QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Maryland
|
52-1726127
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
employer identification no.)
|
200
Westgate Circle, Suite 200
Annapolis,
Maryland
|
21401
|
(Address
of principal executive offices)
|
(Zip
Code)
|
PART
I – FINANCIAL INFORMATION
|
Page
|
|
Item
1.
|
Financial
Statements
|
|
Consolidated
Statements of Financial Condition (Unaudited) as of March 31, 2009 and
December 31, 2008
|
1
|
|
Consolidated
Statements of Income (Unaudited) for the Three Months Ended March 31, 2009
and 2008
|
2
|
|
Consolidated
Statements of Cash Flows (Unaudited) for the Three Months Ended March 31,
2009 and 2008
|
3
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
5
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
11
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
21
|
Item
4.
|
Controls
and Procedures
|
21
|
PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
22
|
Item
1A.
Item
2.
|
Risk
Factors
Unregistered
Sales of Equity Securities and Use of Proceeds
|
22
22
|
Item
3.
|
Defaults
Upon Senior Securities
|
22
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
23
|
Item
5.
|
Other
Information
|
23
|
Item
6.
|
Exhibits
|
23
|
SIGNATURES
|
24
|
|
March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Cash
and due from banks
|
$ | 13,840 | $ | 14,082 | ||||
Interest
bearing deposits in other banks
|
563 | 271 | ||||||
Federal
funds sold
|
5,386 | 17,952 | ||||||
Cash
and cash equivalents
|
19,789 | 32,305 | ||||||
Investment
securities held to maturity
|
1,245 | 1,345 | ||||||
Loans
held for sale
|
2,171 | 453 | ||||||
Loans
receivable, net of allowance for loan losses of
|
||||||||
$18,885
and $14,813, respectively
|
890,180 | 896,006 | ||||||
Premises
and equipment, net
|
29,947 | 30,267 | ||||||
Federal
Home Loan Bank of Atlanta stock at cost
|
8,789 | 8,694 | ||||||
Accrued
interest receivable and other assets
|
20,696 | 18,581 | ||||||
Total
assets
|
$ | 972,817 | $ | 987,651 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Liabilities
|
||||||||
Deposits
|
$ | 677,048 | $ | 683,866 | ||||
Long-term
borrowings
|
146,000 | 153,000 | ||||||
Subordinated
debentures
|
24,119 | 24,119 | ||||||
Accrued
interest payable and other liabilities
|
3,941 | 2,999 | ||||||
Total
liabilities
|
851,108 | 863,984 | ||||||
Stockholders’ Equity
|
||||||||
Preferred
stock, $0.01 par value, 1,000,000 shares authorized:
|
||||||||
Preferred
stock series “A”, 437,500 shares issued and outstanding
|
4 | 4 | ||||||
Preferred
stock series “B”, 23,393 shares issued and
outstanding
|
- | - | ||||||
Common
stock, $0.01 par value, 20,000,000 shares authorized;
|
||||||||
10,066,679
shares issued and outstanding
|
101 | 101 | ||||||
Additional
paid-in capital
|
73,621 | 73,522 | ||||||
Retained
earnings
|
47,983 | 50,040 | ||||||
Total
stockholders' equity
|
121,709 | 123,667 | ||||||
Total
liabilities and stockholders' equity
|
$ | 972,817 | $ | 987,651 |
For
The Three Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Interest Income
|
||||||||
Loans,
including fees
|
$ | 13,636 | $ | 16,875 | ||||
Securities,
taxable
|
16 | 22 | ||||||
Other
|
(36 | ) | 254 | |||||
Total
interest income
|
13,616 | 17,151 | ||||||
Interest Expense
|
||||||||
Deposits
|
5,593 | 7,171 | ||||||
Short-term
borrowings
|
12 | 37 | ||||||
Long-term
borrowings and subordinated debentures
|
1,606 | 2,026 | ||||||
Total
interest expense
|
7,211 | 9,234 | ||||||
Net
interest income
|
6,405 | 7,917 | ||||||
Provision
for loan losses
|
4,534 | 750 | ||||||
