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Earnings and Balance Sheet Growth Along with Pristine Asset Quality Continues - Efficiency Ratio Drops Below 49%

·26-min read

John Marshall Bancorp, Inc. (OTCQB: JMSB) (the "Company"), parent company of John Marshall Bank (the "Bank"), reported its financial results for the three and nine months ended September 30, 2020.

Selected Highlights

  • Seventh Consecutive Quarter of Record Earnings - The Company reported net income of $4.7 million for the three months ended September 30, 2020 compared to $4.0 million for the three months ended September 30, 2019, an increase of 15.7%. Earnings per diluted share was $0.34 for the three months ended September 30, 2020, an increase of 17.2% from $0.29 per diluted share for the three months ended September 30, 2019. The Company reported net income of $13.7 million for the nine months ended September 30, 2020, compared to $11.4 million for the nine months ended September 30, 2019, an increase of 19.9%. Earnings per diluted share was $1.00 for the nine months ended September 30, 2020, an increase of 19.0% from $0.84 per for the nine months ended September 30, 2019.

  • Peer Leading Asset Quality - For the fourth consecutive quarter, the Company had no non-performing assets, no loans 30 days or more past due and no real estate owned at quarter-end September 30, 2020. During the first nine months of 2020, the Company reported $43 thousand in net recoveries, compared to $145 thousand in net charge-offs during the first nine months of 2019. Troubled debt restructurings were $619 thousand at September 30, 2020, a decline of $1.7 million, compared to $2.3 million at September 30, 2019. COVID loan modifications are performing as expected and as of October 16, 2020 represented 0.76% of total (excluding Paycheck Protection Program ("PPP")) loans as of September 30, 2020.

  • Record Pre-Tax, Pre-Provision Income - The Company achieved record pre-tax, pre-provision ("PTPP") income of $7.6 million for the three months ended September 30, 2020, a 40.9% increase from the same period a year ago. The PTPP return on average assets increased from 1.42% for the three months ended September 30, 2019 to 1.67% for the same period in 2020. PTPP income increased 33.8% to $20.6 million for the nine months ended September 30, 2020 from $15.4 million for the nine months ended September 30, 2019. As discussed above, asset quality remained strong as of September 30, 2020; management believes PTPP income enables financial statement users to assess the Company’s ability to generate capital to cover potential credit losses.

  • Expense Management Drives Sub-49%Efficiency Ratio - Revenues were $14.8 million, or 15.9% greater in the third quarter of 2020 as compared to $12.8 million for the third quarter of 2019. Noninterest expense for the third quarter of 2020 decreased $173 thousand or 2.3% to $7.2 million, when compared to the $7.4 million for the third quarter of 2019. This continued improvement in operating leverage enabled the efficiency ratio to decrease from 57.9% for the three months ended September 30, 2019 to 48.8% for the three months ended September 30, 2020. Noninterest expense to average assets declined from 1.96% for the three months ended September 30, 2019 to 1.60% for the three months ended September 30, 2020.

  • Well-Capitalized with Strong Liquidity - While the Company is exempt from the regulatory capital rules at the holding company level, both the Company and the Bank materially exceed the regulatory thresholds defining well-capitalized. The Bank’s total risk-based capital ratio has improved from 13.7% at September 30, 2019 to 14.6% at September 30, 2020. Cash and unencumbered securities equaled $222.9 million, or 12.0% of total assets as of September 30, 2020. Exclusive of the available PPP Lending Facility, the Company had $308.0 million of secured borrowing capacity as well as significant unsecured (correspondent borrowing lines and brokered deposits) funding capacity available at September 30, 2020.

Chris Bergstrom, President and Chief Executive Officer, commented "Despite the challenges of 2020, John Marshall Bank’s commitment to providing an exceptional customer experience is unwavering. I am incredibly proud of the flexibility and ingenuity demonstrated by our associates who have driven record results in the face of adversity. Through those efforts we have developed our Home Pursuit program that provides a path to homeownership, our purchasing card program that enables businesses to be more efficient and we continue to refine our digital banking platform that increases customer convenience. We are constantly evaluating opportunities to provide value to our customers, strengthen our balance sheet and grow the Company in a prudent fashion. Continuous improvement, coupled with conservative management, positions the Company well and should yield benefits for our customers, communities, employees and shareholders."

