A bank that got its start in a trailer in downtown Fredericksburg a decade ago has agreed to join the parent company of a bank that celebrated its 100th anniversary in 1997.
Virginia Partners Bank is expected to become an independent, wholly owned subsidiary of Salisbury, Md.-based Delmar Bancorp through an exchange of shares in an all-stock transaction in the second quarter of 2019.
Delmar Bancorp is the holding company for The Bank of Delmarva, which a group of businessmen and farmers opened on May 4, 1897, in the then-thriving railroad town of Delmar, Md. Today its main office is in Seaford, Del., and it has 11 branch locations in Maryland and three operating under the name Liberty Bell Bank in the South Jersey/Philadelphia metro market.
Both Delmar’s and Partners’s boards of directors have unanimously approved the merger. It is still subject to approval by Partners’ shareholders and bank regulatory authorities.
The transaction will create a partnership between Delmarva and Partners. The banks will maintain their existing names, executive management teams and boards of directors. The consolidated holding company will have, on a pro forma basis at Sept. 30, 2018, approximately $1.2 billion of assets, $947.7 million in loans and $966.6 million in deposits; and a franchise that serves markets from Philadelphia to Newport News.
Company officials said the strategic partnership will allow each bank to leverage the strength of its local community banking franchise and expand the breadth of products and services offered to its existing customer base. Additionally, the creation of a $1.2 billion asset bank holding company provides opportunities for both banks to expand their customer base and lending, and to better address community banking needs in their current and contiguous markets.
“The proposed merger of equals and multi-bank holding company structure will allow us to maintain our identity, while permitting increased efficiencies, greater visibility for our stock, a quarterly dividend for Partners shareholders, and a heightened ability to access the capital markets,” Partners President and CEO Lloyd B. Harrison III said in a news release. “This partnership will serve our shareholders, our employees, our customers and our community well.”
He said that it also sets the stage for other community banks to join a multi-bank holding company that is committed to maintaining separately chartered affiliate banks.
“This affiliate bank model preserves what is best about community banking—the identities and leadership that make them successful—while achieving scale in a rapidly consolidating industry,” Harrison said.
Harrison was one of the founders of Partners, which opened in August of 2008 out of a trailer in what was then a parking lot at 425 William St. It opened a branch a few months later in Westwood Shopping Center, which has since closed, before building its current headquarters at 410 William St.
Harrison will continue in his positions with Partners and also become chief executive officer of Delmar once the transaction is completed.
As of Sept. 30, Partners had approximately $420.1 million in assets, $325.1 million in loans and $344.5 million in deposits. Partners currently has three branches in Fredericksburg and, trading under the name Maryland Partners Bank, a branch in La Plata, Md., and a loan production office in Annapolis. Partners is also a 51 percent owner of Johnson Mortgage Co. in Newport News.
As of Sept. 30, Delmar had approximately $737.9 million in assets, $622.5 million in loans and $622.0 million in deposits. Delmarva has 11 branches located in Wicomico and Worcester counties, Maryland and Sussex County, Delaware, three branches in the South Jersey/Philadelphia metro market doing business under the name of Liberty Bell Bank, and a loan production office in Rehoboth Beach, Del.
Based on the closing price of Delmar common stock on Wednesday of $7.80 per share, the transaction would have a value of $13.40 per share of Partners common stock, and an aggregate value of approximately $55.1 million, or approximately 135 percent of Partners’ tangible common equity as of Sept. 30.
Holders of Partners common stock would own an aggregate of approximately 44 percent of the outstanding shares of Delmar following completion of the share exchange.
Kenneth R. Lehman currently serves on the Board of Directors of both Partners and Delmar. Following the completion of the transaction, Board of Directors of Delmar will consist of Lehman, five current members of Delmar’s board of directors and four current members of Virginia Partners’ board of directors.