þ
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QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
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þ
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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Maryland
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52-1726127
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(State
or other jurisdiction of incorporation or organization)
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(IRS
employer identification number)
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200
Westgate Circle, Suite 200
Annapolis,
Maryland
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21401
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(Address
of principal executive offices)
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(Zip
Code)
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PART
I – FINANCIAL INFORMATION
|
Page
|
|
Item
1.
|
Financial
Statements
|
|
Consolidated
Statements of Financial Condition (Unaudited) as of September 30,
2007 and
December 31, 2006
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1
|
|
Consolidated
Statements of Income (Unaudited) for the Three Months and Nine Months
Ended September 30, 2007 and 2006
|
2
|
|
Consolidated
Statements of Cash Flows (Unaudited) for the Nine Months Ended September
30, 2007 and 2006
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3
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
5
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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9
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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17
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Item
4.
|
Controls
and Procedures
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17
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Item
4T.
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Controls
and Procedures
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17
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PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
18
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Item
1A.
|
Risk
Factors
|
18
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
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Item
3.
|
Defaults
Upon Senior Securities
|
18
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Item
4.
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Submission
of Matters to a Vote of Security Holders
|
18
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Item
5.
|
Other
Information
|
19
|
Item
6.
|
Exhibits
|
19
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SIGNATURES
|
20
|
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
Cash
and due from banks
|
$ |
11,136
|
$ |
16,982
|
||||
Interest
bearing deposits in other banks
|
343
|
709
|
||||||
Federal
funds sold
|
3,941
|
1,024
|
||||||
Cash
and cash equivalents
|
15,420
|
18,715
|
||||||
Investment
securities held to maturity
|
4,904
|
7,271
|
||||||
Loans
held for sale
|
401
|
2,970
|
||||||
Loans
receivable, net of allowance for loan losses of
|
||||||||
$10,202
and $9,026, respectively
|
869,367
|
832,507
|
||||||
Premises
and equipment, net
|
31,321
|
30,411
|
||||||
Federal
Home Loan Bank of Atlanta stock at cost
|
10,172
|
9,468
|
||||||
Accrued
interest receivable and other assets
|
13,190
|
10,574
|
||||||
Total
assets
|
$ |
944,775
|
$ |
911,916
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Liabilities
|
||||||||
Deposits
|
$ |
636,813
|
$ |
626,524
|
||||
Short-term
borrowings
|
25,000
|
18,000
|
||||||
Long-term
borrowings
|
165,000
|
155,000
|
||||||
Subordinated
debentures
|
20,619
|
20,619
|
||||||
Accrued
interest payable and other liabilities
|
3,793
|
5,331
|
||||||
Total
liabilities
|
851,225
|
825,474
|
||||||
Stockholders’
Equity
|
||||||||
Common
stock, $0.01 par value, 20,000,000 shares authorized;
|
||||||||
10,066,679
and 9,150,850 issued and outstanding, respectively
|
101
|
92
|
||||||
Additional
paid-in capital
|
46,736
|
28,270
|
||||||
Retained
