| By Order of the Board of Directors | |
/s/Paul B. Susie | |
| Paul B. Susie | |
| Secretary | |
Annapolis, Maryland
March 23, 2017
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.
200 WESTGATE CIRCLE, SUITE 200
ANNAPOLIS, MARYLAND 21401
(410) 260-2000
This proxy statement contains information about the Annual Meeting of Stockholders of Severn Bancorp, Inc. to be held on Thursday, April 28, 2016,27, 2017, at 9:00 a.m. Eastern Time at the DoubleTree Hotel, 210 Holiday Court, Annapolis, Maryland 21401 (the “Annual Meeting”).
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why did you send me this proxy statement?
Severn Bancorp, Inc. (the “Company”) sent you this Proxy Statement and the enclosed proxy card because you were a stockholder of the Company at the close of business on March 9, 2016,8, 2017, the record date for the Annual Meeting (the “Record Date”). The Company’s Board of Directors chose this day as the record date for stockholders entitled to vote at the Annual Meeting. The Board of Directors is soliciting your proxy to be voted at the Annual Meeting.
This Proxy Statement summarizes the information you need to know to cast an informed vote at the Annual Meeting. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card.
The Company began sending this Proxy Statement, Notice of Annual Meeting and the enclosed proxy card on or about March 24, 201623, 2017 to all stockholders of record on the Record Date. On the Record Date, there were 10,088,87912,128,079 shares of the Company’s common stock issued and outstanding. The Company’s Annual Report to Stockholders, which includes the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2016, accompanies this Proxy Statement.
May I attend the Annual Meeting?
All stockholders and properly appointed proxy holders may attend the Annual Meeting. Stockholders who plan to attend the meeting must present valid photo identification. If you hold your shares in a brokerage account, please also bring proof of your share ownership, such as a broker’s statement showing that you owned shares of the Company on the record date of March 9, 20168, 2017 or a legal proxy from your broker or nominee. As noted above, a legal proxy is required if you hold your shares in a brokerage account and you plan to vote in person at the Annual Meeting. Stockholders of record will be verified against an official list available at the Annual Meeting. The Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the record date.Record Date. No cameras, recording equipment, large bags, briefcases or packages will be permitted into the Annual Meeting.
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. Your vote is important. Whether you plan to attend the Annual Meeting or not, the Company urges 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 Annual Meeting and vote in person.
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If you properly fill incomplete 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 three of the nominees for director; and
“FOR” ratification of the appointment of BDO USA, LLP as independent auditorregistered public accounting firm for the year ending December 31, 2016.2017;and
“FOR” approval of the non-binding advisory vote on the Company’s executive compensation.
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 by February |
| 3. | Matters incidental to the conduct of the Annual 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, the Company knew of no matters that needed to be acted upon at the Annual Meeting, other than those discussed in this Proxy Statement.
If you hold your shares in “street name” through your broker, bank or other nominee, you must vote in accordance with the voting instructions provided by your broker, bank or other nominee.
If you are a participant in the Company’s tax-qualified employee stock ownership plan (“ESOP”) through which you own shares of Company common stock, the trustee of the ESOP votes all the shares held by the ESOP, but each participant may direct the trustee how to vote the shares of Company common stock allocated to his or her plan account. If you own shares through the ESOP and you do not vote by April 20, 2017, the ESOP trustee will vote your shares in accordance with the terms of the ESOP.
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. You may also revoke the proxy if you attend the meeting in person and so request. Attendance at the Annual Meeting will not by itself revoke a previously granted proxy.
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How do I vote in person?
If you plan to attend the meeting and vote in person, the Company will give you a ballot form when you arrive. However, if you hold your shares in “street name” through your broker, bank, or other nominee, you must bring a proxy card and letter from such broker, bank or other nominee authorizing you to vote the shares and indicating that you were the beneficial owner of the shares on the Record Date for voting.
What constitutes a quorum?
The presence at the Annual 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 Annual Meeting. Proxies that are marked as abstentions and broker non-votes (described below) will be included in the calculation of the number of shares considered to be present at the Annual Meeting.
What vote is required for each proposal?
The three nominees for director who receive the most votes cast at the Annual Meeting will be elected. Shares voted “withhold authority”, and broker non-votes will not be counted as votes cast and will have no effect on the results of the vote, although they will be considered present for the purpose of determining the presence of a quorum.
To ratify the selection of the independent auditor,registered public accounting firm and to approve the non-binding advisory vote on the Company’s executive compensation, the proposal must receive the affirmative vote of a majority of the votes cast at the Annual Meeting. Shares voted “abstain” and broker non-votes will not be counted as votes cast and will have no effect on the results of the vote, although they will be considered present for the purpose of determining the presence of a quorum.
To approve any other matter that may properly come before the Annual Meeting, generally the proposal must receive the affirmative vote of a majority of the votes cast at the Annual Meeting. However, there may be occasions where a greater vote is required by law, or by the Company’s Articles of Incorporation or Bylaws.
What is a broker non-vote?
If you are a beneficial owner whose shares are held of record by a broker, bank or other nominee, you must instruct the broker, bank or other nominee how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker, bank or other nominee does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker, bank or other nominee can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required. Under New York Stock Exchange rules, brokers are not permitted to vote shares for which they have not received instruction on how to vote on non-routine matters.
If you are a beneficial owner whose shares are held of record by a broker, bank or other nominee, your broker, bank or other nominee has discretionary voting authority to vote your shares on the ratification of BDO USA, LLP, even if the broker, bank or other nominee does not receive voting instructions from you. However, your broker, bank or other nominee does not have discretionary authority to vote on the election of directors or the non-binding advisory vote on the Company’s executive compensation without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on this matter.these matters. Accordingly, it is important that beneficial owners instruct their brokers how they wish to vote their shares.
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Who will bear the costs of solicitation of proxies?
The Company 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 mail, but directors, officers and regular employees of the Company may solicit the submission of proxies personally or by telephone. Although there is no formal agreement to do so, the Company 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, the Company may pay for and utilize the services of individuals or companies it does not regularly employ in connection with the solicitation of proxies; however, the Company currently has no such arrangement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 28, 201627, 2017
The proxy statement for the Annual Meeting, the form of proxy card, and the Annual Report to Stockholders for the year ended December 31, 20152016 are available at www.edocumentview.com/SVBI.
