svbi2005proxy
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):
(4) Proposed
maximum aggregate value of transaction:
(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:
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4)
Date
Filed:
Severn
Bancorp, Inc.
1919
A
West Street, Annapolis, Maryland 21401
March
21,
2006
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 26, 2006, 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 Beard Miller Company LLP as
independent auditor of Severn Bancorp, Inc., and transact such other business
as
may properly come before the Annual Meeting or any adjournments
thereof.
The
Board
of Directors unanimously recommends that you vote FOR the election of all four
of the Board's nominees for election as directors and FOR the ratification
of
Beard Miller Company 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.
Any proxy given may be revoked by you in writing or in person at any time prior
to its exercise.
Sincerely,
/s/
Alan J. Hyatt
Alan J. Hyatt
Chairman,
President and
Chief
Executive Officer
SEVERN
BANCORP, INC.
1919
A West Street
Annapolis,
Maryland 21401
(410)
268-4554
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON
April
26, 2006
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 26, 2006, 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 Beard Miller Company LLP as independent auditor for Severn
Bancorp, Inc. for the year ending
December 31, 2006; and
3. 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 10, 2006 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
S.
Scott
Kirkley
Secretary
Annapolis,
Maryland
March
21,
2006
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)
268-4554
This
proxy statement contains information about the annual meeting of shareholders
of
Severn Bancorp, Inc. to be held on Wednesday, April 26, 2006, at 7:30 p.m.
Eastern 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 10, 2006, the
record date for the Annual Meeting. 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 22, 2006 to all shareholders entitled to vote. On March
10, 2006, the record date for the Annual Meeting, there were 8,318,184 shares
of
our common stock issued and outstanding. The common stock is our only class
of
stock outstanding. Our Annual Report/Form 10-K for the fiscal year ended
December 31, 2005 accompanies 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 enclosed proxy card in accordance with its
instructions, signing and dating the proxy card 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:
• "FOR"
the
election of all four nominees for director, and
• "FOR"
ratification of the appointment of Beard Miller Company LLP as independent
auditor for the year ending December 31, 2006.
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;
|
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 10, 2006, 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 or 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 10, 2006 by (i) our President and Chief Executive Officer; (ii) our
most highly compensated executive officers in 2005; (iii) each director and
nominee for director; and (iv) by all directors and executive officers as a
group.
Name
of Individual
|
Beneficial
Ownership
of
Severn
Bancorp
|
Percent
of Total
|
Nominees
for Director:
|
|
|
Alan
J. Hyatt
|
1,297,4981
|
15.60%
|
Melvin
E. Meekins, Jr.
|
507,2352
|
6.10%
|
Louis DiPasquale, Jr.
|
186,7623
|
2.25%
|
Keith Stock
|
103,8134
|
1.25%
|
|
|
|
Directors
Continuing in Office:
|
|
|
Melvin
Hyatt
|
161,7245
|
1.94%
|
S.
Scott Kirkley
|
346,5336
|
4.17%
|
Ronald
P. Pennington
|
114,2007
|
1.37%
|
Albert
W. Shields
|
63,498
|
0.76%
|
T.
Theodore Schultz
|
52,2008
|
0.63%
|
|
|
|
Other
Executive Officer:
|
|
|
Thomas
G. Bevivino
|
3769
|
0.00%
|
All
directors and executive officers as a group (10 persons)
|
2,833,839
|
34.07%
|
1
69,700 of such shares are owned by Mr. Hyatt. 1,113,690 of such shares are
owned
by Mr. Hyatt and his wife, Sharon G. Hyatt. Mr. Hyatt controls 19,200 shares
as
custodian for his children. 94,908 of such shares are allocated to Mr. Hyatt
as
a participant in the Company’s Employee Stock Ownership Plan (“ESOP’).
2 89,596
of such shares are owned by Mr. Meekins. 319,000 of such shares are owned
by Mr.
Meekins and his wife. 98,639 of such shares are allocated to Mr. Meekins
as a
participant in the Company’s ESOP.
