936
 
Mortgage servicing rights
   
14,390
   
19,340
 
Federal Home Loan Bank of Atlanta stock
   
 
    
 
  
at cost
   
2,500,000
   
1,900,000
 
Deferred income taxes
   
1,090,356
   
1,090,356
 
Income taxes receivable
   
--
   
164,255
 
Goodwill
   
333,569
   
333,569
 
Prepaid expenses and other assets
   
328,328
   
249,517
 
   
 
 
Total assets
 
$
529,785,277
 
$
458,414,509
 
   
 
 

The accompanying notes to consolidated financial statements
are an integral part of these statements.

 
  1  
 

SEVERN BANCORP, INC. AND SUBSIDIARIES
Annapolis, Maryland

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

      
September 30, 2003
(Unaudited)
  
December 31,
2002
 
  
LIABILITIES AND STOCKHOLDERS' EQUITY
   
 
    
 
  
             
Liabilities
   
 
    
 
  
Deposits
 
$
424,463,898
 
$
377,925,041
 
Checks outstanding in excess of bank balance
   
1,791,595
   
--
 
Federal Home Loan Bank advances
   
50,000,000
   
34,000,000
 
Advance payments by borrowers for expenses
   
1,163,246
   
1,049,408
 
Income taxes payable
   
97,153
   
464,937
 
Accounts payable and accrued expenses
   
1,690,693
   
1,793,746
 
   
 
 
Total liabilities
   
479,206,585
   
415,233,132
 
 
    
 
    
 
  
Stockholders' Equity
   
 
    
 
  
Non-cumulative preferred stock $1.00 par value,
   
 
    
 
  
Series A 500,000 shares authorized; 200,002 issued
   
 
    
 
  
and outstanding September 30, 2003 and December 31, 2002
   
200,002
   
200,002
 
Additional paid-in capital
   
3,800,038
   
3,800,038
 
Common stock, $.01 par value, 20,000,000 shares
   
 
    
 
  
authorized; issued and outstanding 4,144,092
   
 
    
 
  
September 30, 2003 and 4,142,592 December 31, 2002
   
41,441
   
41,426
 
Additional paid-in capital
   
11,434,145
   
11,425,910
 
Retained earnings (substantially restricted)
   
35,103,066
   
27,714,001
 
   
 
 
Total stockholders' equity
   
50,578,692
   
43,181,377
 
   
 
 
Total liabilities and stockholders' equity
 
$
529,785,277
 
$
458,414,509
 
   
 
 

The accompanying notes to consolidated financial statements
are an integral part of these statements.

 
  2  
 

SEVERN BANCORP, INC. AND SUBSIDIARIES
Annapolis, Maryland

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

   
For Three Months Sept 30,
For Nine Months Sept 30,
   

2003  

 2002  

2003 

  

  2002

  
Interest Income
   
 
    
 
    
 
    
 
  
Interest on loans
 
$
9,349,540
 
$
8,343,204
 
$
26,967,130
 
$
23,963,003
 
Interest on securities held to maturity
   
63,718
   
90,987
   
191,609
   
305,789
 
Interest on mortgage backed securities
   
1,814
   
11,992
   
143,419
   
24,152
 
Other interest income
   
44,892
   
64,166
   
193,423
   
183,527
 
   
 
 
 
 
Total interest income
   
9,459,964
   
8,510,349
   
27,495,581
   
24,476,471
 
 
    
 
    
 
    
 
    
 
  
Interest Expense
   
 
    
 
    
 
    
 
  
Interest on deposits
   
2,676,412
   
3,112,027
   
8,391,801
   
9,166,638
 
Interest on short term borrowings
   
--
   
14,994
   
--
   
155,249
 
Interest on long term borrowings
   
388,070