Severn Bancorp, Inc. Announces Second Quarter Earnings

Annapolis, MD (July 28, 2017) – Severn Bancorp, Inc., (Nasdaq: SVBI) parent company of Severn Savings Bank, FSB, today announced net income of $982 thousand or $0.07 per share for the second quarter of 2017. In comparison, the net income for the second quarter of 2016 was $12.5 million. However, in 2016 there was a one-time reversal of a valuation allowance on the deferred tax asset of $11.2 million. On a pretax basis, income for the second quarter of 2017 was $1.6 million versus $1.3 million for the second quarter of 2016.

For the six months ended June 30, 2017 net income was $1.9 million compared to $13.4 million for 2016. The $11.2 million reversal of the valuation allowance on the deferred tax asset in 2016 was the reason for the large variance. On a pretax basis, income was $3.1 million and $2.2 million for the six months ended June 30, 2017 and 2016, respectively.

Total assets were $775.4 million as of June 30, 2017, which was a $12.0 million decrease from $787.5 million as of December 31, 2016. The decrease is primarily due to a reduction in cash that was used to repay $20 million in Federal Home Loan Bank borrowings and to fund new loans.

Asset quality has improved during the six months ended June 30, 2017. Total non-performing assets decreased 44%, moving from $10.8 million as of December 31, 2016 to $6.1 million as of June 30, 2017. Total non-accrual loans to net loans decreased from 1.6% as of December 31, 2016 to 0.8% as of June 30, 2017. The improving asset quality and low charge off levels through June 30, 2017 resulted in a lower required allowance for loan losses. As a result, the allowance for loan losses was reduced by a $375 thousand reversal of provisions for loan losses during the quarter ended June 30, 2017. For the six months ended June 30, 2017, the allowance for loan losses was reduced by $650 thousand in reversals of provisions for loan losses.

“Earnings have improved over the year, aided in part by the reduction of higher cost Federal Home Loan Bank borrowings”, stated Alan J. Hyatt, President and Chief Executive Officer. Mr. Hyatt continued, “We are working diligently on increasing our lower cost core deposits and expanding our lending efforts. We have new team members committed to these efforts, and we are putting plans in place for additional growth. Additionally, we have evaluated our mortgage production model and are making significant changes to improve our lead sourcing and marketing activities. We look forward to partnering with Mid Maryland Title to provide full mortgage service to our customers. We are continuing on the path of making Severn the most efficient and full service choice for our market.”
About Severn Savings 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 $775.4 million and five branches located in Annapolis, Edgewater, Severna Park and Glen Burnie, Maryland. The bank specializes in exceptional customer service and holds itself and its employees to a high standard of community contribution. Severn is on the Web at www.severnbank.com.

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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, 2016.