Net
interest income after provision for loan losses
|
1,871 | 7,167 | ||||||
Non-interest Income
|
||||||||
Real
estate commissions
|
218 | 76 | ||||||
Real
estate management fees
|
157 | 153 | ||||||
Mortgage
banking activities
|
50 | 176 | ||||||
Other
|
191 | 115 | ||||||
Total
non-interest income
|
616 | 520 | ||||||
Non-Interest Expenses
|
||||||||
Compensation
and related expenses
|
2,324 | 2,266 | ||||||
Occupancy
|
307 | 409 | ||||||
Foreclosed
real estate expenses, net
|
626 | 125 | ||||||
Legal
fees
|
169 | 149 | ||||||
Other
|
1,120 | 1,137 | ||||||
Total
non-interest expenses
|
4,546 | 4,086 | ||||||
Income
(loss) before income tax provision (benefit)
|
(2,059 | ) | 3,601 | |||||
Income
tax provision (benefit)
|
(714 | ) | 1,466 | |||||
Net
income (loss)
|
$ | (1,345 | ) | $ | 2,135 | |||
Amortization
of discount on preferred stock
|
(68 | ) | - | |||||
Dividends
on preferred stock
|
(359 | ) | - | |||||
Net
income (loss) available to common stockholders
|
$ | (1,772 | ) | $ | 2,135 | |||
Basic
earnings (loss) per share
|
$ | (0.18 | ) | $ | 0.21 | |||
Diluted
earnings (loss) per share
|
$ | (0.18 | ) | $ | 0.21 | |||
Common
stock dividend declared per share
|
$ | 0.03 | $ | 0.06 |
For
The Three Months Ended
March
31,
|
||||||||
2009
|
2008
|
|||||||
Cash Flows from Operating
Activities
|
||||||||
Net
income (loss)
|
$ | (1,345 | ) | $ | 2,135 | |||
Adjustments
to reconcile net income (loss) to net
|
||||||||
cash
provided by operating activities:
|
||||||||
Amortization
of deferred loan fees
|
(533 | ) | (757 | ) | ||||
Net
amortization of premiums and
|
||||||||
discounts
|
1 | 1 | ||||||
Provision
for loan losses
|
4,534 | 750 | ||||||
Provision
for depreciation
|
319 | 344 | ||||||
Gain
on sale of loans
|
(49 | ) | (107 | ) | ||||
Proceeds
from loans sold to others
|
5,627 | 7,233 | ||||||
Loans
originated for sale
|
(7,296 | ) | (8,085 | ) | ||||
Stock-based
compensation expense
|
32 | 32 | ||||||
(Increase)
decrease in accrued interest receivable
|
||||||||
and
other assets
|
(969 | ) | 961 | |||||
Increase
in accrued interest payable and other
liabilities
|
942 | 1,600 | ||||||
Net
cash provided by operating activities
|
1,263 | 4,107 | ||||||
Cash Flows from Investing
Activities
|
||||||||
Proceeds
from maturing investment securities
|
- | 1,000 | ||||||
Principal
collected on mortgage-backed securities
|
99 | 8 | ||||||
Net
decrease in loans
|
679 | 6,383 | ||||||
Proceeds
from sale of foreclosed real estate
|
- | 295 | ||||||
Investment
in premises and equipment
|
(23 | ) | (124 | ) | ||||
Proceeds
from disposal of premises and equipment
|
24 | - | ||||||
Redemption
(purchase) of Federal Home Loan Bank
|
||||||||
of
Atlanta stock
|
(95 | ) | 578 | |||||
Net
cash provided by investing activities
|
684 | 8,140 |
For
The Three Months Ended
March
31,
|
||||||||
2009
|
2008
|
|||||||
Cash Flows from Financing
Activities
|
||||||||
Net
increase (decrease) in deposits
|
(6,818 | ) | 12,033 | |||||
Decrease
in short-term borrowings
|
- | (15,000 | ) | |||||
Repayment
of borrowed funds, long-term
|
(7,000 | ) | - | |||||
Common
stock dividend paid
|
(302 | ) | (604 | ) | ||||
Series
A preferred stock dividend paid
|
(70 | ) | - | |||||
Series
B preferred stock dividend paid
|
(273 | ) | - | |||||
Net
cash used in financing activities
|
(14,463 | ) | (3,571 | ) |
Increase
(decrease) in cash and cash equivalents
|
(12,516 | ) | 8,676 | |||||
Cash
and cash equivalents at beginning of year
|
32,305 | 11,266 | ||||||
Cash
and cash equivalents at end of period
|
