Severn Bancorp Announces Restatement of Financial Statements To Reflect Additional Net Income

   Severn Bancorp Announces Restatement of Financial Statements To Reflect
                            Additional Net Income

PR Newswire

ANNAPOLIS, Md., Feb. 14, 2013

ANNAPOLIS, Md., Feb. 14, 2013 /PRNewswire/ --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       Adjustment As       As       Adjustment As       As       Adjustment As
                Reported            Restated Reported            Restated Reported            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) 0.18     0.04       0.22     (0.05)   0.03       (0.02)   (0.06)   0.02       (0.04)
 per share
                Quarter Ended
                March 31, 2012               June 30, 2012                September 30, 2012           December 31, 2012
                As       Adjustment As       As       Adjustment As       As       Adjustment As       As       Adjustment As
                Reported            Restated Reported            Restated Reported            Restated Reported            Restated
Increase in:
Pre-tax income  $     $      $     $     $      $     $     $      $     $     195        $   
                  828   172      1,000   1,869    174      2,043     964   191      1,155   1,993              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   0.01     0.01       0.02     0.07     0.01       0.08     0.02     0.01       0.03     0.08     0.01       0.09
 share
                Quarter Ended
                March 31, 2011               June 30, 2011                September 30, 2011           December 31, 2011
                As       Adjustment As       As       Adjustment As       As       Adjustment As       As       Adjustment As
                Reported            Restated Reported            Restated Reported            Restated Reported            Restated
Increase in:
Pre-tax         $     83         $     $      $      $      $     $      $     $     $      $   
income(loss)      791               874  (1,403)  152      (1,251)   954   159      1,113   1,859    167      2,026
Net             447      49         496      (846)    90         (756)    551      95         646      1,067    99         1,166
income(loss)
Basic and
diluted
 earnings(loss) 0.00     0.01       0.01     (0.13)   0.01       (0.12)   0.01     0.01       0.02     0.06     0.01       0.07
 per share
                Quarter Ended
                March 31, 2010               June 30, 2010                September 30, 2010           December 31, 2010
                As       Adjustment As       As       Adjustment As       As       Adjustment As       As       Adjustment As
                Reported            Restated Reported            Restated Reported            Restated Reported            Restated
Increase in:
Pre-tax         $     $      $     $     $      $     $     $      $     $     87         $   
income(loss)     (829)    96      (733)  1,054     67     1,121     870    84       954  1,102              1,189
Net             (528)    58         (470)    593      40         633      485      51         536      607      53         660
income(loss)
Basic and
diluted
 earnings(loss) (0.10)   0.01       (0.09)   0.02     0.00       0.02     0.01     0.00       0.01     0.02     0.00       0.02
 per share



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.

SOURCE Severn Bancorp, Inc.

Contact: Thomas G. Bevivino, Chief Operating Officer & Executive Vice
President, +1-410-260-2000, tbevivino@severnbank.com