SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SEVERN BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): [X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
Severn Bancorp, Inc.
1919 A West Street, Annapolis, Maryland 21401
March 27, 2003
To the Shareholders of Severn Bancorp, Inc.:
You are cordially invited to attend the Annual Meeting of shareholders
of Severn Bancorp, Inc. to be held on Wednesday, April 30, 2003, at 7:30 p.m.
Eastern Time, at The Radisson Hotel, 210 Holiday Court, Annapolis, MD 21401.
At the Annual Meeting, you will be asked to elect four directors, each
to serve for a three-year term, ratify the appointment of Anderson Associates,
LLP as independent auditor of Severn Bancorp, Inc. and to transact such other
business as may properly come before the Annual Meeting or any adjournments.
The Board of Directors unanimously recommends that you vote FOR the
election of all the Board's nominees for election as directors and FOR the
ratification of Anderson Associates, LLP as independent auditor for Severn
Bancorp, Inc. We encourage you to read the accompanying Proxy Statement, which
provides information about Severn Bancorp, Inc. and the matters to be considered
at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed postage
paid envelope.
Sincerely,
/s/
Alan J. Hyatt
Chairman, President and
Chief Executive Officer
SEVERN BANCORP, INC.
1919 A West Street
Annapolis, Maryland 21401
(410) 841-6925
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
April 30, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Severn Bancorp, Inc. will be held at The Radisson Hotel, 210 Holiday Court,
Annapolis, Maryland 21401 on Wednesday, April 30, 2003, at 7:30 p.m., Eastern
Time, and at any adjournments thereof, for the following purposes, all of which
are more completely set forth in the accompanying Proxy Statement:
1. To elect Alan J. Hyatt, Melvin E. Meekins, Jr., Louis
DiPasquale, Jr. and Keith Stock to serve as directors for a
three-year term;
2. To ratify the appointment of Anderson Associates, LLP as
independent auditor for Severn Bancorp, Inc. for the year
ending December 31, 2003; and
2. To transact such other business as may properly come before
the Annual Meeting and any postponements or adjournments of
the meeting.
Except for procedural matters, the Board of Directors is not aware of
any other matters that may come before the Annual Meeting and any adjournments
of the meeting.
Shareholders of record at the close of business on March 17, 2003 are
entitled to notice of and to vote at the Annual Meeting and at any adjournments
of the meeting.
By Order of the Board of Directors
/s/
S. Scott Kirkley
Secretary
Annapolis, Maryland
March 27, 2003
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER
YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED. ANY PROXY
GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO ITS
EXERCISE.
PROXY STATEMENT
FOR
SEVERN BANCORP, INC.
1919A WEST STREET
ANNAPOLIS, MARYLAND 21401
410-841-6925
This proxy statement contains information about the annual meeting of
shareholders of Severn Bancorp, Inc. to be on Wednesday, April 30, 2003, at 7:30
p.m. local time at The Radisson Hotel, 210 Holiday Court, Annapolis, Maryland
21401 and at any postponements or adjournments of the meeting.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why did you send me this proxy statement?
We sent you this Proxy Statement and the enclosed proxy card because
you were a shareholder of Severn Bancorp, Inc. (the "Company") on March 17,
2003. Our Board of Directors chose this day as the record date for shareholders
entitled to vote at the Annual Meeting of Shareholders. The Board of Directors
is soliciting your proxy to be voted at the Annual Meeting of Shareholders.
This Proxy Statement summarizes the information you need to know to
cast an informed vote at the meeting. However, you do not need to attend the
meeting to vote your shares. Instead, you may simply complete, sign and return
the enclosed proxy card.
We began sending this Proxy Statement, Notice of Annual Meeting and the
enclosed proxy card on or about March 27, 2003 to all shareholders entitled to
vote. On the record date, there were 4,142,592 shares of our common stock issued
and outstanding. The common stock is our only class of stock outstanding. We are
also sending our Annual Report/Form 10-K for the fiscal year ended December 31,
2002 along with this Proxy Statement. The Annual Report/Form 10-K is not to be
deemed a part of the material for the solicitation of proxies.
How do I vote by proxy?
You vote your proxy by completing the proxy card enclosed in accordance
with its instructions, signing and dating the proxy and returning it in the
postage-paid envelope. You may also just sign and date your proxy card and
return it. Your vote is important. Whether you plan to attend the meeting or
not, we urge you to complete, sign and date the enclosed proxy card and to
return it promptly in the envelope provided. Returning the proxy card will not
affect your right to attend the meeting and vote.
If you properly fill in your proxy card and send it to us in time to
vote, your "proxy" (one of the individuals named on your proxy card) will vote
your shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares as recommended by the Board
of Directors as follows:
o "FOR" the election of all four nominees for director, and
o "FOR" ratification of the appointment of Anderson Associates,
LLP as independent auditor for the year ending December 31,
2003.