Directions to the Annual Meeting are available by calling our executive offices at (410) 260-2000 during regular business hours.
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STOCK OWNERSHIP
The following table shows the beneficial ownership of the Company’s common stock as of March 9, 2016,8, 2017, the Record Date, by (i) each director and nominee for director; (ii) the executive officers named in the Summary Compensation Table; and (iii) all directors and executive officers as a group.
The securities “beneficially owned” by a person are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the Securities and Exchange Commission (“SEC”) and, accordingly, include securities as to which the person has or shares voting or investment power. Shares of common stock which a person has the right to acquire within 60 days after the Record Date are deemed outstanding for computing the share ownership and percentage ownership of the person having such right, but are not deemed outstanding for computing the percentage of any other person. The same shares may be beneficially owned by more than one person. Beneficial ownership may be disclaimed as to certain of the securities.
| Name of Individual | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||
Nominees for Director: | ||||||||||||||||
| David S. Jones | 51,475 | (1) | * | |||||||||||||
| John A. Lamon, III | 77,900 | (2) | * | |||||||||||||
| Konrad M. Wayson | 58,675 | (3) | * | |||||||||||||
Directors Continuing in Office: | ||||||||||||||||
| Raymond S. Crosby | 10,050 | (1) | * | 46,450 | (4) | * | ||||||||||
| Alan J. Hyatt ** | 1,714,356 | (5) | 14.1 | % | ||||||||||||
| James H. Johnson, Jr. | 1,600 | (6) | * | |||||||||||||
| Eric M. Keitz. | 36,000 | (2) | * | 36,400 | (7) | * | ||||||||||
| Albert W. Shields | 112,350 | (3) | 1.1 | % | 112,750 | (8) | * | |||||||||
| Mary Kathleen Sulick | 1,500 | (9) | * | |||||||||||||
Directors Continuing in Office: | ||||||||||||||||
| Alan J. Hyatt ** | 1,672,356 | (4) | 16.5 | % | ||||||||||||
| James H. Johnson, Jr. | 1,200 | (5) | * | |||||||||||||
| David S. Jones | 31,075 | (6) | * | |||||||||||||
| John A. Lamon, III | 57,500 | (7) | * | |||||||||||||
| Mary Kathleen Sulick | 1,500 | (8) | * | |||||||||||||
| Konrad Wayson | 36,275 | (9) | * | |||||||||||||
Named Executive Officers: | ||||||||||||||||
| Paul Susie | 20,000 | (10) | * | |||||||||||||
| Christopher Chick | 600 | (11) | * | |||||||||||||
Director Resigned from Office: | ||||||||||||||||
| Michael H. Cook | 22,595 | (10) | * | |||||||||||||
Other Named Executive Officers: | ||||||||||||||||
Named Executive Officers no longer with the Company: | ||||||||||||||||
| James M. Anthony | 600 | (11) | * | 65,000 | (12) | * | ||||||||||
| Thomas G. Bevivino | 39,238 | (12) | * | 29,678 | (13) | * | ||||||||||
| All directors, nominees for directors and executive officers as a group (12 persons) | 2,010,739 | (13) | 19.8 | % | ||||||||||||
| All directors, nominees for directors and executive officers as a group (13 persons) | 2,195,504 | (14) | 18.1 | % | ||||||||||||
| * | Less than 1%. |
| ** | Also a named executive officer for |
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| Includes |
| (2) | Includes 71,250 shares owned by Mr. |
| (3) | Includes 52,025 shares owned by Mr. Wayson, and 6,250 shares of common stock issuable upon the conversion of Series A Non-Cumulative Convertible Preferred Stock held by Mr. Wayson. Also included are 400 shares issuable upon exercise of options exercisable within 60 days of the record date. |
| (4) | Includes 46,050 shares owned by Mr. Crosby and his wife. Also included are 400 shares issuable upon exercise of options exercisable within 60 days of the record date. |
| (5) | Includes 100,019 shares owned by Mr. Alan Hyatt, |
| Includes 1,200 shares owned by Dr. Johnson and his wife. |
| (7) | Includes |
| (8) | Includes 93,600 shares owned by a family trust controlled by Mr. Shields, and |
| Includes 1,500 shares owned by Ms. Sulick. |
| (10) | Includes |
| (11) | Includes 600 shares |
| (12) | Includes 65,000 shares owned by Mr. Anthony and his wife. |
| (13) | Includes 793 shares held by Mr. Bevivino and his wife, |
| Includes, among the other shares described above, a total of |
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The following table presents information regarding the beneficial ownership of common stock as of March 9, 20168, 2017 by each person known to be the beneficial owner of more than 5% of the outstanding common stock of the Company.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||
Alan J. Hyatt (1) | 1,672,356 | 16.5 | % | 1,714,356 | 14.1 | % | ||||||||||
Sharon G. Hyatt 200 Westgate Circle, Suite 200 Annapolis, Maryland 21401 | ||||||||||||||||
Louis Hyatt (2) 200 Westgate Circle, Suite 200 Annapolis, Maryland 21401 | 1,073,983 | 10.6 | % | |||||||||||||
Louis Hyatt (2) | 1,073,983 | 8.9 | % | |||||||||||||
200 Westgate Circle, Suite 200 Annapolis, Maryland 21401 | ||||||||||||||||
United States Department of the Treasury (3) 1500 Pennsylvania Avenue, N.W. Washington, D.C. 20220 | 556,976 | 5.5 | % | |||||||||||||
United States Department of the Treasury (3) | 556,976 | 4.6 | % | |||||||||||||
1500 Pennsylvania Avenue, N.W. Washington, D.C. 20220 | ||||||||||||||||
TFO USA Limited(4) | 632,152 | 5.2 | % | |||||||||||||
555 5th Avenue, 6th Floor New York, NY 10017 | ||||||||||||||||
| (1) | Includes 100,019 shares owned by Mr. Alan Hyatt, |
| (2) | Includes 993,463 shares owned by Mr. Louis Hyatt, 61,770 shares owned by Mr. Louis Hyatt and his wife, and 18,750 shares of common stock issuable upon the conversion of Series A Non-Cumulative Convertible Preferred Stock held by Mr. Louis Hyatt and his wife. Mr. Louis Hyatt is the father of Mr. Alan Hyatt. |
| (3) | Consists of a warrant to purchase common stock issued by the Company in connection with its participation in the Capital Purchase Program of the Troubled Asset Relief Program. Pursuant to the purchase agreement, the Department of the Treasury has agreed not to exercise voting power with respect to any common stock issued upon exercise of the warrant. |
| (4) | On a Schedule 13G filed with the Securities and Exchange Commission on February 14, 2017, TFO USA Limited reported sole dispositive and voting power with respect to 632,152 shares of the Company's common stock. |
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Series B Preferred Stock
On November 21, 2008, the Company entered into an agreement with the United States Department of the Treasury (“Treasury”), pursuant to which the Company issued and sold (i) 23,393 shares of its Series B Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.01 per share and liquidation preference $1,000 per share (the “Series B Preferred Stock”), and (ii) a warrant to purchase 556,976 shares of the Company’s common stock at $6.30 per share, for an aggregate purchase price of $23,393,000 in cash.cash (the "Warrant"). On September 25, 2013, the Treasury Department sold all of its 23,393 shares of Series B Preferred Shares to outside investors as part of their ongoing efforts to wind down and recover its remaining investments under the Troubled Asset Relief Program (“TARP”). The terms of the Series B Preferred Stock remain the same. The Treasury Department continues to hold the warrantWarrant to purchase 556,976 shares of the Company’s common stock.
