The Board of Directors has a standing Corporate Governance Committee, Nominating Committee, Compensation Committee and Audit and Examining Committee.
The Board believes that the combined role of Chairman and Chief Executive Officer is in the best interest of stockholders because it provides the appropriate balance between strategic development and independent oversight of management.
The Board of Directors, together with the Audit and Examining, Corporate Governance and Compensation Committees of the Board, coordinate with each other to provide enterprise-wide oversight of our management and handling of risk. These committees report regularly to the entire Board of Directors on risk-related matters and provide the Board of Directors with integrated insight about the Company’s management of strategic, credit, interest rate, financial reporting, technology, liquidity, compliance, operational and reputational risks. While the Company has not developed an enterprise-wide risk statement, the Board of Directors believes that sound credit underwriting to manage credit risk and a conservative investment portfolio to manage liquidity and interest rate risk contribute significantly to an effective oversight of the Company’s risk.
At meetings of the Board of Directors and its committees, directors receive regular updates from management regarding risk management. Outside of formal meetings, the Board, its committees and individual Board members have regular access to senior executives, including the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief Lending Officer.
The Company’s Corporate Governance Committee is comprised of at least three members, each appointed by the Board of Directors, and is responsible for developing a set of corporate governance policies for the Company. The Corporate Governance Committee consists of: Michael H. Cook, Chairman, James H. Johnson, Jr., Eric M. Keitz,Chairman, David Jones, and John A. Lamon III, and Mary Kathleen Sulick.III. The Board has determined that each of the members of the Corporate Governance Committee is independent under the Nasdaq Listing Rules. The Corporate Governance Committee met one timethree times in 2014.2017. The Corporate Governance Committee, in addition to setting corporate governance policies of the Company, is responsible for establishing criteria for selecting new directors, and identifying, screening and recruiting new directors. In addition, the Corporate Governance Committee will select members for the various Board of Director committees, determine director and committee member compensation, and may consider the institution of a process for stockholders to submit recommendations of director candidates and to communicate with the Board.candidates. The Corporate Governance Committee’s responsibilities are described in a written charter that was adopted by the Board of Directors, a copy of which is available on the Company’s website www.severnbank.com.
The Company’s Nominating Committee consists of the full Board of Directors, however, only the independent directors may vote on approval of nominations. There is no written charter. The Board has determined that the following directors are independent as defined under the Nasdaq Listing Rules: Michael H. Cook, Raymond S. Crosby, James H. Johnson, Jr., Eric M. Keitz, John A. Lamon III, Albert W. Shields, Mary Kathleen Sulick and Konrad Wayson. Alan J. Hyatt, Eric M. Keitz, and David S. Jones are not independent as defined under the Nasdaq Listing Rules. While the Nominating Committee will consider nominees recommended by stockholders, it has not actively solicited recommendations from stockholders for nominees nor established any procedures for this purpose, other than the procedures contained in the Bylaws concerning nominations of candidates by stockholders. The Company currently has no written policy in effect regarding the nomination of candidates to the Company’s Board. The Company has traditionally relied upon its Board of Directors acting as the Company’s Nominating Committee to consider candidates. When the Board of Directors considers candidates they are referred to the Company’s Governance Committee for consideration. The Company’s Bylaws provide that if a stockholder wishes to submit nominations for directors, it should be done in writing and sent to the Secretary of the Company at least 60 days prior to the Annual Meeting of Stockholders. The Company’s Board, in its capacity as the Nominating Committee, met two timesonce during 2014.2017. This year’s nominees were selectedapproved by the full Board and approvedfollowing the recommendation by the independent directors after evaluating each nominee’s general business acumen and knowledge of the Company and its business activities and prior service on the Company’s board. In addition to the aforementioned criteria, the Board considers the investment in the Company made by the nominee as demonstrated by the number of shares owned by such nominee. The Nominating Committee is seeking Board membership that reflects diversity in its broadest sense, including persons diverse in professional backgrounds, gender and ethnicity. The Board’s process for identifying and evaluating director nominees relates to the general business acumen and knowledge of the Company and its business activities. Board membership longevity is also evaluated when considering the nomination of current Board members. There was no third party paid to identify or assist in finding candidates for the Board of Directors.
The Company’s Audit and Examining Committee is comprised of at least three members, each of whom is appointed by the Board of Directors, and is responsible for overseeing the accounting and financial reporting process of the Company, and the audits of the financial statements of the Company. In addition, the Committee prepares an audit committee report as required by SEC rules to be included in the Company’s annual proxy statement. The Audit and Examining Committee consists of: Eric M. Keitz, Chairman,Mary Kathleen Sulick, Chairperson, Raymond S. Crosby, John A Lamon, III, Albert W. Shields, Mary Kathleen Sulick and Konrad M. Wayson. EachThe Board has determined that each of the Audit and Examining Committee members is independent under the Nasdaq Listing Rules and applicable SEC rules. The Audit and Examining Committee’s responsibilities are described in a written charter that was adopted by the Board of Directors, a copy of which is available on the Company’s website www.severnbank.com. The Board has determined that Eric M. KeitzMary Kathleen Sulick is an “audit committee financial expert,” as such term is defined by applicable SEC rules. The Audit and Examining Committee met threesix times in 2014.2017.
John A. Lamon III
Albert W. Shields
Konrad M. Wayson
The information contained in this Audit and Examining Committee Report is not “soliciting material” and has not been “filed” with the Securities and Exchange Commission. This Audit and Examining Committee Report will not be incorporated by reference into any of the Company’s future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company may specifically incorporate it by reference into a future filing.
BDO USA, LLP began serving as the Company’s auditor in 2013. Prior to that, ParenteBeard LLC had served as the Company's auditor since 2009.14
On August 29, 2013, the Company notified BDO USA, LLP that it had been selected to serve as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2013. The decision to change the Company’s independent registered public accounting firm was approved by the Audit Committee of the Company’s Board of Directors.
ParenteBeard LLC performed the audit of the Company’s consolidated financial statements for the year ended December 31, 2012. ParenteBeard LLC’s report did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles.
During the two years ended December 31, 2012, and from December 31, 2012 through August 29, 2013, there were no (i) disagreements between the Company and ParenteBeard LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to satisfaction of ParenteBeard LLC, would have caused ParenteBeard LLC to make reference to the subject matter of such disagreements in connection with its report, or (ii) “reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
Further, during the two years ended December 31, 2012 and from December 31, 2012 through August 29, 2013, neither the Company nor anyone on its behalf consulted BDO USA, LLP regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's financial statements; or (ii) any matter that was either subject of a disagreement, as that term is defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a “reportable event”, as that term is described in Item 304(a)(1)(v) of Regulation S-K.
Representatives of BDO USA, LLP will be present at the Annual Meeting, available to respond to your appropriate questions and able to make such statements as they desire.
