11.3% Annualized Loan Growth Supported By
Strong Balance Sheet
John Marshall Bancorp, Inc. (Nasdaq: JMSB) (the “Company”),
parent company of John Marshall Bank (the “Bank”), reported its
financial results for the three and nine months ended September 30,
2023.
Selected Highlights
- Strong Loan Growth – Loans, net of unearned income, grew
$95.0 million or 5.5% from September 30, 2022 to September 30,
2023. Loans, net of unearned income, grew $50.3 million or 11.3%
annualized from June 30, 2023 to September 30, 2023. The Company’s
loan pipeline headed into the fourth quarter of 2023 continues to
be strong as we are seeing increased lending opportunities that
meet our underwriting standards and, in many cases, fewer
competitors for those loans as some market participants have scaled
back lending efforts.
- Pristine Asset Quality – For the sixteenth consecutive
quarter, the Company had no nonperforming loans, no other real
estate owned and no loans 30 days or more past due. There were no
charge-offs during the quarter. The Company continues to adhere to
strict underwriting standards and proactively manages the
portfolio.
- Well Capitalized – Each of the Bank’s regulatory capital
ratios is well in excess of the regulatory threshold to be
considered well capitalized. The Bank’s equity to assets and total
risk-based capital ratios were 10.6% and 15.7%, respectively, as of
September 30, 2023.
- Continued Strength in CRE Loan Portfolio – The Company’s
loan portfolio remains a source of strength. As of September 30,
2023, the Company’s commercial real estate (“CRE”) non-owner
occupied and owner-occupied portfolios had a weighted average
loan-to-values of 50.2% and 55.1%, respectively, and weighted
average debt service coverage ratios of 2.1x and 3.5x,
respectively.
- Decreased Wholesale Deposits – The Company reduced
wholesale deposits (i.e., Brokered and QwickRate CDs) by $58.7
million or 16.3% during the three months ended September 30, 2023.
Year-to-date, the Company reduced wholesale deposits by $73.7
million or 19.7%. As outlined in the deposit detail table included
in this release, wholesale deposits have declined in each of the
past two quarters by a total of $95.4 million.
- Increased Core Deposits – During the quarter, the
Company grew non-interest bearing demand deposits by $3.9 million
or 3.6% annualized. Non-interest bearing deposits as a percentage
of total deposits increased from 21.2% at June 30, 2023 to 22.1% as
of September 30, 2023. Non-maturing deposits increased $16.5
million during the three months ended September 30, 2023,
representing 5.7% annualized growth. Core customer funding sources,
as defined in the deposit detail table included with this release,
increased from 80.3% as of June 30, 2023 to 82.6% as of September
30, 2023.
- Stabilizing Net Interest Margin – Net interest margin
was 2.08% for the three months ended September 30, 2023 compared to
2.10% for the three months ended June 30, 2023 and 3.10% for the
three months ended September 30, 2022. The Company realized the
initial benefits of the July 2023 balance sheet restructuring
disclosed in the Company’s earnings release and Form 10-Q for the
second quarter of 2023 (the “Restructuring”). We continue to
redeploy the Restructuring proceeds into higher yielding,
high-quality earning assets and pay down higher cost funding
sources. As a result of the Restructuring, strong loan growth and
reduction of wholesale deposits, net interest margin progressively
improved throughout the quarter and ended the month of September at
2.13%.
Chris Bergstrom, President and Chief Executive Officer,
commented, “By selling low yielding assets through the
Restructuring, we increased the flexibility and earnings horsepower
of our balance sheet. Part of the proceeds from the Restructuring
were redeployed into the loan growth anticipated in last quarter’s
earnings release and enabled us to enhance our earning asset yield.
Part of the Restructuring proceeds were utilized to pay down higher
cost wholesale funding, which we expect will slow the rate of
increase on our cost of funds. Part of the proceeds are awaiting
redeployment, but are earning a higher yield than they were prior
to the Restructuring. We anticipate putting these funds to work in
the fourth quarter, as our loan pipeline remains strong. In
addition, we are encouraged by our core non-maturing deposit growth
and improved funding mix during the quarter. Our balance sheet
remains strong. We continue to have excellent asset quality and
robust liquidity. While the quarter’s reported results reflect the
non-recurring impact of the Restructuring, core operating
performance of the Company remains strong and we have enhanced our
ability to drive earnings growth.”
Balance Sheet, Liquidity and Credit
Quality
Total assets were $2.30 billion at September 30, 2023, $2.36
billion at June 30, 2023 and $2.31 billion at September 30, 2022.
As discussed in more detail below, the Company reduced wholesale
deposits by $58.7 million during the quarter.
Total loans, net of unearned income, increased $95.0 million or
5.5% to $1.82 billion at September 30, 2023, compared to $1.73
billion at September 30, 2022 and $50.3 million during the quarter
ended September 30, 2023 or 11.3% annualized from $1.77 billion at
June 30, 2023. The increase in loans during both comparative
periods was primarily attributable to growth in the residential
mortgage and commercial investor real estate loan portfolios.
The carrying value of the Company’s fixed income securities
portfolio was $265.4 million at September 30, 2023, $422.7 million
at June 30, 2023 and $467.1 million at September 30, 2022. The
reduction in the portfolio resulted from the Restructuring, which
was previously disclosed in our July 21, 2023 earnings release. As
of September 30, 2023, 96.2% of our bond portfolio was covered by
the implied guarantee of the United States government or one of its
agencies. At September 30, 2023, nearly 67% of the fixed income
portfolio was invested in amortizing bonds, which provides the
Company with a source of steady cash flow. At September 30, 2023,
the fixed income portfolio had an estimated weighted average life
of 4.5 years. The available-for-sale portfolio comprised
approximately 66% of the fixed income securities portfolio and had
a weighted average life of 3.2 years at September 30, 2023. The
held-to-maturity portfolio comprised approximately 34% of the fixed
income securities portfolio and had a weighted average life of 7.0
years at September 30, 2023. The Company did not purchase any fixed
income securities during the three or nine month periods ended
September 30, 2023.
The Company’s balance sheet remains highly liquid. The Company’s
liquidity position, defined as the sum of cash, unencumbered
securities and available secured borrowing capacity, totaled $742.5
million as of September 30, 2023 compared to $839.4 million as of
June 30, 2023 and represented 32.3% and 35.5% of total assets,
respectively. Wholesale deposits, defined as brokered and QwickRate
certificates of deposit, decreased $58.7 million or 16.3% from
$359.1 million at June 30, 2023 to $300.5 million at September 30,
2023. As discussed above, the Company also funded $50.3 million of
net loan growth during the quarter ended September 30, 2023.
Liquidity Trends
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
(Dollars in thousands)
Amount
% of Assets
Amount
% of Assets
Amount
% of Assets
Amount
% of Assets
Amount
% of Assets
Cash
$
192,656
8.4
%
$
129,551
5.5
%
$
103,359
4.4
%
$
61,599
2.6
%
$
74,756
3.2
%
Unencumbered Securities
80,267
3.5
%
233,695
9.9
%
298,194
12.7
%
313,618
13.4
%
345,987
15.0
%
Available Secured Borrowing Capacity
469,524
20.4
%
476,144
20.1
%
451,008
19.2
%
388,257
16.5
%
401,828
17.4
%
Total Liquidity
$
742,447
32.3
%
$
839,390
35.5
%
$
852,561
36.3
%
$
763,474
32.5
%
$
822,571
35.6
%
If the Company were to avail itself of additional Bank Term
Funding Program (“BTFP”) funding, we estimate an incremental
increase in our liquidity position of approximately $13.4 million,
increasing our potential liquidity to $755.8 million as of
September 30, 2023. In addition to available secured borrowing
capacity, the Bank had available federal funds lines of $110.0
million at September 30, 2023.
Total deposits were $1.98 billion at September 30, 2023, $2.05
billion at June 30, 2023 and $2.06 billion at September 30, 2022.
Total deposits decreased $64.7 million or 3.2% when compared to
June 30, 2023. The decrease was primarily due to a managed
reduction in costlier wholesale deposits of $58.7 million or 16.3%
during the quarter. NOW deposits increased $34.3 million or 11.0%
to partially offset the decrease in wholesale deposits. As of
September 30, 2023, the Company had $614.0 million of deposits that
were not insured or not collateralized by securities compared to
$697.0 million at June 30, 2023. Deposits that were not insured or
not collateralized by securities represented only 31.0% of total
deposits at September 30, 2023 compared to 34.1% at June 30,
2023.
The Company obtained a $54.0 million advance from the BTFP on
May 15, 2023 to secure lower funding costs relative to wholesale
deposits. The BTFP advance has a term of one year, bears interest
at a fixed rate of 4.80% and can be prepaid without penalty prior
to maturity. Total borrowings as of September 30, 2023 consisted of
subordinated debt totaling $24.7 million and the BTFP advance
totaling $54.0 million. The Company did not have any FHLB advances
or federal funds purchased outstanding as of September 30,
2023.
Shareholders’ equity increased $18.4 million or 9.1% to $220.6
million at September 30, 2023 compared to $202.2 million at
September 30, 2022. Book value per share was $15.61 as of September
30, 2023 compared to $14.37 as of September 30, 2022. The
year-over-year change in book value per share was primarily due to
the Company’s earnings over the previous twelve months and decrease
in accumulated other comprehensive loss, partially offset by
increased share count from shareholder option exercises and
restricted share award issuances and dividends paid. The decrease
in accumulated other comprehensive loss was primarily attributable
to the sale of certain available-for-sale investment securities in
the July 2023 Restructuring. Book value per share was $15.50 as of
June 30, 2023.