The Warrant has a 10-year term and is immediately exercisable at an exercise price of $6.30 per share of common stock. The exercise price and number of shares subject to the Warrant are both subject to anti-dilution adjustments. Pursuant to the Purchase Agreement, Treasury has agreed not to exercise their rightvoting power with respect to elect directors, and certain other voting or control rights, without the prior approvalany shares of common stock issued upon exercise of the Federal Reserve.Warrant. The warrant expires November 11, 2018.
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DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
| Proposal 1: | Election of Directors |
General. The Company’s bylaws provide that the Board of Directors shall consist of from seven to eleven directors. The Board of Directors currently consists of nine members divided into three classes. Generally, the members of each class are elected for a term of three years and one class is elected annually. Accordingly, the Board has nominated RaymondDavid S. Crosby, EricJones, John A. Lamon III, and Konrad M. Keitz and Albert W. ShieldsWayson to serve as directors for a three-year term. All of the nominees are incumbent directors.
Nominees for Election. The Board of Directors has nominated the persons named below, all of whom are present members of the Board of Directors of the Company, for election as directors of the Company to serve for three year terms and until their successors are elected and qualified:
| Name of Individual | ||||
Age(1) | Principal Occupation and Experience | |||||
David S. Jones | 57 | David S. Jones has been a director of the Company since 2012 and a director of the Bank since 2011. In 1983 Mr. Jones cofounded Southern Drywell, Inc., a septic system contractor, and serves as its President. Mr. Jones also cofounded Jones of Annapolis, Inc., a demolition and excavation contractor, in 1980 and serves as the Secretary/Treasurer. Both companies are located in Annapolis. He has developed, owned and leased commercial and residential real estate throughout Anne Arundel County since 1985. Mr. Jones’ many years of business experience is important to the oversight of the Company’s financial reporting, enterprise and operational risk management. | ||||
| John A. Lamon, III | 58 | John A. Lamon, III has been a director of the Company since 2009 and a director of the Bank since 2008. Mr. Lamon has been a senior account executive with G&G Outfitters, Inc. since 2000, a promotional products and marketing company that focuses on branded merchandise. Prior to that, Mr. Lamon was president and owner of John A. Lamon & Associates, a promotional and marketing company. Mr. Lamon was with the company for 20 years before selling the business to G&G Outfitters, Inc. Mr. Lamon is also a partner in The Boathouse Restaurant in Canton, MD. Mr. Lamon received his Bachelor’s degree from the University of Maryland, where he was a two-time All American lacrosse player. Mr. Lamon has received the Willis Bilderback Volunteer Award and the Willie Gateau Youth Services Award. He has served on various boards including St. Mary’s School, the Annapolis Touchdown Club, St. Mary’s Royal Blue Club and the University of Maryland M Club. Mr. Lamon is currently Chairman of the Compensation Committee and a member of the Audit and Examining Committee and the Corporate Governance Committee. Mr. Lamon’s business and marketing experience is important to the oversight of the Company’s financial reporting, enterprise and operational risk management. |
| Konrad M. Wayson | 55 | Konrad M. Wayson has been a director of the Company since 2009 and a director of the Bank since 2008. Mr. Wayson has served as secretary and treasurer of Hopkins & Wayson, Inc., a general contractor servicing Maryland, Washington DC and Virginia, since 1984. He has been a partner of Wayson Landholdings since its start in 1996 and |
| (1) | As of December 31, 2016 |
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The directors continuing in office whose terms will expire at the 2018 annual meeting of stockholders are:
| Name of Individual | Age(1) | Principal Occupation and Experience | ||||
Alan J. Hyatt | 62 | Alan J. Hyatt has been Chairman of the Board and President of the Bank 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 & Weber, P.A., in Annapolis, Maryland, since 1978, and is also a real estate broker with Hyatt Commercial, a subsidiary of the Bank, also in Annapolis, Maryland. Mr. Hyatt serves on the Board of Trustees of the Anne Arundel Health System Inc., and the Anne Arundel County Pension Trustee Board. He formerly was the Chairman of the Board of the Anne Arundel Community College Foundation, Inc. Mr. Hyatt currently spends the majority of his professional time on the affairs of the Bank and the Company, and the balance on his law practice. As an attorney and businessman, Mr. Hyatt brings strong legal and financial skills important to the oversight of the Company’s financial reporting, enterprise and operational risk management. | ||||