Audit Fees. The aggregate fees billed by BDO USA, LLP for professional services rendered for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 20142017 and December 31, 20132016 and the review of the financial statements included in the Company’s Forms 10-Q for fiscal years 20142017 and 20132016 totaled $163,401$213,251 and $154,693,$188,689, respectively.
Audit-Related Fees. The aggregate fees billed by BDO USA, LLP for professional services rendered for audit-related services that are not disclosed in the paragraph captioned “Audit Fees” above, for the fiscal years ended December 31, 20142017 and December 31, 20132016 totaled $22,817$24,058 and $0,$21,007, respectively. These services related to the audit of the Company’s benefit plans.
Tax Fees. The aggregate fees billed by BDO USA, LLP for professional services rendered for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 20142017 and December 31, 20132016 totaled $49,833$30,756 and $0,$32,998, respectively.
All Other Fees. There were no fees billed by BDO USA, LLP for professional services rendered for products and services, other than the services described in the paragraph “Audit Fees”paragraphs above, for the fiscal years ended December 31, 20142017 and December 31, 2013.2016.
Policy on Audit and Examining Committee Pre-Approval of Audit and Non-Audit Services of Independent AuditorRegistered Public Accounting Firm
Among its other duties, the Audit and Examining Committee is responsible for appointing, setting compensation and overseeing the work of the independent auditor.registered public accounting firm. The Audit and Examining Committee has established a policy regarding pre-approval of all audit and non-audit services provided by the independent auditor.registered public accounting firm. On an ongoing basis, management communicates specific projects and categories of service for which the advance approval of the Audit and Examining Committee is requested. The Audit and Examining Committee reviews these requests and advises management if the Audit and Examining Committee approves the engagement of the independent auditor.registered public accounting firm. Pursuant to its pre-approval policies and procedures, the Audit and Examining Committee approved all of the foregoing audit and permissible non-audit services provided by BDO USA, LLP in fiscal years 20142017 and 2013.2016.
The Audit and Examining Committee reviews summaries of the services provided by BDO USA, LLP and the related fees and has considered whether the provision of non-audit services is compatible with maintaining the independence of BDO USA, LLP.
Recommendation: The Board of Directors recommends a vote “FOR” the ratification of the selection of BDO USA, LLP as the independent auditorregistered public accounting firm for the year ending December 31, 2015.2018.
EXECUTIVE AND DIRECTOR COMPENSATION
Background
Because the Company does not have anypay its employees, compensation decisions are made by the Compensation Committee of the Bank’s Board of Directors. The Compensation Committee currently consists of: John A. Lamon III, Chairman, Raymond S. Crosby, Eric M. Keitz, Albert W. Shields and Konrad M. Wayson. Each of the members of the Bank’s Compensation Committee is independent under the Nasdaq Listing Rules as currently in effect.
The Compensation Committee operates under a written charter adopted by the Company’s Board of Directors. The responsibilities of the Committee include:
| · | formulating, evaluating and approving the compensation of the Company’s executive officers; and |
| · | overseeing all compensation programs involving the issuance of the Company’s stock and other equity securities of the Company; and |
| · | to the extent required by SEC regulations, reviewing and discussing with the Company’s management the “Compensation Discussion and Analysis” section and preparing the Compensation Committee’s report thereon for inclusion in the Company’s annual proxy statement.Company. |
Objectives of the Compensation Program
The primary objectives of the Compensation Committee with respect to executive compensation are:
| · | To attract and retain the best possible executive talent; |
| · | To tie annual and long-term cash and stock incentives to achievement of corporate and individual performance objectives; and |
| · | To align executives’ incentives with stockholder value creation. |
To achieve these objectives, the Compensation Committee has implemented and maintains compensation plans that tie a portion of an executive’s overall compensation to the financial performance of the Company. Overall, the total compensation opportunity is intended to create an executive compensation program that is set at the median competitive levels of comparable public savings and loan companies.publicly traded financial institutions. This is based upon an annual informal survey of similar sized companies established by the Compensation Committee.
The executive officers of the Company have no employment contracts. Annually, the Bank’s Compensation Committee evaluates profiles of comparable financial institutions to assure that the compensation to its executive officers is comparable to similarly sized companiesfinancial institutions in the industry. Other factors used by the Compensation Committee in determining compensation for its executive officers include an assessment of the overall financial condition of the Company and the Bank, including an analysis of the Bank’sour asset quality, interest rate risk exposure, capital position, net income and consistency of earnings. The Bank’sOur return on average assets and return on equity are considered and compared to its peer group. In addition, the Compensation Committee interviews each executive officer individually and collectively to evaluate performance of the Company and the individual executive officers. This input is used to determine the total compensation package for each executive officer, and the allocation between the different components within the compensation package. The complexity of the activities of the executive officers are considered, and intangible items are considered such as the reputation and general standing of the Bank within the community and the likelihood of continuing successful and profitable results.
Say-on-Pay Vote
At the 20142017 annual meeting, we held a stockholder advisory vote on the compensation of our named executive officers, commonly referred to as a say-on-pay vote. Our stockholders approved the compensation of our named executive officers at the 20142017 annual meeting, with an overwhelming majority of stockholder votes that were cast in favor of our say-on-pay resolution. As we evaluated our compensation practices, we were aware of the strong support our stockholders expressed for our pay for performance compensation philosophy. As a result, following our annual review of our executive compensation philosophy, the Compensation Committee decided to retain our general approach to executive compensation. We believe our executive compensation program for 20152018 advances our goals of recruitment and retention, promotes both short-term and long-term performance of our executive officers and aligns executives’ incentives with stockholder value creation.
In keeping with the preference expressed by our stockholders at our 2014 annual meeting, ourOur Board has adopted a policy of holding say-on-pay votes every three years until changed by the Company is required to hold another advisory vote onof stockholders at the frequency of say-on-pay votes, whichnext say-on-frequency vote. The next say-on-frequency vote will occur no later than our 2020 annual meeting. The next say-on-pay vote will occur at our 2017 annual meeting.
Compensation Components
Compensation consists of the following components:
Base Salary.Base salaries are used to attract and retain employees by providing a portion of compensation that is not considered “at risk.” Base salaries are designed to reward the performance of our executive officers in the daily fulfillment of their responsibilities to the Company. Base salaries for our executives are established based on the scope of their responsibilities and historical compensation levels, taking into account competitive market compensation paid by other companies for similar positions. Generally, the Company believes that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions and with similar responsibilities at comparable companies in line with the Company’s compensation philosophy. Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience.
Annual Bonus.The purpose of the annual bonus program is to align the interests of executive officers with Company stockholders by motivating executive officers to achieve superior annual financial and annual operational performance. The Company’s annual bonus plan for its executives provides for a discretionary cash bonus, dependent upon the level of achievement of corporate and personal goals. In addition, the discretionary bonus for the executive officers named in the proxy statement is determined based on the Company’s performance compared to budgets and projections. The Board of Directors establishes specific financial and operational goals for the Company at the beginning of each year and annual discretionary bonus funding is in part related to achievement of these annual goals. The Compensation Committee approves any awardbonus for the Chief Executive Officer and for each other named executive officer. The Compensation Committee retains the right to award discretionary bonuses.