The Bank’s capital ratios at September 30, 2023 improved when
compared to September 30, 2022 and remained well above regulatory
thresholds for well-capitalized banks. As of September 30, 2023,
the Bank’s total risk-based capital ratio was 15.7%, compared to
15.4% at September 30, 2022 (GAAP). As outlined below, the Bank
would continue to remain well above regulatory thresholds for
well-capitalized banks at September 30, 2023 in the hypothetical
scenario where the entire bond portfolio was sold at fair market
value and the losses realized (Non-GAAP). Refer to “Explanation of
Non-GAAP Measures” and the “Reconciliation of Certain Non-GAAP
Financial Measures” table for further details about financial
measures used in this release that were determined by methods other
than in accordance with GAAP.
Bank Regulatory Capital Ratios
(As Reported)
Well-Capitalized
Threshold
September 30, 2023
December 31, 2022
September 30, 2022
Total risk-based capital ratio
10.0
%
15.7
%
15.6
%
15.4
%
Tier 1 risk-based capital ratio
8.0
%
14.6
%
14.4
%
14.3
%
Common equity tier 1 ratio
6.5
%
14.6
%
14.4
%
14.3
%
Leverage ratio
5.0
%
11.3
%
11.3
%
11.0
%
Bank Regulatory Capital Ratios
(Hypothetical Scenario of Selling All Bonds at Fair Market Value -
Non-GAAP)
Well-Capitalized
Threshold
September 30, 2023
December 31, 2022
September 30, 2022
Total risk-based capital ratio
10.0
%
14.1
%
13.8
%
13.4
%
Tier 1 risk-based capital ratio
8.0
%
12.9
%
12.6
%
12.2
%
Common equity tier 1 ratio
6.5
%
12.9
%
12.6
%
12.2
%
Leverage ratio
5.0
%
11.3
%
11.8
%
11.4
%
The Company recorded no charge-offs during the third quarter of
2023, during the second quarter of 2023 or during the third quarter
of 2022. As of September 30, 2023, the Company had no non-accrual
loans, no loans greater than 30 days past due and no other real
estate owned assets.
At September 30, 2023, the allowance for loan credit losses was
$20.0 million or 1.10% of outstanding loans, net of unearned
income, compared to $20.6 million or 1.17% of outstanding loans,
net of unearned income, at June 30, 2023. The decrease in the
allowance as a percentage of outstanding loans, net of unearned
income, was primarily a result of changes in the Company’s loss
driver analysis, resulting from a periodic review of our
assumptions. The review resulted in a lower modeled probability of
default, changes in prepayment and curtailment rates, and an
assessment of management’s considerations of existing economic
versus historical conditions combined with the continued strong
credit performance of our loan portfolio segments.
At September 30, 2023, the allowance for credit losses on
unfunded loan commitments was $0.9 million compared to $1.1 million
at June 30, 2023. The decrease in the allowance for credit losses
on unfunded loan commitments was primarily the result of the
updated loss factors utilized on the funded loan portfolio.
The Company did not have an allowance for credit losses on
held-to-maturity securities as of September 30, 2023 or June 30,
2023.
The Company’s owner occupied and non-owner occupied CRE
portfolios continue to be of sound credit quality. The following
table provides a detailed breakout of the two aforementioned
portfolios as of September 30, 2023, demonstrating their strong
debt-service-coverage and loan-to-value ratios.
Commercial Real Estate
Owner Occupied
Non-owner Occupied
Asset Class
Weighted Average
Loan-to-Value(1)
Weighted Average Debt Service
Coverage Ratio(2)
Number of Total Loans
Principal Balance(3) (Dollars
in thousands)
Weighted Average
Loan-to-Value(1)
Weighted Average Debt Service
Coverage Ratio(2)
Number of Total Loans
Principal Balance(3) (Dollars
in thousands)
Office
60.7
%
4.3
x
129
$
84,512
47.1
%
1.9
x
64
$
124,288
Retail
61.0
%
2.3
x
43
61,170
51.2
%
1.9
x
142
396,544
Warehouse
62.3
%
2.4
x
28
37,359
46.5
%
3.0
x
24
33,558
Church
32.4
%
3.1
x
19
37,799
- -
- -
- -
- -
Hotel/Motel
- -
- -
- -
- -
48.6
%
2.2
x
7
39,282
Industrial
55.8
%
4.7
x
24
37,603
52.8
%
2.5
x
16
66,210
Other(4)
52.5
%
3.6
x
50
104,574
50.0
%
1.8
x
16
23,804
Total
293
$
363,017
269
$
683,686
___________________________
(1)
Loan-to-value is determined at origination
date and is divided by principal balance as of September 30,
2023.
(2)
The debt service coverage ratio (“DSCR”)
is calculated from the primary source of repayment for the loan.
Owner occupied DSCR’s are derived from cash flows from the owner
occupant’s business, property and their guarantors, while non-owner
occupied DSCR’s are derived from the net operating income of the
property.
(3)
Principal balance excludes deferred fees
or costs.
(4)
Other asset class is primarily comprised
of schools, daycares and country clubs.
Income Statement Review
Quarterly Results
The Company reported a net loss of $10.1 million for the third
quarter of 2023, a decrease of $18.2 million when compared to the
third quarter of 2022. As disclosed in our July 21, 2023 earnings
release discussing results for the quarter and year-ended June 30,
2023, during July the Company sold certain lower-yielding
available-for-sale investment securities with a total par value of
$161.2 million and agreed to surrender $21.4 million of bank owned
life insurance (“BOLI”) contracts, resulting in a non-recurring,
after-tax loss of $14.6 million that was recorded during the third
quarter of 2023. Core net income (Non-GAAP) defined as reported net
income excluding the non-recurring after-tax loss and taxes paid in
conjunction with the surrender of the Bank’s BOLI policies
resulting from the Restructuring, was $4.5 million, a decrease of
$3.6 million when compared to the third quarter of 2022 and
consistent with net income reported for the second quarter of 2023.
Reported (GAAP) and core (Non-GAAP) earnings per share, annualized
return on average assets (“ROAA”) and annualized return on average
equity (“ROAE”) were as follows:
For the Three Months
Ended
September 30, 2023
June 30, 2023
September 30, 2022
Net income (loss) (GAAP)
$
(10,137
)
$
4,490
$
8,045
Add: Loss on securities sale, net of
tax
13,520
-
-
Add: Non-recurring tax and 10% modified
endowment contract penalty on early surrender of BOLI policies
1,101
-
-
Core net income (Non-GAAP)
$
4,484
$
4,490
$
8,045
Earnings per share - diluted (GAAP)
$
(0.72
)
$
0.32
$
0.57
Core earnings per share - diluted
(Non-GAAP)
$
0.32
$
0.32
$
0.57
Return on average assets (annualized)
(GAAP)
(1.73
)%
0.77
%
1.38
%
Core return on average assets (annualized)
(Non-GAAP)
0.76
%
0.77
%
1.38
%
Return on average equity (annualized)
(GAAP)
(18.24
)%
8.13
%
15.07
%
Core return on average equity (annualized)
(Non-GAAP)
8.07
%
8.13
%
15.07
%
Refer to “Explanation of Non-GAAP Measures” and the
“Reconciliation of Certain Non-GAAP Financial Measures” table for
further details about financial measures used in this release that
were determined by methods other than in accordance with GAAP.
Net interest income for the third quarter of 2023 decreased $5.7
million or 32.3% compared to the third quarter of 2022, driven
primarily by the increase in costs of interest-bearing liabilities
outpacing the increase in yield on interest-earning assets. The
yield on interest earning assets was 4.54% for the third quarter of
2023 compared to 3.71% for the same period in 2022. The increase in
yield on interest earning assets was primarily due to higher yields
on the Company’s loan and investment portfolios and deposits in
banks as a result of increases in interest rates subsequent to the
third quarter of 2022. The cost of interest-bearing liabilities was
3.41% for the third quarter of 2023 compared to 0.90% for the same
quarter in the prior year. The increase in the cost of
interest-bearing liabilities was primarily due to a 2.53% increase
in the cost of interest-bearing deposits as a result of the
repricing of the Company’s time deposits coupled with an increase
in rates offered on money market, NOW and savings deposit accounts
since the third quarter of 2022. The increase in the overall cost
of interest-bearing liabilities in the third quarter of 2023
relative to the same period of the prior year is largely due to
rate hikes totaling 5.25% by the Federal Reserve Bank since the
beginning of 2022, which has increased cost of funds and compressed
net interest margins across the banking industry. The annualized
net interest margin for the third quarter of 2023 was 2.08% as
compared to 3.10% for the same quarter of the prior year. The
decrease in net interest margin was primarily due to the increase
in cost of interest-bearing deposits, which was partially offset by
an increase in yields on the Company’s interest-earning assets.
With a portion of the proceeds from the Restructuring being
redeployed to higher yielding assets, the Company’s net interest
margin increased each month during the third quarter to 2.13% for
the month of September 2023.