| James H. Johnson, Jr. | 69 | James H. Johnson, Jr. has been a director of the Company since 2012 and a director of the Bank since 2011. Since April 2012, Dr. Johnson has served as the Director of the U.S. EPA's Center for Environmental Research. He is Professor Emeritus of Civil Engineering and former dean of the College of Engineering, Architecture and Computer Sciences at Howard University. Dr. Johnson received his B.Sc. from Howard University, M.Sc. from the University of Illinois and Ph.D. from the University of Delaware. Dr. Johnson also serves as a member of the Anne Arundel Community College (MD) Board of Trustees. Previous board and committee activities include past Chair of U.S. EPA Board of Scientific Counselors, past Chair of the U.S. EPA National Advisory Council for Environmental Policy and Technology, and member of the National Research Council’s (NRC) Division of Earth and Life Studies oversight committee, U.S. EPA Science Advisory Board, the NRC Boards on Radioactive Waste Management and Environmental Studies and Toxicology, and the American Society of Civil Engineering Foundation Board. Mr. Johnson is currently a member of the Corporate Governance Committee. Mr. Johnson’s many years of education and government experience is important to the oversight of the Company’s financial reporting, enterprise and operational risk management. |
Mary Kathleen Sulick
| (1) | As of |
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The directors continuing in office whose terms will expire at the 2019 annual meeting of stockholders are:
| Name of Individual | Age(1) | Principal Occupation and Experience | ||||
| Raymond S. Crosby | 54 | Raymond S. Crosby has been a | ||||
Eric M. Keitz | 56 | Eric M. Keitz has been a director of the | ||||
| Albert W. Shields | 72 | Albert W. Shields has been a director of the Company and the Bank since 2003. Mr. Shields has over 35 years of experience in the real estate and development industry, and currently provides independent consulting services to business executives. He served as senior vice president of Home Depot Inc. from 2003 through 2008. From 1986 to 2002, Mr. Shields was the chief executive officer of Floors, Inc. a flooring specialty company with thirteen centers located on the east coast. In 2002, the company was sold to Home Depot, Inc. Mr. Shields is |
| (1) | As of |
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Executive Officers who are not Directors.
Paul B. Susie, age 50, joined the Company in July 2016 and currently serves as Executive Vice President and Chief Financial Officer. Mr. Susie brings to Severn a strong background and many years of experience in financial management and banking in particular. He previously held the position of Chief Financial Officer at Hopkins Federal Savings Bank and 1st Mariner Bank. He has also held financial executive positions in biopharmaceutical, manufacturing and marine companies. Mr. Susie has passed the CPA Exam, is a member of the American Institute of Certified Public Accountants and is a Chartered Global Management Accountant. He received his Bachelor of Science in Accounting from the University of Baltimore.
Christopher A. Chick, age 49, joined the Company in 2015 as Executive Vice President and Chief Lending Officer. Mr. Chick has over 26 years in the banking industry. Prior to joining the Company, Mr. Chick held various management positions at Susquehanna Bank and was a Bank Examiner with the Office of Thrift Supervision. Mr. Chick is a graduate of the University of Baltimore where he received his Master of Finance. He is also a graduate of the Maryland Bankers Association, Executive School of Bank Management. Mr. Chick has been recognized within the industry with various awards including Next Leader in Banking, Maryland Bankers Association and Top Banker Award, Smart CEO.
The Board of Directors and Committees. The Company’s Board of Directors generally meets on a monthly basis, or as needed. During the year ended December 31, 2016, the Company’s 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, 2016 and (b) the total number of meetings held by committees on which the director served during the year ended December 31, 2016.
The Board of Directors has a standing Corporate Governance Committee, Nominating Committee, Compensation Committee and Audit and Examining Committee.
Attendance of Directors at Annual Meeting. It is the policy of the Board of Directors to encourage directors to attend each annual meeting of stockholders. Such attendance allows for direct interaction between stockholders and members of the Board of Directors. All the directors attended the 2016 Annual Meeting of Stockholders.
Director Independence. The Board of Directors examines the independence of the Company’s directors on an annual basis in both fact and appearance to promote arms-length oversight. Based upon the definition of an “independent director” under the Nasdaq Listing Rules, the Board of Directors has determined that the Company has a majority of “independent” directors that comprise its Board as required by the corporate governance rules of Nasdaq. Independent directors consist of: Raymond S. Crosby, James H. Johnson, Jr., Eric M. Keitz, John A. Lamon III, Albert W. Shields, Mary Kathleen Sulick and Konrad Wayson. The Board determined that these individuals are independent because they are not executive officers or employees of the Company and otherwise satisfy all of the Nasdaq independence requirements and, in the opinion of the Board of Directors, are not individuals having a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. As an employee of the Bank, Mr. Alan J. Hyatt is not considered independent. David S. Jones is not independent under the Nasdaq Listing Rules because he serves as the Secretary/Treasurer of Jones of Annapolis, Inc., a company that has provided services to the Company.