3 64,002
of such shares are owned by Mr. DiPasquale. 122,760 of such shares are owned
by
Mr. DiPasquale for the benefit of his children.
4 43,813
of such shares are owned by Mr. Stock. 60,000 shares are held by First Financial
Partners, Inc., a private investment company of which Mr. Stock serves as
Chairman.
5 128,724
of such shares are owned by Mr. Hyatt. 33,000 of such shares are owned by
Mr.
Hyatt and his wife. Melvin Hyatt is the uncle of Alan J. Hyatt.
6 18,288
of such shares are owned by Mr. Kirkley. 262,350 of such shares are owned
by Mr.
Kirkley and his wife. 65,895 of such shares are allocated to Mr. Kirkley
as a
participant in the Company’s ESOP.
7 All
such shares are owned by Mr. Pennington and his wife.
8 37,200
of such shares are owned by Mr. Schultz. 15,000 of such shares are owned
by Mr.
Schultz and his wife.
9 160
of such shares are held by Mr. Bevivino and his wife. 216 of such shares
are
allocated to Mr. Bevivino as a participant in the Company’s ESOP.
PRINCIPAL
SHAREHOLDERS
The
following table presents information known to the Company regarding the
beneficial ownership of Common Stock as of March 10, 2006 by each person
believed to be the beneficial owner of more than 5% of the outstanding Common
Stock of the Company.
Name
and Address of Beneficial Owner
|
Number
of Shares and Nature of Beneficial Ownership
|
Percent
of Common Stock Outstanding
|
|
|
|
Alan
J. Hyatt10
|
1,297,498
|
15.60%
|
1919
West Street
|
|
|
Annapolis,
Maryland 21401
|
|
|
|
|
|
Sharon
G. Hyatt11
|
1,120,086
|
13.47%
|
1919
West Street
|
|
|
Annapolis,
Maryland 21401
|
|
|
|
|
|
Louis
Hyatt 12
|
864,592
|
10.39%
|
1919
West Street
|
|
|
Annapolis,
Maryland 21401
|
|
|
|
|
|
Melvin
E. Meekins, Jr. 13
|
507,235
|
6.10%
|
1919
West Street
|
|
|
Annapolis,
Maryland 21401
|
|
|
10 69,700
of such shares are owned by Mr. Hyatt. 1,113,690 of such shares are owned
by Mr.
Hyatt and his wife, Sharon G. Hyatt. Mr. Hyatt controls 19,200 shares as
custodian for his children. 94,908 of such shares are allocated to Mr. Hyatt
as
a participant in the Company’s ESOP.
11 6,396
of such shares are owned by Ms. Hyatt. 1,113,690 of such shares are owned
by Ms.
Hyatt and her husband, Alan J. Hyatt.
12 819,420
of such shares are owned by Mr. Hyatt. 43,380 of such shares are owned by
Mr.
Hyatt and his wife. 1,792 of such shares are allocated to Mr. Hyatt as a
participant in the Company’s ESOP. Louis Hyatt is the father of Alan J.
Hyatt.
13 89,596
of such shares are owned by Mr. Meekins. 319,000 of such shares are owned
by Mr.
Meekins and his wife. 98,639 of such shares are allocated to Mr. Meekins
as a
participant in the Company’s ESOP.
DISCUSSION
OF PROPOSALS RECOMMENDED BY THE BOARD
Proposal
1: Election of Directors
General. Our
Board of Directors consists of nine members divided into three classes as nearly
equal in number as possible. The members of each class are elected for a term
of
three years and until their successors are elected and qualified. One class
is
elected annually. 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, all of whom are present members of the Board
of Directors of the Company, for election to serve until the 2009 Annual Meeting
of Shareholders:
Name
of Individual
|
Age14
|
Principal
Occupation for Last Five Years
|
Alan
J. Hyatt
|
51
|
Alan
J. Hyatt
has been Chairman of the Board and President of Severn Savings Bank,
FSB
(the “Bank”), a subsidiary of the Company, since 1982, having previously
served as an officer and director since 1978. He has also served
as the
Chairman of the Board and President of the Company since 1990. Mr.
