Delmar Bancorp, Salisbury, MD (DBCP)

A Case of Bordering on a New Frontier


DBCP is priced too low. Delmar Bancorp's performance has crossed over into new territory and the stock doesn't reflect it, yet. Other banks of similar profitability trade at 150% of book or better.

NPAs less TDRs are 1.2%, ROE is approaching 10%, and book value has grown 22% since 2013. At this rate, book value will surpass $7 in three years, and DBCP could easily trade at $11.


Disclosure: As of this posting, I own shares of DBCP and may subsequently either dispose of them or purchase more.


Prospective Buyers

The Bank of Delmarva holds 12% of the Salisbury, MD and Seaford, DE markets, is the only bank in Delmar, MD and Dagsboro, DE, and shares territory with these three banks:

Fulton Financial, Lancaster, PA (FULT)
WSFS Financial, Wilmington, DE (WSFS)
Xenith Bancshares, Richmond, VA (XBKS)

Financial Snapshot
as of 12/31/2016

Total assets:
$512M
Tangible book value per share:
$5.62
NPAs to assets:
4.4%
Price to book:
107.3%
Market cap:
$49.6M
Dividend yield:
1.3%
Trailing 12-month return on assets:
0.8%
Trailing 12-month return on equity:
8.6%
TARP:$0M*
*Redeemed $9M 1/29/2013

The Crew

Jeffrey F. Turner, Chairman
Edward M. Thomas, President and CEO
John Breda, Chief Credit Officer, successor CEO

The Skinny

Six ways that Delmar Bancorp is on a border*
  1. Bank of Delmarva branches literally straddle the Delaware - Maryland border
  2. Delmar Bancorp is on the border between privately held and public (DBCP doesn't trade much, and one investor — Ken Lehman — controls 41% of the shares)
  3. The company is borderline too small for brokerage firm analysts to follow it (None do)
  4. The Bank of Delmarva is about to cross a border into the prestigious top 25% of U.S. banks earning 1% on assets and 10% on equity
  5. The bank is at a management border, too, as CEO Ed Thomas retires in June and John Breda prepares to take the helm
  6. Delmar's Board is at a strategic border where the "sell or stay the course" question tends to arise
* All of which are way better than the borderline between survival and failure on which Delmar was teetering in 2011, with a Texas ratio near 120% and NPAs well over 10% of assets.

Sources

  • Confidential interviews with shareholders and analysts

5-Year Anniversary Portfolio Performance Assessment

Happy Anniversary, Timyan Bank Alert!


It's hard to believe five years have passed since I launched the Timyan Bank Alert.  The publication serves a wide range of purposes in my life: it helps me hone my art, make money, help others make money, and connect personally with those of you who share my passion for community banks. And I really like how it establishes an historical record of the stories behind these bank stocks.

If you had invested $100 in each stock when I reviewed it here, your $4300 investment would be worth $9159 today. If you only invested in HCBP, I apologize...


Disclosure: As of this posting, I own shares of all the bank stocks reviewed in the Timyan Bank Alert that still exist (or the stocks of their acquiring banks) and may subsequently either dispose of them or purchase more. For full disclosure, please note, I personally own many other bank stocks that are not represented in the Timyan Bank Alert portfolio or record.


The average running return rate for the Timyan Bank Alert portfolio so far is 113%.

Over the past five years, I've reviewed 43 bank stocks.

Four have undeperformed against the market. (The first two stocks I reviewed turned out to be the least auspicious.)
  • HCBP essentially lost everything when it was seized by the FDIC
  • CDBK merged into Parkway, is currently down 8%, but still looks promising to me
  • CNAF is running "flat" at 1%
  • BKUT is up an un-thrilling 7%

Nineteen have doubled their value or better, as shown in the table below.
  • FMFC and SBFC increased 5-fold, but are now in acquiring company stock
  • CITZ and CWBC quadrupled, CITZ via acquisition and CWBC on its own
  • BHWBCPBO, and CMTB have tripled, BHWB on its own

My "median" performer gained 89% — BBIM, which was acquired for cash.