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Board Leadership Structure. The Board of Directors believes that the Company’s Chief Executive Officer is best situated to serve as Chairman because he is the director most familiar with the Company’s business and industry, and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. The Board believes this provides an efficient and effective leadership model for the Company. The Board believes that combining the Chairman and Chief Executive Officer roles fosters clear accountability, effective decision-making, and alignment on corporate strategy. In addition, this structure facilitates the flow of information between management and the Board. To assure effective independent oversight, and because the Company does not have a lead independent director, the Board has adopted a number of governance practices, including:
| · | A strong, independent
The Board believes that the combined role of Chairman and Chief Executive Officer is in the best interest of stockholders because it provides the appropriate balance between strategic development and oversight of management. Risk Oversight. The Board of Directors has an active role, as a whole and also at the committee level, in overseeing management of the Company’s risks. The Board reviews monthly information regarding the Company’s credit, liquidity and operations, as well as the risks associated with each. The Company’s Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements. The Audit and Examining Committee oversees management of financial risks. The Nominating Committee and Corporate Governance Committee each manages risks associated with the independence of the Board of Directors and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks. The Board of Directors, together with the Audit and Examining, Corporate Governance and Compensation Committees of the Board, coordinate with each other to provide enterprise-wide oversight of our management and handling of risk. These committees report regularly to the entire Board of Directors on risk-related matters and provide the Board of Directors with integrated insight about the Company’s management of strategic, credit, interest rate, financial reporting, technology, liquidity, compliance, operational and reputational risks. While the Company has not developed an enterprise-wide risk statement, the Board of Directors believes that sound credit underwriting to manage credit risk and a conservative investment portfolio to manage liquidity and interest rate risk contribute significantly to an effective oversight of the Company’s risk. At meetings of the Board of Directors and its committees, directors receive regular updates from management regarding risk management. Outside of formal meetings, the Board, its committees and individual Board members have regular access to senior executives, including the Chief Executive Officer, Chief Financial Officer, and Chief Lending Officer. Corporate Governance Committee 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 corporate governance policies for the Company. The Corporate Governance Committee consists of: Mary Kathleen Sulick, Chairperson, James H. Johnson, Jr., Eric M. Keitz, and John A. Lamon III. The Board has determined that each of the members of the Corporate Governance Committee is independent under the Nasdaq Listing Rules. The Corporate Governance Committee met three times in 2016. The Corporate Governance Committee, in addition to setting corporate governance policies of the Company, is responsible for establishing criteria for selecting new directors, and identifying, screening and recruiting new directors. In addition, the Corporate Governance Committee will select members for the various Board of Director committees, determine director and committee member compensation, and may consider the institution of a process for stockholders to submit recommendations of director candidates and to communicate with the Board. The Corporate Governance Committee’s responsibilities are described in a written charter that was adopted by the Board of Directors, a copy of which is available on the Company’s website www.severnbank.com. 13 Nominating Committee The Company’s Nominating Committee consists of the full Board of Directors, however, only the independent directors may vote on approval of nominations. There is no written charter. The Board has determined that the following directors are independent as defined under the Nasdaq Listing Rules: Raymond S. Crosby, James H. Johnson, Jr., Eric M. Keitz, John A. Lamon III, Albert W. Shields, Mary Kathleen Sulick and Konrad Wayson. Alan J. Hyatt and David S. Jones are not independent as defined under the Nasdaq Listing Rules. While the Nominating Committee will consider nominees recommended by stockholders, it has not actively solicited recommendations from stockholders for nominees nor established any procedures for this purpose, other than the procedures contained in the Bylaws concerning nominations of candidates by stockholders. The Company’s Bylaws provide that if a stockholder wishes to submit nominations for directors, it should be done in writing and sent to the Secretary of the Company at least 60 days prior to the Annual Meeting of Stockholders. The Company’s Board, in its capacity as the Nominating Committee, met once during 2016. This year’s nominees were approved by the full Board following the recommendation by the independent directors after evaluating each nominee’s general business acumen and knowledge of the Company and its business activities and prior service on the Company’s board. In addition to the aforementioned criteria, the Board considers the investment in the Company made by the nominee as demonstrated by the number of shares owned by such nominee. The Nominating Committee is seeking Board membership that reflects diversity in its broadest sense, including persons diverse in professional backgrounds, gender and ethnicity. The Board’s process for identifying and evaluating director nominees relates to the general business acumen and knowledge of the Company and its business activities. Board membership longevity is also evaluated when considering the nomination of current Board members. There was no third party paid to identify or assist in finding candidates for the Board of Directors. Compensation Committee The Company has no compensation committee because the Company does not pay its employees. The executive officers of the Company are paid by the Bank. The Bank has a Compensation Committee, the primary functions of which are for the committee to determine the compensation of the Company’s executive officers and to administer, and approve awards under, the Company’s equity compensation plans. The role of the Compensation Committee is described in greater detail under the section entitled “Executive and Director Compensation - Background.” The Compensation Committee currently consists of: John A. Lamon, III, Chairman, Eric M. Keitz, Raymond S. Crosby, Albert W. Shields and Konrad M. Wayson. The Board has determined that each of the members of the Bank’s Compensation Committee is independent under the Nasdaq Listing Rules. The Compensation Committee’s responsibilities are described in a written charter that was adopted by the Board of Directors, a copy of which is available on the Company’s website www.severnbank.com. The Compensation Committee met two times in 2016. Scope of Authority of the Compensation Committee. The scope of the Compensation Committee’s authority and responsibilities is set forth in its written charter, a copy of which is available on the Company’s website www.severnbank.com. The chairperson, in consultation with other members of the Committee, sets the agenda of each meeting. As provided under the Committee’s charter, the Committee may delegate its authority to special subcommittees as the Committee deems appropriate, consistent with applicable law and the Nasdaq Listing Rules. 14 The Role of Management in Determining or Recommending Executive Compensation. As part of the review process, each executive officer is independently interviewed by the Compensation Committee, and provides input into the performance of the Company and the Bank and the performance of each executive officer, including himself, purely in an informational and advisory capacity. However, no executive officer participates in the Compensation Committee’s deliberations or decisions. Role of Compensation Consultants in Determining or Recommending Executive Compensation. Under its charter, the Compensation Committee has authority to retain, at the Company’s expense, such counsel, consultants, experts and other professionals as it deems necessary. To date, the Compensation Committee has not engaged an independent compensation consultant. Instead, the Compensation Committee performs an informal survey of area companies and banks and reviews the compensation practices of the surveyed companies. Audit and Examining Committee The Company’s Audit and Examining Committee is comprised of at least three members, each of whom is appointed by the Board of Directors, and is responsible for overseeing the accounting and financial reporting process of the Company, and the audits of the financial statements of the Company. In addition, the Committee prepares an audit committee report as required by SEC rules to be included in the Company’s annual proxy statement. The Audit and Examining Committee consists of: Eric M. Keitz, Chairman, John A Lamon, III, Albert W. Shields, Mary Kathleen Sulick and Konrad M. Wayson. The Board has determined that each of the Audit and Examining Committee members is independent under the Nasdaq Listing Rules and applicable SEC rules. The Audit and Examining Committee’s responsibilities are described in a written charter that was adopted by the Board of Directors, a copy of which is available on the Company’s website www.severnbank.com. The Board has determined that Eric M. Keitz is an “audit committee financial expert,” as such term is defined by applicable SEC rules. The Audit and Examining Committee met six times in 2016. Audit and Examining Committee Report The Audit and Examining Committee has reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2016, with the Company’s management. The Audit and Examining Committee has discussed with BDO USA, LLP, the Company’s independent registered public accounting firm, the matters required to be discussed by Auditing Standard No. 16, as issued by the Public Company Accounting Oversight Board. The Audit and Examining Committee has received the written disclosures and the letter from BDO USA, LLP required by applicable requirements of the Public Company Accounting Oversight Board’s Rule 3526 regarding the independent accountant’s communications with the Audit and Examining Committee concerning independence, and has discussed with BDO USA, LLP the independence of BDO USA LLP. Based on the review and discussions described in this paragraph, the Audit and Examining Committee recommended to the Company’s Board of Directors that the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2016 be included in the Company’s Annual Report on Form 10‑K for the fiscal year ended December 31, 2016 for filing with the SEC. 15 Audit and Examining Committee Members: Eric M. Keitz, Chairman John A. Lamon III Albert W. Shields Mary Kathleen Sulick Konrad M. Wayson The information contained in this Audit and Examining Committee Report is not “soliciting material” and has not been “filed” with the Securities and Exchange Commission. This Audit and Examining Committee Report will not be incorporated by reference into any of the Company’s future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company may specifically incorporate it by reference into a future filing. Recommendation: The Board recommends a vote “FOR” the nominees for director.