Hyatt
has been a partner in the law firm of Hyatt, Peters & Weber, LLP, in
Annapolis, Maryland since 1978, and is a real estate broker with
Arundel
Realty Services, LLC, also in 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.
|
64
|
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.
|
83
|
Louis
DiPasquale, Jr.
has been a director since the inception of the Company and the Bank
in
1946. 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.
|
Keith
Stock
|
53
|
Keith
Stock served
as a Director of the Bank and the Company from April 1990 to December
1993, and was re-elected in 2003. Mr.
Stock has served as President of MasterCard Advisors, LLC, a MasterCard
International business since 2004. Previously he served in management
positions with consulting firms CapGemini Ernst & Young, AT Kearney
and McKinsey & Co., as well as Chairman and Chief Executive Officer of
First Financial Investors, Inc. and its bank holding company, St.
Louis
Bank, FSB.
|
14
As of December 31, 2005
Directors
Continuing in Office. The
directors continuing in office whose terms will expire at the 2007 Annual
Meeting of Shareholders are:
Name
of Individual
|
Age14
|
Principal
Occupation for Last Five Years
|
S.
Scott Kirkley
|
53
|
S.
Scott Kirkley
has been a director and Secretary/Treasurer of the Bank since 1980
and
Senior Vice President since 1989. He has served in the same capacities
for
the Company since 1990. Mr. Kirkley has been employed by the Bank
on a
full-time basis since 1987 and has primary responsibility for the
Bank’s
residential loan operations.
|
Albert
W. Shields
|
61
|
Albert
W. Shields
was elected as a director of the Company and the Bank in December
2003. He
is presently the Vice President of Sales for the Northeast Region
of HD
Builder Solutions Group. He was the Chief Executive Officer of Floors,
Inc. from 1986 until 2002 when the company was sold to The Home Depot.
Mr.
Shields has been involved in the real estate and development market,
and
the building supply industry for the past 35 years. Mr. Shields earned
a
degree in Commerce and Tariff Laws from Humboldt
University.
|
Melvin
Hyatt
|
73
|
Melvin
Hyatt
has been a director of the Company since its inception and a director
of
the Bank since 1978. He is a retired restaurant owner and was formerly
employed by the Housing Authority of the City of Annapolis, Maryland.
Mr.
Hyatt is the uncle of Alan J. Hyatt and the brother of Louis
Hyatt.
|
Directors
Continuing in Office. The
directors continuing in office whose terms will expire at the 2008 Annual
Meeting of Shareholders are:
Name
of Individual
|
Age14
|
Principal
Occupation for Last Five Years
|
Ronald
P. Pennington
|
66
|
Ronald P.
Pennington
has been a director of the Company since its inception and a director
of
Severn Savings Bank, FSB, a subsidiary of the Company, since 1980.
Mr.
Pennington has owned and operated an independent tool distributorship
since 1985, and now is a retired investor.
|
T.
Theodore Schultz
|
66
|
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. He is an enrolled agent, accredited tax advisor with
an
accounting and tax practice in the Annapolis, Maryland area since
1971.
|
14
As of December 31, 2005
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, 2005, 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, 2005 and (b) the total number of meetings held by committees on
which the director served during the year ended December 31, 2005. All the
directors except Mr. Meekins and Mr. Stock attended the 2005 Annual Meeting
of
Shareholders.
Director
Independence.
The
Company has a majority of “independent” directors that comprises its Board as
required by the corporate governance rules of NASDAQ. Independent directors
as
of December 31, 2005 are: Louis DiPasquale, Jr., Melvin Hyatt, Ronald
Pennington, T. Theodore Schultz, Albert W. Shields and Keith Stock.
