About Severn Bancorp

Severn Bancorp, Inc. operates as the bank holding company for Severn Savings Bank, FSB that provides a wide range of personal and commercial banking services. The company operates seven full-service branch offices and one administrative office, all in Anne Arundel County, Maryland. The company operates as a federally chartered savings bank whose principal business is attracting deposits from the general public and investing those funds in residential mortgage and commercial loans. The company also uses advances, or loans, from the Federal Home Loan Bank of Atlanta (FHLB) to fund its lending activities. Personal services include mortgage lending and various other lending services, as well as checking, savings, money market, time deposit, and individual retirement accounts, in addition to Internet and mobile banking. Commercial services include commercial secured and unsecured lending services, as well as business Internet banking, corporate cash management services, and deposit services to commercial customers, including those in the medical-use cannabis industry. The company also provides safe deposit boxes, ATMs, debit cards, credit cards, personal Internet banking (including on-line bill pay and telephone banking), and other products and services. In 2017, the company began providing banking services to customers that are licensed by the state of Maryland to do business in the medical-use cannabis industry as growers, processors, and dispensaries. Medical-use cannabis businesses are legal in the state of Maryland. The company conducts business primarily through four subsidiaries, Severn Savings Bank, FSB (the ‘bank’); Mid-Maryland Title Company, Inc. (the Title Company); SBI Mortgage Company (SBI); and the bank’s principal subsidiary, Louis Hyatt, Inc. (Hyatt Commercial), which conducts business as Hyatt Commercial. SBI is the parent company of Crownsville Development Corporation (Crownsville), which does business as Annapolis Equity Group. Hyatt Commercial is a real estate brokerage company specializing in commercial real estate sales, leasing, and property management. SBI engages in the origination of mortgages that do not meet the underwriting criteria of the bank. It also owns subsidiary companies that purchase real estate for investment purposes. Crownsville, doing business as Annapolis Equity Group, engages in the business of acquiring real estate for investment and syndication purposes. HS West, LLC (HS) is a subsidiary of the bank, which constructed a building in Annapolis, Maryland that serves as the company’s and the bank’s administrative headquarters. A branch office of the bank is also located in the building. In addition, HS leases space to four unrelated companies and to a law firm. The Title Company engages in title work related to real estate transactions. The bank has seven branches in Anne Arundel County, Maryland, which offer a full range of deposit products and originate mortgages in the bank’s primary market of Anne Arundel County, Maryland, and to a lesser extent, in other parts of Maryland, Delaware, and Virginia. Lending Activities The company originates loans of all types, including residential mortgage, commercial, commercial mortgage, home equity, residential construction, commercial construction, land, residential lot, and consumer loans. The company originates residential mortgage loans that are to be held in its loan portfolio, as well as loans that are intended for sale in the secondary market. Loans sold in the secondary market are primarily sold to investors with which the bank maintains a correspondent relationship. Loans that are sold into the secondary market are typically residential long-term loans (15 or more years), generally with fixed rates of interest. Loans retained for the company’s portfolio typically include construction loans, commercial loans, and loans that periodically reprice or mature prior to the end of an amortized term. Residential Mortgage Loans All of the company’s residential mortgage loans are secured by one-to-four family residential properties and are primarily located in its market area. Commercial Loans The company offers other business and commercial loans. These are loans to businesses and are typically lines of credit or other loans that, in general, are not secured by real estate. If not secured by real estate, they are usually secured by business assets, including accounts receivable, inventory, equipment, securities, or other collateral. Commercial Real Estate Loans All of the company’s commercial real estate loans are secured by improved property, such as office buildings, retail strip shopping centers, industrial condominium units, and other small businesses, most of which are located in its primary lending area. Construction, Land Acquisition, and Development Loans (ADC) The company originates loans to finance the construction of one-to-four family dwellings, and to a lesser extent, commercial real estate. It also originates loans for the acquisition and development of unimproved property to be used for residential and/or commercial purposes, generally in cases where the company is to provide the construction funds to improve the properties. Home Equity and Other Consumer Loans The company offers various consumer loans, including home equity loans, home equity lines of credit, and other personal loans. Deposit Activities Deposits As of December 31, 2020, the company’s interest-bearing deposits, such as NOW, money market, savings, and certificates of deposit; and noninterest-bearing deposits. Treasury Activities The company invests primarily in the United States of America (U.S.) Treasury and Agency securities and the U.S. Agency mortgage-backed securities (MBS). Securities Portfolio As of December 31, 2020, the company’s securities portfolio included U.S. government agency notes, corporate obligations, and MBS. Market Area The company’s market area is primarily Anne Arundel County, Maryland and nearby areas, and its seven branch locations are all located in Anne Arundel County. Business Strategy The company’s business strategy is targeted to capitalize on its personal relationship approach that differentiates the company from its larger competitors; provide its customers with access to local executives who make key credit and other decisions; pursue commercial lending opportunities with small to mid-sized businesses that are underserved by its larger competitors; develop innovative financial products and services to generate additional sources of revenue; cross-sell its products and services to its existing customers to leverage relationships; expand its closely monitored medical-use cannabis customer base in its market area; and adhere to rigorous credit standards to maintain good quality assets as the company implements its growth strategy. Supervision and Regulation The company is a unitary savings and loan holding company within the meaning of the Home Owners’ Loan Act (HOLA). The company’s securities are registered with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (Exchange Act). As such, the company is subject to the information, proxy solicitation, insider trading, and other requirements and restrictions of the Exchange Act. The company is subject to Sarbanes-Oxley Act of 2002 because it is required to file periodic reports with the SEC under the Exchange Act. As a federally chartered, FDIC (the Federal Deposit Insurance Corporation) insured savings institution, the bank is subject to extensive regulation, primarily by the Office of the Comptroller of the Currency (OCC) and secondarily, by the FDIC. The deposits of the bank are insured up to the applicable limits by the Deposit Insurance Fund (DIF) of the FDIC, generally up to $250,000 per insured depositor. The bank is subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records. The bank’s authority to extend credit to executive officers, directors, trustees, and 10% stockholders, as well as entities under such person’s control, is governed by Section 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated by the Federal Reserve Board (FRB). The bank is a member of the FHLB. Anti-terrorism legislation enacted under the U.S. Patriot Act expanded the scope of anti-money laundering laws and regulations and imposed significant new compliance obligations for financial institutions, including the bank. The bank’s operations are also subject to federal laws applicable to credit transactions, such as the Truth-In-Lending Act; Real Estate Settlement Procedures Act; the Home Mortgage Disclosure Act; Fair Credit Reporting Act; Fair Debt Collection Act; Electronic Funds Transfer Act and Regulation E promulgated thereunder; Check Clearing for the 21st Century Act; and rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. In addition, the Consumer Financial Protection Bureau issues regulations and standards under these federal consumer protection laws that affect the company’s consumer loan transactions. History Severn Bancorp, Inc. was founded in 1946. The company was incorporated in the state of Maryland in 1990.