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Delmar Bancorp Announces $11 Million Common Equity Increase

Buckley Sandler represented The Bank of Delmarva on the transaction.

August 13, 2013, Salisbury, Maryland – Delmar Bancorp (OTCQB: DBCP) (the “Company”), today announced that it had entered into a Securities Purchase and Exchange Agreement (the “Agreement”) with Kenneth R. Lehman pursuant to which Mr. Lehman will acquire 3,250,000 newly issued shares of the Company’s common stock for aggregate consideration consisting of $6,000,000 in cash, the cancellation of his 5,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having an aggregate liquidation amount of $5,000,000 (the “Series A Preferred Stock”), and the waiver of unpaid dividends on the Series A Preferred Stock and interest on unpaid dividends, in an amount expected to equal approximately $600,000 at closing. The per share consideration, including the effect of the dividend and interest waiver, is approximately $3.57 per share. While this represents a discount of 6.33% of the closing price on August 13, 2013, the last day on which there was a reported trade in the common stock, the per share consideration represents a premium of 1.24% over the average closing price for the 10 days on which trades were reported between June 1, 2013 and August 13, 2013.

The transaction will result in an increase of $11,000,000 in the Company’s common stockholders’ equity, and a reduction of $5,000,000 in the preferred stock account.

Edward M. Thomas, President and Chief Executive Officer of the Company, stated that “I am very pleased Ken Lehman has agreed to deepen his relationship with the Company by exchanging his Series A Preferred Stock for common stock and making a substantial additional cash investment. The additional $6,000,000 of tier 1 capital will enable us to accelerate our efforts to resolve or dispose of problem assets, and to take the additional charge-offs and provisions for such accelerated plans as called for by the Agreement, and to focus our efforts on making new loans and serving our communities. Mr. Lehman is an experienced investor in, and advisor to, community banks, and understands and supports the values and dynamics of community banks. The Board and I look forward to working with him.”

Mr. Lehman stated “I am excited to be a stockholder in a company with such an earnings-focused culture. I believe this transaction will allow the Company to quickly address legacy credit issues, and return to the usual profitability that characterized its operating history prior to the great recession of 2008.”

The transaction, which is subject to regulatory approval, is expected to close in the fourth quarter of 2013.

Delmar Bancorp is the holding company for The Bank of Delmarva. The Bank of Delmarva was organized in 1897 and as of June 30, 2013, was the fourth-largest independent community bank headquartered on the Delmarva Peninsula, with 10 branches and $432 million in assets.

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