8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event report)   February 14, 2013                                                      

Severn Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	0-49731	52-1726127
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification Number)

200 Westgate Circle, Suite 200, Annapolis, Maryland	21401
(Address of principal executive offices)	(Zip Code)
410-260-2000
(Registrant’s telephone number, including area code)

(Former name or former address, if change since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

      (17 CFR 240.14d-2(b))

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

     (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On February 14, 2013, Severn Bancorp, Inc. (“the Company”) issued a press release stating that it had reached a determination to (i) revise the Company’s previously filed audited annual consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and 2011 and (ii) restate the Company’s previously filed unaudited interim 2010, 2011 and 2012 consolidated financial statements contained in the Company’s Quarterly Reports on Form 10-Q for each of the quarters ended March 31, 2010, 2011 and 2012, June 30, 2010, 2011 and 2012,  and September 30, 2010, 2011 and 2012.  The press release also contained information about the estimated effect of the revisions on pre-tax income, net income and basic and diluted earnings (loss) per share on the restatement periods.  A copy of this press release is being furnished as Exhibit 99.1 to this report and is incorporated herein by reference.  Such Exhibit has been “furnished” and shall not be deemed filed for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1934, as amended.

The Company plans to reflect these revisions  in the Company’s Annual Report on  Form 10-K for the year ended December 31, 2012 that will be filed with the Securities and Exchange Commission on or before March 31, 2013.

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

(a) On February 11, 2013,  the Company’s Board of Directors, upon recommendation of the Audit Committee of the Board of Directors and in consultation with  the Company’s management, concluded that the Company’s previously filed audited consolidated financial statements for fiscal years 2010 and 2011 contained in the Company’s Annual Reports on Form 10-K for those years, and unaudited interim consolidated financial statements contained in the Company’s Quarterly Reports on Form 10-Q for each of the quarters ended March 31, 2010, 2011 and 2012, June 30, 2010, 2011 and 2012, and September 30, 2010, 2011 and 2012 require restatement to correct the method used to amortize a three year prepayment made in 2009 for the Company’s FDIC risk-based insurance assessment, and, therefore, should no longer be relied upon.  In 2009, the Company paid an estimated assessment in advance for fiscal years 2010, 2011 and 2012 based on the level of net assets as of June 30, 2009, and began expensing the prepayment evenly over the three year period covered by the prepayment.  Management has now determined that this method of amortization was incorrect and that it should have amortized the prepayment based on the actual reduced level of net assets over that period.  This error was discovered by management during the course of its preparation of the 2012 year-end financial statements and audit.

As a result of the error detected above, the Company expects to report that the Company had a material weakness in its internal control over financial reporting.  A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.  For a discussion of the Company’s controls and procedures and the material weakness identified, see Item 9A , Controls and Procedures to be filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 with the Securities and Exchange Commission.

The Board of Directors, Audit Committee and management of the Company have discussed the matters disclosed in Item 4.02(a) of this Current Report on Form 8-K with the Company’s independent registered public accounting firm, ParenteBeard LLC.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.            Description of Exhibit

99.1                      Press Release dated February 14, 2013

Forward Looking Statements

In addition to the historical information contained herein, this Current Report on Form 8-K contains forward-looking statements that involve risks and uncertainties that may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. The forward-looking statements contained herein include, but are not limited to, statements with respect to the estimated effects of the revisions to its financial statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “could,” “should,” “guidance,” “potential,” “continue,” “project,” “forecast,” “confident,” and similar expressions are typically used to identify forward-looking statements. The Company’s operations and actual results could differ significantly from those discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences include, but are not limited to, additional information arising from the review of the revisions to the financial statements by the Company and by its independent accountants, the Company’s ability to maintain an effective system of internal controls and other factors detailed from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including “Item 1A. Risk Factors” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Severn Bancorp, Inc.
Dated: February 14, 2013	By:  /Alan J. Hyatt/
	Alan J. Hyatt, President

EX-99.1

EXHIBIT 99.1

SEVERN BANCORP, INC.

FOR IMMEDIATE RELEASE	Contact:
	Thomas G. Bevivino
	Chief Operating Officer &
	Executive Vice President
	Email: tbevivino@severnbank.com
	Phone: 410.260.2000

Severn Bancorp Announces Restatement of Financial Statements

To Reflect Additional Net Income

Annapolis, MD (February 14, 2013) – Severn Bancorp, Inc. (“the Company”), (Nasdaq: SVBI) parent company of Severn Savings Bank, FSB (“Severn”), today announced that it will restate its previously issued annual consolidated financial statements for the fiscal years 2010, and 2011 and quarterly consolidated financial statements for fiscal years 2010, 2011 and 2012 (including its selected financial data for the relevant periods) due to errors identified in these financial statements.  These restatements are expected to be reflected in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 that will be filed with the Securities and Exchange Commission in March 2013.  The decision was made by the Company’s Board of Directors, upon the recommendation of the Audit Committee and in consultation with management.   As a result of this decision, investors should no longer rely upon the Company’s previously released financial statements for these periods and any earnings releases or other communications relating to these periods.

