Severn Bancorp, Inc. Announces Second Quarter Net Income and Reversal of Net Deferred Tax Asset Valuation Allowance

Annapolis, MD (July 27, 2016) – Severn Bancorp, Inc., (“the Company”),(Nasdaq: SVBI) parent company of Severn Bank (“Severn”), today announced net income of $12,475,000 or $1.02 per diluted share for the second quarter of 2016 compared to a net income of $1,365,000 or $.08 per diluted share for the second quarter of 2015. Earnings for the second quarter also increased compared to net income of $907,000 or $.03 per diluted share for the first quarter of 2016. Year to date earnings increased to $13,382,000 or $1.12 per diluted share for 2016 versus $2,230,000 or $.10 per share for the same period of 2015. Diluted earnings per share is calculated using net income available for common shareholders, which is net income less preferred stock dividends and discount amortization.

Included in the net income for the quarter ended June 30, 2016 is the reversal of the valuation allowance recorded against the net deferred tax assets of the Company. The reversal results in the recognition of a one-time income tax benefit in the second quarter of 2016 of approximately $11,837,000, or $1.00 per diluted share. The Company has now concluded that, as of June 30, 2016, it is more likely than not that it will generate sufficient taxable income within the applicable carry-forward periods to realize its net deferred tax assets. This conclusion, and the resulting reversal of the net deferred tax asset valuation allowance, is based upon consideration of a number of factors, including the Company’s (i) completion of an eighth consecutive quarter of profitability and (ii) forecast of future profitability, under several potential scenarios where the Company has assigned more weight to its continued profitability than potential future growth which it is planning to achieve. As a result of the reversal, the Company’s net deferred tax asset amounted to approximately $11,239,000 as of June 30, 2016.

“The second quarter of 2016 has seen a lot of positive activity for the Company,” stated Alan J. Hyatt, President and Chief Executive Officer. Mr. Hyatt continued, “During the quarter we raised $11 million in new capital and redeemed $10 million of TARP preferred shares. Our assets increased over $30 million from year end 2015 with a $19 million increase in our loan portfolio. Our Commercial Banking team is doing a fantastic job of meeting our local business community’s lending needs. We are making good progress on the opening of our fifth branch in Severna Park, Maryland scheduled for this Fall. All signs point to potential for continued growth and strength for Severn. We are excited for the continued opportunity to offer the best in local banking to Anne Arundel County residents.”

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About Severn Bank:

Founded in 1946, Severn is a full-service community bank offering a wide array of personal and commercial banking products as well as residential and commercial mortgage lending. It has assets of approximately $790 million and four branches located in Annapolis, Edgewater and Glen Burnie, Maryland with a fifth branch scheduled to open in the Fall of 2016. The bank specializes in exceptional customer service and holds itself and its employees to a high standard of community contribution. Severn Bank is a trade name used by Severn Savings Bank, FSB. Severn is on the Web at www.severnbank.com.

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, those with respect to management’s determination of the amount of loan loss reserve and statements about the economy. 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, changes in the economy and interest rates both in the nation and in Severn’s general market area, federal and state regulation, competition 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, 2015.