The Company recorded an $829 thousand release of provision for
credit losses for the third quarter of 2023 compared to no
provision for the third quarter of 2022. The release of provision
for credit losses during the third quarter of 2023 was primarily a
result of changes in the Company’s loss driver analysis, resulting
from a periodic review of our assumptions. The review resulted in a
lower modeled probability of default, changes in prepayment and
curtailment rates, and an assessment of management’s considerations
of existing economic versus historical conditions combined with the
continued strong credit performance of our loan portfolio
segments.
Non-interest income decreased $17.3 million during the third
quarter of 2023 compared to the third quarter of 2022. The decrease
in non-interest income was primarily due to the Restructuring that
resulted in a loss of $17.1 million. Core non-interest income
(Non-GAAP) defined as reported non-interest income excluding the
$17.1 million loss stemming from the bond sale portion of the
Restructuring, decreased $151 thousand primarily as a result of a
decrease in bank owned life insurance (“BOLI”) income of $232
thousand due to the surrender of all BOLI policies as part of the
Restructuring. This decrease was partially offset by favorable
variances of $47 thousand related to mark-to-market adjustments on
investments related to the Company’s nonqualified deferred
compensation plan and gains recorded on the sale of the guaranteed
portion of SBA 7(a) loans totaling $27 thousand when compared to
the third quarter of 2022.
Non-interest expense decreased $298 thousand or 3.7% during the
third quarter of 2023 compared to the third quarter of 2022
primarily due to the reversal of a litigation reserve totaling $322
thousand as a result of a favorable verdict received by the Company
on a multi-year legal matter that was resolved during the quarter.
The decrease was partially offset by increases in FDIC insurance
expense and franchise tax expense. The increase in FDIC insurance
expense resulted from the FDIC increasing the base assessment rate
for all insured depository institutions. The increase in franchise
tax expense was due to an increase in the Bank’s equity as that is
the basis the Commonwealth of Virginia uses to assess taxes on
banking institutions. The decrease in salaries and employee
benefits was due to lower benefit costs incurred by the Company.
The decrease in occupancy expense of premises was due to a decrease
in office rent as a result of the renegotiation of certain leases.
The decrease in furniture and equipment expense was due to lower
depreciation expense on fixed assets. The Company continues to
analyze cost savings opportunities on existing leases and material
contracts.
For the three months ended September 30, 2023, annualized
non-interest expense to average assets was 1.30% compared to 1.36%
for the three months ended September 30, 2022. The decrease was
primarily due to lower overhead costs as a result of continued cost
consciousness.
For the three months ended September 30, 2023, the annualized
core efficiency ratio (Non-GAAP), which excludes the impact of the
Restructuring, was 62.4% compared to 43.9% for the three months
ended September 30, 2022. The increase was primarily due to a
decrease in net interest income and to a lesser extent a decrease
in non-interest income.
Year-to-Date Results
The Company reported net income of $656 thousand for the nine
months ended September 30, 2023, a decrease of $22.9 million when
compared to the same period in 2022. This decrease was primarily
attributable to the Restructuring, as previously discussed, that
resulted in an after-tax loss of $14.6 million. Core net income
(Non-GAAP) for the nine months ended September 30, 2023 was $15.3
million, a decrease of $8.3 million when compared to the same
period in 2022. Reported (GAAP) and core (Non-GAAP) earnings per
share, ROAA and ROAE were as follows:
For the Nine Months
Ended
September 30, 2023
September 30, 2022
Net income (GAAP)
$
656
$
23,601
Add: Loss on securities sale, net of
tax
13,520
-
Add: Non-recurring tax and 10% modified
endowment contract penalty on early surrender of BOLI policies
1,101
-
Core net income (Non-GAAP)
$
15,277
$
23,601
Earnings per share - diluted (GAAP)
$
0.05
$
1.67
Core earnings per share - diluted
(Non-GAAP)
$
1.08
$
1.67
Return on average assets (annualized)
(GAAP)
0.04
%
1.40
%
Core return on average assets (annualized)
(Non-GAAP)
0.87
%
1.40
%
Return on average equity (annualized)
(GAAP)
0.40
%
15.03
%
Core return on average equity (annualized)
(Non-GAAP)
9.25
%
15.03
%
Refer to “Explanation of Non-GAAP Measures” and the
“Reconciliation of Certain Non-GAAP Financial Measures” table for
further details about financial measures used in this release that
were determined by methods other than in accordance with GAAP.
Net interest income for the nine months ended September 30, 2023
decreased $14.5 million or 27.3% compared to the same period of
2022, driven primarily by the increase in costs of interest-bearing
liabilities outpacing the increase in yield on interest-earning
assets. The yield on interest earning assets was 4.32% for the nine
months ended September 30, 2023 compared to 3.65% for the same
period in 2022. The increase in yield on interest earning assets
was primarily due to higher yields on the Company’s loan and
investment portfolios and deposits in banks as a result of
increases in interest rates subsequent to the second quarter of
2022. The cost of interest-bearing liabilities was 2.89% for the
nine months ended September 30, 2023 compared to 0.67% for the nine
months ended September 30, 2022. The increase in the cost of
interest-bearing liabilities was primarily due to a 2.26% increase
in the cost of interest-bearing deposits as a result of the
repricing of the Company’s time deposits coupled with an increase
in rates offered on money market, NOW and savings deposit accounts
since the third quarter of 2022. The annualized net interest margin
for the nine months ended September 30, 2023 was 2.25% as compared
to 3.19% for the same period in the prior year. The decrease in net
interest margin was primarily due to the increase in cost of
interest-bearing deposits, which was partially offset by an
increase in yields on the Company’s interest-earning assets.
The Company recorded a $2.5 million release of provision for
credit losses for the nine months ended September 30, 2023 compared
to no provision for the nine months ended September 30, 2022. The
release of provision for credit losses during the third quarter of
2023 was primarily a result of changes in the Company’s loss driver
analysis, resulting from a periodic review of our assumptions. The
review resulted in a lower modeled probability of default, changes
in prepayment and curtailment rates, and an assessment of
management’s considerations of existing economic versus historical
conditions combined with the continued strong credit performance of
our loan portfolio segments.
Non-interest income decreased $16.5 million during the nine
months ended September 30, 2023 compared to the same period in
2022. The decrease in non-interest income was primarily due to the
Restructuring that resulted in a loss of $17.1 million. Core
non-interest income (Non-GAAP) increased $577 thousand primarily
due to favorable variances of $610 thousand as a result of
mark-to-market adjustments on investments related to the Company’s
nonqualified deferred compensation plan. The Company also had an
increase in other service charges and fee income of $208 thousand
primarily as a result of penalty fee income recognized on the early
withdrawal of certificates of deposit, a $91 thousand increase in
customer interest rate swap fee income and gains recorded on the
sale of the guaranteed portion of SBA 7(a) loans totaling $50
thousand. These increases were partially offset by a decrease in
BOLI income of $221 thousand due to the surrender of all BOLI
policies as part of the Restructuring.
Non-interest expense decreased $1.2 million or 4.8% during the
nine months ended September 30, 2023 compared to the same period in
2022 primarily due to decreases in salaries and employee benefits
expense. The decrease in salaries and employee benefits was
primarily due to a reduction in incentive compensation accruals
when compared to the same period of the prior year. Incentive
compensation accruals can fluctuate materially from quarter to
quarter, based upon the Company’s financial performance and
conditions measured against, among other evaluation criteria, our
strategic plan and budget. At the end of each year, the ultimate
determination of the incentive compensation is approved by the
Board of Directors. The decrease in other expense was due to the
reversal of a litigation reserve previously discussed and lower
legal and consulting expenses, partially offset by increases in
FDIC insurance expense, franchise tax expense and marketing
expense. The increase in FDIC insurance expense resulted from the
FDIC increasing the base assessment rate for all insured depository
institutions. The increase in franchise tax expense was due to an
increase in the Bank’s equity as that is the basis the Commonwealth
of Virginia uses to assess taxes on banking institutions. The
increase in marketing expense was due to increased marketing and
promotional activity. The decrease in occupancy expense of premises
was due to a decrease in office rent as a result of the
renegotiation of certain leases. The decrease in furniture and
equipment expense was due to lower depreciation expense on fixed
assets.
For the nine months ended September 30, 2023, annualized
non-interest expense to average assets was 1.33% compared to 1.45%
for the nine months ended September 30, 2022. The decrease was
primarily due to lower overhead costs as a result of continued cost
consciousness.
For the nine months ended September 30, 2023, the annualized
core efficiency ratio (Non-GAAP) was 58.1% compared to 45.3% for
the nine months ended September 30, 2022. The increase was
primarily due to a decrease in net interest income, which more than
offset the increase in core non-interest income (Non-GAAP) and
decrease in non-interest expense.
Explanation of Non-GAAP Financial Measures
This release contains financial information determined by
methods other than in accordance with GAAP. Management believes
that the supplemental non-GAAP information provides a better
comparison of the impact of unrealized losses in the Company’s bond
portfolio on the Bank’s regulatory capital ratios and
period-to-period operating performance, respectively. Additionally,
the Company believes this information is utilized by regulators and
market analysts to evaluate a company’s financial condition and
therefore, such information is useful to investors. Non-GAAP
measures used in this release consist of the following:
- The impact to the Bank’s regulatory capital ratios in the
hypothetical scenario where the entire bond portfolio was sold at
fair market value and the losses realized.