Long-Term Incentive Program. The Compensation Committee believes that long-term performance is achieved through an ownership culture that encourages long-term performance by the Company’s executive officers through the use of stock-based awards. In connection with this, the Board of Directors adopted the Severn Bancorp, Inc. 2008 Equity Incentive Plan (the “2008 Plan”), which was ratified by our stockholders at the 2008 annual meeting. The purpose of the 2008 Plan is to enable the Company to (i) promote the long-term retention of key employees; (ii) further reward thesekey employees, directors and other persons for their contributions to the Company’s growth and expansion; (iii) provide additional incentive to thesekey employees, directors and other persons to continue to make similar contributions in the future; and (iv) to further align the interests of thesekey employees, directors and other persons with those of the Company’s stockholders. These purposes will be achieved by granting to such employees, directors and other persons, in accordance with the 2008 Plan, options, stock appreciation rights, restricted stock or unrestricted stock, deferred stock, restricted stock units or performance awards (collectively the “Awards”), for shares of the Company’s common stock. By encouraging such stock ownership, the Company seeks to attract, retain and motivate the best available personnel for positions of substantial responsibility, and to provide additional incentiveincentives to the Company’s directors and key employees and to promote the success of theour business. On December 23, 2014,19, 2017, the Compensation Committee granted 50,00095,800 options to directors, executives and employees under the 2008 Plan, and will consider other Awards under the 2008 Plan when determining long-term incentive programs. Included in the December 23, 201419, 2017 grant were 15,00020,000 options at an exercise price of $4.98$7.81 to Mr. Hyatt, 5,0004,000 options at an exercise price of $4.53$7.10 to Mr. Anthony, andKeitz, 10,000 options at an exercise price of $4.53$7.10 to eachMr. Susie and 12,000 options at an exercise price of Messrs. Bevivino and Lindlaw.$7.10 to Mr. Chick. Additionally, Mr. Keitz was awarded 20,000 options at an exercise price of $7.10 on August 23, 2017, the date of his employment. All options awarded vest in five equal annual installments of 20% each over a five year period and, except for those options awarded to Mr. Hyatt, expire after six years from the grant date. Options awarded to Mr. Hyatt expire five years from the grant date.
Other Compensation.The Company’s named executive officers participate in other employee benefit plans generally available to all employees, including the following:
| · | The Bank maintains a 401(k) plan, a tax-qualified defined contribution retirement plan, and contributes, on behalf of each participating employee, a matching contribution of 50% of salary deferredcontributed by an employee, on a pre-tax basis, to the 401(k) plan, up to 6% of each participant’s salary. The Bank’s plan also allows a non-matching profit sharing contribution to be determined at the discretion of the Board of Directors. |
| · | The CompanyBank maintains the ESOP for employees of the Bank and its subsidiaries. The ESOP provides an opportunity for the employees of the Bank to become stockholders of the Company and thus strengthen their directprovide them with a greater financial interest in the success of the Bank. In addition, the ESOP assists the Bank in attracting and retaining capable personnel. As of December 31, 2014,2017, a total of 586,393540,138 shares of the Company’s common stock were owned by the ESOP, of which 561,393530,138 shares were allocated to employees. |
In addition, our executive officers receive modest benefits, including health insurance; however, the Compensation Committee in its discretion may revise, amend or add to the officer’sofficers’ benefits if it deems it advisable. The Compensation Committee believes these benefits are currently at or slightly below median competitive levels for comparable companies. The Compensation Committee has no current plans to make changes to the levels of benefits provided.
Determination of Executive Compensation
Traditionally, the Compensation Committee reviews our executive compensation program in November of each year, although decisions in connection with new hires and promotions are made on an as-needed basis. As part of the review process, each executive provides input into the performance of the Company and the performance of each executive officer, including himself. However, no executive officer participates in the Compensation Committee’s deliberations or decisions. Each executive’s current and prior compensation is considered in setting future compensation. In addition, the Compensation Committee performs an informal survey of area companies and banks and reviews the compensation practices of the surveyed companies. To some extent, the compensation plan (base salary, bonus and long-term incentive program) iscontains elements similar to the elementsthose used by many companies; however, our additional emphasis on fair treatment of all employees requires that the Company limitswe set executive salaries at a levellevels that doesdo not prohibit us from competingimpede our ability to compete for quality employees. The exact salary, annual bonus and stock option grants are chosen in an attempt to balance our competing objectives of fairness to all employees and attracting and retaining executive officers. The Compensation Committee also considered the favorable results of the nonbinding advisory vote on executive compensation held at the 20142017 Annual Meeting of Stockholders. The Compensation Committee determined that Mr. Hyatt would receive a 3% increase in base salary in 20152018 to $383,160$422,754 from a base salary of $372,000$410,441 in 2014.2017. Mr. Bevivino would receive an approximately 1.3%Hyatt received a 4% salary increase in base salary in 2015 to $228,000 from a base salary of $225,000 in 2014. Neither2017. The Compensation Committee determined that Mr. Hyatt nor Mr. Bevivino had receivedKeitz would not immediately receive a salary increase since 2012.in 2018 because he was appointed Chief Operating Officer in August 2017. Mr. LindlawKeitz’s salary will remain at $215,000 in 2018. The Compensation Committee determined that Mr. Susie would receive a 3% increase in base salary in 20152018 to $200,850$211,150 from a base salary of $195,000$205,000 in 2014. Mr. Anthony was appointed Chief Operating Officer in August 2014 with a base salary of $236,000.2017. The Compensation Committee determined that Mr. Anthony’sChick would receive a 3% increase in base salary would remain the same for 2015. Based on the informal surveyin 2018 to $241,020 from a base salary of area companies and banks, and the performance of the Company, the$234,000 in 2017. The Compensation Committee did not award aawarded discretionary bonusbonuses to executive officers in 2014 or 2013.2016 as follows: Mr. Hyatt - $20,000; Mr. Keitz - $4,000; Mr. Susie - $10,000; and Mr. Chick - $12,000.
Accounting and Tax Considerations
Generally,Under Section 162(m) of the Code, andcompanies are subject to limits on the IRS regulations adopted under that section, which are referreddeductibility of executive compensation. Deductible compensation is limited to collectively$1 million per year for each executive officer listed in the summary compensation table, with the exception of the executive listed as Section 162(m), denies a deduction to any publicly held corporation, suchresult of serving as the Company, for certain compensation exceeding $1,000,000 paid during each calendar year to each of the chief executive officer and the four other highest paid executive officers whose compensation must be reported to stockholders on the proxy statement. Section 162(m) does not apply to “qualified performance-based compensation.” The Company’s policyprincipal financial officer. Compensation that is to maximize the tax deductibility of compensation paid to our most highly compensated executives under Section 162(m). For example, awards under the 2008 Equity Incentive Plan are intended to satisfy the exemption for “qualified performance-based compensation” under Section 162(m).the Code’s definition is exempt from this limit.
The Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017, significantly modified Section 162(m) didof the Code. The Act eliminated the “qualified performance-based compensation” exception to the deductibility limitation under Section 162(m) for tax years commencing after December 31, 2017. The Tax Act provides “grandfathered” treatment for qualified performance-based compensation in excess of $1 million that meets the requirements of Section 162(m), is payable pursuant a written binding contract in effect as of November 2, 2017, and is not havemodified in any effect onmaterial respect. In addition, the CompanyAct expands the definition of “covered employee” to include the principal financial officer as well as any employee who has been designated a covered employee for any fiscal year beginning after December 31, 2016.
The Compensation Committee has historically attempted to structure its compensation arrangements to achieve deductibility under Section 162(m) of the Code. As was the case prior to the enactment of the Tax Act, the Compensation Committee will continue to monitor issues concerning the deductibility of executive compensation. Since corporate objectives may not always be consistent with the requirements for tax deductibility, the Compensation Committee is prepared, when it deems appropriate, to enter into compensation arrangements under which payments will not be deductible under Section 162(m) of the Code. Thus, deductibility will be one of many factors considered by the Compensation Committee in 2014.ascertaining appropriate levels or modes of compensation.
Summary Compensation Table
The following table sets forth information regarding compensation earned by the Company’s Chief Executive Officer Chief Operating Officer and the other two most highly compensated executive officerofficers that received total compensation of $100,000 or more during each of the last twopast fiscal years.year ("named executive officers").
Summary Compensation Table
Name and Principal Position | | Year | | Salary(1) | | | Bonus(1) | | | | | | All Other Compensation(3) | | | Total | | | Year | | Salary(1) | | | Bonus(1) | | | | | | | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Alan J. Hyatt | | 2014 | | $ | 372,000 | | | $ | - | | | $ | 38,400 | | | $ | 7,791 | | | $ | 418,191 | | | 2017 | | $ | 412,646 | | | $ | 20,000 | | | $ | 44,484 | | | $ | 4,286 | | | $ | 480,758 | |
President and Chief Executive | | 2013 | | $ | 372,000 | | | $ | - | | | $ | 74,815 | | | $ | 7,963 | | | $ | 454,778 | | | 2016 | | $ | 396,860 | | | $ | 20,000 | | | $ | 68,860 | | | $ | 4,528 | | | $ | 490,248 | |
Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James M. Anthony Executive Vice-President and Chief Operating Officer (4) | | 2014 | | $ | 86,231 | | | $ | - | | | $ | 13,250 | | | $ | 1,679 | | | $ | 101,160 | | |
| | |
Paul Susie | | | 2017 | | $ | 200,087 | | | $ | 10,000 | | | $ | 24,700 | | | $ | 9,896 | | | $ | 244,683 | |
Executive Vice-President and | | | 2016 | | $ | 79,093 | | | $ | 2,500 | | | $ | 18,013 | | | $ | 1,814 | | | $ | 101,420 | |
Chief Financial Officer(4) | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Thomas G. Bevivino | | 2014 | | $ | 225,000 | | | $ | - | | | $ | 26,500 | | | $ | 14,615 | | | $ | 266,115 | | |
Christopher Chick | | | 2017 | | $ | 235,219 | | | $ | 18,250 | | | $ | 29,640 | | | $ | 14,846 | | | $ | 297,718 | |
Executive Vice-President and | | 2013 | | $ | 225,000 | | | $ | - | | | $ | 78,000 | | | $ | 15,184 | | | $ | 318,184 | | | 2016 | | $ | 227,188 | | | $ | 12,000 | | | $ | 43,230 | | | $ | 7,634 | | | $ | 290,052 | |
Chief Financial Officer (5) | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
William F. Lindlaw | | 2014 | | $ | 195,000 | | | $ | - | | | $ | 26,500 | | | $ | 9,281 | | | $ | 230,781 | | |
Executive Vice-President and | | 2013 | | $ | 182,250 | | | $ | - | | | $ | 46,200 | | | $ | - | | | $ | 228,450 | | |
Chief Lending Officer (6) | | | | | | | | | | | | | | | | | | | | | | | |
Chief Lending Officer | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Amounts reflect compensation for services rendered in year indicated. |
(2) | This column reflects the aggregate grant date fair value of options awarded in 20142017 and 20132016 in accordance with FASB ASC Topic 718. Additional information regarding the size of the awards is set forth below under the “Outstanding Equity Awards” table. For information concerning the assumptions made in the valuation of these options, see Note 12 to the Company’s consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014.2017. The Company did not issue stock awards in 2017 or 2016. |
(3) | All other compensation for 20142017 consisted of the following elements: |
Name and Principal Position | | Year | | Health Care Contribution(a) | | | 401 (k) Matching Contribution(b) | | | ESOP Plan(c) | | | Total | |
| | | | | | | | | | | | | | |
Alan J. Hyatt | | 2014 | | $ | - | | | $ | 3,559 | | | $ | 4,232 | | | $ | 7,791 | |
President and Chief Executive Officer | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
James M. Anthony Executive Vice President and Chief Operating Officer | | 2014 | | $ | 1,679 | | | $ | - | | | $ | - | | | $ | 1,679 | |
| | | | | | | | | | | | | | | | | | |
Thomas G. Bevivino | | 2014 | | $ | 4,305 | | | $ | 6,527 | | | $ | 3,783 | | | $ | 14,615 | |
Executive Vice-President and Chief Financial Officer | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
William F. Lindlaw | | 2014 | | $ | 5,456 | | | $ | 3,825 | | | $ | - | | | $ | 9,281 | |
Executive Vice-President And Chief Lending Officer | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Health Care Contribution(a) | | | 401 (k) Matching Contribution(b) | | | ESOP Plan(c) | | | Total | |
| | | | | | | | | | | | | | |
Alan J. Hyatt | | 2017 | | $ | - | | | $ | 3,628 | | | $ | 658 | | | $ | 4,286 | |
President and Chief Executive Officer | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Paul Susie | | 2017 | | $ | 7,015 | | | $ | 2,882 | | | $ | - | | | $ | 9,896 | |
Executive Vice President and | | | | | | | | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Christopher Chick | | 2017 | | $ | 7,042 | | | $ | 7,568 | | | $ | - | | | $ | 14,846 | |
Executive Vice-President and Chief Lending Officer | | | | | | | | | | | | | | | | | | |
| (a) | Amounts reflect contributions made by the Company for the executive’s health insurance premiums in excess of the amounts the Company would otherwise contribute.contribute to employees in general. |
| (b) | Amounts reflect matching contributions made by the Company to the executive’s 401(k) plan. |
| (c) | Amounts reflect contributions by the Company to the executive’s ESOP account in 20142017 for 2013.2016 plan year. Amounts to be contributed by the Company to the executive’s ESOP account for 20142017 plan year have not yet been determined and are expected to be determined during the second quarter of 2015.2018. |
(4) | Mr. AnthonySusie became an employee and Chief OperatingFinancial Officer in August, 2014.July, 2016. |
(5) | Mr. Bevivino was the Chief Financial Officer prior to February, 2012 and has been the Chief Financial Officer since November, 2013. In addition, Mr. Bevivino was Chief Operating Officer from December 2011 to August 2014. |
20
(6) | Mr. Lindlaw became an employee and Chief Lending Officer in January, 2013. |
Narrative to Summary Compensation Table
The Company does not have employment agreements with the named executive officers. Salary and bonus decisions concerning named executive officers are made by the Compensation Committee as described above. The base salaries for 20152018 for Messrs. Hyatt, Anthony, BevivinoSusie and LindlawChick are $383,160, $236,000, $228,000$422,754, $211,150 and $200,850,$241,020, respectively. For more information, see “Determination of Executive Compensation” above.
