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correspondence033105

Severn
Bancorp, Inc.

March 31,
2005

VIA
FACSIMILE 202-942-9530

AND
FIRST CLASS MAIL

Mr. John
P. Nolan

Accounting
Branch Chief

United
States Securities and Exchange Commission

Mail Stop
04-08

Washington,
D.C. 20549

                Re: Severn
Bancorp, Inc.

                Form 10-K for the
fiscal year ended December 31, 2004

                Filed March 21,
2005

                File Number:
000-49731

Dear Mr.
Nolan:

Reference
is made to your letter of March 28, 2005 to me as President, Chairman and Chief
Executive Officer of Severn Bancorp, Inc. (the “Company”).

Your
letter, in particular, references Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations on page 37 where the Company
disclosed that certain accounts maintained at other financial institutions were
not reconciled and there existed a discrepancy of approximately $500,000 as of
December 31, 2004.

You have
asked the Company to provide to the Securities and Exchange Commission (“SEC”)
supplemental answers to the following:

1. Explain
how you were able to determine that the required adjustments, if any, will not
have a material effect on your financial condition as of December 31, 2004.
Please include the guidance in SAB Topic 1M in your response to support your
conclusion.

Response
to Question Number 1 Above:

This
issue was discovered in a review of the internal control procedures for
reconciling accounts by the Company and brought to the attention of its
independent registered public accounting firm (“independent accountant”) as well
as the Company’s Audit Committee. After discussions with the Company’s
accountants, it was determined that the amount in question and any required
adjustments to the financial statements would not have a material effect on the
financial condition or results of operations of the Company as of December 31,
2004. While the amount was deemed immaterial, management, based on the advice of
counsel, determined it prudent to disclose the matter in its Form
10-K.

1919
A West Street

P.O.
Box 6679

Annapolis,
Maryland  21401-0679

410-841-6925

Mr. John
P. Nolan

March 31, 2005

Page 2

    The Company has reviewed
SAB Topic 1M. In reviewing Topic 1M, which assesses materiality with respect to
earnings or financial condition, the Company, in consultation with its
independent accountants and the Audit Committee, determined that this was a
limited event that did not, in any manner, reflect upon the regular earnings or
earnings trends of the Company. Additionally, the amount involved was deemed to
be quantitatively immaterial (2.4% of pretax income and .50% (after tax) of
total stockholders’ equity) and qualitatively immaterial in that it did not
affect the general trend of earnings of the Company. Also, at the time the Form
10-K was filed, it was not entirely evident that the entire difference related
to 2004 (versus prior years) so that the charge to any particular year may have
been less than the $500,000, which was considered quantitatively immaterial as
noted above. The difference was treated as a passed audit adjustment and
communicated to the Audit Committee pursuant to SAS #61. In addition, the
Company determined that the amount in question was not precise or certain enough
to take a charge in the 2004 year end statements since a substantial amount of
work would be required to accurately reconcile the accounts due to the large
number of entries required to be reviewed. As a result, it was determined that
no charge should be taken in the 2004 year end financials and that no reserve
was required because there was no way to accurately determine the amount of a
reserve, if any, was required. See response to question number 3 for update on
current status of the difference.

2. Explain
to us how you were able to conclude that no loss accrual is required as of the
December 31, 2004, but rather that any adjustment, charge or reserve will be
taken in the first quarter ending March 31, 2005 is appropriate. Please include
guidance in paragraph 8 of SFAS No. 5 in your response.

Response
to Question Number 2 Above:

The
Company and its accountants reviewed whether or not it would be appropriate to
set up a loss accrual as of December 31, 2004 versus a careful review of the
Company’s accounts in order to accurately access whether or not any adjustment,
charge or reserve should be taken. Since it was determined by the Company and
its accountants that the amount in question itself was not material and this was
not an event which would be of a regularly occurring nature or affect earnings
or financial condition on a continual basis, it was determined it would be best
to accurately reconcile the accounts to determine whether or not any adjustment
or charge was necessary.

The
Company and its accountants have reviewed Statement of Financial Accounting
Standards No. 5, paragraph 8 and determined that at December 31, 2004, and the
date on which the Form 10-K was filed, it was impossible to estimate, with any
degree of accuracy, whether or not there was any loss as a result of the
inability to reconcile certain financial accounts as of that date with the
information that was available without a complete review of these accounts which
could not be completed prior to the Company’s filing of its annual report on
Form 10-K. As a result, it was determined that a loss contingency, if any, would
not be appropriate absent an appropriate account reconciliation.

Mr. John
P. Nolan

March 31, 2005

Page 3

3. Provide
us a progress update on your plans to reconcile these accounts in a timely
fashion as of the current date and integrate this information into your
responses to the above supplemental requests.

Response
to Question Number 3 Above:

As soon
as this matter was discovered, the Company engaged the services of certain
outside experts to review these accounts and to provide the Company with a
complete reconciliation so as to correct any possible errors between these
accounts and its financial statements. The Company has been reconciling these
accounts on a daily basis while also working to determine the causes of the
unreconciled difference. The differences identified to date were balance sheet
only adjustments between several cash accounts. The Company is in the process of
reconciling the accounts and has preliminarily determined that as of the date of
this letter that a reserve or charge off in the amount of approximately $135,000
will be necessary to resolve this issue. The Company will continue to
investigate the differences until the Form 10-Q for the quarter ending March 31,
2005 is filed and will reflect a charge for the then known unlocated difference
in its first quarter income statement. It is anticipated that this amount will
be immaterial to the March 31, 2005 results. As a result of the review and audit
of the discrepancies in these accounts, neither the Company nor its accountants
believes that any restatement is required to its year-end financial statements
or its Form 10-K for the fiscal year ended December 31, 2004.

The
Company has provided the attached statement acknowledging that:

1. The
Company is responsible for the adequacy and accuracy of the disclosure in the
filing.

2. Staff
comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing.

3. The
Company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United
States.

Mr. John
P. Nolan

March 31, 2005

Page 4

We hope
the information contained in this letter is responsive to your inquiry. Should
you have any further questions with respect to this matter, please feel free to
contact the undersigned at your convenience.

Sincerely,

    Alan J.
Hyatt

Alan J.
Hyatt

President,
Chairman and

Chief
Executive Officer

cc:    Terry
Lehman Partner, Beard Miller Company LLP

(via
facsimile 717-236-2200 and First Class Mail)

T.
Theodore Schultz, Chairman Audit Committee

(via
facsimile 410-263-2297 and First Class Mail)

Edward
Lublin, Esquire, Blank Rome

(via
facsimile 202-572-8379 and First Class Mail)