- Non-interest income, income before taxes, income tax expense,
net income, earnings per share (basic and diluted), return on
average assets (annualized), return on average equity (annualized),
non-interest income as a percentage of average assets (annualized)
and efficiency ratio excluding the impact of losses recognized in
July 2023 on the sale of available-for-sale securities and taxes
paid on the early surrender of bank owned life insurance
policies.
These disclosures should not be viewed as a substitute for
financial results in accordance with GAAP, nor are they necessarily
comparable to non-GAAP performance measures which may be presented
by other companies. Please refer to the Reconciliation of Certain
Non-GAAP Financial Measures table for a reconciliation of these
non-GAAP measures to the most directly comparable GAAP measure.
About John Marshall Bancorp,
Inc.
John Marshall Bancorp, Inc. is the bank holding company for John
Marshall Bank. The Bank is a $2.30 billion asset bank headquartered
in Reston, Virginia with eight full-service branches located in
Alexandria, Arlington, Loudoun, Prince William, Reston, and Tysons,
Virginia, as well as Rockville, Maryland, and Washington, D.C. The
Bank is dedicated to providing exceptional value, personalized
service and convenience to local businesses and professionals in
the Washington D.C. Metro area. The Bank offers a comprehensive
line of sophisticated banking products and services that rival
those of the largest banks along with experienced staff to help
achieve customers’ financial goals. Dedicated Relationship Managers
serve as direct points-of-contact, providing subject matter
expertise in a variety of niche industries including Charter and
Private Schools, Government Contractors, Health Services,
Nonprofits and Associations, Professional Services, Property
Management Companies and Title Companies. Learn more at
www.johnmarshallbank.com.
In addition to historical information, this press release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that are based on
certain assumptions and describe future plans, strategies and
expectations of the Company. These forward-looking statements are
generally identified by use of the words “believe,” “expect,”
“intend,” “anticipate,” “estimate,” “project,” “will,” “should,”
“may,” “view,” “opportunity,” “potential,” or similar expressions
or expressions of confidence. Our ability to predict results or the
actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on
the operations of the Company and the Bank include, but are not
limited to, the following: the concentration of our business in the
Washington, D.C. metropolitan area and the effect of changes in the
economic, political and environmental conditions on this market;
adequacy of our allowance for credit losses; deterioration of our
asset quality; future performance of our loan portfolio with
respect to recently originated loans; the level of prepayments on
loans and mortgage-backed securities; liquidity, interest rate and
operational risks associated with our business; changes in our
financial condition or results of operations that reduce capital;
our ability to maintain existing deposit relationships or attract
new deposit relationships; changes in consumer spending, borrowing
and savings habits; inflation and changes in interest rates that
may reduce our margins or reduce the fair value of financial
instruments; changes in the monetary and fiscal policies of the
U.S. Government, including policies of the U.S. Treasury and the
Board of Governors of the Federal Reserve System; additional risks
related to new lines of business, products, product enhancements or
services; increased competition with other financial institutions
and fintech companies; adverse changes in the securities markets;
changes in the financial condition or future prospects of issuers
of securities that we own; our ability to maintain an effective
risk management framework; changes in laws or government
regulations or policies affecting financial institutions, including
changes in regulatory structure and in regulatory fees and capital
requirements; compliance with legislative or regulatory
requirements; results of examination of us by our regulators,
including the possibility that our regulators may require us to
increase our allowance for credit losses or to write-down assets or
take similar actions; potential claims, damages, and fines related
to litigation or government actions; the effectiveness of our
internal controls over financial reporting and our ability to
remediate any future material weakness in our internal controls
over financial reporting; geopolitical conditions, including acts
or threats of terrorism and/or military conflicts, or actions taken
by the U.S. or other governments in response to acts or threats of
terrorism and/or military conflicts, negatively impacting business
and economic conditions in the U.S. and abroad; the potential
adverse effects of unusual and infrequently occurring events, such
as weather-related disasters, terrorist acts, geopolitical
conflicts or public health events (such as COVID-19), and of
governmental and societal responses thereto; technological risks
and developments, and cyber threats, attacks, or events; the
additional requirements of being a public company; changes in
accounting policies and practices; our ability to successfully
capitalize on growth opportunities; our ability to retain key
employees; deteriorating economic conditions, either nationally or
in our market area, including higher unemployment and lower real
estate values; implications of our status as a smaller reporting
company and as an emerging growth company; and other factors
discussed in the Company’s reports (such as our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K) filed with the Securities and Exchange Commission. These
risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed
on such statements. The Company does not undertake, and
specifically disclaims any obligation, to publicly release the
result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or
unanticipated events. Annualized, pro forma, projected and
estimated numbers are used for illustrative purpose only, are not
forecasts and may not reflect actual results.
John Marshall Bancorp,
Inc.
Financial Highlights
(Unaudited)
(Dollar amounts in thousands,
except per share data)
At or For the Three Months
Ended
At or For the Nine Months
Ended
September 30,
September 30,
2023
2022
2023
2022
Selected Balance Sheet Data
Cash and cash equivalents
$
192,656
$
74,756
$
192,656
$
74,756
Total investment securities
272,881
473,478
272,881
473,478
Loans, net of unearned income
1,820,132
1,725,114
1,820,132
1,725,114
Allowance for loan credit losses
20,036
20,032
20,036
20,032
Total assets
2,298,202
2,305,540
2,298,202
2,305,540
Non-interest bearing demand deposits
437,880
535,186
437,880
535,186
Interest bearing deposits
1,543,743
1,528,155
1,543,743
1,528,155
Total deposits
1,981,623
2,063,341
1,981,623
2,063,341
Federal funds purchased
- -
- -
- -
- -
Federal Home Loan Bank advances
- -
- -
- -
- -
Federal Reserve Bank borrowings
54,000
- -
54,000
- -
Shareholders' equity
220,567
202,212
220,567
202,212
Summary Results of Operations
Interest income
$
26,263
$
21,208
$
74,171
$
60,509
Interest expense
14,284
3,516
35,715
7,593
Net interest income
11,979
17,692
38,456
52,916
Provision for (recovery of) credit
losses
(829
)
- -
(2,471
)
- -
Net interest income after provision for
(recovery of) credit losses
12,808
17,692
40,927
52,916
Non-interest income (loss)
(16,815
)
450
(15,564
)
973
Core non-interest income(1)
299
450
1,550
973
Non-interest expense
7,660
7,958
23,261
24,425
Income (Loss) before income taxes
(11,667
)
10,184
2,102
29,464
Core income before income taxes(1)
5,447
10,184
19,216
29,464
Net income (loss)
(10,137
)
8,045
656
23,601
Core net income(1)
4,484
8,045
15,277
23,601
Per Share Data and Shares
Outstanding
Earnings (loss) per share - basic
$
(0.72
)
$
0.57
$
0.05
$
1.69
Core earnings per share - basic(1)
$
0.32
$
0.57
$
1.08
$
1.69
Earnings (loss) per share - diluted
$
(0.72
)
$
0.57
$
0.05
$
1.67
Core earnings per share - diluted(1)
$
0.32
$
0.57
$
1.08
$
1.67
Book value per share
$
15.61
$
14.37
$
15.61
$
14.37
Weighted average common shares (basic)
14,080,026
13,989,414
14,126,522
13,902,324
Weighted average common shares
(diluted)
14,080,026
14,108,286
14,199,179
14,065,887
Common shares outstanding at end of
period
14,126,084
14,070,080
14,126,084
14,070,080
Performance Ratios
Return on average assets (annualized)
(1.73
)%
1.38
%
0.04
%
1.40
%
Core return on average assets
(annualized)(1)
0.76
1.38
0.87
1.40
Return on average equity (annualized)
(18.24
)%
15.07
%
0.40
%
15.03
%
Core return on average equity
(annualized)(1)
8.07
15.07
9.25
15.03
Net interest margin
2.08
%
3.10
%
2.25
%
3.19
%
Non-interest income (loss) as a percentage
of average assets (annualized)
(2.86
)%
0.08
%
(0.89
)%
0.06
%
Core non-interest income as a percentage
of average assets (annualized)(1)
0.05
0.08
0.09
0.06
Non-interest expense to average assets
(annualized)
1.30
%
1.36
%
1.33
%
1.45
%
Efficiency ratio
(158.4
)%
43.9
%
101.6
%
45.3
%
Core efficiency ratio(1)
62.4
43.9
58.1
45.3
Asset Quality
Non-performing assets to total assets
- -
%
- -
%
- -
%
- -
%
Non-performing loans to total loans
- -
%
- -
%
- -
%
- -
%
Allowance for loan credit losses to
non-performing loans
N/M
N/M
N/M
N/M
Allowance for loan credit losses to total
loans
1.10
%
1.16
%
1.10
%
1.16
%
Net charge-offs (recoveries) to average
loans (annualized)
0.00
%
0.00
%
0.00
%
0.00
%
Loans 30-89 days past due and accruing
interest
$
- -
$
- -
$
- -
$
- -
Non-accrual loans
- -
- -
- -
- -
Other real estate owned
- -
- -
- -
- -
Non-performing assets (2)
- -
- -
- -
- -
Capital Ratios (Bank Level)
Equity / assets
10.6
%
9.7
%
10.6
%
9.7
%
Total risk-based capital ratio
15.7
%
15.4
%
15.7
%
15.4
%
Tier 1 risk-based capital ratio
14.6
%
14.3
%
14.6
%
14.3
%
Common equity tier 1 ratio
14.6
%
14.3
%
14.6
%
14.3
%
Leverage ratio
11.3
%
11.0
%
11.3
%
11.0
%
Other Information
Number of full time equivalent
employees
138
136
138
136
# Full service branch offices
8
8
8
8
# Loan production or limited service
branch offices
- -
1
- -
1
___________________________
(1)
Non-GAAP financial measure. Refer to
“Reconciliation of Certain Non-GAAP Financial Measures” for further
details.