In addition, the proxy card confers authority on the proxy named in the
proxy card to vote with respect to:
1. The election of any person as a director should the nominee be unable to
serve or, for good cause, will not serve, and
2. Other proposals for which management did not have notice at least 60 days
prior to the date of the annual meeting of shareholders, and
3. Matters incidental to the conduct of the meeting.
On these other matters, your proxy will vote in accordance with the
recommendation of the Board of Directors, or, if no recommendation is given, in
their own discretion. At the time this Proxy Statement was mailed, we knew of no
matters that needed to be acted upon at the meeting, other than those discussed
in this Proxy Statement.
How many votes do I have?
The number of votes you have is dependent on the number of shares of
common stock you own. Each share of common stock entitles you to one vote. The
proxy card indicates the number of shares of common stock that you own.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised if you file with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request. Attendance at the meeting will not by itself
revoke a previously granted proxy.
How do I vote in person?
If you plan to attend the meeting and vote in person, we will give you
a ballot form when you arrive. However, if your shares are held in the name of
your broker, bank, or other nominee, you must bring a proxy card and letter from
the nominee authorizing you to vote the shares and indicating that you were the
beneficial owner of the shares on March 17, 2003, the record date for voting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the conduct of business at the meeting. Proxies
that are marked as abstentions will be included in the calculation of the number
of shares considered to be present at the meeting.
What vote is required for each proposal?
The four nominees for director who receive a majority of the votes
represented and voting at the meeting will be elected. As a result, if you do
not vote for a particular nominee or you indicate "withhold authority to vote"
for a particular nominee on your proxy card, your vote will not count either
"for" or "against" the nominee.
In order to ratify the selection of the independent auditor, the
auditor must receive the affirmative vote of a majority of the votes represented
and voting at the meeting. As a result, if you "abstain" from voting, it has the
same effect as if you voted "against" this proposal.
In order to approve any other matters that may properly come before the
meeting, generally, a majority of those votes cast by stockholders shall be
sufficient to pass on the matter. However, there may be occasions where a
greater vote is required by law, or by our Articles of Incorporation or Bylaws.
Who will bear the costs of solicitation of proxies?
We will bear the costs of this solicitation, including the expense of
preparing, assembling, printing and mailing this Proxy Statement and the
material used in this solicitation of proxies. The proxies will be solicited
principally through the mails, but directors, officers and regular employees of
the Company may solicit proxies personally or by telephone. Although there is no
formal agreement to do so, we may reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expense in forwarding
these proxy materials to their principals. In addition, we may pay for and
utilize the services of individuals or companies we do not regularly employ in
connection with the solicitation of proxies.
STOCK OWNERSHIP
Who are the largest owners of Severn Bancorp's common stock?
Persons and groups owning in excess of 5% of the common stock are
required to file reports with the Securities and Exchange Commission regarding
their ownership pursuant to the Securities Exchange Act of 1934. Except as set
forth in the following tables, we know of no person or entity, including any
group of persons, who or which is the beneficial owner of more than 5% of the
outstanding shares of common stock on the record date. "Beneficial ownership" is
a technical term broadly defined by the Securities and Exchange Commission to
mean more than ownership in the usual sense. So, for example, you beneficially
own common stock not only if you hold it directly, but also if you hold it
indirectly or, through a relationship, contract, or understanding, have, or
share, the power to vote the stock, to sell it, or you have the right to acquire
it within 60 days of the record date.
How much stock do Severn Bancorp's directors and officers own?
The following table shows the beneficial ownership of the Company's
common stock as of March 17, 2003 by (i) our President and Chief Executive
Officer; (ii) our most highly compensated executive officers in 2002; (iii) each
director and nominee for director; and (iv) by all directors and executive
officers as a group.
Beneficial
Ownership of Percent of
Name of Individual Severn Bancorp Total
Nominees for Director:
Alan J. Hyatt .......................... 1,008,806 1 24.35%
Melvin E. Meekins, Jr. ................. 203,125 2 4.90%
Louis DiPasquale, Jr. .................. 93,081 3 2.25%
Keith Stock ............................ 39,000 4 0.94%
Directors Continuing in Office:
S. Scott Kirkley ....................... 139,419 5 3.37%
Melvin Hyatt ........................... 79,617 6 1.92%
Ronald P. Pennington ................... 56,466 7 1.36%
T. Theodore Schultz .................... 25,500 8 0.62%
Dimitri Sfakiyanudis ................... 30,000 0.72%
Other Executive Officer
Cecilia Lowman ......................... 54,225 9 1.31%
All directors and executive
officers as a group....................... 1,729,239 41.74%
1 595,995 of such shares are owned by Mr. Hyatt and his wife. He controls
9,000 shares as custodian for his children. The Company's ESOP holds an
additional 44,332 shares for the benefit of Mr. Hyatt. The number of shares
indicated includes 378, 593 shares which Mr. Hyatt can vote as a trustee of
the Company's ESOP.
2 159,915 of such shares are owned by Mr. Meekins and his wife. The Company's
ESOP holds an additional 46,110 shares for the benefit of Mr. Meekins. The
number of shares indicated does not include the shares which Mr. Meekins
can vote as a trustee of the Company's ESOP.