The Company estimates that it understated pre-tax income by an aggregate of approximately $1,627,000, over the restated periods, due to the Company overstating its FDIC insurance expense for those periods.  This resulted from the method the Company used to amortize a prepayment of its risk-based insurance assessment paid to the FDIC in 2009.  At that time, the Company paid an estimated assessment in advance for fiscal years 2010, 2011 and 2012 based on the level of net assets as of June 30, 2009, and began expensing the prepayment evenly over the three year period covered by the prepayment.  Management has now determined that this method of amortization was incorrect and that it should have amortized the prepayment based on the actual level of net assets over that period.  This error was discovered by management during the course of its preparation of the 2012 year-end financial statements and audit.

The amounts disclosed below are the estimated net cumulative effect of this error on income through December 31, 2012.  The effect on income in certain periods is quantitatively significant. The adjustments necessary have no effect on reported cash flow from operations, and do not have a material impact on the consolidated balance sheet.  The impact of this correction for the restatement periods increases cumulative net income by approximately $980,000 and cumulative earnings per share by approximately $0.09.

Impact of the restatement

The estimated adjustments to the Company’s consolidated statements of operations are summarized in the tables below (in thousands, except per share amounts).

	Fiscal Year Ended
	December 31, 2012								December 31, 2011								December 31, 2010
	As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated
Increase in:
Pre-tax income	$	5,654		$	732	$	6,386		$	2,201		$	561	$	2,762		$	2,197		$	334	$	2,531
Net income		3,283			445		3,728			1,219			333		1,552			1,157			202		1,359
Basic and diluted
earnings(loss) per share		0.18			0.04		0.22			(0.05	)		0.03		(0.02	)		(0.06	)		0.02		(0.04	)
	Quarter Ended
	March 31, 2012								June 30, 2012								September 30, 2012								December 31, 2012
	As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated			As Reported		Adjustment		As Restated
Increase in:
Pre-tax income	$	828		$	172	$	1,000		$	1,869		$	174	$	2,043		$	964		$	191	$	1,155		$	1,993		195	$	2,188
Net income		472			105		577			1,097			106		1,203			558			116		674			1,156		118		1,274
Basic and diluted
earnings per share		0.01			0.01		0.02			0.07			0.01		0.08			0.02			0.01		0.03			0.08		0.01		0.09
	Quarter Ended
	March 31, 2011								June 30, 2011								September 30, 2011								December 31, 2011
	As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated			As Reported		Adjustment		As Restated
Increase in:
Pre-tax income(loss)	$	791			83	$	874		$	(1,403	)	$	152	$	(1,251	)	$	954		$	159	$	1,113		$	1,859	$	167	$	2,026
Net income(loss)		447			49		496			(846	)		90		(756	)		551			95		646			1,067		99		1,166
Basic and diluted
earnings(loss) per share		0.00			0.01		0.01			(0.13	)		0.01		(0.12	)		0.01			0.01		0.02			0.06		0.01		0.07
	Quarter Ended
	March 31, 2010								June 30, 2010								September 30, 2010								December 31, 2010
	As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated			As Reported			Adjustment		As Restated			As Reported		Adjustment		As Restated
Increase in:
Pre-tax income(loss)	$	(829	)	$	96	$	(733	)	$	1,054		$	67	$	1,121		$	870		$	84	$	954		$	1,102		87	$	1,189
Net income(loss)		(528	)		58		(470	)		593			40		633			485			51		536			607		53		660
Basic and diluted
earnings(loss) per share		(0.10	)		0.01		(0.09	)		0.02			0.00		0.02			0.01			0.00		0.01			0.02		0.00		0.02

The Board of Directors, Audit Committee and management have discussed the matters disclosed in this press release with the Company’s independent registered public accounting firm, ParenteBeard LLC.  The Company is working diligently to complete the restatement of its financial statements and expects to file its Annual Report on Form 10-K, including the restated financial statements, by no later than March 31, 2013.

Forward Looking Statements

In addition to the historical information contained herein, this press release contains forward-looking statements that involve risks and uncertainties that may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements.  The forward-looking statements contained herein include, but are not limited to, statements with respect to the estimated effects of the revisions to its financial statements.  The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “could,” “should,” “guidance,” “potential,” “continue,” “project,” “forecast,” “confident,” and similar expressions are typically used to identify forward-looking statements.  Severn’s operations and actual results could differ significantly from those discussed in the forward-looking statements.  Some of the factors that could cause or contribute to such differences include, but are not limited to, additional information arising from the review of the revisions to the financial statements by Severn and by its independent accountants, the Company’s ability to maintain an effective system of internal controls and other factors detailed from time to time in Severn’s filings with the Securities and Exchange Commission (the “SEC”), including “Item 1A. Risk Factors” contained in Severn’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.