Severn Bancorp (SVBI) 8-K Severn Bancorp, Inc. Announces Substantial Increase in Second Quarter Earnings

Exhibit 99.1

FOR IMMEDIATE RELEASE	Contact:
	Paul B. Susie
	Chief Financial Officer &
	Executive Vice President
	Email: psusie@severnbank.com
	Phone: 410.260.2000

Severn Bancorp, Inc. Announces Substantial Increase in Second Quarter Earnings

Annapolis, MD (July 27, 2018) – Severn Bancorp, Inc., (Nasdaq: SVBI) parent company of Severn Bank, today announced net income of $1.9 million for the three months ending June 30, 2018 versus $982 thousand for the same quarter in 2017. This is an increase of 95% year over year for the period. On a diluted per share basis, earnings were $0.15 versus $0.08 for the quarters ended June 30, 2018 and 2017, respectively. Net income for the six months ended June 30, 2018 is $3.8 million, a 99% increase over net income of $1.9 million for the same six month period in 2017.

Net interest income increased 15.3% during the second quarter of 2018. Net interest income was $6.9 million during the second quarter of 2018 versus $6.0 million during the second quarter of 2017. Net interest margin improved to 3.57% for the three months ending June 30, 2018 from 3.26% for the same period in 2017. Net interest income increased to $13.9 million for the first six months of 2018 from $11.6 million for the same time frame in 2017. Non-interest expenses increased modestly by 11% from $5.8 million for the second quarter of 2017 to $6.5 million for 2018. The additional expense was mostly related to new lending staff being added.

Severn Bank experienced a significant increase in mortgage banking revenue of 126% in the second quarter of 2018 versus the second quarter of 2017. Year to date mortgage banking revenue saw an increase of 51% for the first six months of 2018 versus 2017. The company’s efficiency ratio improved to 71.23% for the three months ending June 30, 2018 versus 82.96% for that same three months in 2017. Year over year the efficiency ratio improved to 70.59% from 82.11% for the first six months of 2018 and 2017 respectively.

“Earnings for the company are the best they have been in some time”, stated Alan J. Hyatt, President and Chief Executive Officer.  Mr. Hyatt continued, “In June we opened a new branch in Lothian/Wayson’s Corner so we now have excellent coverage of the county from north to south. We are making tremendous progress in picking up some strong local business relationships and bringing key staff on board. We were pleased to be able to pay a dividend the past couple of quarters, and management and the Board of Directors are focused on continued improvement in our operations and enhancing long term shareholder value.”

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 $821 million and six branches located in Annapolis, Edgewater, Severna Park, Lothian/Wayson’s Corner 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, 2017.

Severn Bancorp, Inc.

Consolidated Income Statement

(dollars in thousands, except per share data)

(Unaudited)

Quarterly income statement results:	Three Months Ended June 30,
	2018			2017			$ Change			% Change
Interest Income
Interest on loans	$	8,516		$	7,394		$	1,122			15.17	%
Interest on securities		307			328			(21	)		-6.40	%
Other interest income		178			174			4			2.30	%
Total interest income		9,001			7,896			1,105			13.99	%
Interest Expense
Interest on deposits		1,274			938			336			35.82	%
Interest on long term borrowings		800			951			(151	)		-15.88	%
Total interest expense		2,074			1,889			185			9.79	%
Net interest income		6,927			6,007			920			15.32	%
Provision for (reversal of) loan losses		0			(375	)		375			-100.00	%
Net interest income after provision for (reversal of) loan losses		6,927			6,382			545			8.54	%
Non-Interest Income
Mortgage-banking revenue		635			281			354			125.98	%
Real Estate Commissions		360			268			92			34.33	%
Real Estate Management Income		187			122			65			53.28	%
All other income		1,010			334			676			202.40	%
Net Non-Interest Income		2,192			1,005			1,187			118.11	%
Net interest income plus non-interest income after provision for (reversal of) loan losses		9,119			7,387			1,732			23.45	%
Non-Interest Expenses
Compensation and related expenses		4,420			3,674			746			20.30	%
Net Occupancy & Depreciation		391			325			66			20.31	%
Net Costs of Foreclosed Real Estate		(18	)		7			(25	)		-357.14	%
Other		1,684			1,818			(134	)		-7.37	%
Total non-interest expenses		6,477			5,824			653			11.21	%
Income before income tax provision		2,642			1,563			1,079			69.03	%
Income tax provision		724			581			143			24.61	%
Net income	$	1,918		$	982		$	936			95.32	%
Net income available to common shareholders	$	1,918		$	912		$	1,006			110.31	%

Severn Bancorp, Inc.