3 61,380 of such shares are owned by Mr. DiPasquale for the benefit of his
children.
4 30,000 shares are held by First Financial Partners, Inc., a private
investment company of which Mr. Stock serves as Chairman.
5 131,175 of such shares are owned by Mr. Kirkley and his wife. The Company's
ESOP holds an additional 30,594 shares for the benefit of Mr. Kirkley.
6 16,500 of such shares are owned by Mr. Hyatt and his wife. Melvin Hyatt is
the uncle of Alan J. Hyatt.
7 All such shares are owned by Mr. Pennington and his wife.
8 7,500 of such shares are owned by Mr. Schultz and his wife.
9 54,225 of such shares are held by Mrs. Lowman and her husband. The
Company's ESOP holds an additional 21,638 shares for the benefit of Mrs.
Lowman.
PRINCIPAL SHAREHOLDERS
The following table presents information known to the Company regarding
the beneficial ownership of Common Stock as of March 17, 2003 by each person
believed to be the beneficial owner of more than 5% of the outstanding Common
Stock of the Company.
Number of Shares
and Nature of Percent of
Beneficial Common Stock
Name and Address of Beneficial Owner Ownership(a) Outstanding
Alan J. Hyatt 10 1,008,806 24.35%
1919 West Street
Annapolis, Maryland 21401
Louis Hyatt 11 431,100 10.41%
1919 West Street
Annapolis, Maryland 21401
The Severn Savings Bank Employee Stock Ownership Plan Trust 12 378,593 9.14%
(the "ESOP Trust")
c/o Severn Bancorp, Inc.
1919 A West Street
Annapolis, Maryland 21401
10 595,995 of such shares are owned by Mr. Hyatt and his wife. He controls
9,000 shares as custodian for his children. The Company's ESOP holds an
additional 44,332 shares for the benefit of Mr. Hyatt. The number of shares
indicated includes 378, 593 shares which Mr. Hyatt can vote as a trustee of
the Company's ESOP.
11 21,690 of such shares are owned by Mr. Hyatt and his wife. Louis Hyatt is
the father of Alan J. Hyatt.
12 Employees cannot vote or control the stock held for their benefit in the
Company's ESOP and the number of such shares are, therefore, not included
on their behalf in this chart in the number of shares held by such
individual. The shares of stock in the Company's ESOP are voted by the
trustees of the plan; the trustees are Alan J. Hyatt and Melvin E. Meekins,
Jr.
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
Proposal 1: Election of Directors
General. We have nominated four directors for election at the annual
meeting, which is the number of directorships fixed for the election of
directors.
We have nominated the persons named below, three of whom are present
members of the Board of Directors of the Company, for election to serve until
the annual meeting of shareholders for the year ended December 31, 2005.
[See chart on following page]
Name of Individual Age 13 Principal Occupation for Last Five Years
- -------------------------------- ------ ------------------------------------------------------
Alan J. Hyatt 48 Alan J. Hyatt has been Chairman of the Board and President of the
Severn Savings Bank, FSB (the "Bank"), a subsidiary of the
Company, since 1982, having previously served as an officer
and director since 1978. He is also the Chairman of the Board
and President of the Company. Mr. Hyatt has been a partner in the
law firm of Hyatt, Peters & Weber, LLP, Annapolis, Maryland
since 1978 and is a real estate broker with Arundel Realty
Services, LLC, Annapolis, Maryland. Mr. Hyatt spends
approximately 50% of his professional time on the affairs
of the Bank and the Company and the balance on his law practice.
Melvin E. Meekins, Jr. 61 Melvin E. Meekins, Jr. joined the Bank as a Director and Executive
Vice President in April 1983, and he serves in the same capacity for
the Company. Mr. Meekins is the Bank's Principal Operating
Officer. Mr. Meekins has been employed in the savings and loan
industry since 1962. He is a graduate of the Institution of
Financial Education's Executive Development School, University of
Connecticut and the Graduate School of Savings & Loan, Indiana
University.
Louis DiPasquale, Jr. 80 Louis DiPasquale, Jr. has been a Director since the inception of the
Company and the Bank. Mr. DiPasquale has been the owner/operator of
the Motel Carlton in Baltimore, Maryland since 1964. Mr. DiPasquale
served as Secretary/Treasurer of the Bank from 1964 to 1978.
The director nominee currently not serving as a director is:
Name of Individual Age 13 Principal Occupation for Last Five Years
- -------------------------------- ------------------------------------------------------
Keith Stock 50 Keith Stock served as a Director of the Bank From April 1990 to
December 1993. Mr. Stock is Global Vice President of Cap Gemini
Ernst & Young. Previously he was Chairman and Chief Executive
Officer of First Financial Investors, Inc., the bank holding company
for St. Louis Bank, FSB. Mr. Stock earned his A.B. from Princeton
University and received his M.B.A. in finance from the Wharton
School, University of Pennsylvania.