On December 19, 2017, the Compensation Committee granted 20,000 options at an exercise price of $7.81 to Mr. Hyatt, 10,000 options at an exercise price of $7.10 to Mr. Susie and 12,000 options at an exercise price of $7.10 to Mr. Chick. All options awarded vest in five equal annual installments of 20% each over a five year period, and, except for those options awarded to Mr. Hyatt, expire six years from the grant date. Options awarded to Mr. Hyatt expire five years from the grant date.
Outstanding Equity Awards at Fiscal Year-End Table
The following table includes certain information with respect to the value of all unexercised options previously awarded to the named executive officers listed in the Summary Compensation Table as of December 31, 2014:2017:
Outstanding Equity Awards at Fiscal Year End 20142017
| | | Option Awards | | | | | | | Option Awards | | | | |
Name and Principal Position | | Option Grant Date | | Number of Securities Underlying Unexercised Options Exercisable | | | Number of Securities Underlying Unexercised Options Unexercisable | | | Option Exercise Price | | Option Expiration | | | | Number of Securities Underlying Unexercised Options Exercisable | | | Number of Securities Underlying Unexercised Options Unexercisable | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Alan J. Hyatt | | 03/16/10 | | | 16,000 | | | | 4,000 | (1) | | $ | 4.540 | | 03/16/15 | | 11/05/13 | | | 20,000 | | | | 5,000 | (1) | | $ | 5.310 | | 11/05/18 |
President and Chief Executive Officer | | 11/05/13 | | | 5,000 | | | | 20,000 | (3) | | $ | 5.310 | | 11/05/19 | | 12/23/14 | | | 9,000 | | | | 6,000 | (2) | | $ | 4.980 | | 12/23/19 |
| | 12/23/14 | | | - | | | | 15,000 | (4) | | $ | 4.980 | | 12/23/20 | | 12/22/15 | | | 8,000 | | | | 12,000 | (3) | | $ | 6.330 | | 12/22/20 |
| | | | | | | | | | | | | | | | | 11/22/16 | | | 4,000 | | | | 16,000 | (4) | | $ | 7.480 | | 11/22/21 |
James M. Anthony Executive Vice-President and Chief Operating Officer | | 12/23/14 | | - | | | 5,000 | (4) | | $ | 4.530 | | 12/23/20 | |
| | | | | | | | | | | | | | | | | 12/19/17 | | | - | | | | 20,000 | (5) | | $ | 7.810 | | 12/19/22 |
Thomas G. Bevivino | | 03/16/10 | | | 16,000 | | | | 4,000 | (1) | | $ | 4.130 | | 03/16/15 | |
| | | | | | | | | | | | | | | | |
Paul B. Susie | | | 11/22/16 | | | 1,000 | | | | 4,000 | (4) | | $ | 6.800 | | 11/22/22 |
Executive Vice-President and | | 01/02/13 | | | 3,000 | | | | 12,000 | (2) | | $ | 3.370 | | 01/02/19 | | 12/19/17 | | | - | | | | 10,000 | (5) | | $ | 7.100 | | 12/19/23 |
Chief Financial Officer | | 11/05/13 | | | 3,000 | | | | 12,000 | (3) | | $ | 4.830 | | 11/05/19 | | | | | | | | | | | | | | | |
| | 12/23/14 | | | - | | | | 10,000 | (4) | | $ | 4.530 | | 12/23/20 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
William F. Lindlaw | | 11/05/13 | | | 3,000 | | | | 12,000 | (3) | | $ | 4.830 | | 11/05/19 | |
Christopher Chick | | | 12/22/15 | | | 1,200 | | | | 1,800 | (3) | | $ | 5.750 | | 12/22/21 |
Executive Vice-President and | | 12/23/14 | | | - | | | | 10,000 | (4) | | $ | 4.530 | | 12/23/20 | | 11/22/16 | | | 2,400 | | | | 9,600 | (4) | | $ | 6.800 | | 11/22/22 |
Chief Lending Officer | | | | | | | | | | | | | | | | | 12/19/17 | | | - | | | | 12,000 | (5) | | $ | 7.100 | | 12/19/23 |
(1) | The options vest in five equal annual installments of 20% upon each of the first five anniversaries of the date of the grant on March 16, 2010. |
(2) | The options vest in five equal annual installments of 20% upon each of the first five anniversaries of the date of the grant on January 2, 2013. |
(3) | The options vest in five equal annual installments of 20% upon each of the first five anniversaries of the date of the grant on November 5, 2013. |
(4)(2) | The options vest in five equal annual installments of 20% upon each of the first five anniversaries of the date of the grant on December 23, 2014. |
(3) | The options vest in five equal annual installments of 20% upon each of the first five anniversaries of the date of the grant on December 22, 2015. |
Options Exercised and Stock Vested(4) | The options vest in five equal annual installments of 20% upon each of the first five anniversaries of the date of the grant on November 22, 2016. |
(5) | The options vest in five equal annual installments of 20% upon each of the first five anniversaries of the date of the grant on December 19, 2017. |
2421
No options were exercised by an executive officer in 2014 and the Company had no outstanding stock awards during 2014.
Potential Payments upon a Termination of Employment or Change in Control
The Company does not have employment agreements, severance or “change in control” agreements with its executive officers.
Under the 2008 Plan, all outstanding stock options automatically will become exercisable upon the termination of the employment of the holder due to death or permanent disability.
In the event of a “change in control,” as determined by the Compensation Committee in its sole discretion and defined in the Company’s 2008 Plan, all outstanding stock options will become immediately exercisable, as determined by the Compensation Committee in its sole discretion.exercisable. The Company’s 2008 Plan defines “change of control” to mean: (i) the sale of all, or a material portion, of the assets of the Company; (ii) a merger or recapitalization of the Company whereby the Company is not the surviving entity; (iii) an acquisition by which a person becomes a controlling stockholder within the meaning of federal banking regulations; or (iv) the acquisition, directly or indirectly, of the beneficial ownership (within the meaning of that term as it is used in Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of ten percent or more of the outstanding voting securities of the Company by any person, entity, or group; provided, however, that a change in control of the Company shall not include the acquisition or disposition of securities of the Company by any person in control of the Company at the time of the adoption of the plan2008 Plan and shall not include any subsequent acquisition or disposition of the securities of the Company by any person owned or controlled by, or under common control with, a person in control of the Company at the time of the adoption of these plans.the 2008 Plan.