earnings
|
46,713
|
58,080
|
||||||
Total
stockholders' equity
|
93,550
|
86,442
|
||||||
Total
liabilities and stockholders' equity
|
$ |
944,775
|
$ |
911,916
|
For
Three Months Ended
|
For
Nine Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Interest
Income
|
||||||||||||||||
Loans
|
$ |
17,795
|
$ |
17,804
|
$ |
52,990
|
$ |
50,809
|
||||||||
Securities,
taxable
|
52
|
65
|
171
|
204
|
||||||||||||
Other
|
354
|
305
|
1,040
|
961
|
||||||||||||
Total
interest income
|
18,201
|
18,174
|
54,201
|
51,974
|
||||||||||||
Interest
Expense
|
||||||||||||||||
Deposits
|
7,568
|
6,340
|
21,809
|
16,954
|
||||||||||||
Short-term
borrowings
|
183
|
49
|
407
|
294
|
||||||||||||
Long-term
borrowings
|
2,121
|
2,101
|
6,061
|
5,851
|
||||||||||||
Total
interest expense
|
9,872
|
8,490
|
28,277
|
23,099
|
||||||||||||
Net
interest income
|
8,329
|
9,684
|
25,924
|
28,875
|
||||||||||||
Provision
for loan losses
|
750
|
392
|
1,712
|
1,149
|
||||||||||||
Net
interest income after provision for loan losses
|
7,579
|
9,292
|
24,212
|
27,726
|
||||||||||||
Other
Income
|
||||||||||||||||
Real
estate commissions
|
299
|
340
|
1,903
|
1,409
|
||||||||||||
Real
estate management fees
|
172
|
162
|
492
|
409
|
||||||||||||
Mortgage
banking activities
|
101
|
166
|
469
|
610
|
||||||||||||
Other
|
101
|
133
|
790
|
364
|
||||||||||||
Total
other income
|
673
|
801
|
3,654
|
2,792
|
||||||||||||
Non-Interest
Expenses
|
||||||||||||||||
Compensation
and related expenses
|
2,556
|
2,371
|
8,555
|
7,704
|
||||||||||||
Occupancy,
net
|
416
|
174
|
1,273
|
545
|
||||||||||||
Other
|
1,042
|
810
|
2,921
|
2,150
|
||||||||||||
Total
non-interest expenses
|
4,014
|
3,355
|
12,749
|
10,399
|
||||||||||||
Income
before income tax provision
|
4,238
|
6,738
|
15,117
|
20,119
|
||||||||||||
Income
tax provision
|
1,806
|
2,740
|
6,304
|
8,052
|
||||||||||||
Net
income
|
$ |
2,432
|
$ |
3,998
|
$ |
8,813
|
$ |
12,067
|
||||||||
Basic
earnings per share
|
$ |
.24
|
$ |
.40
|
$ |
.88
|
$ |
1.20
|
||||||||
Diluted
earnings per share
|
$ |
.24
|
$ |
.40
|
$ |
.87
|
$ |
1.20
|
||||||||
Common
stock dividends declared per share
|
$ |
.06
|
$ |
.05
|
$ |
.18
|
$ |
.16
|
For
The Nine Months Ended
September
30,
|
||||||||
2007
|
2006
|
|||||||
Cash
Flows from Operating Activities
|
||||||||
Net
income
|
$ |
8,813
|
$ |
12,067
|
||||
Adjustments
to reconcile net income to net
|
||||||||
cash
provided by operating activities:
|
||||||||
Amortization
of deferred loan fees
|
(2,606 | ) | (3,199 | ) | ||||
Net
amortization of premiums and
|
||||||||
discounts
|
3
|
23
|
||||||
Provision
for loan losses
|
1,712
|
1,149
|
||||||
Provision
for depreciation
|
974
|
245
|
||||||
Gain
on sale of loans
|
(159 | ) | (257 | ) | ||||
Proceeds
from loans sold to others
|
18,778
|
24,906
|
||||||
Loans
originated for sale
|
(16,050 | ) | (23,544 | ) | ||||
Stock-based
compensation expense
|
96
|
131
|
||||||
Increase
in accrued interest receivable and
|
||||||||
other
assets
|
(1,075 | ) | (500 | ) | ||||
Increase
(decrease) in accrued interest payable
and
other liabilities
|
(1,538 | ) |
619
|
|||||
Net
cash provided by operating activities
|
8,948
|
11,640
|
||||||
Cash
Flows from Investing Activities
|
||||||||
Proceeds
from maturing investment securities
|
2,000
|
-
|
||||||
Principal
collected on mortgage backed securities
|
364
|
659
|
||||||
Net
increase in loans
|
(38,826 | ) | (59,172 | ) | ||||
Net
proceeds from sale of foreclosed real estate
|
1,319
|
-
|
||||||
Investment
in premises and equipment
|
(3,668 | ) | (7,461 | ) | ||||
Proceeds
from sale of premises and equipment
|
1,784
|
42
|
||||||
Purchase
of Federal Home Loan Bank
|
||||||||
of
Atlanta stock
|
(704 | ) | (1,045 | ) | ||||
Net
cash used in investing activities
|
(37,731 | ) | (66,977 | ) |
For
The Nine Months Ended
September
30,
|
||||||||
2007
|
2006
|
|||||||
Cash
Flows from Financing Activities
|
||||||||
Net
increase in deposits
|
10,289
|
32,217
|
||||||
Net
increase (decrease) in short-term borrowings
|
7,000
|
(16,000 | ) | |||||
Additional
borrowed funds, long-term
|
20,000
|
40,000
|
||||||
Repayment
of borrowed funds, long-term
|