Corporate
Governance Committee
On
March
16, 2004, the Board of Directors adopted a Corporate Governance Committee
Charter. 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 Bank’s
Corporate Governance Committee consists of Louis DiPasquale, Jr.; Ronald
Pennington; T. Theodore Schultz; Albert W. Shields; and Keith
Stock.
Nominating
Committee
The
Company’s nominating committee consists of the full Board of Directors, however,
only the independent directors may vote on nominations. A director is
“independent” as defined under Rule 4200 of the NASDAQ Marketplace Rules. The
Board has determined that the following directors are independent: Louis
DiPasquale, Jr.; Melvin Hyatt; Ronald Pennington; T. Theodore Schultz; Albert
W.
Shields; and Keith Stock. The Board believes that it is appropriate not to
have
a standing nominating committee because its current method allows it to receive
input from the full Board, while limiting the approval of recommendations to
the
independent directors. 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. The Company’s Bylaws provide that if a
shareholder wishes to submit recommendations for a nominee it should be done
in
writing and sent to the Secretary of the Company at least 60 days prior to
the
Annual Meeting of Shareholders. We do not believe any additional policies and
procedures for shareholder nominations are necessary beyond those set forth
in
the Bylaws. Our nominating committee met one time in its capacity as the
nominating committee during 2005. The nominating committee has no separate
charter. This year’s nominees were selected by the full nominating committee and
approved by the independent directors after evaluating each nominee’s general
business acumen, the nominee’s knowledge of the Company and its business
activities. In addition to the aforementioned criteria, the nominating committee
considers the investment in the Company made by the nominee as demonstrated
by
the number of shares owned by each such nominee. The nominating committee’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.
Compensation
Committee
The
Company has no compensation committee because the Company has no employees.
The
executive officers of the Company are employed and paid by the Bank. The Bank
has a compensation committee . The Bank’s Compensation Committee consists of:
Louis DiPasquale, Jr.; Melvin Hyatt; Ronald Pennington; T. Theodore Schultz;
Albert W. Shields; and Keith Stock. The Compensation Committee met one time
in
2005.
Audit
Committee
T.
Theodore Schultz, Chairman, Ronald Pennington, Keith Stock and Albert W. Shields
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 and the applicable SEC rules. 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 an appendix
to
our proxy statement filed on March 25, 2004. Keith Stock serves as the Audit
Committee’s “financial expert,” as such term is defined by applicable federal
securities laws. The Audit Committee met four times in 2005.
Audit
Committee Report
The
Audit
Committee has reviewed and discussed the Company's audited consolidated
financial statements for the fiscal year ended December 31, 2005 with the
Company's management. The Audit Committee has discussed with Beard Miller
Company 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 Beard Miller
Company LLP required by Independence Standards Board Standard No. 1,
Independence
Discussions with Audit Committees, and
has
discussed with Beard Miller Company LLP the independence of Beard Miller Company
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,
2005 be included in the Company's Annual Report on Form 10-K for the fiscal
year
ended December 31, 2005 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 Beard Miller Company LLP as independent auditor for the year ending
December 31, 2006. If you do not ratify the selection of the independent
auditor, the Audit Committee and the Board will reconsider the appointment.
However, even if you ratify the selection, the Board may still appoint a new
independent auditor at any time during the year if it believes that a change
would be in the best interests of the Company an its shareholders.
Recommendation. The
Board of Directors recommends a vote "FOR" the ratification of the selection
of
Beard Miller Company LLP as the independent auditor for the year ending December
31, 2006.
Director
and Executive Officer Compensation
How
do we compensate directors?
The
Company does not compensate its directors. 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. Non-employee
directors of the Bank received $2,000 per meeting of the Board of Directors
attended in 2005. Additionally, each non-employee member of a committee of
the
Board of Directors of the Bank receives a fee of $750 per committee meeting.
A
total of $168,153 was paid as directors’ fees and committee fees for the Bank in
2005.
Effective
January 1, 2006, the non-employee directors are entitled to receive $2,000
per
attended meeting and $800 per committee meeting.