InUnder the 2008 Plan, in the event of a change of control, the Compensation Committee, in its sole discretion, will take one or a combination of the following actions with respect to outstanding stock options, to be effective as of the date of such change in control:
| · | provide that such options shall be assumed, or equivalent options shall be substituted by the acquiring or succeeding corporation,corporation; or |
| · | provide that the participants will receive upon the closing of the change in control transaction a cash payment for each option surrendered equal to the difference between (1) the market value of the consideration to be received for each share of our common stock in the change in control transaction times the number of shares subject to a surrendered option and (2) the aggregate exercise price of such surrendered options. |
The following table sets forth the intrinsic value of the unvested stock options held by each named executive officer named in the Summary Compensation Table as of December 31, 20142017 that would become vested upon termination of employment of the executive due to death or permanent disability or, assuming that the Compensation Committee so elects, the occurrence of a change in control as described above:
Name and Principal Position | | Year | | Amount (1) | |
| | | | | |
Alan J. Hyatt | | 2014 | | $ | - | |
President and Chief Executive Officer | | | | | | |
| | | | | | |
James M. Anthony Executive Vice-President and Chief Operating Officer | | 2014 | | $ | 50 | |
| | | | | | |
Thomas G. Bevivino | | 2014 | | $ | 15,780 | |
Executive Vice-President and Chief Financial Officer | | | | | | |
| | | | | | |
William F. Lindlaw | | 2014 | | $ | 100 | |
Executive Vice-President and | | | | | | |
Chief Lending Officer | | | | | | |
Name and Principal Position | | Year | | Amount (1) | |
| | | | | |
Alan J. Hyatt | | 2017 | | $ | 39,500 | |
President and Chief Executive Officer | | | | | | |
| | | | | | |
Paul B. Susie | | 2017 | | $ | 3,440 | |
Executive Vice-President and | | | | | | |
Chief Financial Officer | | | | | | |
| | | | | | |
Christopher Chick | | 2017 | | $ | 9,054 | |
Executive Vice-President and Chief Lending Officer | | | | | | |
(1) | Calculated based on the difference between $7.26, the closing price of our common stock on December 31, 20142017, and the exercise price of unvested stock options as of such date, multiplied by the number of outstanding options. |
In the event that the employment of executive officers was terminated for any other reason on December 31, 2014,2017, none of the unvested options would vest and all such options would expire.
In the event that the employment of an executive officer was terminated due to disability or death on December 31, 2014,2017, they or their estate would be entitled to payments under disability or life insurance plans that the Company maintains for all full-time employees.
Director Compensation
For 2014,2017, non-employee directors of the Company received a fee of $750 per attended meeting and non-employee directors of the Bank received $1,550 per attended meeting. Each director of the Company is also a director of the Bank. Meetings of the directors of the Company are held immediately before or after meetings of the directors of the Bank. In addition, each non-employee member of a committee of the Board of Directors received a fee for committee meetings attended in 20142017 as follows: $880 per Compensation Committee meeting; $200 per Loan Committee meeting; $800 per Corporate Governance Committee meeting; and $880 per Audit and Examining Committee meeting. The Chairman of each committee received an additional $270 per meeting. Additionally, the Audit Committee Chairman receives a $1,000 monthly fee. A total of $287,310$278,150 was paid as directors’ fees and committee fees for the Company and the Bank in 2014.2017.
The Board of Directors decided that for 2015,2018, there would be no change in any of the fees payable to non-employee directors described above.
Non-employee directors are eligible to receive awards under the 2008 Plan, although no grantsand a total of 12,000 stock options were made in 2014.granted to certain non-employee directors on December 19, 2017.
The following table sets forth a summary of the compensation the Company paid to our non-employee directors (with the exception of Director Keitz who became an executive officer in 2014:August 2017) in 2017:
Director Compensation for 20142017
Name | | Fees earned or paid in cash(1) | | | Fees earned or paid in cash(1) | | | Option Awards(2) | | | All Other Compensation(3) | | | Total | |
| | | | |
Michael H. Cook(2) | | $ | 24,600 | | |
| | | | | | | | | | | | | | | | |
Raymond S. Crosby | | $ | 31,040 | | | $ | 31,290 | | | $ | 4,940 | | | | | | $ | 36,230 | |
| | | | | | | | | | | | | | | | | | | |
James H. Johnson, Jr. | | $ | 28,500 | | | $ | 31,600 | | | $ | 4,940 | | | | | | $ | 36,540 | |
| | | | | | | | | | | | | | | | | | | |
David S. Jones | | $ | 27,600 | | | $ | 28,400 | | | $ | 4,940 | | | | | | $ | 33,340 | |
| | | | | | | | | | | | | | | | | | | |
Eric M. Keitz | | $ | 37,690 | | | $ | 38,130 | | | $ | 61,008 | | | $ | 73,887 | | | $ | 173,025 | |
| | | | | | | | | | | | | | | | | | | | |
John A. Lamon III | | $ | 37,690 | | | $ | 39,450 | | | $ | 4,940 | | | | | | | $ | 44,390 | |
| | | | | | | | | | | | | | | | | | | | |
Albert W. Shields | | $ | 33,070 | | | $ | 34,540 | | | $ | 4,940 | | | | | | | $ | 39,480 | |
| | | | | | | | | | | | | | | | | | | | |
Mary Kathleen Sulick | | $ | 30,240 | | | $ | 35,030 | | | $ | - | | | | | | | $ | 35,030 | |
| | | | | | | | | | | | | | | | | | | | |
Konrad M. Wayson | | $ | 36,880 | | | $ | 40,480 | | | $ | 4,940 | | | | | | | $ | 45,420 | |
(1) | No stock options were granted to directorsAmounts reflect compensation for services rendered in 2014. At December 31, 2014, there were no option awards outstanding for non-employee directors.2017. |
(2) | This column reflects the aggregate grant date fair value of options awarded in 2017 in accordance with FASB ASC Topic 718. For information concerning the assumptions made in the valuation of these options, see Note 12 to the Company’s consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The total number of option awards outstanding as of December 31, 2017 was 6,000 for directors Raymond S. Crosby, James H. Johnson Jr., David S. Jones, John A. Lamon III, Albert W. Shields and Konrad M. Wayson. Mary Kathleen Sulick did not have any option awards outstanding as of December 31, 2017. Mr. Cook became a director of theKeitz had 26,000 options outstanding at December 31, 2017. The Company did not issue stock awards in April, 2014 and a director of the Bank in September 2013.2017. |
Compensation Committee Interlocks and Insider Participation(3) | All other compensation for Mr. Keitz represents the following amount paid to him after being named Chief Operating Officer in August 2017: Salary - $68,635, Bonus - $4,000, and $1, 252 in Company paid health insurance premiums. |
No member of our Board’s Compensation Committee has served as one of our officers or employees at any time. None of our executive officers serve as a member of the board of directors or compensation committee of any other company that has an executive officer serving as a member of our Board of Directors or Compensation Committee.
