On November 15, 2008, Severn Bancorp, Inc. ("Bancorp") accepted subscriptions to purchase a total of 70 units, at an offering price of $100,000 per unit, for gross proceeds of $7.0 million pursuant to its previously announced private placement of units. Each unit consists of 6,250 shares of Bancorp's Series A 8.0% Non-Cumulative Convertible Preferred Stock ("Series A Preferred Stock") and Bancorp's Subordinated Note in the original principal amount of $50,000. In the private placement, Bancorp will issue a total of 437,500 shares of its Series A Preferred Stock and $3.5 million aggregate principal amount of its Subordinated Notes. Purchasers of the units entered into Subscription Agreements with Bancorp, a copy of the form of which is attached hereto as Exhibit 10.1.

Bancorp intends to use the net proceeds from the sale of the units for general corporate purposes, including one or more of the following:

· contribution to its wholly-owned subsidiary, Severn Bank, (including investment in equity or subordinated indebtedness of Severn Bank) to fund its operations or provide additional capital for regulatory purposes,

· possible repayment of indebtedness of Severn Bank or Bancorp, and

· other general corporate purposes.

The units were sold without registration under the Securities Act of 1933, as amended (the "Act") in reliance upon the exemptions from registration provided under Section 4(2) of the Act and Regulation D promulgated under the Act ("Regulation D"). Each of the investors represented in the Purchase Agreement, among other things, that the investor was acquiring the units for investment for the investor's account and that the investor was an "accredited investor" within the meaning of Regulation D.

The following summary of the material terms and provisions of the Subordinated Notes is not intended to be complete and is qualified by reference to the form of Subordinated Note, a copy of which is attached hereto as Exhibit 10.2. If any specific information regarding the Subordinated Notes in this description is inconsistent with the terms of the form of Subordinated Note, you should rely on the information contained in the form of Subordinated Note.

Maturity Date. The full principal amount of the Subordinated Notes is due and payable on December 31, 2018.

Sinking Fund. There will be no sinking fund for the Subordinated Notes.

Interest. Interest on the Subordinated Notes at an annual rate of 8.0% will be paid quarterly in arrears on the last day of March, June, September and December commencing December 31, 2008.

Option to Defer Interest Payment Date. Generally, as long as Bancorp is not in default in the payment of interest on the Subordinated Notes, Bancorp has the right, at any time and from time to time during the term of the Subordinated Notes, to defer payments of interest for a period not exceeding 20 consecutive quarters or extending beyond the stated maturity of the Subordinated Notes (or any date of redemption therefor), during which deferral period no interest will be due and payable. At the end of the deferral period, Bancorp shall pay all interest then accrued and unpaid, together with interest thereon compounded quarterly at an annual rate of 8.0%.

Ranking. The Subordinated Notes will be subordinated to all of Bancorp's senior indebtedness, as defined in the Subordinated Notes.

Redemption. The Subordinated Notes will be redeemable in whole or in part at the option of Bancorp at any time beginning on December 31, 2009 until maturity.

Merger, Consolidation, Sale of Assets and Other Transactions. Bancorp may consolidate with or merge into any other person or convey, transfer or lease all or substantially all of its properties to any person, and any person may . . .

The information set forth under "Item 1.01. Entry into a Material Definitive Agreement" is incorporated by reference into this Item 2.03.

The information set forth under "Item 1.01. Entry into a Material Definitive Agreement" is incorporated by reference into this Item 3.02.

The information set forth under "Item 1.01. Entry into a Material Definitive Agreement" is incorporated by reference into this Item 3.03.

So long as any share of Series A Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the Series A Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, Bancorp will not, during the same dividend period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any of Bancorp's junior stock, including Bancorp common stock, or make any guarantee payment with respect thereto, other than:

· purchases, redemptions or other acquisitions of shares of junior stock of Bancorp in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;

· purchases of shares of Bancorp common stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;

· as a result of an exchange or conversion of any class or series of Bancorp's junior stock for any other class or series of Bancorp's junior stock; or

· the purchase of fractional interests in shares of Bancorp's junior stock pursuant to the conversion or exchange provisions of such junior stock or the security being converted or exchanged.

"Junior stock" means Bancorp common stock and any other class or series of stock of Bancorp now existing or hereafter authorized over which Series A Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of Bancorp.

Upon the voluntary or involuntary liquidation, dissolution or winding up of Bancorp, the holders of the Series A Preferred Stock are entitled to receive, out of assets legally available for distribution to stockholders, before any distribution of assets is made to holders of Bancorp common stock or any other shares of stock ranking junior to the Series A Preferred Stock as to distributions upon the liquidation, dissolution or winding up of Bancorp, a liquidating distribution in the amount of $8.00 per share, plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared.

On November 18, 2008, Bancorp filed Articles of Amendment to the Articles of Incorporation with the Secretary of State of the State of Maryland designating 437,500 shares of preferred stock as Series A Preferred Stock. A copy of the Articles of Amendment to the Articles of Incorporation of Bancorp is attached hereto as Exhibit 3.1.

On November 18, 2008, Bancorp issued a press release concerning the completion of the private placement referred to in Item 1.01 and also announcing that its application to participate in the U.S. Treasury Capital Purchase Program had been approved. This press release is furnished in this report as Exhibit 99.1 and is incorporated herein by reference.

This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

(d) Exhibits

Item No. Description
3.1      Articles of Amendment to the Articles of Incorporation of Bancorp
10.1     Form of Subscription Agreement
10.2     Form of Subordinated Note
99.1     Press Release dated November 18, 2008