13 As of December 31, 2002
Directors Continuing in Office. The directors continuing in office are:
Name of Individual Age13 Principal Occupation for Last Five Years
- -------------------------------- ------- ------------------------------------------------------
S. Scott Kirkley 50 S. Scott Kirkley has been a Director and Secretary/Treasurer of the
Bank since 1980 and Senior Vice President since 1989. He serves
in the same capacities for the Company. He has been employed by
the Bank on a full-time basis since 1987 and has primary
responsibility for the Bank's residential loan operations.
Melvin Hyatt 70 Melvin Hyatt has been a Director of the Company since its inception
and a Director of the Bank since 1978. He is employed by the
Housing Authority of the City of Annapolis. Mr. Hyatt is the uncle
of Alan J. Hyatt.
Ronald P. Pennington 63 Ronald P. Pennington has been a Director of the Company since its
inception and a Director of the Bank since 1980. Mr. Pennington has
owned and operated an independent tool distributorship since 1985,
and now is a retired investor.
T. Theodore Schultz 63 T. Theodore Schultz has been a Director of the Company since its
inception and a Director of the Bank since 1986. Mr. Schultz is
self-employed and owns Schultz and Company, Inc. Mr. Schultz is an
enrolled agent, accredited tax advisor with an accounting and tax
practice in the Annapolis area since 1971.
Dimitri Sfakiyanudis 60 Dimitri Sfakiyanudis has served as a Director of the Company and of
the Bank since 1993. He is Chief Executive Officer of Sigma
Engineering, Inc. a civil engineering and surveying firm and also
serves as President of Omega Properties, Inc. a land development
company.
13 As of December 31, 2002
The Board of Directors and Committees. Our Board of Directors generally
meets on a monthly basis, or as needed. During the year ended December 31, 2002,
our Board of Directors met twelve times. No director attended fewer than 75% in
the aggregate of (a) the total number of board meetings held while the director
was a member during the year ended December 31, 2002 and (b) the total number of
meetings held by committees on which the director served during the year.
The Company's nominating committee consists of Louis DiPasquale, Jr.,
Melvin Hyatt, Ronald P. Pennington, T. Theodore Schultz and Dimitri
Sfakiyanudis. While the nominating committee will consider nominees recommended
by shareholders, it has not actively solicited recommendations from shareholders
for nominees nor, conditioned on compliance with the procedural requirements
contained in our Articles of Incorporation and Bylaws, established any
procedures for this purpose. Our nominating committee met one time in its
capacity as the nominating committee during 2002.
The Company has no compensation committee because the Company has no
employees. The Bank has a compensation committee, as the Bank has employees. The
Bank's compensation Committee consists of:
13 As of December 31, 2002
T. Theodore Schultz
Melvin Hyatt14
Dimitri Sfakiyanudis
Louis DiPasquale, Jr.
Ronald Pennington
T. Theodore Schultz, Ronald Pennington and Dimitri Sfakiyanudis serve
as the Company's Audit Committee. As of the date of this Proxy Statement, each
of the Committee members is an "independent director" under the rules of the
Nasdaq Stock Market. The Audit Committee's responsibilities are described in a
written charter that was adopted by the Board of Directors of the Company, a
copy of which is attached as Appendix A hereto.
The Audit Committee has reviewed and discussed the Company's audited
consolidated financial statements for the fiscal year ended December 31, 2002
with Severn Bancorp, Inc.'s management. The Audit Committee has discussed with
Anderson Associates, LLP, the Company's independent auditors, the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees. The Audit Committee has received the
written disclosures and the letter from Anderson Associates, LLP required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with Anderson Associates, LLP the independence of
Anderson Associates, LLP. Based on the review and discussions described in this
paragraph, the Audit Committee recommended to the Company's Board of Directors
that the Company's audited consolidated financial statements for the fiscal year
ended December 31, 2002 be included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 for filing with the Securities and
Exchange Commission.
Recommendation: The Board recommends a vote "FOR" all four nominees for
director.
Proposal 2: Ratification of appointment of independent auditor.
We have appointed Anderson Associates, LLP as independent auditor for
the year ending December 31, 2003. If you do not ratify the selection of
independent auditor, the Audit Committee and the Board will reconsider the
appointment. However, even if you ratify the selection, the Board may still
appoint new independent accountants at any time during the year if it believes
that a change would be in our best interests and the best interest of our
shareholders.
Recommendation. The Board of Directors recommends a vote "FOR" the
ratification of the selection of Anderson Associates, LLP as the independent
auditor for the year ending December 31, 2003.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
How do we compensate directors?
The Company does not compensate its directors. Directors of the Bank
received $1,150 per meeting of the Board of Directors attended in 2002.
Additionally, each non-employee member of a committee of the Board of Directors
of the Bank receives a fee ranging between $300 to $750 per committee meeting. A
total of $82,200 in the year ended December 31, 2002 was paid as directors' fees
and committee fees for the Bank.
14 Mr. Hyatt is the uncle of Alan J. Hyatt and does not participate in the
evaluation and determination of Alan J. Hyatt's compensation.
How do we compensate executive officers?
Summary of Cash and Certain Other Compensation. We have no full time
employees, but rely on the employees of the Bank for the limited services that
we require. All compensation paid to our officers is paid by the Bank.