The Audit and Examining Committee has appointed BDO USA, LLP as independent registered public accounting firm for the year ending December 31, 2017. Although action by the stockholders on this matter is not required, the Audit and Examining Committee believes it is appropriate to seek stockholder ratification of the appointment of the independent registered public accounting firm to provide a forum for stockholders to express their views with regard to the Audit and Examining Committee’s appointment. If the stockholders do not ratify the selection of the independent registered public accounting firm, the Audit and Examining Committee will reconsider the appointment, but is not required to change its selection. However, even if you ratify the selection, the Audit and Examining Committee may still appoint a new independent registered public accounting firm at any time during the year if it believes that a change would be in the best interests of the Company and its stockholders. Representatives of BDO USA, LLP will be present at the Annual Meeting, available to respond to your appropriate questions and able to make such statements as they desire. Audit Fees. The aggregate fees billed by BDO USA, LLP for professional services rendered for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2016 and December 31, 2015 and the review of the financial statements included in the Company’s Forms 10-Q for fiscal years 2016 and 2015 totaled $188,689 and $169,953, respectively. Audit-Related Fees. The aggregate fees billed by BDO USA, LLP for professional services rendered for audit-related services that are not disclosed in the paragraph captioned “Audit Fees” above, for the fiscal years ended December 31, 2016 and December 31, 2015 totaled $21,007 and $21,552, respectively. These services related to the audit of the Company’s benefit plans. Tax Fees. The aggregate fees billed by BDO USA, LLP for professional services rendered for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2016 and December 31, 2015 totaled $32,998 and $35,437, respectively. All Other Fees. There were no fees billed by BDO USA, LLP for professional services rendered for products and services, other than the services described in the paragraphs above, for the fiscal years ended December 31, 2016 and December 31, 2015. 16 Policy on Audit and Examining Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm Among its other duties, the Audit and Examining Committee is responsible for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. The Audit and Examining Committee has established a policy regarding pre-approval of all audit and non-audit services provided by the independent registered public accounting firm. On an ongoing basis, management communicates specific projects and categories of service for which the advance approval of the Audit and Examining Committee is requested. The Audit and Examining Committee reviews these requests and advises management if the Audit and Examining Committee approves the engagement of the independent registered public accounting firm. Pursuant to its pre-approval policies and procedures, the Audit and Examining Committee approved all of the foregoing audit and permissible non-audit services provided by BDO USA, LLP in fiscal years 2016 and 2015. The Audit and Examining Committee reviews summaries of the services provided by BDO USA, LLP and the related fees and has considered whether the provision of non-audit services is compatible with maintaining the independence of BDO USA, LLP. Recommendation: The Board of Directors recommends a vote “FOR” the ratification of the selection of BDO USA, LLP as the independent registered public accounting firm for the year ending December 31, 2017.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires that we provide our stockholders the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of executive officers named in the Summary Compensation Table (who are referred to as the “named executive officers”, in accordance with applicable SEC rules, referred to as “say-on-pay.” As a stockholder, you are being provided with the opportunity to provide an advisory vote on the Company's executive compensation as disclosed in this proxy statement through the following resolution: "RESOLVED, that the stockholders approve the compensation of the Company's named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure shall include the compensation tables and narrative discussion) in the Company's proxy statement for the 2017 annual meeting of stockholders." Because the vote is advisory, it will not be binding upon the Board of Directors, will not overrule any decision made by the Board of Directors, and will not create or imply any additional fiduciary duty on the Board of Directors. The Compensation Committee may, however, take into account the outcome of the vote when considering future executive compensation decisions. The Board of Directors believes that the Company's executive compensation program is reasonable in comparison both to similarly sized companies in the industry and to the performance of the Company during 2016. We also believe that the Company's compensation program strongly aligns the interests of the executives with the interests of the Company's stockholders in the creation of long-term value of the Company as well as the components that drive long-term value. Recommendation: The Board recommends a vote “FOR” approval of a non-binding advisory vote with respect to the compensation paid to the Company’s named executive officers. 17 EXECUTIVE AND DIRECTOR COMPENSATION Background Because the Company does not pay its employees, compensation decisions are made by the Compensation Committee of the Bank’s Board of Directors. The Compensation Committee currently consists of: John A. Lamon III, Chairman, Raymond S. Crosby, Eric M. Keitz, Albert W. Shields and Konrad M. Wayson. Each of the members of the Bank’s Compensation Committee is independent under the Nasdaq Listing Rules as currently in effect. The Compensation Committee operates under a written charter adopted by the Company’s Board of Directors. The responsibilities of the Committee include:
Objectives of the Compensation Program The primary objectives of the Compensation Committee with respect to executive compensation are:
To achieve these objectives, the Compensation Committee has implemented and maintains compensation plans that tie a portion of an executive’s overall compensation to the financial performance of the Company. Overall, the total compensation opportunity is intended to create an executive compensation program that is set at the median competitive levels of comparable public savings and loan companies. This is based upon an annual informal survey of similar sized companies established by the Compensation Committee. The executive officers of the Company have no employment contracts. Annually, the Bank’s Compensation Committee evaluates profiles of comparable financial institutions to assure that the compensation to its executive officers is comparable to similarly sized companies in the industry. Other factors used by the Compensation Committee in determining compensation for its executive officers include an assessment of the overall financial condition of the 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 are considered and compared to its peer group. In addition, the Compensation Committee interviews each executive officer individually and collectively to evaluate performance of the Company and the individual executive officers. This input is used to determine the total compensation package for each executive officer, and the allocation between the different components within the compensation package. The complexity of the activities of the executive officers are considered, and intangible items are considered such as the reputation and general standing of the Bank within the community and the likelihood of continuing successful and profitable results. 