(2)
Non-performing assets consist of
non-accrual loans, loans 90 days or more past due and still
accruing interest and other real estate owned.
John Marshall Bancorp,
Inc.
Consolidated Balance
Sheets
(Dollar amounts in thousands,
except per share data)
% Change
September 30,
December 31,
September 30,
Last Nine
Year Over
2023
2022
2022
Months
Year
Assets
(Unaudited)
*
(Unaudited)
Cash and due from banks
$
7,642
$
6,583
$
14,957
16.1
%
(48.9
)%
Interest-bearing deposits in banks
185,014
55,016
59,799
236.3
%
209.4
%
Securities available-for-sale, at fair
value
169,084
357,576
366,546
(52.7
)%
(53.9
)%
Securities held-to-maturity, fair value of
$75,733, $81,161, and $81,765 at 9/30/2023, 12/31/2022, and
9/30/2022, respectively.
96,347
99,415
100,598
(3.1
)%
(4.2
)%
Restricted securities, at cost
5,007
4,425
4,421
13.2
%
13.3
%
Equity securities, at fair value
2,443
2,115
1,913
15.5
%
27.7
%
Loans, net of unearned income
1,820,132
1,789,508
1,725,114
1.7
%
5.5
%
Allowance for credit losses
(20,036
)
(20,208
)
(20,032
)
(0.9
)%
0.0
%
Net loans
1,800,096
1,769,300
1,705,082
1.7
%
5.6
%
Bank premises and equipment, net
1,264
1,219
1,331
3.7
%
(5.0
)%
Accrued interest receivable
5,701
5,531
4,744
3.1
%
20.2
%
Bank owned life insurance
-
21,170
21,071
(100.0
)%
(100.0
)%
Right of use assets
4,136
4,611
3,936
(10.3
)%
5.1
%
Other assets
21,468
21,274
21,142
0.9
%
1.5
%
Total assets
$
2,298,202
$
2,348,235
$
2,305,540
(2.1
)%
(0.3
)%
Liabilities and Shareholders'
Equity
Liabilities
Deposits:
Non-interest bearing demand deposits
$
437,880
$
476,697
$
535,186
(8.1
)%
(18.2
)%
Interest-bearing demand deposits
675,819
691,945
705,593
(2.3
)%
(4.2
)%
Savings deposits
57,408
95,241
102,909
(39.7
)%
(44.2
)%
Time deposits
810,516
803,857
719,653
0.8
%
12.6
%
Total deposits
1,981,623
2,067,740
2,063,341
(4.2
)%
(4.0
)%
Federal funds purchased
- -
25,500
- -
N/M
N/M
Federal Reserve Bank borrowings
54,000
- -
- -
N/M
N/M
Subordinated debt, net
24,687
24,624
24,603
0.3
%
0.3
%
Accrued interest payable
2,610
1,035
643
152.2
%
305.9
%
Lease liabilities
4,415
4,858
4,186
(9.1
)%
5.5
%
Other liabilities
10,300
11,678
10,555
(11.8
)%
(2.4
)%
Total liabilities
2,077,635
2,135,435
2,103,328
(2.7
)%
(1.2
)%
Shareholders' Equity
Preferred stock, par value $0.01 per
share; authorized 1,000,000 shares; none issued
- -
- -
- -
N/M
N/M
Common stock, nonvoting, par value $0.01
per share; authorized 1,000,000 shares; none issued
- -
- -
- -
N/M
N/M
Common stock, voting, par value $0.01 per
share; authorized 30,000,000 shares; issued and outstanding,
14,126,084 at 9/30/2023 including 45,871 unvested shares,
14,098,986 at 12/31/2022 including 55,185 unvested shares, and
14,070,080 at 9/30/2022, including 58,046 unvested shares
141
141
140
- -
%
0.7
%
Additional paid-in capital
95,510
94,726
94,560
0.8
%
1.0
%
Retained earnings
141,886
146,630
138,428
(3.2
)%
2.5
%
Accumulated other comprehensive loss
(16,970
)
(28,697
)
(30,916
)
(40.9
)%
(45.1
)%
Total shareholders' equity
220,567
212,800
202,212
3.6
%
9.1
%
Total liabilities and shareholders'
equity
$
2,298,202
$
2,348,235
$
2,305,540
(2.1
)%
(0.3
)%
* Derived from audited consolidated financial statements.
John Marshall Bancorp,
Inc.
Consolidated Statements of
Income
(Dollar amounts in thousands,
except per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
% Change
2023
2022
% Change
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Interest and Dividend Income
Interest and fees on loans
$
21,925
$
18,222
20.3
%
$
63,355
$
53,740
17.9
%
Interest on investment securities,
taxable
1,507
2,323
(35.1
)%
5,895
5,597
5.3
%
Interest on investment securities,
tax-exempt
10
30
(66.7
)%
45
90
(50.0
)%
Dividends
75
62
21.0
%
222
185
20.0
%
Interest on deposits in other banks
2,746
571
N/M
4,654
897
N/M
Total interest and dividend income
26,263
21,208
23.8
%
74,171
60,509
22.6
%
Interest Expense
Deposits
13,273
3,068
N/M
33,590
6,090
N/M
Federal funds purchased
- -
- -
N/M
10
- -
N/M
Federal Home Loan Bank advances
- -
- -
N/M
67
42
59.5
%
Federal Reserve Bank borrowings
662
- -
N/M
1,001
- -
N/M
Subordinated debt
349
448
(22.1
)%
1,047
1,461
(28.3
)%
Total interest expense
14,284
3,516
306.3
%
35,715
7,593
370.4
%
Net interest income
11,979
17,692
(32.3
)%
38,456
52,916
(27.3
)%
Provision for (recovery of) Credit
Losses
(829
)
- -
N/M
(2,471
)
- -
N/M
Net interest income after provision for
(recovery of) credit losses
12,808
17,692
(27.6
)%
40,927
52,916
(22.7
)%
Non-interest Income
Service charges on deposit accounts
85
79
7.6
%
239
240
(0.4
)%
Bank owned life insurance
23
255
(91.0
)%
224
445
(49.7
)%
Other service charges and fees
160
175
(8.6
)%
677
469
44.3
%
Losses on sale of available-for-sale
securities
(17,114
)
- -
N/M
(17,316
)
- -
N/M
Insurance commissions
54
47
14.9
%
310
312
(0.6
)%
Gain on sale of government guaranteed
loans
27
- -
N/M
50
- -
N/M
Non-qualified deferred compensation plan
asset gains (losses), net
(60
)
(107
)
(43.9
)%
112
(498
)
(122.5
)%
Other income
10
1
N/M
140
5
N/M
Total non-interest income (loss)
(16,815
)
450
(3,836.7
)%
(15,564
)
973
(1,699.6
)%
Non-interest Expenses
Salaries and employee benefits
5,052
5,072
(0.4
)%
14,929
15,754
(5.2
)%
Occupancy expense of premises
445
461
(3.5
)%
1,363
1,435
(5.0
)%
Furniture and equipment expenses
282
323
(12.7
)%
882
989
(10.8
)%
Other expenses
1,881
2,102
(10.5
)%
6,087
6,247
(2.6
)%
Total non-interest expenses
7,660
7,958
(3.7
)%
23,261
24,425
(4.8
)%
Income (Loss) before income taxes
(11,667
)
10,184
(214.6
)%
2,102
29,464
(92.9
)%
Income tax Expense (Benefit)
(1,530
)
2,139
(171.5
)%
1,446
5,863
(75.3
)%
Net income (loss)
$
(10,137
)
$
8,045
(226.0
)%
$
656
$
23,601
(97.2
)%
Earnings (Loss) Per Share
Basic
$
(0.72
)
$
0.57
(226.3
)%
$
0.05
$
1.69
(97.0
)%
Diluted
$
(0.72
)
$
0.57
(226.3
)%
$
0.05
$
1.67
(97.0
)%
John Marshall Bancorp,
Inc.