The following table contains information on the cash and non-cash
compensation awarded to or earned by our Chief Executive Officer and each
executive officer of the Bank that earned a salary and bonus in excess of
$100,000 during the fiscal years ended December 31, 2002, 2001, and 2000. No
other executive officer of the Company, the Bank or person performing a similar
policy making function for us had a salary and bonus in excess of $100,000
during these same periods for services rendered in all capacities to the
Company. There are no employment agreements with the Bank and its officers.
Annual Compensation Long Term Compensation
Awards Payouts
Name Other Restricted Securities
and Annual Stock Underlying LTIP All Other
Principal Compen- Award(s) Options/ Payouts Compen-
Position Year Salary ($) Bonus ($) sation ($)15 ($) SARs (#)16 ($) sation($)17
- ------ ------ ---------- --------- ---------- ------------ -------- --------- ------------
Alan J. Hyatt
CEO
2002 178,675 113,000 1,200 --- --- --- $2,938.33
2001 162,430 94,400 1,200 --- --- --- $2,938.33
2000 150,400 78,660 1,200 --- --- --- $2,938.33
Melvin E. Meekins, Jr.
Executive Vice-President
2002 212,410 80,000 1,200 --- --- --- $2,938.33
2001 193,100 69,500 1,200 --- --- --- $2,938.33
2000 178,800 60,490 1,200 --- --- --- $2,938.33
S. Scott Kirkley
Senior Vice- President
2002 147,785 48,000 1,200 --- --- --- $2,938.33
2001 134,350 41,300 1,200 --- --- --- $2,938.33
2000 124,400 35,715 1,200 --- --- --- $2,938.33
Cecelia Lowman
Principal Financial and Accounting Officer
2002 104,899 30,000 1,200 --- --- --- $2,938.33
2001 95,362 24,883 1,200 --- --- --- $2,938.33
2000 88,298 21,637 1,200 --- --- --- $2,938.33
15 SBI Mortgage Company directors' fees
16 No stock options were granted in the last five years.
17 Consists of insurance premiums paid by the Bank under a supplemental
executive retirement plan.
What other benefits do Directors and Executive Officers receive?
Annuities, Pensions And Retirement Benefits
During 1985, the Bank established a defined contribution pension plan
covering all employees. In 1989, that plan was converted to a 401(k) plan. The
Bank contributes, on behalf of each employee, a matching contribution of fifty
percent (50%) of salary deferred by an employee up to six percent (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 following table sets forth for the fiscal year ended December 31,
2002, certain information regarding 401(k) benefits for Officers eligible for
such benefits.
Amount contributed by Total
Severn during Severn's value at
Name of Individual last audit period 12/31/02
- ------------------ --------------------------- ---------
Alan J. Hyatt $3,313 $190,414
Melvin E. Meekins, Jr. $5,807 $288,899
S. Scott Kirkley $5,634 $173,561
Cecelia Lowman $3,532 $175,329
All Officers as a $18,286 $828,203
Group (4)
Effective January 1, 1990, the Company established an Employee Stock
Ownership Plan (the "ESOP") for employees of the Bank and its subsidiaries. The
ESOP provides an opportunity for the employees of the Bank to become
shareholders and thus strengthen their direct interest in the success of the
Bank. In addition, the ESOP assists the Bank in attracting and retaining capable
personnel. As of December 31, 2002, a total of 376,593 shares of the Company's
Common Stock were owned by the ESOP.
The Bank has in place a Supplemental Executive Retirement Plan ("SERP")
for executive officers, Alan J. Hyatt, Melvin E. Meekins, Jr., S. Scott Kirkley
and Cecelia Lowman. Under the SERP, the Bank owns life insurance policies for
the four named individuals, and contributes $11,753.32 per year, in the
aggregate, to pay for premiums on life insurance policies insuring each of the
aforementioned officers. Some of the officers make voluntary additional
contributions toward the premiums on such policies.
The death benefit and cash values under each insurance policy is
payable to the Bank.
Upon retirement from the Bank and the attainment of age 62, each of the
above officers shall be entitled to an annual "Retirement Income Benefit" for
ten (10) years in an amount which will be calculated at the time of retirement,
based on available assets within the applicable insurance policy insuring each
executive, and existing market conditions.
Stock Option Grants.
Bancorp maintains a stock option plan which was ratified by Bancorp's
shareholders at the 1998 annual meeting. The purpose of the plan is to advance
the interest of Bancorp through providing select key employees and directors of
Bancorp and its affiliates with the opportunity to acquire shares. By
encouraging such stock ownership, Bancorp seeks to attract, retain and motivate
the best available personnel for positions of substantial responsibility and to
provide additional incentive to directors and key employees of Bancorp or any
affiliate to promote the success of the business. The plan provides that the
exercise price must be the market value per share as set by the mean between the
bid and the asked price on the date of the award. The exception is for
individuals owning shares representing more than ten percent (10%) of Bancorp's
outstanding shares of common stock, in which case the exercise price must be not
less than one hundred ten percent (110%) of the market value of the optioned
shares on the date of the award. Incentive Stock Options ("ISO") granted become
vested and exercisable, on a cumulative basis, with respect to twenty percent
(20%) of the optioned shares upon each of the first five (5) anniversary dates
of the grant. The awarding to directors of non-ISO options is not subject to
vesting rules.
