Severn Bancorp, Inc. Announces Double Digit Percentage Increase in Earnings

Annapolis, MD (October 27, 2017) – Severn Bancorp, Inc., (Nasdaq: SVBI) parent company of Severn Savings Bank, FSB, today announced net income of $1.26 million, or $0.09 per diluted share for the third quarter of 2017. This is an increase of 19% over the third quarter of 2016 results of $1.06 million, or $0.04 per diluted share. Additionally, net income increased 28% when comparing to the prior period where net income was $982 thousand, or $0.07 per diluted share, for the quarter ended June 30, 2017.

For the nine months ended September 30, 2017 net income was $3.17 million compared to $14.4 million for the same period in 2016. Included in the results for the nine months ended September 30, 2016 was the effect of the reversal of the valuation allowance on the net deferred tax asset which occurred in the second quarter of 2016. This resulted in a negative income tax provision of $10.8 million. Excluding the effect of this one-time tax benefit, income before taxes was $5.3 million and $3.6 million for the nine months ended September 30, 2017 and 2016, respectively, representing a 47% increase.

Total assets were $801.3 million as of September 30, 2017, which was a $13.8 million increase from $787.5 million as of December 31, 2016. Deposits increased by $21.5 million as of September 30, 2017 compared to December 31, 2016.

Asset quality has improved during the nine months ended September 30, 2017. Total non-performing assets were $7.5 million as of September 30, 2017 versus $10.8 million as of December 31, 2016, which represents a 31% decrease. Total non-accrual loans to total loans decreased from 1.6% as of December 31, 2016 to 1.0% as of September 30, 2017.

“We are pleased with our growth in earnings”, stated Alan J. Hyatt, President and Chief Executive Officer. Mr. Hyatt continued, “Our cost of funds continues to decrease as we repay or refinance long outstanding Federal Home Loan Bank borrowings. Replacing these borrowings with lower cost funding has allowed us to significantly improve our net interest margin. Commercial lending and deposit activity has been robust for the first three quarters of this year. We are building strong banking relationships that are beneficial to the company and our customers. We are definitely in growth mode and very optimistic about our outlook.”

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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 $797.7 million and five branches located in Annapolis, Edgewater, Glen Burnie, and Severna Park, 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.