$ | 19,789 | $ | 19,942 | ||||
Supplemental
disclosure of cash flows information:
|
||||||||
Cash
paid during period for:
|
||||||||
Interest
|
$ | 7,402 | $ | 9,411 | ||||
Income
taxes
|
$ | 250 | $ | 369 | ||||
Transfer
of loans to foreclosed real estate
|
$ | 1,147 | $ | 1,214 |
Three
Months Ended
|
||
March
31,
|
||
2009
|
2008
|
|
Common
shares – weighted average (basic)
|
10,066,679
|
10,066,679
|
Common
share equivalents – weighted average
|
-
|
-
|
Common
shares – diluted
|
10,066,679
|
10,066,679
|
Actual
|
Actual
|
To
Be Well Capitalized Under
|
|
at March 31, 2009
|
at December 31, 2008
|
Prompt Corrective
Provisions
|
|
Tangible
(1)
|
13.6%
|
13.5%
|
N/A
|
Tier
I Capital (2)
|
16.7%
|
16.9%
|
6.0%
|
Core
(1)
|
13.6%
|
13.5%
|
5.0%
|
Total
Capital (2)
|
17.9%
|
18.1%
|
10.0%
|
2009
|
2008
|
|||||||||||||||
Weighted
Average
|
Weighted
Average
|
|||||||||||||||
Exercise
Price
|
Exercise
Price
|
|||||||||||||||
Shares
|
Per
Share
|
Shares
|
Per
Share
|
|||||||||||||
Outstanding
at beginning of year
|
114,950 | $ | 15.87 | 122,815 | $ | 15.85 | ||||||||||
Options
granted
|
- | - | - | - | ||||||||||||
Exercised
|
- | - | - | - | ||||||||||||
Forfeited
|
- | - | - | - | ||||||||||||
Outstanding
at period end
|
114,950 | $ | 15.87 | 122,815 | $ | 15.85 | ||||||||||
Exercisable
at period end
|
74,365 | $ | 15.85 | 56,467 | $ | 15.83 |
Weighted
Average Remaining
|
Weighted
Average
|
||
Range
of Exercise Prices
|
Number
Outstanding
|
Contractual
Life
|
Exercise
Price
|
$15.62
|
63,172
|
1.89
|
$15.62
|
$17.18
|
11,193
|
1.89
|
$17.18
|
$15.62-$17.18
|
74,365
|
1.89
|
$15.85
|
Fair
Value Measurement at March 31, 2009 Using
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Loans
accounted for under SFAS 114
|
$ | 43,499 | - | - | $ | 43,499 | ||||||||||
Foreclosed
real estate
|
6,895 | - | - | 6,895 |
Fair
Value Measurement at December 31, 2008 Using
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Loans
accounted for under SFAS 114
|
$ | 32,054 | - | - | $ | 32,054 | ||||||||||
Foreclosed
real estate
|
6,317 | - | - | 6,317 |
Impaired Loans
|
Foreclosed Real Estate
|
||||||
Balance
at December 31, 2008
|
$32,054
|
$6,317
|
|||||
Transfer
to foreclosed real estate
|
(1,305)
|
1,147
|
|||||
Additions
|
17,041
|
-
|
|||||
Additional
reserves
|
(3,978)
|
(569)
|
|||||
Paid
off/sold
|
(313)
|
-
|
|||||
Balance
at March 31, 2009
|
$43,499
|
$6,895
|
March
31,
2009
|
Number
of loans
|
December
31, 2008
|
Number
of loans
|
|||||||||||||
Loans
accounted for on a non-accrual basis:
|
||||||||||||||||
Mortgage
loans:
|
||||||||||||||||
Residential
- consumer
|
$ | 33,721 | 76 | $ | 30,769 | 73 | ||||||||||
Residential
- builder
|
25,184 | 51 | 20,970 | 45 | ||||||||||||
Commercial
|
1,615 | 9 | 3,047 | 11 | ||||||||||||
Non-mortgage
loans:
|
||||||||||||||||
Consumer
|
7 | 1 | 9 | 2 | ||||||||||||
Commercial
loans
|
2,096 | 6 | - | - | ||||||||||||
Total
non-accrual loans
|
$ | 62,623 | 143 | $ | 54,795 | 131 | ||||||||||
Accruing
loans greater than 90 days past due
|
$ | - | $ | - | ||||||||||||
Foreclosed
real-estate
|
$ | 6,895 | $ | 6,317 | ||||||||||||
Total
non-performing assets
|
$ | 69,518 | $ | 61,112 | ||||||||||||
Total
non-accrual loans to net loans
|
7.0 | % | 6.1 | % | ||||||||||||
Allowance
for loan losses
|
$ | 18,885 | $ | 14,813 | ||||||||||||
Allowance
to total loans
|
2.1 | % | 1.6 | % | ||||||||||||
Allowance
for loan losses to total non-performing loans,
|
||||||||||||||||
including
loans contractually past due 90 days or more
|
30.2 | % | 27.0 | % | ||||||||||||
Total
