Liberty Bell Bank Reports Second Quarter 2017 Results of Operations

Liberty Bell Bank LBBB today reported a net loss of $63,000 for the three months ended June 30, 2017, compared to net income of $27,000 for the same period in 2016, a decrease of $90,000. Net income for the six months ended June 30, 2017 was $43,000, a decrease of $34,000 as compared to net income of $77,000 for the same period in 2016. At June 30, 2017, the Bank is well capitalized by all regulatory measures.

Benjamin F. Watts, President and Chief Executive Officer, reported that on July 20, 2017, Liberty Bell Bank and Delmar Bancorp signed a definitive merger agreement pursuant to which Liberty Bell Bank will be merged into Delmar Bancorp's subsidiary, The Bank of Delmarva, subject to the satisfaction of certain conditions including shareholder and regulatory approval. The transaction is expected to be completed in either December 2017 or the first quarter of 2018. Under the Agreement, each Liberty Bell Bank shareholder will be entitled to elect to receive either 0.2857 shares of Delmar Bancorp common stock, or $1.70 in cash, for each share of Liberty Bell Bank common stock they own, provided that in the aggregate 70% of the shares of Liberty Bell Bank common stock must be converted into Delmar Bancorp common stock and 30% of such shares must be converted into cash. Based on the average closing price of Delmar common stock during the 90 days ended July 14, 2017 of $6.58, the aggregate value of the transaction would be approximately $16 million.

The decrease in the Bank's net income for the three months ended June 30, 2017 over the same quarter in 2016 was due primarily to an increase in its provision for loan losses of $246,000, and a decrease in its non-interest income of $51,000 due primarily to a decrease in loan related fees. The increase in the provision for loan losses was needed to replenish the allowance for loan losses due to the charge-off of a problem loan that was previously classified as "non-accruing." Partially offsetting these negative variances, the Bank's net interest income increased $146,000, other expenses decreased $66,000 and the income tax expense decreased $11,000.

The increase in net interest income was due to a $137,000 increase in interest and dividend income and a $9,000 decrease in interest expense from interest paid on deposits. The increase in interest and dividend income was due primarily to an increase of $144,000 in interest and fees from loans. The decrease in interest expense from interest paid on deposits was due to a $4.2 million decrease in the average balance in interest-bearing accounts to $115.3 million for the quarter ended June 30, 2017. The average rate paid on interest-bearing deposits was 0.69%, consistent with the 0.70% rate in last year's second quarter.

The increase of $144,000 in interest and fees from loans was due primarily to an $11.9 million increase in average loan balances outstanding for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. The interest yield from the loan portfolio of 4.81% for the second quarter of 2017 was consistent with the 4.82% yield for the same time period in 2016.

The $66,000 decrease in other expenses was due primarily to a $48,000 decrease in deposit insurance premium expense and a $20,000 decrease in expenses related to other real estate owned. In addition, decreases in expenses related to audit expense, other professional fees, equipment maintenance expenses, and occupancy expenses related to amortization of leasehold improvements of $10,000, $9,000, $8,000 and $6,000, respectively, contributed to lower non-interest expense. Partially offsetting these positive variances, compensation expense increased $25,000, and expenses for data processing, supplies and director fees increased $114,000. Also during the quarter, the Bank's provision for income tax expense decreased $11,000.

Net interest margin for the second quarter of 2017 was 3.67%, an increase of 0.44% from the 3.23% net interest margin for the second quarter of 2016. The increase in the net interest margin resulted from an increase of 0.42% in the yield from earning assets, primarily cash deposits at the Federal Reserve Bank.

The $34,000 decrease in net income for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 can be primarily attributed to an increase in the provision for loan losses of $295,000, largely for the same reason cited above in the three month period comparison, and a decrease in gains from the sale of investment securities of $68,000. In addition, fee income from loans decreased $34,000 and losses from the sale of other real estate increased $9,000. An increase in net interest income of $203,000, a decrease in other expenses of $136,000 and a decrease in the provision for income taxes of $37,000 partially reduced the impact of the unfavorable variances.

The increase of $203,000 in net interest income was due to a $198,000 increase in interest income and a $5,000 decrease in interest expense, primarily resulting from a decrease of interest on deposits. The $198,000 increase in interest and dividend income was due primarily to an increase of $227,000 in increase in interest and fees from loans and an increase of $7,000 in interest from cash and cash equivalents while interest from investment securities available for sale decreased $36,000.

The increase of $227,000 in interest and fees from loans was due primarily to the a $10.7 million increase in average loan balances outstanding for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. Partially offsetting the impact of an increase in average loan balances outstanding, the interest yield for the loan portfolio decreased 4 basis points from 4.87% to 4.83%. The decrease of $36,000 in interest earned from investment securities was due primarily to a $4.8 million decrease in the average investment balance outstanding, as the bank sold securities primarily to fund the growth in loans and to monetize gains in the portfolio.

The $136,000 decrease in other expenses for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 was due primarily to a $80,000 decrease in deposit insurance premium expense, a $38,000 decrease in expenses related to other real estate owned, a $19,000 decrease in legal expense related to the Bank's ongoing troubled asset reduction plan, a $14,000 decrease in audit fees, a $11,000 decrease in equipment expenses due to data processing outsourcing and a $10,000 decrease in other professional expense. Partially offsetting these positive variances, compensation expenses increased $13,000, data processing expenses increased by $6,000 as the Bank outsourced data processing functions, other insurance premium expense increased $8,000 and director fees increased by $6,000. The provision for income taxes decreased $37,000.