Historical Trends - Quarterly
Financial Data (Unaudited)
(Dollar amounts in thousands,
except per share data)
2023
2022
September 30
June 30
March 31
December 31
September 30
June 30
March 31
Profitability for the Quarter:
Interest income
$
26,263
$
24,455
$
23,453
$
23,557
$
21,208
$
19,555
$
19,745
Interest expense
14,284
12,446
8,984
6,052
3,516
2,247
1,829
Net interest income
11,979
12,009
14,469
17,505
17,692
17,308
17,916
Provision for (recovery of) credit
losses
(829
)
(868
)
(774
)
175
- -
- -
- -
Non-interest income (loss)
(16,815
)
685
566
718
450
109
414
Non-interest expenses
7,660
7,831
7,770
7,449
7,958
7,681
8,786
Income (loss) before income taxes
(11,667
)
5,731
8,039
10,599
10,184
9,736
9,544
Income tax expense (benefit)
(1,530
)
1,241
1,735
2,397
2,139
1,854
1,870
Net income (loss)
$
(10,137
)
$
4,490
$
6,304
$
8,202
$
8,045
$
7,882
$
7,674
Financial Performance:
Return on average assets (annualized)
(1.73
)%
0.77
%
1.10
%
1.40
%
1.38
%
1.41
%
1.40
%
Return on average equity (annualized)
(18.24
)%
8.13
%
11.83
%
15.65
%
15.07
%
15.28
%
14.76
%
Net interest margin
2.08
%
2.10
%
2.57
%
3.05
%
3.10
%
3.16
%
3.34
%
Non-interest income (loss) as a percentage
of average assets (annualized)
(2.86
)%
0.12
%
0.10
%
0.12
%
0.08
%
0.02
%
0.08
%
Non-interest expense to average assets
(annualized)
1.30
%
1.34
%
1.35
%
1.27
%
1.36
%
1.38
%
1.61
%
Efficiency ratio
(158.4
)%
61.7
%
51.7
%
40.9
%
43.9
%
44.1
%
47.9
%
Per Share Data:
Earnings (loss) per share - basic
$
(0.72
)
$
0.32
$
0.45
$
0.58
$
0.57
$
0.56
$
0.55
Earnings (loss) per share - diluted
$
(0.72
)
$
0.32
$
0.44
$
0.58
$
0.57
$
0.56
$
0.55
Book value per share
$
15.61
$
15.50
$
15.63
$
15.09
$
14.37
$
14.80
$
14.68
Dividends declared per share
$
- -
$
0.22
$
- -
$
- -
$
- -
$
- -
$
0.20
Weighted average common shares (basic)
14,080,026
14,077,658
14,067,047
14,019,429
13,989,414
13,932,256
13,783,034
Weighted average common shares
(diluted)
14,080,026
14,143,253
14,156,724
14,131,352
14,108,286
14,085,160
13,991,692
Common shares outstanding at end of
period
14,126,084
14,126,138
14,125,208
14,098,986
14,070,080
14,026,589
13,950,570
Non-interest Income:
Service charges on deposit accounts
$
85
$
82
$
72
$
84
$
79
$
84
$
77
Bank owned life insurance
23
101
100
99
255
95
95
Other service charges and fees
160
314
203
187
175
157
137
Losses on securities
(17,114
)
- -
(202
)
- -
- -
- -
- -
Insurance commissions
54
50
206
70
47
44
221
Gain on sale of government guaranteed
loans
27
23
- -
- -
- -
- -
- -
Non-qualified deferred compensation plan
asset gains (losses), net
(60
)
83
89
144
(107
)
(274
)
(117
)
Other income
10
32
98
134
1
3
1
Total non-interest income (loss)
$
(16,815
)
$
685
$
566
$
718
$
450
$
109
$
414
Non-interest Expenses:
Salaries and employee benefits
$
5,052
$
4,965
$
4,912
$
4,436
$
5,072
$
4,655
$
6,027
Occupancy expense of premises
445
448
470
458
461
482
493
Furniture and equipment expenses
282
304
296
336
323
341
325
Other expenses
1,881
2,114
2,092
2,219
2,102
2,203
1,941
Total non-interest expenses
$
7,660
$
7,831
$
7,770
$
7,449
$
7,958
$
7,681
$
8,786
Balance Sheets at Quarter End:
Total loans, net of unearned income
$
1,820,132
$
1,769,801
$
1,771,272
$
1,789,508
$
1,725,114
$
1,692,652
$
1,631,260
Allowance for loan credit losses
(20,036
)
(20,629
)
(21,619
)
(20,208
)
(20,032
)
(20,031
)
(20,031
)
Investment securities
272,881
429,954
445,785
463,531
473,478
473,914
409,692
Interest-earning assets
2,278,027
2,315,368
2,312,404
2,308,055
2,258,822
2,274,968
2,217,553
Total assets
2,298,202
2,364,250
2,351,307
2,348,235
2,305,540
2,316,374
2,249,609
Total deposits
1,981,623
2,046,309
2,088,642
2,067,740
2,063,341
2,043,741
1,983,099
Total interest-bearing liabilities
1,622,430
1,691,044
1,665,837
1,641,167
1,552,758
1,581,017
1,530,133
Total shareholders' equity
220,567
218,970
220,823
212,800
202,212
207,530
204,855
Quarterly Average Balance
Sheets:
Total loans, net of unearned income
$
1,790,720
$
1,767,831
$
1,772,922
$
1,759,747
$
1,684,796
$
1,641,914
$
1,620,533
Investment securities
310,407
441,778
463,254
468,956
488,860
447,688
376,608
Interest-earning assets
2,301,642
2,305,050
2,295,677
2,289,061
2,277,325
2,204,709
2,183,897
Total assets
2,331,403
2,344,712
2,334,695
2,330,307
2,314,825
2,240,119
2,216,131
Total deposits
2,012,934
2,051,702
2,066,139
2,079,161
2,057,640
1,980,231
1,946,882
Total interest-bearing liabilities
1,660,980
1,667,597
1,621,131
1,566,902
1,547,766
1,504,574
1,505,854
Total shareholders' equity
220,473
221,608
220,282
207,906
212,147
206,967
210,900
Financial Measures:
Average equity to average assets
9.5
%
9.5
%
9.4
%
8.9
%
9.2
%
9.2
%
9.5
%
Investment securities to earning
assets
12.0
%
18.6
%
19.3
%
20.1
%
21.0
%
20.8
%
18.5
%
Loans to earning assets
79.9
%
76.4
%
76.6
%
77.5
%
76.4
%
74.4
%
73.6
%
Loans to assets
79.2
%
74.9
%
75.3
%
76.2
%
74.8
%
73.1
%
72.5
%
Loans to deposits
91.9
%
86.5
%
84.8
%
86.5
%
83.6
%
82.8
%
82.3
%
Capital Ratios (Bank Level):
Equity / assets
10.6
%
10.2
%
10.3
%
10.0
%
9.7
%
9.9
%
10.2
%
Total risk-based capital ratio
15.7
%
16.1
%
16.1
%
15.6
%
15.4
%
15.1
%
15.4
%
Tier 1 risk-based capital ratio
14.6
%
15.0
%
14.9
%
14.4
%
14.3
%
14.0
%
14.2
%
Common equity tier 1 ratio
14.6
%
15.0
%
14.9
%
14.4
%
14.3
%
14.0
%
14.2
%
Leverage ratio
11.3
%
11.6
%
11.5
%
11.3
%
11.0
%
11.0
%
10.8
%
John Marshall Bancorp,
Inc.