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 during the last three fiscal years to or earned by our Chief Executive
Officer and each executive officer of the Bank that earned a salary and bonus
in
excess of $100,000 during the fiscal year ended December 31, 2005. There are
no
written employment agreements with the Bank and its officers.
|
|
|
Long Term Compensation
|
|
|
|
Annual
Compensation
|
Awards
|
Payouts
|
|
Name
and
Principal
Position
|
Year
|
Salary
|
Bonus
|
Other
Annual
Compen-
sation
($) 15
|
Restricted
Stock
Award(s)
($)
|
Securities
Underlying Options/
SARS
(#) 16
|
LTIP
Payouts ($)
|
All
Other Compensation ($)
17
|
Alan
J. Hyatt
|
|
|
|
|
|
|
|
|
President
and Chief
|
2005
|
$250,000
|
$174,000
|
$1,200
|
---
|
---
|
---
|
$16,429
|
Executive
Officer
|
2004
|
224,000
|
151,000
|
1,200
|
---
|
---
|
---
|
5,338
|
|
2003
|
200,000
|
130,000
|
1,200
|
---
|
---
|
---
|
5,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melvin
E. Meekins, Jr.
|
|
|
|
|
|
|
|
|
Executive
Vice-
|
2005
|
$298,000
|
$123,000
|
$1,200
|
---
|
---
|
---
|
$18,237
|
President
|
2004
|
266,500
|
107,000
|
1,200
|
---
|
---
|
---
|
9,088
|
|
2003
|
238,000
|
92,000
|
1,200
|
---
|
---
|
---
|
8,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S.
Scott Kirkley
|
|
|
|
|
|
|
|
|
Senior
Vice-
|
2005
|
$208,000
|
$75,000
|
$1,200
|
---
|
---
|
---
|
$14,262
|
President
|
2004
|
186,000
|
$65,000
|
1,200
|
---
|
---
|
---
|
7,753
|
|
2003
|
166,000
|
55,200
|
1,200
|
---
|
---
|
---
|
6,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
G. Bevivino
|
|
|
|
|
|
|
|
|
Principal
Financial
|
2005
|
$130,961
|
$30,000
|
---
|
---
|
---
|
---
|
$6,987
|
and
Accounting
|
2004
|
41,385
|
1,000
|
---
|
---
|
---
|
---
|
---
|
Officer
|
|
|
|
|
|
|
|
|
15 SBI
Mortgage Company directors’ fees. SBI Mortgage Company is a wholly-owned
subsidiary of the Company.
16 No
stock options were granted in the years shown.
17 In
2005, consisted of 401(k) and ESOP contributions by the Company and the Bank,
as
follows:
Name
|
|
401(k)
Contribution
|
ESOP
Contribution
|
Alan
J. Hyatt
|
|
$4,500
|
$11,929
|
Melvin
E. Meekins, Jr.
|
|
6,300
|
11,937
|
S.
Scott Kirkley
|
|
6,300
|
7,962
|
Thomas
G. Bevivino
|
|
2,458
|
4,529
|
For
2004
and 2003, also includes insurance premiums paid by the Bank under a Supplemental
Executive Retirement Plan (“SERP”) that was terminated effective December
31,2004. Upon termination of the SERP, the life insurance policies maintained
under the SERP were surrendered and the cash surrender values were paid to
the
respective participants in the SERP in 2005, including $93,005 to each of
Messrs. Hyatt and Kirkley and $55,803 to Mr. Meekins. The payments of the cash
surrender values are not included in the table above because the Company
previously reported the SERP insurance premiums paid on the participant’s behalf
in prior proxy statements.
What
other benefits do Directors and Executive Officers
receive?
Annuities,
Pensions And Retirement Benefits
The
Bank
maintains a 401(k) plan, and contributes, on behalf of each participating
employee, a matching contribution of 50% of salary deferred by an employee
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 amount contributed by the Bank to each of the employees named
in
the Summary Compensation Table is shown in the “All Other Compensation” column
of such table.
