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
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