(10,000 | ) | (7,000 | ) | ||||
Cash
dividends and cash paid in lieu of fractional shares
|
(1,814 | ) | (1,648 | ) | ||||
Proceeds
from exercise of options
|
13
|
15
|
||||||
Net
cash provided by financing activities
|
25,488
|
47,584
|
Decrease
in cash and cash equivalents
|
(3,295 | ) | (7,753 | ) | ||||
Cash
and cash equivalents at beginning of year
|
18,715
|
24,995
|
||||||
Cash
and cash equivalents at end of period
|
$ |
15,420
|
$ |
17,242
|
||||
Supplemental
disclosure of cash flows information:
|
||||||||
Cash
paid during period for:
|
||||||||
Interest
paid
|
$ |
27,989
|
$ |
23,281
|
||||
Income
taxes paid
|
$ |
7,064
|
$ |
8,445
|
||||
Loans
transferred to foreclosed real estate
|
$ |
2,860
|
$ |
970
|
Three
Months Ended
|
Nine
Months Ended
|
|||
September
30,
|
September
30,
|
|||
2007
|
2006
|
2007
|
2006
|
|
Common
shares – weighted average (basic)
|
10,066,679
|
10,065,321
|
10,066,150
|
10,065,071
|
Common
share equivalents – weighted average
|
-
|
12,574
|
9,489
|
4,639
|
Common
shares – diluted
|
10,066,679
|
10,077,895
|
10,075,639
|
10,069,710
|
Actual
|
Actual
|
To
Be Well Capitalized Under
|
|
at
September 30, 2007
|
at
December 31, 2006
|
Prompt
Corrective Provisions
|
|
Tangible
(1)
|
11.3%
|
11.0%
|
N/A
|
Tier
I Capital (2)
|
13.7%
|
13.1%
|
6.0%
|
Core
(1)
|
11.3%
|
11.0%
|
5.0%
|
Total
Capital (2)
|
15.0%
|
14.3%
|
10.0%
|
Nine
Months Ended September 30, 2007
|
Nine
Months Ended September 30, 2006
|
|||||||||||
Average
Balance
|
Interest
|
Rate
Annualized
|
Average
Balance
|
Interest
|
Rate
Annualized
|
|||||||
(dollars
in thousands)
|
||||||||||||
ASSETS
|
||||||||||||
Loans
(1)
|
$847,303
|
$52,990
|
8.34%
|
$814,873
|
$50,809
|
8.31%
|
||||||
Investments
(2)
|
3,667
|
94
|
3.42%
|
5,000
|
115
|
3.07%
|
||||||
Mortgage-backed
securities
|
2,107
|
77
|
4.87%
|
2,960
|
89
|
4.01%
|
||||||
Other
interest-earning assets (3)
|
19,859
|
1,040
|
6.98%
|
19,815
|
961
|
6.47%
|
||||||
Total
interest-earning assets
|
872,936
|
54,201
|
8.28%
|
842,648
|
51,974
|
8.22%
|
||||||
Non-interest
earning assets
|
52,268
|
41,812
|
||||||||||
Total
assets
|
$925,204
|
$884,460
|
||||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||
Savings
and checking deposits
|
$134,039
|
2,420
|
2.41%
|
$139,410
|
1,961
|
1.88%
|
||||||
Certificates
of deposit
|
509,884
|
19,389
|
5.07%
|
479,565
|
14,993
|
4.17%
|
||||||
Short-term
borrowings
|
11,111
|
407
|
4.88%
|
7,889
|
294
|
4.97%
|
||||||
Long-term
borrowings
|
153,889
|
6,061
|
5.25%
|
152,222
|
5,851
|
5.12%
|
||||||
Total
interest-bearing liabilities
|
808,923
|
28,277
|
4.66%
|
779,086
|
23,099
|
3.95%
|
||||||
Non-interest
bearing liabilities
|
25,403
|
26,707
|
||||||||||
Stockholders'
equity
|
90,878
|
78,667
|
||||||||||
Total
liabilities and stockholders’ equity
|
$925,204
|
$884,460
|
||||||||||
Net
interest income and interest rate spread
|
$25,924
|
3.62%
|
$28,875
|
4.27%
|
||||||||
Net
interest margin
|
3.96%
|
4.57%
|
||||||||||
Average
interest-earning assets to average interest-bearing
liabilities
|
107.91%
|
108.16%
|
(1)
|
Non-accrual
loans are included in the average balances and in the computation
of
yields.
|
(2)
|
The
Company does not have any tax-exempt
securities.
|
(3)
|
Other
interest-earning assets includes interest-bearing deposits in other
banks,
federal funds sold and FHLB stock
investments.
|
Financial
Instruments Whose Contract
|
Contract
Amount At
|
|
Amounts
Represent Credit and Interest Rate Risk
|
September
30, 2007
|
|
(dollars
in thousands)
|
||
Standby
letters of credit
|
$6,751
|
|
Home
equity lines of credit
|
$24,019
|
|
Unadvanced
construction commitments
|
$94,366
|
|
Loan
commitments
|
$20,376
|
|
Lines
of credit
|
$37,055
|
|
Loans
sold with limited repurchase
|
||
provisions
|
$3,972
|
SEVERN
BANCORP, INC.
|
||
November
8, 2007
|
_Alan
J. Hyatt___________________________
|
|
Alan
J. Hyatt, Chairman of the Board, President and Chief Executive
Officer
|
||
(Principal
Executive Officer)
|
||
November
8, 2007
|
_Thomas
G. Bevivino______________________
|
|
Thomas
G. Bevivino, Executive Vice President and Chief Financial
Officer
|
||
(Principal
Financial and Accounting Officer)
|