Certain Transactions with Related Persons
Alan J. Hyatt, who is an affiliated person by virtue of his stock ownership and positions as director and President of the Company and the Bank, is a partner of the law firm of Hyatt & Weber, P.A., which serves as general counsel to the Company and the Bank. The law firm of Hyatt & Weber, P.A. received fees in the amount of $323,711$148,703 and $615,134$227,570 for services rendered to the Company and to the Bank and its subsidiaries for the years ended December 31, 20142017 and 2013,2016, respectively. The law firm received $209,801$325,829 and $247,956$283,478 in fees from borrowers who obtained loans from the Bank for the year ended December 31, 20142017 and 2013,2016, respectively. Mr. Hyatt’s interest in these fees is not determinable.
During January, 2007, Hyatt & Weber, P.A. entered into a five year lease agreement with HS West, LLC, a wholly owned subsidiary of the Company to lease office space from the Company. The term of the lease was five years with the option to renew the lease for three additional five year terms. The monthly lease payment is $20,056, which increases 2% annually beginning with the third anniversary of the lease. The firstsecond option to renew was exercised in January 2012.2017. The lease payment for 20152018 will be $21,709.$23,038 per month. Total rental income received by the Company during 20142017 and 20132016 was $255,404 each year.$276,458 and $270,150, respectively. In addition, Hyatt & Weber, P.A. reimburses the Company for its share of common area maintenance and utilities. The total reimbursement for 20142017 and 20132016 was $129,438$130,803 and $122,979,$133,399, respectively.
David S. Jones cofounded and serves as the Secretary/Treasurer of Jones of Annapolis, Inc., which provides services to the Bank. The Bank selected Jones of Annapolis, Inc. to provide these services based on a competitive bidding process. Fees paid by the Bank for those services totaled $58,735 and $640,012 for the years ended December 31, 2014 and 2013, respectively.
In November 2008, the Company completed a private placement of units, each unit consisting of 6,250 shares of the Company’s Series A 8.0% Non-Cumulative Convertible Preferred Stock and a Subordinated Note in the original principal amount of $50,000. The following table shows the outstanding principal due on the Subordinated Notes as of December 31, 2014 (which did not change during the year) and the total interest paid or accrued on the Subordinated Notes for 2014 and 2013 with respect to Subordinated Notes held by directors, nominees for director, executive officers and greater than 5% stockholders of Severn Bancorp, Inc., or their family members or affiliates:
Name | | Principal of Subordinated Notes | | | Interest Paid or Accrued in 2014 | | | Interest Paid or Accrued in 2013 | |
| | | | | | | | | |
Thomas G. Bevivino | | $ | 25,000 | | | $ | 2,000 | | | $ | 2,000 | |
| | | | | | | | | | | | |
Michael H. Cook(1) | | $ | 50,000 | | | $ | 4,000 | | | $ | 4,000 | |
| | | | | | | | | | | | |
Alan J. Hyatt(2) | | $ | 100,000 | | | $ | 8,000 | | | $ | 8,000 | |
| | | | | | | | | | | | |
Louis Hyatt(3) | | $ | 150,000 | | | $ | 12,000 | | | $ | 12,000 | |
| | | | | | | | | | | | |
Melvin Hyatt(3) (4) | | $ | 25,000 | | | $ | 2,000 | | | $ | 2,000 | |
| | | | | | | | | | | | |
John A. Lamon, III | | $ | 50,000 | | | $ | 4,000 | | | $ | 4,000 | |
| | | | | | | | | | | | |
Albert W. Shields | | $ | 150,000 | | | $ | 12,000 | | | $ | 12,000 | |
| | | | | | | | | | | | |
Konrad M. Wayson | | $ | 50,000 | | | $ | 4,000 | | | $ | 4,000 | |
(1) | Mr. Cook holds the Subordinated Note in an investment fund managed by Mr. Cook and in which he has an ownership interest. |
(2) | Mr. Alan Hyatt and his wife hold one Subordinated Note and Crownsville Family Limited Partnership, of which Mr. Alan Hyatt is a general partner holds one Subordinated Note. |
(3) | Subordinated Notes are owned jointly with their spouse. |
(4) | Retired from the Board at the annual meeting in April 2010. |
Louis Hyatt, a 10% stockholder and the father of Alan J. Hyatt, is a real estate broker at Hyatt Commercial, a wholly owned subsidiary. As a real estate broker, Louis Hyatt earned $63,361 and $27,866 in commissions from Hyatt Commercial during 2014 and 2013, respectively. In addition, Hyatt Commercial provided health insurance benefits to Louis Hyatt during 2014 and 2013 at a cost of $1,812 per year.
The Bank has, and expects to continue to have, loan and other banking transactions (including, but not limited to, checking, savings and time deposits) with certain of its directors, nominees for director, officers, certain of their immediate family members and certain corporations or organizations with which they are affiliated. All such loan and other banking transactions (i) have not been classified as nonaccrual, past due, restructured or potential problems, (ii) were made in the ordinary course of business, (iii) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to us, and (iv) did not involve more than the normal risk of collectability or present other unfavorable features.
The Company has adopted written policies and procedures regarding approval of transactions between the Company and any employee, officer, director and certain of their family members and other related persons required to be reported under Item 404 of Regulation S-K. Under these policies, a majority of the disinterested members of the Audit and Examining Committee must approve any transaction between the Company and any related party that involves more than $10,000. If a majority of the members of the Audit and Examining Committee are interested in the proposed transaction, then the transaction must be approved by a majority of the disinterested members of the Board (excluding directors who are employees of the Company). The Chair of the Audit and Examining Committee has the delegated authority to pre-approve or ratify (as applicable) any related party transaction in which the aggregate amount involved is expected to be less than $120,000. In determining whether to approve or ratify a related party transaction, the Audit and Examining Committee will take into account, among other factors it deems appropriate, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. After adopting this policy, the Audit and Examining Committee ratified each of the transactions described above and approved the continuation of such transactions for the current year on substantially the same terms and conditions.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR INCLUSION IN PROXY STATEMENT
Any proposal that a Company stockholder wishes to have included in the Company’s proxy statement and form of proxy relating to the Company’s 20162019 Annual Meeting of Stockholders under Rule 14a‑8 of the Securities Exchange Act of 1934, as amended must be received by the Company’s Secretary at Severn Bancorp, Inc., 200 Westgate Circle, Suite 200, Annapolis, Maryland 21401 on or before November 25, 2015.26, 2018. Nothing in this paragraph shall be deemed to require the Company to include in its proxy statement and form of proxy for such meeting any stockholder proposal that does not meet the requirements of the SEC in effect at the time, including Rule 14a-8.