1st ReviewSymbolReturnPrice ThenPrice Now*
07/09/12FMFC425%$5.05$26.50
06/20/12SBFC423%$12.60$65.95
05/30/12CITZ381%$5.45$26.24
05/11/12CWBC360%$2.23$10.25
10/04/12BHWB259%$6.75$24.25
03/30/14CPBO237%$8.45$28.47
08/21/14CMTB207%$7.27$22.35
05/07/13CBIN188%$13.00$37.47
04/12/14BBBI159%$6.38$16.50
07/07/12PSBQ146%$25.50$62.75
05/04/12HBNC132%$11.29$26.21
08/08/12FRAF123%$13.60$30.35
05/21/13EMYB111%$6.65$14.00
09/26/16GRBS108%$11.40$23.69
06/04/12CARE107%$8.25$17.11
01/07/13FIBP105%$13.60$27.85
09/23/12BXS104%$15.00$30.60
06/24/12HFBC102%$7.07$14.26
02/27/13LOGN100%$21.00$41.95
06/30/13HARI94%$7.20$14.00
07/11/14BANC93%$10.76$20.75
12/30/14BBIM89%$49.75$93.93
11/13/13MFGI86%$32.25$60.00
07/03/14CABC80%$10.80$19.40
03/02/14NCNB76%$9.25$16.25
07/13/13NWYF73%$15.80$27.40
06/01/15EXSR73%$84.00$145.00
09/17/12MFNC71%$7.84$13.41
08/26/16CCFH67%$1.05$1.75
04/25/15SLRK54%$4.80$7.40
09/02/15PFBX52%$9.75$14.80
01/19/15FGBI45%$17.09$24.74
02/06/14NWBN43%$4.02$5.75
02/27/16SBBI41%$41.00$58.00
01/11/17BAOB38%$3.11$4.30
01/15/14ASRV33%$3.05$4.05
08/30/12NECB23%$6.73$8.27
07/03/16SRNN21%$9.80$11.85
04/06/17BRBW14%$7.25$8.25
05/29/14BKUT7%$4.37$4.67
11/18/14CNAF1%$20.70$21.00
04/30/12CDBK-8%$14.5$13.39
04/26/12HCBP-100%$3.50$0.01

* April 2017 price, where the stock exists, or its value in acquiring stock

UPDATE: Merchants Financial Group, Winona, MN (MFGI)

My assessment of MFGI hasn't changed much in the three and a half years since my first Timyan Bank Alert™ review of Merchants Financial Group (November 2013): it still looks to me like "all Merchants Bank Management needs is to be left alone to keep doing what they do."

This community bank stock has largely performed as I had expected — the price has nearly doubled from 2013's $32.50, and stated book value has reached $55. Therefore, I'm updating my expectations: over the next three years, I anticipate that book value will approach $70, and MFGI will trade above $100.

In other words, Merchants Financial stock is still a "winner" in my book.


Disclosure: As of this posting, I own shares of MFGI and may subsequently either dispose of them or purchase more.

Prospective Buyers
As in 2013, I'd prefer to see Merchants Bank remain independent. Strongly positioned within the footprints of these banks though, it certainly has attractive options.
Associated Bank, Green Bay, WI (ASB)
Bank of Montreal, Toronto, Canada (BMO)
Bremer Financial, Saint Paul, MN (private)
Financial Snapshot
as of 12/31/2016
Total assets:
$1.6B
Tangible book value per share:
$46.04
NPAs to assets:
1.2%
Price to book:
108%
Market cap:
$162M
Dividend yield:
1.9%
Trailing 12-month return on assets:
0.9%
Trailing 12-month return on equity:
9.8%
Luminaries
Scott Biesanz, Chairman
Greg Evans, President and CEO
Susan M. Savat, Senior VP and CFO
Gold Stars
Let me count the ways I still love this bank!
  1. Excellent value. At 11.4x earnings, and 108% of book value, MFGI is still exceptionally cheap, especially when you consider that the bank ranks in the top quartile of US banks in both ROA and ROE.
  2. Healthy insider ownership. The ESOP together with officers and directors still hold about 23% of the stock. and local Fastenal Founders Slaggie and Kierlin own another 16%.
  3. Conservative bankers. Thanks to the sound underwriting practices of Merchants Bank loan officers, NPAs are a low 1.2% of loans.
Since my last review, it has also occurred to me that Merchants Financial Group has another winning card it could play:
With its market cap of $161M, were MFGI to list on Nasdaq, it would be eligible for inclusion in the Russell 2000 Index. Given its thin trading and float, the stock could then exceed my expectations pretty fast. 
Sources