There were no stock options granted to the Company's (or the Bank's)
named executive officers during the year ended December 31, 2002.
Option Exercises and Values
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-END (%) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise ($) Value Realized ($) Unexercisable Unexercisable
- ---- ------------------ ------------------ ----------------- -------------
Alan J. Hyatt 18,000 $ 80,100 ---- ----
Melvin E. Meekins, Jr. 18,000 182,400 ---- ----
S. Scott Kirkley 12,000 91,800 ---- ----
Cecelia Lowman 12,000 91,800 ---- ----
The following table details information regarding Bancorp's existing
equity compensation plans as of December 31, 2002:
(c)
-------------------------- Number of securities
remaining available for
(b) future issuance under
Weighted-average equity compensation
(a) exercise price of plans (excluding
Plan Category Number of securities to outstanding options, securities reflected in
be issued upon exercise warrants and rights column (a))
of outstanding options,
warrants and rights
Equity compensation plans approved
by security holders................. 18,000 5.50 70,500
Equity compensation plans not
approved by security holders........ 0 0 0
Total............................... 18,000 5.50 70,500
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
What is our philosophy on executive compensation?
Because we do not have any employees, compensation decisions are made
by the Bank's Board of Directors. All non-employee directors serve as members of
the Compensation Committee. Melvin Hyatt, a director of the Bank, does not
participate in compensation decisions relating to Chief Executive Officer Alan
J. Hyatt, his nephew.
The Bank's executive officers 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 its peer group. Other factors used by the Compensation Committee
in determining compensation for its executive officers include an assessment of
the overall financial condition of the Bank, including an analysis of the Bank's
asset quality, interest rate risk exposure, capital position, net income and
consistency of earnings. The Bank's return on average assets and return on
equity is considered and compared to its peer group. 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.
The Bank sponsors a 401(k) plan for retirement benefits to all of its
employees including its executive officers, and executive officers participate
in a Supplemental Executive Retirement Plan ("SERP"). Both the 401(k) Plan and
SERP are described in this Proxy Statement under "Annuities, Pensions and
Retirement Benefits" on page 11. The Bank maintains a stock option plan for key
employees however no stock options have been granted recently, see "Stock Option
Grants" on page 11.
How do we compensate our President and Chief Executive Officer?
Mr. Hyatt, the President and Chief Executive Officer of the Company and
the Bank and Chairman of the Board of each, received compensation for his
services during 2002 from the Bank based on review of compensation paid for high
performing companies within the Bank's peer group; and based on the factors
described under our philosophy on executive compensation described above.
Report of the Board of Directors on executive compensation not to be
incorporated by reference.
This report of the Board of Directors on executive compensation should
not be deemed incorporated by reference into any filing under the Securities Act
of 1933 or under the Securities Exchange Act of 1934, except to the extent that
we specifically incorporate the information contained in the report by
reference.
..........The following graph sets forth comparative information regarding the
Company's cumulative shareholder return on its Common Stock over the last five
years. Total shareholder return is measured by dividing total dividends
(assuming dividend reinvestment) for the measurement period plus share price
change for a period by the share price at the beginning of the measurement
period. Severn Bancorp, Inc.'s cumulative shareholder return is based on an
investment of $100 on December 31, 1997, and is compared to the cumulative total
return of the NASDAQ Total US Index and the SNL Securities LC Thrift Index for
thrifts with total assets between $.25 and $.5 billion (the "SNL Thrift ($.25B
to $.5B) Index")
Comparison of Cumulative Total Return Among
Severn, NASDAQ Total US and SNL Thrift ($.25B to
$.5B) Index from December 31, 1997 to December 31, 2002
Severn Bancorp.
Period Ending
Index 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- --------------------------------------------------------------------------------------------------------------------
Severn Bancorp, Inc. 100.00 139.60 158.07 131.18 181.38 328.09
NASDAQ - Total US* 100.00 140.99 261.48 157.42 124.89 86.33
SNL $250M-$500M Thrift Index 100.00 86.81 102.04 113.74 161.78 211.37
Note: 12/31/97 and 12/31/98 price data was supplied by the company.
REPORT OF THE AUDIT COMMITTEE
Under the guidance of a written charter adopted by the Board of
Directors, the Audit Committee is responsible for overseeing our financial
reporting process on behalf of the Board of Directors. T. Theodore Schultz is
the Chairman of the Audit Committee and serves as its financial expert.
Management has the primary responsibility for the system of internal controls
and the financial reporting process. The independent accountants have the
responsibility to express an opinion on the financial statements based on an
audit conducted in accordance with auditing standards generally accepted in the
United States of America. The Audit Committee has the responsibility to monitor
and oversee these processes.
Without management representation, the Audit Committee met separately
with the independent accountants to review the results of their audit, their
evaluation of our internal controls, and the overall quality of the our
accounting and financial reporting.