The
Company maintains 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, 2005, a total
of
734,019 shares of the Company’s Common Stock were owned by the ESOP, of which
717,460 shares were allocated to employees.
The
Bank
had in place a Supplemental Executive Retirement Plan (“SERP”) for certain
executive officers. This plan was terminated effective December 31, 2004. The
life insurance policies were surrendered and the cash value of the policies
was
used to pay the executives their portion due under the plan. See footnote 17
to
the annual compensation table above.
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 10% of Bancorp’s outstanding shares of common stock, in
which case the exercise price must be not less than 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
20% of the optioned shares upon each of the first five 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, 2005. On February 21, 2006, the
Company granted a total of 103,000 options to certain employees and directors
of
the Company, including 15,000 each to Mr. Alan J. Hyatt, Mr. Melvin E. Meekins,
Jr., Mr. S. Scott Kirkley, and Mr. Thomas G. Bevivino. All options that have
been previously granted were exercised by the Company’s executive officers and
directors prior to 2004.
REPORT
OF THE COMPENSATION COMMITTEE OF THE
BOARD
OF DIRECTORS OF THE BANK
ON
EXECUTIVE COMPENSATION
What
is our philosophy on executive compensation?
Because
we do not have any employees, compensation decisions are made by the
Compensation Committee of 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 and an ESOP for retirement benefits for its employees
including its executive officers, and certain executive officers participated
in
a Supplemental Executive Retirement Plan (“SERP”) prior to the SERP’s
termination effective December 31, 2004. The 401(k) Plan, ESOP, and SERP are
described in this Proxy Statement under “Annuities, Pensions and Retirement
Benefits” on page 12. The Bank maintains a stock option plan for key employees,
however, no stock options were granted in 2005.
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 salary and a bonus for his services
during 2005 from the Bank based on review of compensation paid for similar
performing companies within the Bank’s peer group; and based on the factors
described under our philosophy on executive compensation described above. For
2006, Mr. Hyatt will be paid an annual salary of $265,000.
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
Compensation Committee
Louis
DiPasquale, Jr., Melvin Hyatt, Ronald Pennington, T. Theodore Schultz, Albert
W.
Shields and Keith Stock.
The
graph
below 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, 1999, 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 $.50 and $1.0 billion (the "SNL Thrift ($.50B to $1.0B)
Index")
Comparison
of Cumulative Total Return Among Severn, NASDAQ Total US and
SNL
Thrift ($.50B to $1.0B) Index from December 31, 2000 to December 31,
2005
|
|
Period
Ending
|
|
Index
|
12/31/00
|
12/31/01
|
12/31/02
|
12/31/03
|
12/31/04
|
12/31/05
|
Severn
Bancorp, Inc.
|
100.00
|
138.28
|
250.12
|
505.99
|
772.97
|
631.48
|
NASDAQ
Composite
|
100.00
|
79.18
|
54.44
|
82.09
|
89.59
|
91.54
|
SNL
$500M-$1B Thrift Index
|
100.00
|
140.30
|
196.56
|
279.87
|
309.57
|
294.21
|
Relationship
with Independent Auditors
Beard
Miller Company LLP, who performed audit services for us in 2005, including
an
audit of the consolidated financial statements and services related to filings
with the Securities and Exchange Commission, has served as our accountants
since
2003. Beard Miller Company LLP performed all of its services in 2005 at
customary rates and terms. Representatives of Beard Miller Company 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.
The
aggregate fees billed by Beard Miller Company LLP for professional services
rendered for the audit of the Company’s annual financial statements for the
fiscal years ended December 31, 2005 and December 31, 2004 and the review of
the
financial statements included in the Company’s Forms 10-Q for fiscal years 2005
and 2004 totaled $97,406 and $99,311, respectively.
Audit-Related
Fees.
There
were no fees billed by Beard Miller Company LLP for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company’s financial statements for the fiscal years ended December 31,
2005 and December 31, 2004 and that are not disclosed in the paragraph captioned
“Audit Fees” above.
