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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 June 30, 2004

OR

o                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

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 r 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No x

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 July 27, 2004


     

SEVERN BANCORP, INC. AND SUBSIDIARIES
Table of Contents


PART I – FINANCIAL INFORMATION
1
Item 1.
Financial Statements
1
 
Consolidated Statements of Financial Condition as of June 30, 2004
 
 
(Unaudited) and December 31, 2003
1
 
Consolidated Statements of Operations (Unaudited)
2
 
Consolidated Statements of Cash Flows (Unaudited)
3
 
Notes to Consolidated Financial Statements (Unaudited)
5
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
14
 
 
 
Item 4.
Controls and Procedures
14
 
 
 
PART II – OTHER INFORMATION
15
Item 1.
Legal Proceedings
15
 
 
 
Item 2.
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
15
 
 
 
Item 3.
Defaults Upon Senior Securities
15
 
 
 
Item 4.
Submission of Matters to a Vote of Security Holders
15
 
 
 
Item 5.
Other Information
15
 
 
 
Item 6.
Exhibits and Reports on Form 8-K
15
 
 
 
SIGNATURES
16
 
 
 
EXHIBIT 31.1 CERTIFICATION OF ALAN J. HYATT
17
 
 
 
EXHIBIT 31.2 CERTIFICATION OF CECELIA LOWMAN
18
 
 
 
EXHIBIT 32 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
19
   
EXHIBIT 32 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
19
   
i
     

PART I– FINANCIAL INFORMATION

Item 1. Financial Statements
SEVERN BANCORP, INC. AND SUBSIDIARIES
Annapolis, Maryland
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)

 
    
June 30,

 

 
December 31,

 

 

 

 
2004

 

 
2003

 

 

 

 
(Unaudited) 

 

  
 
  
ASSETS
  
 
Cash and due from banks
  
$
3,270
  
$
4,055
  
Interest bearing deposits in other banks
    
716
    
457
  
Federal funds
    
1,868
    
3,914
  
Investment securities held to maturity
    
5,000
    
6,000
  
Mortgage backed securities held to maturity
    
5,589
    
6,721
  
Loans held for sale
    
9,036
    
3,175
  
Loans receivable, net of allowance for loan losses of  $5,197 and $4,832 respectively
    
579,848
    
502,851
  
Premises and equipment, net
    
5,436
    
5,327
  
Federal Home Loan Bank of Atlanta stock at cost
    
4,800
    
3,250
  
Accrued interest receivable and other assets
    
5,257
    
4,721
  
   
 
 
Total assets
  
$
620,820
  
$
540,471
  
   
 
 
 
    
 
    
 
  
LIABILITIES AND STOCKHOLDERS' EQUITY
    
 
    
 
  
Liabilities
    
 
    
 
  
Deposits
  
$
462,470
  
$
419,726
  
Short-term borrowings
    
12,000
    
6,000
  
Long-term borrowings
    
84,000
    
59,000
  
Advance payments by borrowers for expenses
    
2,251
    
902
  
Accounts payable and accrued interest payable & other liabilities
    
1,705
    
1,873
  
   
 
 
Total liabilities
    
562,426
    
487,501
  
 
    
 
    
 
  
Minority interest – preferred securities of subsidiary
    
4,000
    
4,000
  
 
    
 
    
 
  
Stockholders’ Equity
    
 
    
 
  
Common stock, $0.01 par value, 20,000,000 shares authorized;  4,159,092 issued and outstanding
   
42
    
42
  
Additional paid-in capital
    
11,516
    
11,516
  
Retained earnings
   
42,836
    
37,412
  
   
 
 
Total stockholders' equity
    
54,394
    
48,970
  
   
 
 
Total liabilities and stockholders' equity
  
$
620,820
  
$
540,471
  
   
 
 

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 OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)

 
  
For Three Months Ended June 30,
For Six Months Ended June 30,
 
  
2004
2003
2004
2003
Interest Income
    
 
    
 
    
 
    
 
  
Interest on loans
  
$
10,537
  
$
8,936
  
$
20,402
  
$
17,618
  
Interest on securities, tax exempt
    
37
    
82
    
88
    
128
  
Interest on mortgage backed securities
    
65
    
84
    
141
    
142
  
Other interest income
    
63
    
70
    
103
    
148
  
   
 
 
 
 
Total interest income
    
10,702
    
9,172
    
20,734
    
18,036
  
 
    
 
    
 
    
 
    
 
  
Interest Expense
    
 
    
 
    
 
    
 
  
Interest on deposits
    
2,606
    
2,789
    
5,111
    
5,716
  
Interest on short term borrowings
    
29
    
--
    
64
    
--
  
Interest on long term borrowings
    
767
    
317
    
1,394
    
527
  
   
 
 
 
 
Total interest expense
    
3,402
    
3,106
    
6,569
    
6,243
  
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Net interest income
    
7,300
    
6,066
    
14,165
    
11,793
  
Provision for loan losses
    
300
    
225
    
550
    
450
  
   
 
 
 
 
Net interest income after provision for loan losses
    
7,000
    
5,841
    
13,615
    
11,343
  
 
    
 
    
 
    
 
    
 
  
Other Income
    
 
    
 
    
 
    
 
  
Gain on sale of foreclosed real estate
    
--
    
--
    
--
    
169
  
Real estate commissions
    
385
    
551
    
728
    
654
  
Real estate management fees
    
103
    
100
    
196
    
182
  
Mortgage banking activities
    
482
    
543
    
687
    
1,219
  
All other income
    
145
    
124
    
258
    
258
  
   
 
 
 
 
Total other income
    
1,115
    
1,318
    
1,869
    
2.482
  
 
    
 
    
 
    
 
    
 
  
Non-Interest Expenses
    
 
    
 
    
 
    
 
  
Compensation and related expenses
    
2,107
    
1,934
    
3,856
    
3,483
  
Occupancy
    
142
    
126
    
292
    
255
  
Other
    
549
    
543
    
1,142
    
985
  
   
 
 
 
 
Total non-interest expenses
    
2,798
    
2,603
    
5,290
    
4,723
  
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Income before income tax provision
    
5,317
    
4,556
    
10,194
    
9,102
  
Income tax provision
    
2,091
    
1,759
    
3,939
    
3,598
  
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Net income
  
$
3,226
  
$
2,797
  
$
6,255
  
$
5,504
  
 
    
   
 
    
 		    
 		  
Basic earnings per common share
  
$
.78
  
$
.66