Net interest margin for the six months ended June 30, 2017 was 3.59%, an increase of 0.31% from the 3.28% net interest margin for the six months ended June 30, 2016. The increase in the net interest margin resulted from an increase of 0.31% in the yield from earning assets, primarily cash deposits.

Total assets at June 30, 2017 were $147.8 million, representing a decrease of $1.8 million from $149.6 million at December 31, 2016. The decrease was due primarily to a $6.4 million reduction in cash and cash equivalents, primarily in interest-bearing cash deposits at the Federal Reserve Bank, as the Bank increased net loans receivables by $5.0 million.

Total deposits decreased by $4.6 million to $131.5 million at June 30, 2017 from $136.1 million at December 31, 2016. This was primarily due to a decrease in interest bearing accounts, while non-interest bearing account balance remained steady at $20.5 million.

The decrease in interest-bearing deposit accounts of $4.6 million was due primarily to interest bearing checking accounts, including money market accounts, which decreased $815,000. Savings accounts decreased $868,000 and certificates of deposit decreased $2.8 million from December 31, 2016 to $57.1 million at June 30, 2017.

The Bank's President and Chief Executive Officer, Benjamin Watts indicated "Non-performing assets, like other real estate, are a drain on the earnings of the Bank. However, on a more positive note, we are thrilled to have found such a strong and high caliber institution as Delmar Bancorp to merge with. This partnership will serve our shareholders, our employees, our customers and our community well." The Chairman of the Board of Directors of the Bank, William Dunkelberg added, "We have made substantial progress redeploying our assets into earning activities. This has strengthened our bank and positioned us to be able to partner with Delmar. Bank management is doing a great job with excellent support from our Board of Directors."

Set forth below is certain selected balance sheet and income statement data at June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016.

SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)		June 30,				December 31,
		2017				2016
Cash and cash equivalents		$	7,711			$	14,090
Investment securities			10,321				10,897
Net loans receivable			124,516				119,468
Total assets			147,837				149,576
Deposits			131,549				136,159
Shareholders' equity			9,884				9,730
Capital Ratios:
Common Equity Tier 1 Capital to Risk Weighted Assets			9.01	%			9.15	%
Leverage Capital			6.64	%			6.73	%
Tier 1 Capital to Risk Weighted Assets			9.01	%			9.15	%
Total risk based capital			10.16	%			10.31	%

SELECTED INCOME STATEMENT DATA
(Unaudited, in thousands except per share data)
		Quarter ended June 30,								Six months ended June 30,
		2017				2016				2017				2016
Net interest income		$	1,312			$	1,166			$	2,573			$	2,370
Provision for loan losses			261				15				325				30
Gain on sale of securities		0				8				0					68
Other Non-interest income			145				195				339				377
Loss on write-down of ORE		9				0				9				0
Other expenses			1,252				1,318				2,552				2,688
Provision (credit) for income taxes			(2	)		9					(17	)			20
Net income (Loss)		$	(63	)		$	27			$	43			$	77
Earnings per share:
Basic		$	(0.01	)		$	0.00
Diluted		$	(0.01	)		$	0.00

Liberty Bell Bank is a full-service, state-chartered commercial bank, whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The Bank provides diversified financial products through two locations in Burlington County, New Jersey and one location in Camden County, New Jersey.

The Bank may from time to time make written or oral "forward-looking statements", including statements contained in this release. Such statements are not historical facts and include expressions about management's strategies, views and expectations about its programs and products, pending transactions, relationships, opportunities, technology and market conditions. Actual results may differ materially from such forward-looking statements, and no undue reliance should be placed on any forward-looking statement. Factors that may cause results to differ materially from such forward-looking statements include, but are not limited to, unanticipated changes in the financial markets and the direction of interest rates; volatility in earnings due to certain financial assets and liabilities held at fair value; stronger competition; insufficient allowance for credit losses; a higher level of net loan charge-offs and delinquencies than anticipated; material adverse changes in the Bank's operations or earnings; a decline in the economy; changes in relationships with major customers; changes in effective income tax rates; higher or lower cash flow levels than anticipated; inability to hire or retain qualified employees; a decline in the levels of deposits or loss of alternate funding sources; the inability to increase our loan portfolio; the inability to increase our capital to sustain our growth and meet regulatory requirements; changes in laws and regulations; adoption, interpretation and implementation of new accounting pronouncements; operational risks, including the risk of fraud by employees and customers; the ability to obtain required regulatory and shareholder approvals to complete its merger with The Bank of Delmarva; the ability to complete such merger as expected and within the expected timeframe; and the possibility that one or more of the conditions to the completion of such merger may not be satisfied. and other factors, many of which are beyond the Bank's control. The words "may", "could", "should", "would", "will", "project", "continue", "believe", "anticipate", "expect", "intend", "plan", and similar expressions are intended to identify forward-looking statements. All such statements are made in good faith by the Bank pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Bank.

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