Consolidated Income Statement

(dollars in thousands, except per share data)

(Unaudited)

Year-to-Date income statement results:	Six Months Ended June 30,
	2018		2017			$ Change			% Change
Interest Income
Interest on loans	$	16,887	$	14,525		$	2,362			16.26	%
Interest on securities		627		597			30			5.03	%
Other interest income		364		331			33			9.97	%
Total interest income		17,878		15,453			2,425			15.69	%
Interest Expense
Interest on deposits		2,407		1,913			494			25.82	%
Interest on long term borrowings		1,560		1,947			(387	)		-19.88	%
Total interest expense		3,967		3,860			107			2.77	%
Net interest income		13,911		11,593			2,318			19.99	%
Provision for (reversal of) loan losses		0		(650	)		650			-100.00	%
Net interest income after provision for (reversal of) loan losses		13,911		12,243			1,668			13.62	%
Non-Interest Income
Mortgage-banking revenue		1,230		816			414			50.74	%
Real Estate Commissions		745		648			97			14.97	%
Real Estate Management Income		370		316			54			17.09	%
All other income		1,716		583			1,133			194.34	%
Net Non-Interest Inccome		4,061		2,363			1,698			71.86	%
Net interest income plus non-interest income after provision for (reversal of) loan losses		17,972		14,606			3,366			23.05	%
Non-Interest Expenses
Compensation and related expenses		8,698		7,431			1,267			17.05	%
Net Occupancy & Depreciation		735		661			74			11.20	%
Net Costs of Foreclosed Real Estate		14		40			(26	)		-65.00	%
Other		3,253		3,367			(114	)		-3.39	%
Total non-interest expenses		12,700		11,499			1,201			10.44	%
Income before income tax provision		5,272		3,107			2,165			69.68	%
Income tax provision		1,469		1,200			269			22.42	%
Net income	$	3,803	$	1,907		$	1,896			99.42	%
Net income available to common shareholders	$	3,733	$	1,767		$	1,966			111.26	%

Severn Bancorp, Inc.

Consolidated Balance Sheet

(dollars in thousands, except per share data)

(Unaudited)

	June 30, 2018			December 31, 2017			$ Change			% Change
Balance Sheet Data:
ASSETS
Cash	$	2,239		$	2,382		$	(143	)		-6.00	%
Federal funds and Interest bearing deposits in other banks		19,926			19,471			455			2.34	%
Certificates of deposit held as investment		8,780			8,780			0			0.00	%
Investment securities available for sale		11,975			10,119			1,856			18.34	%
Investment securities held to maturity		46,487			54,303			(7,816	)		-14.39	%
Loans held for sale		9,444			4,530			4,914			108.48	%
Loans receivable		686,912			668,151			18,761			2.81	%
Loan valuation allowance		(8,257	)		(8,055	)		(202	)		2.51	%
Accrued interest receivable		2,604			2,640			(36	)		-1.36	%
Foreclosed real estate, net		295			403			(108	)		-26.80	%
Premises and equipment, net		23,059			23,139			(80	)		-0.35	%
Restricted stock investments		4,227			4,489			(262	)		-5.84	%
Bank owned life insurance		5,146			5,064			82			1.62	%
Deferred income taxes		3,993			5,302			(1,309	)		-24.69	%
Prepaid expenses and other assets		3,858			4,069			(211	)		-5.19	%
	$	820,688		$	804,787		$	15,901			1.98	%
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits	$	621,615		$	602,228		$	19,387			3.22	%
Borrowings		82,000			88,500			(6,500	)		-7.34	%
Subordinated debentures		20,619			20,619			-			0.00	%
Accounts payable and accrued expenses		2,413			2,340			73			3.12	%
Total Liabilities		726,647			713,687			12,960			1.82	%
Preferred stock		-			4			(4	)		-100.00	%
Common stock		127			122			5			4.10	%
Additional paid-in capital		65,157			65,137			20			0.03	%
Retained earnings		28,858			25,872			2,986			11.54	%
Accumulated comprehensive income (loss)		(101	)		(35	)		(66	)		188.57	%
Total Stockholders' Equity		94,041			91,100			2,941			3.23	%
	$	820,688		$	804,787		$	15,901			1.98	%

Severn Bancorp, Inc.

Selected Financial Data

(dollars in thousands, except per share data)

(Unaudited)

	Six Months Ended June 30,							Three Months Ended June 30,
	2018				2017			2018			2017
Per Share Data:				��								.
Basic earnings per share	$	0.30			$	0.15		$	0.15		$	0.08
Diluted earnings per share	$	0.30			$	0.14		$	0.15		$	0.07
Average basic shares outstanding		12,463,132				12,125,324			12,684,711			12,125,324
Average diluted shares outstanding		12,559,069				12,209,250			12,781,037			12,209,250
Performance Ratios:
Return on average assets		0.95	%			0.45	%		0.95	%		0.46	%
Return on average equity		9.04	%			4.03	%		8.12	%		4.14	%
Net interest margin		3.62	%			3.18	%		3.57	%		3.26	%
Efficiency ratio*		70.59	%			82.11	%		71.23	%		82.96	%

	June 30, 2018			December 31, 2017
Asset Quality Data:
Non-accrual loans	$	7,610		$	5,710
Foreclosed real estate		295			403
Total non-performing assets		7,905			6,113
Total non-accrual loans to total loans		1.1	%		0.9	%
Total non-accrual loans to total assets		0.9	%		0.7	%
Allowance for loan losses		8,257			8,055
Allowance for loan losses to total loans		1.2	%		1.2	%
Allowance for loan losses to total non-accrual loans		108.5	%		141.1	%
Total non-performing assets to total assets		1.0	%		0.8	%
Non-accrual troubled debt restructurings (included above)		803			820
Performing troubled debt restructurings		11,868			13,714
Loan to deposit ratio		110.5	%		110.9	%

* This non-GAAP financial measure is calculated as noninterest expenses less OREO expenses divided by net interest income plus noninterest income