18 Say-on-Pay Vote At the 2014 annual meeting, we held a stockholder advisory vote on the compensation of our named executive officers, commonly referred to as a say-on-pay vote. Our stockholders approved the compensation of our named executive officers at the 2014 annual meeting, with an overwhelming majority of stockholder votes that were cast in favor of our say-on-pay resolution. As we evaluated our compensation practices, we were aware of the strong support our stockholders expressed for our pay for performance compensation philosophy. As a result, following our annual review of our executive compensation philosophy, the Compensation Committee decided to retain our general approach to executive compensation. We believe our executive compensation program for In keeping with the preference expressed by our stockholders at our 2014 annual meeting, our Board has adopted a policy of holding say-on-pay votes every three years until changed by the advisory vote of stockholders at the next say-on-frequency vote. Compensation Components Compensation consists of the following components: Base Salary. Base salaries are used to attract and retain employees by providing a portion of compensation that is not considered “at risk.” Base salaries are designed to reward the performance of our executive officers in the daily fulfillment of their responsibilities to the Company. Base salaries for our executives are established based on the scope of their responsibilities and historical compensation levels, taking into account competitive market compensation paid by other companies for similar positions. Generally, the Company believes that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions and with similar responsibilities at comparable companies in line with the Company’s compensation philosophy. Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. Annual Bonus. The purpose of the annual bonus program is to align the interests of executive officers with Company stockholders by motivating executive officers to achieve superior annual financial and annual operational performance. The Company’s annual bonus plan for its executives provides for a discretionary cash bonus, dependent upon the level of achievement of corporate and personal goals. In addition, the discretionary bonus for the executive officers named in the proxy statement is determined based on the Company’s performance compared to budgets and projections. The Board of Directors establishes specific financial and operational goals for the Company at the beginning of each year and annual discretionary bonus funding is in part related to achievement of these annual goals. The Compensation Committee approves any 19 Long-Term Incentive Program. The Compensation Committee believes that long-term performance is achieved through an ownership culture that encourages long-term performance by the Company’s executive officers through the use of stock-based awards. In connection with this, the Board of Directors adopted the Severn Bancorp, Inc. 2008 Equity Incentive Plan (the “2008 Plan”), which was ratified by our stockholders at the 2008 annual meeting. The purpose of the 2008 Plan is to enable the Company to (i) promote the long-term retention of key employees; (ii) further reward Other Compensation. The Company’s named executive officers participate in other employee benefit plans generally available to all employees, including the following:
In addition, our executive officers receive modest benefits, including health insurance; however, the Compensation Committee in its discretion may revise, amend or add to the Determination of Executive Compensation Traditionally, the Compensation Committee reviews our executive compensation program in November of each year, although decisions in connection with new hires and promotions are made on an as-needed basis. As part of the review process, each executive provides input into the performance of the Company and the performance of each executive officer, including himself. However, no executive officer participates in the Compensation Committee’s deliberations or decisions. Each executive’s current and prior compensation is considered in setting future compensation. In addition, the Compensation Committee performs an informal survey of area companies and banks and reviews the compensation practices of the surveyed companies. To some extent, the compensation plan (base salary, bonus and long-term incentive program) 20 Accounting and Tax Considerations Generally, Section 162(m) of the Code, and the IRS regulations adopted under that section, which are referred to collectively as Section 162(m), denies a deduction to any publicly held corporation, such as the Company, for certain compensation exceeding $1,000,000 paid during each calendar year to each executive officer named in the summary compensation table of the Summary Compensation Table The following table sets forth information regarding compensation earned by the Company’s Chief Executive Officer, Chief Summary Compensation Table
21
Narrative to Summary Compensation Table The Company does not have employment agreements with the named executive officers. Salary and bonus decisions concerning named executive officers are made by the Compensation Committee as described above. The base salaries for 22 On Outstanding Equity Awards at Fiscal Year-End Table The following table includes certain information with respect to the value of all unexercised options Outstanding Equity Awards at Fiscal Year End
23 Potential Payments upon a Termination of Employment or Change in Control The Company does not have employment agreements, severance or “change in control” agreements with its executive officers. Under the 2008 Plan, all outstanding stock options automatically will become exercisable upon the termination of the employment of the holder due to death or permanent disability. In the event of a “change in control,” as determined by the Compensation Committee in its sole discretion and defined in the Company’s 2008 Plan, all outstanding stock options will become immediately Under the 2008 Plan, in the event of a change of control, the Compensation Committee, in its sole discretion, will take one or a combination of the following actions with respect to outstanding stock options, to be effective as of the date of such change in control:
The following table sets forth the intrinsic value of the unvested stock options held by each named executive officer named in the Summary Compensation Table as of December 31,
24 In the event that the employment of executive officers was terminated for any other reason on December 31, In the event that the employment of an executive officer was terminated due to disability or death on December 31, Director Compensation For The Board of Directors decided that for Non-employee directors are eligible to receive awards under the 2008 Plan, and a total of 14,000 stock options were granted to certain non-employee directors on The following table sets forth a summary of the compensation the Company paid to our non-employee directors in Director Compensation for