Loan, Deposit and Borrowing
Detail (Unaudited)
(Dollar amounts in
thousands)
2023
2022
September 30
June 30
March 31
December 31
September 30
June 30
March 31
Loans
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
Commercial business loans
$
37,793
2.1
%
$
40,156
2.3
%
$
41,204
2.3
%
$
44,788
2.5
%
$
44,967
2.6
%
$
47,654
2.8
%
$
52,569
3.2
%
Commercial PPP loans
132
0.0
%
133
0.0
%
135
0.0
%
136
0.0
%
138
0.0
%
224
0.0
%
7,781
0.5
%
Commercial owner-occupied real estate
loans
363,017
20.0
%
360,859
20.4
%
363,495
20.6
%
366,131
20.5
%
362,346
21.1
%
378,457
22.4
%
339,933
20.9
%
Total business loans
400,942
22.1
%
401,148
22.7
%
404,834
22.9
%
411,055
23.0
%
407,451
23.7
%
426,335
25.2
%
400,283
24.6
%
Investor real estate loans
683,686
37.6
%
654,623
37.0
%
660,740
37.4
%
662,769
37.1
%
622,415
36.1
%
598,501
35.5
%
553,093
34.0
%
Construction & development loans
179,570
9.9
%
179,656
10.2
%
179,606
10.2
%
195,027
11.0
%
199,324
11.6
%
189,644
11.2
%
219,160
13.4
%
Multi-family loans
86,366
4.8
%
86,061
4.9
%
88,670
5.0
%
89,227
5.0
%
106,460
6.2
%
106,236
6.3
%
99,100
6.1
%
Total commercial real estate loans
949,622
52.3
%
920,340
52.1
%
929,016
52.6
%
947,023
53.1
%
928,199
53.9
%
894,381
53.0
%
871,353
53.5
%
Residential mortgage loans
464,509
25.7
%
443,305
25.2
%
433,076
24.5
%
426,841
23.9
%
385,696
22.4
%
368,370
21.8
%
356,331
21.9
%
Consumer loans
467
0.0
%
646
0.0
%
324
0.0
%
529
0.0
%
585
0.0
%
651
0.0
%
513
0.0
%
Total loans
$
1,815,540
100.0
%
$
1,765,439
100.0
%
$
1,767,250
100.0
%
$
1,785,448
100.0
%
$
1,721,931
100.0
%
$
1,689,737
100.0
%
$
1,628,480
100.0
%
Less: Allowance for loan credit losses
(20,036
)
(20,629
)
(21,619
)
(20,208
)
(20,032
)
(20,031
)
(20,031
)
Net deferred loan costs (fees)
4,592
4,362
4,022
4,060
3,183
2,915
2,780
Net loans
$
1,800,096
$
1,749,172
$
1,749,653
$
1,769,300
$
1,705,082
$
1,672,621
$
1,611,229
2023
2022
September 30
June 30
March 31
December 31
September 30
June 30
March 31
Deposits
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
$ Amount
% of Total
Non-interest bearing demand deposits
$
437,880
22.1
%
$
433,931
21.2
%
$
447,450
21.4
%
$
476,697
23.1
%
$
535,186
25.9
%
$
512,284
25.1
%
$
495,811
25.0
%
Interest-bearing demand deposits:
NOW accounts(1)
345,522
17.4
%
311,225
15.2
%
284,872
13.7
%
253,148
12.3
%
293,558
14.2
%
338,789
16.6
%
345,087
17.4
%
Money market accounts(1)
330,297
16.7
%
341,413
16.7
%
392,962
18.8
%
438,797
21.2
%
412,035
20.0
%
399,877
19.6
%
414,987
20.9
%
Savings accounts
57,408
3.0
%
68,013
3.4
%
81,150
3.9
%
95,241
4.6
%
102,909
5.0
%
112,276
5.4
%
114,427
5.8
%
Certificates of deposit
$250,000 or more
364,805
18.4
%
376,899
18.4
%
338,824
16.2
%
314,738
15.2
%
280,027
13.6
%
255,411
12.5
%
241,230
12.1
%
Less than $250,000
103,600
5.2
%
105,956
5.2
%
94,429
4.5
%
89,247
4.3
%
88,421
4.3
%
87,505
4.3
%
91,050
4.6
%
QwickRate® certificates of deposit
11,526
0.6
%
12,772
0.6
%
16,952
0.8
%
22,163
1.1
%
20,154
1.0
%
20,154
1.0
%
23,136
1.2
%
IntraFi® certificates of deposit
41,659
2.1
%
49,729
2.4
%
53,178
2.5
%
25,757
1.2
%
46,305
2.2
%
32,686
1.6
%
39,628
2.0
%
Brokered deposits
288,926
14.6
%
346,371
16.9
%
378,825
18.2
%
351,952
17.0
%
284,746
13.8
%
284,759
13.9
%
217,743
11.0
%
Total deposits
$
1,981,623
100.0
%
$
2,046,309
100.0
%
$
2,088,642
100.0
%
$
2,067,740
100.0
%
$
2,063,341
100.0
%
$
2,043,741
100.0
%
$
1,983,099
100.0
%
Borrowings
Federal funds purchased
$
- -
0.0
%
$
- -
0.0
%
$
- -
0.0
%
$
25,500
50.9
%
$
- -
0.0
%
$
- -
0.0
%
$
- -
0.0
%
Federal Home Loan Bank advances
- -
0.0
%
- -
0.0
%
- -
0.0
%
- -
0.0
%
- -
0.0
%
- -
0.0
%
18,000
42.0
%
Federal Reserve Bank borrowings
54,000
68.6
%
54,000
68.6
%
- -
0.0
- -
0.0
%
- -
0.0
%
- -
0.0
%
- -
0.0
%
Subordinated debt
24,687
31.4
%
24,666
31.4
%
24,645
100.0
%
24,624
49.1
%
24,603
100.0
%
49,560
100.0
%
24,845
58.0
%
Total borrowings
$
78,687
100.0
%
$
78,666
100.0
%
$
24,645
100.0
%
$
50,124
100.0
%
$
24,603
100.0
%
$
49,560
100.0
%
$
42,845
100.0
%
Total deposits and borrowings
$
2,060,310
$
2,124,975
$
2,113,287
$
2,117,864
$
2,087,944
$
2,093,301
$
2,025,944
Core customer funding sources (2)
$
1,681,171
82.6
%
$
1,687,166
80.3
%
$
1,692,865
81.1
%
$
1,693,625
80.9
%
$
1,758,441
85.2
%
$
1,738,828
85.1
%
$
1,742,220
87.1
%
Wholesale funding sources (3)
354,452
17.4
%
413,143
19.7
%
395,777
18.9
%
399,615
19.1
%
304,900
14.8
%
304,913
14.9
%
258,879
12.9
%
Total funding sources
$
2,035,623
100.0
%
$
2,100,309
100.0
%
$
2,088,642
100.0
%
$
2,093,240
100.0
%
$
2,063,341
100.0
%
$
2,043,741
100.0
%
$
2,001,099
100.0
%
_____________________________
(1)
Includes IntraFi® accounts.
(2)
Includes reciprocal IntraFi Demand®,
IntraFi Money Market® and IntraFi CD® deposits, which are
maintained by customers.
(3)
Consists of QwickRate® certificates of
deposit, brokered deposits, federal funds purchased, Federal Home
Loan Bank advances and Federal Reserve Bank borrowings.
John Marshall Bancorp,
Inc.
Average Balance Sheets,
Interest and Rates (unaudited)
(Dollar amounts in
thousands)
Nine Months Ended September
30, 2023
Nine Months Ended September
30, 2022
Interest Income /
Average
Interest Income /
Average
Average Balance
Expense
Rate
Average Balance
Expense
Rate
Assets:
Securities:
Taxable
$
401,623
$
6,117
2.04
%
$
433,128
$
5,782
1.78
%
Tax-exempt(1)
2,678
56
2.80
%
5,002
114
3.05
%
Total securities
$
404,301
$
6,173
2.04
%
$
438,130
$
5,896
1.80
%
Loans, net of unearned income(2):
Taxable
1,748,904
62,664
4.79
%
1,626,661
53,192
4.37
%
Tax-exempt(1)
28,319
875
4.13
%
22,656
694
4.10
%
Total loans, net of unearned income
$
1,777,223
$
63,539
4.78
%
$
1,649,317
$
53,886
4.37
%
Interest-bearing deposits in other
banks
$
119,002
$
4,654
5.23
%
$
134,874
$
897
0.89
%
Total interest-earning assets
$
2,300,526
$
74,366
4.32
%
$
2,222,321
$
60,679
3.65
%
Total non-interest earning assets
36,572
35,066
Total assets
$
2,337,098
$
2,257,387
Liabilities & Shareholders’
Equity:
Interest-bearing deposits
NOW accounts
$
291,217
$
4,484
2.06
%
$
325,647
$
829
0.34
%
Money market accounts
374,053
7,560
2.70
%
389,535
1,516
0.52
%
Savings accounts
75,273
673
1.20
%
109,740
284
0.35
%
Time deposits
855,076
20,873
3.26
%
658,897
3,461
0.70
%
Total interest-bearing deposits
$
1,595,619
$
33,590
2.81
%
$
1,483,819
$
6,090
0.55
%
Federal funds purchased
294
10
4.55
%
—
—
0.00
%
Subordinated debt
24,653
1,047
5.68
%
27,476
1,461
7.11
%
Other borrowed funds
29,483
1,068
4.84
%
8,257
42
0.68
%
Total interest-bearing liabilities
$
1,650,049
$
35,715
2.89
%
$
1,519,552
$
7,593
0.67
%
Demand deposits
447,778
511,504
Other liabilities
18,483
16,321
Total liabilities
$
2,116,310
$
2,047,377
Shareholders’ equity
$
220,788
$
210,010
Total liabilities and shareholders’
equity
$
2,337,098
$
2,257,387
Tax-equivalent net interest income and
spread
$
38,651
1.43
%
$
53,086
2.98
%
195
170
Net interest income
$
38,456
$
52,916
Tax-equivalent interest income/earnings
assets
4.32
%
3.65
%
Interest expense/earning assets
2.08
%
0.46
%
Net interest margin(3)
2.25
%
3.19
%
________________________________
(1)
Tax-equivalent income has been adjusted
using the federal statutory tax rate of 21%. The annualized
taxable-equivalent adjustments utilized in the above table to
compute yields aggregated to $195 thousand and $170 thousand for
the nine months ended September 30, 2023 and September 30, 2022,
respectively.
(2)
The Company did not have any loans on
non-accrual as of September 30, 2023 or September 30, 2022.
(3)
The net interest margin has been
calculated on a tax-equivalent basis.
John Marshall Bancorp,
Inc.