In addition, stockholders are notified that the deadline for providing the Company timely notice of any stockholder proposal submitted outside of the Rule 14a-8 process for consideration at the Company’s 20162019 Annual Meeting of Stockholders is 60 days prior to the 20162019 Annual Meeting of Stockholders. For example, assuming that the 20162019 Annual Meeting is held on April 28, 2016,25, 2019, then the notice would be due on or before February 29, 2016.25, 2019. With respect to any proposal which the Company does not have notice of on or prior to such 60 day notice period, discretionary authority shall be granted to the persons designated in the Company’s proxy related to the 20162019 Annual Meeting of Stockholders to vote on such proposal.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company’s Annual Report to Stockholders for the year ended December 31, 20142017 accompanies this Proxy Statement.Statement
.
Upon receipt of a written request, the Company will furnish to any stockholder without charge a copy of the Company’s Annual Report on Form 10-K10--K for the year ended December 31, 20142017 and the exhibits thereto required to be filed with the SEC under the Securities Exchange Act of 1934. Such written request should be directed to:
Thomas G. Bevivino
Paul B. Susie
Executive Vice-President and Secretary
Severn Bancorp, Inc.
200 Westgate Circle, Suite 200
Annapolis, Maryland 21401
The Form 10‑K is not part of the proxy solicitation materials.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, certain officers and persons who own more than 10% of its common stock, to file with the Securities and Exchange Commission initial reports of ownership of the Company’s equity securities and to all subsequent reports when there are changes in such ownership. Based on a review of reports submitted to the Company, except for Directors Raymond S. Crosby, James H. Johnson Jr., David S. Jones, John A. Lamon III, Albert W. Shields and Konrad M. Wayson, and officers Alan J. Hyatt, Eric M. Keitz, Chris Chick, and Paul B. Susie, who each had one late Form 4 reporting one late transaction, the Company believes that during the fiscal year ended December 31, 20142017 all other Section 16(a) filing requirements applicable to the Company’s officers, directors, and more than 10% owners were complied with on a timely basis, except that Mr. Cook did not file a timely Form 3 Report concerning initial beneficial ownership of securities and Messrs. Lamon and Crosby did not timely file a Form 4 Report with respect to one transaction.basis.
COMMUNICATIONS WITH DIRECTORS
If any stockholder wishes to communicate with a member of the Board of Directors, the stockholder may communicate in writing to 200 Westgate Circle, Suite 200, Annapolis, Maryland 21401, attention: Thomas G. Bevivino,Paul B. Susie, via first class mail, or by facsimile at (410) 260-2059. All communications received by Mr. Susie will be distributed to all members of the Board of Directors. Stockholders may also speak with the directors who attend the Annual Meeting. All communications received by Mr. Bevivino will be distributed to all members of the Board of Directors.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not know of any other matters to be presented for action by the Stockholders at the Annual Meeting. If, however, any other matters not now known are properly brought before the Annual Meeting, the persons named in the accompanying proxy will vote such proxy in accordance with the determination of a majority of the Board of Directors. The enclosed proxy confers discretionary authority to vote with respect to any and all of the following matters that may come before the Annual Meeting: (i) matters which the Company did not receive notice by February 27, 201526, 2018 were to be presented at the Annual Meeting; (ii) approval of the minutes of a prior meeting of the stockholders, if such approval does not amount to ratification of the action taken at the Annual Meeting; (iii) the election of any person to any office for which a bona fide nominee named in this Proxy Statement is unable to serve or for good cause will not serve; (iv) any proposal omitted from this Proxy Statement and the form of the proxy pursuant to Rules 14a-8 or 14a-9 under the Securities Exchange Act of 1934; and (v) matters incident to the conduct of the Annual Meeting.
| By order of the Board of Directors |
| |
| /s/Paul B. Susie |
| |
| Thomas G. BevivinoPaul B. Susie |
| Secretary |
Annapolis, Maryland
March 24, 201529, 2018
SEVERN BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SEVERN BANCORP, INC. (THE "COMPANY") FOR THE ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY TO BE HELD ON APRIL 28, 2015 (THE “MEETING”).
The undersigned hereby appoints Thomas G. Bevivino, or his designee, with full power of substitution, to act as attorney and proxy for the undersigned, to represent and to vote, as designated below, all shares of common stock of the Company, which the undersigned is entitled to vote at the Meeting and at any postponement or adjournment thereof, with all powers the undersigned would possess if personally present.
The directors recommend a vote “FOR” Proposals 1 and 2.
| | | FOR
| WITHHOLD AUTHORITY |
| | | | | |
1. | The election as directors of the nominees listed below for a term of three years: | | ☐ | ☐ |
| | | | | |
| Alan J. Hyatt | | | | |
| James H. Johnson, Jr. | | | | |
| Mary Kathleen Sulick | | | | |
| | | | | |
| | | | | |
| INSTRUCTIONS: To withhold your vote for any individual nominee, insert the nominee’s name on the line provided below.
|
| | | | | |
| | | | | |
| | | FOR
| AGAINST
| ABSTAIN
|
| | | | | |
2. | The ratification of the appointment of BDO USA, LLP as independent auditor of the Company for the year ending December 31, 2015, as more fully described in the accompanying Proxy Statement. | | ☐ | ☐ | ☐ |
| |
| This proxy, when properly completed and executed, will be voted in the manner directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF ALL OF THE NOMINEES SPECIFIED IN PROPOSAL 1, and “FOR” APPROVAL OF PROPOSAL 2. In addition, this proxy will be voted at the discretion of the proxy holder(s) upon any other matter that may properly come before the Meeting as described in the Proxy Statement.
|
Should the signatory(ies) be present and elect to vote at the Meeting, or at any postponements or adjournments thereof, and after notification to the Secretary of the Company at the Meeting of such person’s decision to terminate this proxy, the power of said attorneys and proxies shall be deemed terminated and of no further force and effect. The signatory(ies) may also revoke this proxy by filing a subsequently dated proxy or by written notification to the Secretary of the Company of his or her decision to terminate this proxy.
The signatory(ies) acknowledge(s) receipt from the Company prior to the execution of this proxy of Notice of the Meeting, a Proxy Statement dated March 24, 2015, and an Annual Report to Stockholders for the year ended December 31, 2014.
| | Please check here if you |
Dated: ___________, 2015 | | ☐ plan to attend the Meeting.
|
| |
| SIGNATURE OF STOCKHOLDER |
| |
| |
| SIGNATURE OF STOCKHOLDER |
Please sign exactly as your name appears on this Proxy card. When signing as attorney, executor, administrator, trustee, or guardian, or on behalf of a corporation, partnership or other entity, please give your full title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. |