Tax
Fees. The
aggregate fees billed by Beard Miller Company LLP for professional services
rendered for tax compliance, tax advice and tax planning for the fiscal years
ended December 31, 2005 and December 31, 2004 were $13,651 and $11,244,
respectively.
All
Other Fees.
There
were no fees billed by Beard Miller Company LLP for products and services,
other
than the services described in the paragraphs “Audit Fees,” “Audit-Related
Fees,” and “Tax Fees” above for the fiscal years ended December 31, 2005 and
December 31, 2004.
The
Audit
Committee has established its pre-approval policies and procedures, pursuant
to
which the Audit Committee approved the foregoing audit and permissible non-audit
services provided by Beard Miller Company LLP in fiscal 2005.
The
Audit
Committee reviews summaries of the services provided by Beard Miller Company
LLP
and the related fees and has considered whether the provision of non-audit
services is compatible with maintaining the independence of Beard Miller Company
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 $126,000 for services rendered to the Company
and
to the Bank and its subsidiaries for the year ended December 31, 2005. The
law
firm received $512,370 in fees from borrowers who obtained loans from the Bank
for the year ended December 31, 2005. Additionally, that law firm received
$3,241 in trustee’s commissions arising from the sale of foreclosed real estate
by the Bank.
During
2005, Louis Hyatt, the father of Alan J. Hyatt, was an employee of Hyatt
Commercial, a subsidiary of the Company, and earned salary and commissions
in
2005 totaling $114,280.
A
subsidiary of the Bank, Homeowner’s Title and Escrow Corporation, leases space
at 1925 West Street on a month to month basis from 1925 West, LLC. Alan J.
Hyatt
is a partner of the entity that owns 1925 West, LLC. The rent paid in 2005
totaled $43,974.
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 2007 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 on or before November 27, 2006. 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, including Rule 14a-8.
In
addition, shareholders are notified that the deadline for providing the Company
timely notice of any shareholder proposal, submitted outside of the Rule 14a-8
process for consideration at the Company’s 2007 annual meeting of shareholders,
is February 6, 2007. As with respect to any proposal which the Company does
not
have notice on or prior to February 6, 2007, discretionary authority shall
be
granted to the persons designated in the Company’s proxy related to the 2007
annual meeting of shareholders to vote on such proposal.
ANNUAL
REPORT AND FINANCIAL STATEMENTS
A
copy of
the Company's Annual Report to Shareholders for the year ended December 31,
2005
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, 2005 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,
2005 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,
including all required filings by the Company’s directors, officers, and more
than 10% beneficial owners on Forms 3, 4, or 5, as applicable, to satisfy the
reporting requirements under federal securities laws, except for the untimely
filing of a Form 4 relating to the acquisition by Keith Stock, a director of
the
Company, of 463 shares of Common Stock on November 18, 2005. The Form 4 for
that
transaction was filed on November 28, 2005, two business days after the November
22, 2005 deadline.
COMMUNICATIONS
WITH DIRECTORS
There
is
no independent process where shareholders may communicate with the Board of
Directors of the Company. There have been no requests received by the Company
from shareholders to communicate with the Company’s Board of Directors and, as a
result, the Company determined that a formal process for such communications
was
not necessary to be established. If any shareholder wishes to communicate with
a
member of the Board of Directors, the shareholder may communicate in writing
to
1919A West, Street, Annapolis, Maryland 21401, attention: S. Scott Kirkley,
via
first class mail, or by facsimile at 410-841-6296.
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.
The
enclosed proxy confers discretionary authority to vote with respect to any
and
all of the following matters that may come before the Meeting: (i) matters
which
the Company did not receive notice by February 6, 2006 were to be presented
at
the meeting; (ii) approval of the minutes of a prior meeting of the
shareholders, if such approval does not amount to ratification of the action
taken at the 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
meeting.
By
order
of the Board of Directors
/s/
S. Scott Kirley
S.
Scott
Kirkley
Secretary
Annapolis,
Maryland
March
21,
2006