In fulfilling its responsibilities, the Audit Committee recommended to
the Board of Directors, the selection of our independent auditors, Anderson
Associates, LLP. The firm has discussed with the Audit Committee and provided
written disclosures to the Audit Committee on (1) that firm's independence as
required the Independence Standards Board and (2) the matters required to be
communicated under auditing standards generally accepted in the United States of
America.
Relationship with Independent Auditors
Anderson Associates, LLP, who performed audit services for us in 2002,
including an examination of the consolidated financial statements and services
related to filings with the Securities and Exchange Commission, has served as
our accountants since 1990. Anderson Associates, LLP performed all of its
services in 2002 at customary rates and terms. Representatives of Anderson
Associates, LLP will be present at the meeting, will be available to respond to
your appropriate questions and will be able to make such statements as they
desire.
Audit fees
Aggregate fees billed for audit of our 2002 financial statements and
review of our 2002 quarterly Forms 10-Q $74,830
Financial information systems design and implementations fees
Anderson Associates, LLP did not provide any financial information
system design and implementation services during the year ended December 31,
2002.
All other fees
Aggregate fees billed for 2002 for all other services $37,180
"All other services" includes (i) Federal Home Loan Bank collateral
verification procedures; (ii) assistance with evaluating the effect of corporate
structure changes and various accounting and reporting issues; (iii) preparation
of tax returns; (iv) agreed upon procedures; and (v) review and verification of
the Company's Form 10 Registration Statement.
The Audit Committee reviews summaries of the services provided by
Anderson Associates, LLP and the related fees and has considered whether the
provision of non-audit services is compatible with maintaining the independence
of Anderson Associates, LLP.
Certain Relationships and Transactions Where Certain Persons Have Material
Interests
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, Peters & Weber, LLP, which serves as
general counsel to the Company and the Bank. The law firm of Hyatt, Peters &
Weber, LLP received fees in the amount of $161,890 for services rendered to the
Company and to the Bank and its subsidiaries for the year ended December 31,
2002. The law firm received $300,437 in fees from borrowers who obtained loans
from the Bank for the year ended December 31, 2002. Additionally, that law firm
received $31,516 in trustee's commissions arising from the sale of foreclosed
real estate by the Bank.
A subsidiary of the Bank, Homeowner's Title and Escrow Corporation,
leases space at 1923 West Street from Hyatt, Peters & Weber, LLP. The lease is
dated November 1990 with an original term of three (3) years, and a continuing
month-to-month term thereafter. The rent paid in 2002 was $26,561.74, subject to
increases annually based upon Consumer Price Index. Homeowner's has no
obligation to continue to rent the facility in the future, but it anticipates
that it will continue to do so.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
FOR INCLUSION IN PROXY STATEMENT
Any proposal that a Company shareholder wishes to have included in the
Company's proxy statement and form of proxy relating to the Company's 2004
annual meeting of shareholders under Rule 14a-8 of the Securities and Exchange
Commission must be received by the Company's Secretary at Severn Bancorp, Inc.,
1919 A West Street, Annapolis, Maryland 21401 at least 60 days prior to the
Company's 2004 annual meeting. As of the date of mailing of this proxy
statement, the date of the 2004 annual meeting has not yet been scheduled,
however, it is anticipated that it will take place in late April 2004. 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 shareholder proposal that does
not meet the requirements of the Securities and Exchange Commission in effect at
the time.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Shareholders for the year
ended December 31, 2002 accompanies this Proxy Statement.
Upon receipt of a written request, the Company will furnish to any
shareholder without charge a copy of the Company's Annual Report on Form 10-K
for the year ended December 31, 2002 and the exhibits thereto required to be
filed with the Commission under the Securities Exchange Act of 1934. Such
written request should be directed to:
S. Scott Kirkley
Senior Vice President and Secretary
Severn Bancorp, Inc.
1919A West Street
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, the Company believes that during the fiscal
year ended December 31, 2002 all Section 16(a) filing requirements applicable to
the Company's officers, directors, and more than 10% owners were complied with
on a timely basis.
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 shareholders at the
Annual Meeting. If, however, any other matters not now known are properly
brought before the 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.
By order of the Board of Directors
/s/
S. Scott Kirkley
Secretary
Annapolis, Maryland
March 27, 2003
Appendix A
SEVERN BANCORP, INC.
AUDIT AND EXAMINING COMMITTEE CHARTER
General:
This charter establishes the duties of the Audit Committee (the "Audit
Committee") of the Board of Directors of Severn Bancorp, Inc. (the "Company").
The Audit Committee will review and assess the adequacy of this written charter
annually and recommend changes to the Board of Directors when necessary. The
Audit Committee will report its activities to the full Board of Directors on a
regular basis and make such recommendations to the Board as the Audit Committee
may deem necessary or appropriate.
The Audit Committee assists the Board of Directors in fulfilling its statutory
and fiduciary responsibilities relating to internal control, accounting
policies, and auditing and reporting practices. This Committee will serve as the
audit committee for all Company subsidiaries as permitted by local laws and
banking regulations.