Average Balance Sheets,
Interest and Rates (unaudited)
(Dollar amounts in
thousands)
Three Months Ended September
30, 2023
Three Months Ended September
30, 2022
Interest Income /
Average
Interest Income /
Average
Average Balance
Expense
Rate
Average Balance
Expense
Rate
Assets:
Securities:
Taxable
$
308,723
$
1,582
2.03
%
$
483,861
$
2,385
1.96
%
Tax-exempt(1)
1,684
13
3.06
%
4,999
38
3.02
%
Total securities
$
310,407
$
1,595
2.04
%
$
488,860
$
2,423
1.97
%
Loans, net of unearned income(2):
Taxable
1,762,653
21,695
4.88
%
1,655,670
17,983
4.31
%
Tax-exempt(1)
28,067
292
4.13
%
29,126
302
4.11
%
Total loans, net of unearned income
$
1,790,720
$
21,987
4.87
%
$
1,684,796
$
18,285
4.31
%
Interest-bearing deposits in other
banks
$
200,515
$
2,746
5.43
%
$
103,669
$
571
2.19
%
Total interest-earning assets
$
2,301,642
$
26,328
4.54
%
$
2,277,325
$
21,279
3.71
%
Total non-interest earning assets
29,761
37,500
Total assets
$
2,331,403
$
2,314,825
Liabilities & Shareholders’
Equity:
Interest-bearing deposits
NOW accounts
$
327,309
$
2,239
2.71
%
$
329,780
$
404
0.49
%
Money market accounts
341,672
2,609
3.03
%
377,736
727
0.76
%
Savings accounts
63,956
198
1.23
%
106,647
107
0.40
%
Time deposits
849,270
8,227
3.84
%
705,206
1,830
1.03
%
Total interest-bearing deposits
$
1,582,207
$
13,273
3.33
%
$
1,519,369
$
3,068
0.80
%
Federal funds purchased
99
—
—
%
—
—
0.00
%
Subordinated debt, net
24,674
349
5.61
%
28,397
448
6.26
%
Other borrowed funds
54,000
662
4.86
%
—
—
0.00
%
Total interest-bearing liabilities
$
1,660,980
$
14,284
3.41
%
$
1,547,766
$
3,516
0.90
%
Demand deposits
430,727
538,271
Other liabilities
19,223
16,641
Total liabilities
$
2,110,930
$
2,102,678
Shareholders’ equity
$
220,473
$
212,247
Total liabilities and shareholders’
equity
$
2,331,403
$
2,314,925
Tax-equivalent net interest income and
spread
$
12,044
1.13
%
$
17,763
2.81
%
Less: tax-equivalent adjustment
65
71
Net interest income
$
11,979
$
17,692
Tax-equivalent interest income/earnings
assets
4.54
%
3.71
%
Interest expense/earning assets
2.46
%
0.61
%
Net interest margin(3)
2.08
%
3.10
%
____________________________
(1)
Tax-equivalent income has been adjusted
using the federal statutory tax rate of 21%. The annualized
taxable-equivalent adjustments utilized in the above table to
compute yields aggregated to $65 thousand and $71 thousand for the
three months ended September 30, 2023 and September 30, 2022,
respectively.
(2)
The Company did not have any loans on
non-accrual as of September 30, 2023 or September 30, 2022.
(3)
The net interest margin has been
calculated on a tax-equivalent basis.
John Marshall Bancorp,
Inc.
Reconciliation of Certain
Non-GAAP Financial Measures (unaudited)
(Dollar amounts in
thousands)
As of
September 30, 2023
December 31, 2022
September 30, 2022
Regulatory Ratios (Bank)
Total risk-based capital (GAAP)
$
280,891
$
283,471
$
274,611
Less: Unrealized losses on
available-for-sale securities, net of tax benefit (1)
17,143
28,942
31,191
Less: Unrealized losses on
held-to-maturity securities, net of tax benefit (1)
16,285
14,421
14,878
Total risk-based capital, excluding
unrealized losses on available-for-sale and held-to-maturity
securities, net of tax benefit (Non-GAAP)
$
247,463
$
240,108
$
228,542
Tier 1 capital (GAAP)
$
261,666
$
262,960
$
254,226
Less: Unrealized losses on
available-for-sale securities, net of tax benefit (1)
17,143
28,942
31,191
Less: Unrealized losses on
held-to-maturity securities, net of tax benefit (1)
16,285
14,421
14,878
Tier 1 capital, excluding unrealized
losses on available-for-sale and held-to-maturity securities, net
of tax benefit (Non-GAAP)
$
228,238
$
219,597
$
208,157
Risk weighted assets (GAAP)
$
1,794,603
$
1,819,305
$
1,783,344
Less: Risk weighted available-for-sale
securities
25,094
60,894
62,969
Less: Risk weighted held-to-maturity
securities
17,229
17,762
17,973
Risk weighted assets, excluding
available-for-sale and held-to-maturity securities (Non-GAAP)
$
1,752,280
$
1,740,649
$
1,702,402
Total average assets for leverage ratio
(GAAP)
$
2,326,722
$
2,327,939
$
2,312,355
Less: Average available-for-sale
securities
206,116
362,024
380,324
Less: Average held-to-maturity
securities
96,988
100,050
101,558
Total average assets for leverage ratio,
excluding available-for-sale and held-to-maturity securities
(Non-GAAP)
$
2,023,618
$
1,865,865
$
1,830,473
Total risk-based capital ratio (2)
Total risk-based capital ratio (GAAP)
15.7
%
15.6
%
15.4
%
Total risk-based capital ratio
(Non-GAAP)
14.1
%
13.8
%
13.4
%
Tier 1 capital ratio (3)
Tier 1 risk-based capital ratio (GAAP)
14.6
%
14.4
%
14.3
%
Tier 1 risk-based capital ratio
(Non-GAAP)
12.9
%
12.6
%
12.2
%
Common equity tier 1 ratio (4)
Common equity tier 1 ratio (GAAP)
14.6
%
14.4
%
14.3
%
Common equity tier 1 ratio (Non-GAAP)
12.9
%
12.6
%
12.2
%
Leverage ratio (5)
Leverage ratio (GAAP)
11.3
%
11.3
%
11.0
%
Leverage ratio (Non-GAAP)
11.3
%
11.8
%
11.4
%
__________________________
(1)
Includes tax benefit calculated using the
federal statutory tax rate of 21%.
(2)
The total risk-based capital ratio is
calculated by dividing total risk-based capital by risk weighted
assets.
(3)
The tier 1 capital ratio is calculated by
dividing tier 1 capital by risk weighted assets.
(4)
The common equity tier 1 ratio is
calculated by dividing tier 1 capital by risk weighted assets.
(5)
The leverage ratio is calculated by
dividing tier 1 capital by total average assets for leverage
ratio.
John Marshall Bancorp,
Inc.
Reconciliation of Certain
Non-GAAP Financial Measures (unaudited)
(Dollar amounts in
thousands)
For the Three Months
Ended
For the Nine Months
Ended
September 30, 2023
September 30, 2023
Non-interest income (loss) (GAAP)
$
(16,815
)
$
(15,564
)
Adjustment: Pre-tax loss recognized on
sale of available-for-sale securities
17,114
17,114
Core non-interest income (Non-GAAP)
$
299
$
1,550
Income (loss) before taxes (GAAP)
$
(11,667
)
$
2,102
Adjustment: Pre-tax loss recognized on
sale of available-for-sale securities
17,114
17,114
Core income before taxes (Non-GAAP)
$
5,447
$
19,216
Income tax expense (benefit) (GAAP)
$
(1,530
)
$
1,446
Adjustment: Tax and 10% modified endowment
contract penalty on early surrender of BOLI policies
(1,101
)
(1,101
)
Adjustment: Tax benefit of loss recognized
on sale of available-for-sale securities
3,594
3,594
Core income tax expense (Non-GAAP)(1)
$
963
$
3,939
Net income (loss) (GAAP)
$
(10,137
)
$
656
Core net income (Non-GAAP)(2)
$
4,484
$
15,277
Earnings (loss) per share - basic
(GAAP)
$
(0.72
)
$
0.05
Core earnings per share - basic
(Non-GAAP)(3)
$
0.32
$
1.08
Earnings (loss) per share - diluted
(GAAP)
$
(0.72
)
$
0.05
Core earnings per share - diluted
(Non-GAAP)(3)
$
0.32
$
1.08
Return on average assets (annualized)
(GAAP)
(1.73
)
%
0.04
%
Core return on average assets (annualized)
(Non-GAAP)(4)
0.76
%
0.87
%
Return on average equity (annualized)
(GAAP)
(18.24
)
%
0.40
%
Core return on average equity (annualized)
(Non-GAAP)(5)
8.07
%
9.25
%
Non-interest income (loss) as a percentage
of average assets (annualized) (GAAP)
(2.86
)
%
(0.89
)
%
Core non-interest income as a percentage
of average assets (annualized) (Non-GAAP)(6)
0.05
%
0.09
%
Efficiency ratio (GAAP)
(158.4
)
%
101.6
%
Core efficiency ratio (Non-GAAP)(7)
62.4
%
58.1
%
___________________________
(1)
Includes tax benefit (expense) calculated
using the federal statutory tax rate of 21%.
(2)
Core net income reflects net income
adjusted for the non-recurring tax effected loss recognized on the
sale of available-for-sale securities in and non-recurring tax
expense associated with the surrender of the Company’s BOLI
policies in July 2023. It is calculated by subtracting core income
tax expense from core income before taxes for each period
presented.
(3)
Core earnings per share – basic and core
earnings per share – diluted is calculated by dividing core net
income by basic weighted average shares outstanding and diluted
weighted average shares outstanding, respectively, for each period
presented.
(4)
Core return on average assets (annualized)
is calculated by dividing annualizing core net income by average
assets for each period presented.
(5)
Core return on average equity (annualized)
is calculated by dividing annualizing core net income by average
equity for each period presented.
(6)
Core non-interest income as a percentage
of average assets (annualized) is calculated by dividing annualized
core non-interest income by average assets for each period
presented.
(7)
Core efficiency ratio is calculated by
dividing non-interest expense by the sum of core non-interest
income and net interest income for each period presented.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231018741695/en/
Christopher W. Bergstrom (703) 584-0840 Kent D. Carstater (703)
289-5922
John Marshall Bancorp (NASDAQ:JMSB)
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