25 Certain Transactions with Related Persons Alan J. Hyatt, who is an affiliated person by virtue of his stock ownership and positions as director and President of the Company and the Bank, is a partner of the law firm of Hyatt & Weber, P.A., which serves as general counsel to the Company and the Bank. The law firm of Hyatt & Weber, P.A. received fees in the amount of During January, 2007, Hyatt & Weber, P.A. entered into a five year lease agreement with HS West, LLC, a wholly owned subsidiary of the Company to lease office space from the Company. The term of the lease was five years with the option to renew the lease for three additional five year terms. The monthly lease payment is $20,056, which increases 2% annually beginning with the third anniversary of the lease. The In November 2008, the Company completed a private placement of units, each unit consisting of 6,250 shares of the Company’s Series A 8.0% Non-Cumulative Convertible Preferred Stock and a Subordinated Note in the original principal amount of $50,000. On September 30, 2016 the $3,500,000 aggregate principal amount of Subordinated Notes outstanding was paid in full. The following table shows
26 The Bank has, and expects to continue to have, loan and other banking transactions (including, but not limited to, checking, savings and time deposits) with certain of its directors, nominees for director, officers, certain of their immediate family members and certain corporations or organizations with which they are affiliated. All such loan and other banking transactions (i) have not been classified as nonaccrual, past due, restructured or potential problems, (ii) were made in the ordinary course of business, (iii) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to us, and (iv) did not involve more than the normal risk of collectability or present other unfavorable features. The Company has adopted written policies and procedures regarding approval of transactions between the Company and any employee, officer, director and certain of their family members and other related persons required to be reported under Item 404 of Regulation S-K. Under these policies, a majority of the disinterested members of the Audit and Examining Committee must approve any transaction between the Company and any related party that involves more than $10,000. If a majority of the members of the Audit and Examining Committee are interested in the proposed transaction, then the transaction must be approved by a majority of the disinterested members of the Board (excluding directors who are employees of the Company). The Chair of the Audit and Examining Committee has the delegated authority to pre-approve or ratify (as applicable) any related party transaction in which the aggregate amount involved is expected to be less than $120,000. In determining whether to approve or ratify a related party transaction, the Audit and Examining Committee will take into account, among other factors it deems appropriate, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. After adopting this policy, the Audit and Examining Committee ratified each of the transactions described above and approved the continuation of such transactions for the current year on substantially the same terms and conditions. DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR INCLUSION IN PROXY STATEMENT Any proposal that a Company stockholder wishes to have included in the Company’s proxy statement and form of proxy relating to the Company’s In addition, stockholders are notified that the deadline for providing the Company timely notice of any stockholder proposal submitted outside of the Rule 14a-8 process for consideration at the Company’s 27 ANNUAL REPORT AND FINANCIAL STATEMENTS A copy of the Company’s Annual Report to Stockholders for the year ended December 31, Upon receipt of a written request, the Company will furnish to any stockholder without charge a copy of the Company’s Annual Report on Form Executive Vice-President and Secretary Severn Bancorp, Inc. 200 Westgate Circle, Suite 200 Annapolis, Maryland 21401 The Form 10‑K is not part of the proxy solicitation materials. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, certain officers and persons who own more than 10% of its common stock, to file with the Securities and Exchange Commission initial reports of ownership of the Company’s equity securities and to all subsequent reports when there are changes in such ownership. Based on a review of reports submitted to the Company, except for Directors Raymond S. Crosby, James H. Johnson Jr., David S. Jones, Eric M. Keitz, John A. Lamon III, Albert W. Shields and Konrad M. Wayson, who each had one late Form 4 reporting one late transaction, the Company believes that during the fiscal year ended December 31, COMMUNICATIONS WITH DIRECTORS If any stockholder wishes to communicate with a member of the Board of Directors, the stockholder may communicate in writing to 200 Westgate Circle, Suite 200, Annapolis, Maryland 21401, attention: 28 OTHER MATTERS As of the date of this proxy statement, the Board of Directors does not know of any other matters to be presented for action by the Stockholders at the Annual Meeting. If, however, any other matters not now known are properly brought before the Annual Meeting, the persons named in the accompanying proxy will vote such proxy in accordance with the determination of a majority of the Board of Directors. The enclosed proxy confers discretionary authority to vote with respect to any and all of the following matters that may come before the Annual Meeting: (i) matters which the Company did not receive notice by February
Annapolis, Maryland March 23, 2017 29  Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X 02JE3C 1 U P X + q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Annual Meeting Proxy Card . + Authorized Signatures — This section must be completed for your vote to be counted. — B Date and Sign Below Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. IMPORTANT ANNUAL MEETING INFORMATION Please sign exactly as your name appears on this Proxy card. When signing as attorney, executor, administrator, trustee, or guardian, or on behalf of a corporation, partnership or other entity, please give your full title. If shares are held jointly, each holder should sign. A Proposals — The Board of Directors recommends a vote FOR all the nominees listed, FOR Proposal 2, and FOR Proposal 3. 1. The election as directors of the nominees listed below for a term of three years: For Against Abstain 2. The ratification of the appointment BDO USA, LLP as independent auditor of the Company for the year ending December 31, 2017. 01 - David S. Jones 02 - John A. Lamon, III 03 - Konrad M. Wayson For Withhold For Withhold For Withhold 3. The approval of a non-binding advisory vote on the Company’s executive compensation, refered to as “say on pay”. For Against Abstain MMMMMMMMM MMMMMMMMMMMM 3 1 7 9 9 2 2  q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q . REVOCABLE PROXY — SEVERN BANCORP, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SEVERN BANCORP, INC. (THE "COMPANY") FOR THE ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY TO BE HELD ON APRIL The undersigned hereby appoints This proxy, when properly completed and executed, will be voted in the manner directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF ALL OF THE NOMINEES SPECIFIED IN PROPOSAL 1, Should the signatory(ies) be present and elect to vote at the Meeting, or at any postponements or adjournments thereof, and after notification to the Secretary of the Company at the Meeting of such person’s decision to terminate this proxy, the power of said attorneys and proxies shall be deemed terminated and of no further force and effect. The signatory(ies) may also revoke this proxy by filing a subsequently dated proxy or by written notification to the Secretary of the Company of his or her decision to terminate this proxy. The signatory(ies) acknowledge(s) receipt from the Company prior to the execution of this proxy of the Notice of the Meeting, the Proxy Statement dated March 2016. PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||