The Audit Committee shall be entitled to rely on (i) the integrity of those
persons and organizations within and outside the Company that it receives
information from and (ii) the accuracy of the financial and other information
provided to the Audit Committee by such persons or organizations absent actual
knowledge to the contrary (which shall be promptly reported to the Board of
Directors).
The Board of Directors has the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent public accountants (or
to nominate the independent public accountants). The management of the Company
is responsible for the preparation, presentation and integrity of the Company's
consolidated financial statements. Management is responsible for maintaining
appropriate accounting and financial reporting principles and policies and
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent public
accountants are responsible for planning and carrying out proper audits and
other procedures, including reviews of the Company's unaudited interim
consolidated financial statements prior to the filing of each quarterly report
on Form 10-Q, and other procedures.
Membership Requirements:
The Audit Committee members will be appointed by the Board of Directors. The
Committee shall be comprised of three. or more members as determined by the
Board of Directors and will be based on the specific needs of the Company and by
regulation. No members will have relationship to the Company that may interfere
with the exercise of their independence from management and the Company, as
determined by the Board of Directors in its business judgment. All members shall
have basic financial literacy, and at a minimum, one member of the Audit
Committee will have accounting or related financial management expertise, as
determined by the Board of Directors. The composition of the Audit Committee and
its independence will be reviewed periodically by the Board of Directors.
Meetings:
The Audit Committee will meet as often as necessary to fulfill its duties and
responsibilities. Minutes of all meetings will be maintained and will be
approved by the Audit Committee.
The Audit Committee will meet separately at least quarterly with each of
management and the independent public accountants to discuss any matters that
the Audit Committee or any of these persons or firms believe should be
discussed. The Audit Committee may request any officer or employee of the
Company or the Company's outside counsel or independent public accountants or
any special counsel or advisors to the Audit Committee to attend a meeting of
the Audit Committee or to meet with any members of, or consultants to, the Audit
Committee.
Duties and Responsibilities:
Independent Public Accountants
The Audit Committee will discuss with management the selection and termination
of the independent public accountants and will provide advice regarding the
evaluation, selection and termination of the independent public accountants to
the Board of Directors and shareholders. In recommending the independent public
accountants, the Audit Committee will receive from the independent public
accountants written disclosures about their independence, and discuss with them
any factors, which might detract from their independence. The Audit Committee
shall review the fees charged by the independent public accountants for audit
and non-audit services. The independent public accountants are ultimately
accountable to the Board of Directors, as assisted by the Audit Committee.
The Audit Committee will review management's and its independent public
accountants' assessments of the adequacy of internal controls, and the
resolution of identified material weaknesses and reportable conditions in
internal controls, including the prevention and detection of management override
or compromise of the internal control system.
The Committee will review the independent public accountants' judgment about the
quality of accounting principles as applied in financial reporting.
The Audit Committee will review and discuss with management and its independent
public accountants the scope of services required at the commencement of the
audit, matters relating to the conduct of the audit and the results of the
audit. The Committee will review with the independent public accountants their
review of the Company's unaudited interim consolidated financial statements
included in Form 10-Q and reports on other communications as required by or
referred to in Statement on Auditing Standards No. 61.
Internal Audit
The Audit Committee will discuss with management matters pertaining to internal
auditing of the Company, and will provide advice to the Board of Directors and
shareholders regarding the evaluation and selection of internal auditing methods
and the creation and implementation of the Company's annual internal audit plan.
The Audit Committee will review the annual internal audit plan and its
objectives. Periodically, the Audit Committee will review reports describing
progress against this plan and describing significant deficiencies in the system
of internal controls, significant operating issues or other matters of interest
to the Audit Committee.
Compliance to Laws and Regulations
The Audit Committee will review with management and its independent public
accountants the Company's year-end consolidated financial statements and the
related opinion thereon prior to filing with the Securities and Exchange
Commission.
The Audit Committee shall obtain from the independent public accountants
assurance that the audit was conducted in a manner consistent with Section 10A
of the Securities Exchange Act of 1934.
The Audit Committee shall discuss with management and the independent public
accountants, as appropriate, significant proposed or contemplated changes to the
Company's auditing and accounting principles, policies, controls, procedures and
practices, and inquire about significant risks and exposures, if any, and the
steps taken to monitor and minimize such risks.
The Audit Committee will prepare and review with its independent public
accountants the report relating to its oversight rote as required by the
Securities and Exchange Commission, for inclusion in the Company's annual proxy
statement.
The Audit Committee will review with management and its independent public
accountants the content and the basis for reports, issued to comply with the
laws and regulations required under the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA).
The Committee will review with management and compliance officer(s) the
Company's compliance with laws and regulations, including the laws and
regulations relating to safety and soundness designated by the FDIC and
appropriate federal banking agency.
The Committee will review all regulatory examination reports and management's
response thereon.
Other
The Committee may perform or supervise special investigations, which it deems
appropriate.
The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to engage outside
auditors for special audits, reviews and other procedures and to retain special
counsel and other experts or consultants.