non-accrual and accruing loans greater than
|
||||||||||||||||
90
days past due to total assets
|
6.4 | % | 5.5 | % | ||||||||||||
Total
non-performing assets to total assets
|
7.1 | % | 6.2 | % |
Impaired
loans at December 31, 2008
|
$ | 69,836 | ||
Added
to impaired loans
|
30,563 | |||
Gross
loans transferred to foreclosed real estate
|
(1,504 | ) | ||
Paid
off prior to foreclosure
|
(1,960 | ) | ||
Impaired
loans at March 31, 2009
|
$ | 96,935 |
Foreclosed
real estate at December 31, 2008
|
$ | 6,317 | ||
Transferred
from impaired loans, net of charge-offs of $357
|
1,147 | |||
Property
improvements
|
- | |||
Property
sold
|
- | |||
Additional
write downs
|
(569 | ) | ||
Foreclosed
real estate at March 31, 2009
|
$ | 6,895 |
Principal
Amount
|
Rate
|
Maturity
|
|||||
$ | 21,000 |
1.996%
to 3.083%
|
2009
|
||||
10,000 |
5.000‰
|
2010
|
|||||
- | - |
2011
|
|||||
- | - |
2012
|
|||||
- | - |
2013
|
|||||
115,000 |
2.579%
to 4.340%
|
Thereafter
|
|||||
$ | 146,000 |
Three
Months Ended March 31, 2009
|
Three
Months Ended March 31, 2008
|
|||||||||||
Average
Volume
|
Interest
|
Yield/Cost
|
Average
Volume
|
Interest
|
Yield/Cost
|
|||||||
(dollars
in thousands)
|
||||||||||||
ASSETS
|
||||||||||||
Loans
(1)
|
$905,691
|
$13,636
|
6.02%
|
$896,189
|
$16,875
|
7.53%
|
||||||
Mortgage-backed
securities(2)
|
1,278
|
16
|
5.01%
|
1,377
|
18
|
5.23%
|
||||||
Other
interest-earning assets (3)
|
11,039
|
(36)
|
(1.30%)
|
16,851
|
258
|
6.12%
|
||||||
Total
interest-earning assets
|
918,008
|
13,616
|
5.93%
|
914,417
|
17,151
|
7.50%
|
||||||
Non-interest
earning assets
|
57,804
|
50,590
|
||||||||||
Total
assets
|
$975,812
|
$965,007
|
||||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||
Savings
and checking deposits
|
$140,812
|
793
|
2.25%
|
$124,190
|
558
|
1.80%
|
||||||
Certificates
of deposit
|
532,577
|
4,800
|
3.61%
|
542,561
|
6,613
|
4.88%
|
||||||
Borrowings
|
150,666
|
1,618
|
4.30%
|
176,667
|
2,063
|
4.67%
|
||||||
Total
interest-bearing liabilities
|
824,055
|
7,211
|
3.50%
|
843,418
|
9,234
|
4.38%
|
||||||
Non-interest
bearing liabilities
|
28,541
|
25,017
|
||||||||||
Stockholders'
equity
|
123,216
|
96,572
|
||||||||||
Total
liabilities and stockholders’ equity
|
$975,812
|
$965,007
|
||||||||||
Net
interest income and interest rate spread
|
$6,405
|
2.43%
|
$7,917
|
3.12%
|
||||||||
Net
interest margin
|
2.79%
|
3.46%
|
||||||||||
Average
interest-earning assets to average interest-bearing
liabilities
|
111.40%
|
108.42%
|
(1)
|
Non-accrual
loans are included in the average balances and in the computation of
yields.
|
(2)
|
The
Company does not have any tax-exempt
securities.
|
(3)
|
Other
interest-earning assets includes interest-bearing deposits in other banks,
federal funds sold and FHLB stock
investments.
|
Financial
Instruments Whose Contract
|
Contract
Amount At
|
|||
Amounts
Represent Credit Risk
|
March
31, 2009
|
|||
Standby
letters of credit
|
$ | 11,925 | ||
Home
equity lines of credit
|
21,682 | |||
Unadvanced
construction commitments
|
49,532 | |||
Mortgage
loan commitments
|
5,027 | |||
Lines
of credit
|
32,625 | |||
Loans
sold with limited repurchase
|
||||
provisions
|
9,435 |
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
SEVERN
BANCORP, INC.
|
||
May 13, 2009
|
Alan J.
Hyatt
|
|
Alan
J. Hyatt, Chairman of the Board, President and Chief Executive
Officer
|
||
(Principal
Executive Officer)
|
||
May 13, 2009
|
Thomas G.
Bevivino
|
|
Thomas
G. Bevivino, Executive Vice President and Chief Financial
Officer
|
||
(Principal
Financial Officer)
|