Delmar Bancorp (DBCP)

[norweger1979]

Dear Shareholders:
After writing these letters since the 1990 annual report, I can unequivocally say I am the most pleased to write this one. The reason I say that is the bottom line of the Company in 2014. We finally have returned to an acceptable level of profitability for the first year since 2008. I am also pleased to report that the problem asset resolution plan we put into place late in 2013 played out the way we had expected. Simply put, that plan was to use additional capital available to us in late 2013 to accelerate the write-down and write-off of legacy loans and other problem assets with the expectation that 2014 would be a rebound year, which is what happened. We also had fairly ambitious growth goals for 2014, which, for the most part, we achieved or exceeded. Our lending teams were very busy resulting in loan growth of $40.0 million, net of the allowance. This loan growth was the fuel of our improved net interest income, which increased by more than $1.1 million to $16.3 million. We also took advantage of the valuation increase of four TRUPs bonds to sell them at a significant gain early in the year. We used a large portion of the gain to further reduce our problem loan exposure. Our net income in 2014 was $3.5 million or $.325 per share, which is a significant turnaround from 2013. Also highlighted in this financial statement, our capital levels remain strong and our credit quality improved in 2014. Despite a regional economy which has not yet recovered (aside from the resort areas), the Bank has maintained solid capital and has worked through many of our credit issues. During the year we added two directors who provide additional knowledge and experience to the Boards of both the Holding Company and the Bank. Heidi Gilmore is an attorney from the Rehoboth area. Heidi’s legal expertise is real estate law and working with non-profits and along with her legal background she brings to us an extensive knowledge of businesses in Sussex County. Ken Lehman is a private bank investor who made a significant investment in Delmar Bancorp in 2013. Ken has extensive experience dealing with capital structures and needs of financial institutions. We are fortunate to have both Heidi and Ken as part of our team. As far as 2015 is concerned, our plan is to build on the momentum from last year. We project another year of solid loan and asset growth. Funding that growth will likely be a greater challenge than in the recent past. We expect to continue to chip away at our classified assets and to maintain capital levels well in excess of regulatory requirements. We also project another profitable year. The Holding Company still has about $4.5 million of preferred stock on the books as well as deferred dividends owed. Our intention this year is to catch up on the dividends in arrears and then replace the preferred shares with debt. Once those steps are accomplished, we will be able to consider reestablishing a common stock dividend. This has been a long journey since the depths of the recession of 2008. However, we are not nai¨ve and we know there will be unexpected challenges this year still. We look forward to a prosperous and successful 2015.
Very truly yours,
Edward M. Thomas President and Chief Executive Officer


http://www.bankofdelmarvahb.com/home/fiFiles/static/documents/2015_Annual_Report.pdf