Balance Sheet Review

Assets

Total assets were $1.86 billion at September 30, 2020, $1.58 billion at December 31, 2019 and $1.51 billion at September 30, 2019. During the third quarter of 2020, assets increased $59.3 million, or 13.1% annualized. Asset growth was $348.7 million, or 23.0%, from September 30, 2019 to September 30, 2020.

Loans

Gross loans were $1.53 billion at September 30, 2020, $1.33 billion at December 31, 2019 and $1.26 billion at September 30, 2019. Gross loans net of unearned income grew $15.1 million or 4.0% annualized during the third quarter of 2020. Excluding PPP, gross loans net of unearned income increased $128.6 million or 10.2% from September 30, 2019 to September 30, 2020. Non-PPP loan growth during the first nine months of 2020 was reduced by payoffs and paydowns totaling $328.6 million.

Investment Securities

The Company’s portfolio of investments in fixed income securities was $131.2 million at September 30, 2020, $122.7 million at December 31, 2019 and $108.0 million at September 30, 2019. Year-over-year bond growth, from September 30, 2019 to September 30, 2020, was $23.3 million, or 21.5%. The Company also had restricted equity securities totaling $5.7 million at September 30, 2020, $7.2 million at December 31, 2019 and $6.5 million at September 30, 2019. The reduction in restricted equity securities reflects the decrease in Federal Home Loan Bank of Atlanta ("FHLB") stock, which decreased commensurately with the Bank’s FHLB advances.

Interest Bearing Deposits in Banks

Interest-bearing deposits in banks were $154.6 million at September 30, 2020, $87.0 million at December 31, 2019 and $98.0 million at September 30, 2019. The Company expects to operate with a higher level of liquidity in the current economic environment.

Deposits

Total deposits were $1.62 billion at September 30, 2020, $1.31 billion at December 31, 2019 and $1.27 billion at September 30, 2019. During the third quarter of 2020, deposits grew $60.6 million or 15.4% annualized. During the first nine months of 2020, deposits grew $313.4 million, or 32.0% annualized. Year-over-year deposit growth, from September 30, 2019 to September 30, 2020, was $351.2 million, or 27.6%.

Non-interest bearing demand deposits were $385.9 million at September 30, 2020, $273.5 million at December 31, 2019 and $254.4 million at September 30, 2019. During the first nine months of 2020, non-interest bearing demand deposits grew $112.4 million, or 41.1%. Year-over-year non-interest bearing demand deposit growth, from September 30, 2019 to September 30, 2020, was $131.5 million, or 51.7%. Non-interest bearing demand deposits represented 23.8% of total deposits at September 30, 2020, 20.9% at December 31, 2019 and 20.0% at September 30, 2019.

Core customer funding was $1.43 billion at September 30, 2020, $1.17 billion at December 31, 2019 and $1.14 billion at September 30, 2019. Year-over-year core customer funding sources increased by $290.9 million, or 25.5%, from September 30, 2019 to September 30, 2020. Core customer funding was 85.8% of all funding sources as of September 30, 2020, as compared to 82.8% at December 31, 2019 and 85.0% as of September 30, 2019. Non-maturing deposits were 61.5% of total deposits as of September 30, 2020, 55.9% as of December 31, 2019 and 55.4% as of September 30, 2019.

Insured Cash Sweep ("ICS") deposits were $233.1 million at September 30, 2020, $187.4 million at December 31, 2019 and $175.3 million at September 30, 2019. Year-over-year, ICS deposits increased $57.7 million from September 30, 2019 to September 30, 2020. Certificate of Deposit Account Registry Service ("CDARS") deposits were $36.9 million at September 30, 2020, $50.9 million at December 31, 2019 and $65.9 million at September 30, 2019.

Certificates of deposits were $398.5 million at September 30, 2020, $383.5 million at December 31, 2019 and $369.3 million at September 30, 2019. Year-over-year certificates of deposit increased $29.2 million from September 30, 2019 to September 30, 2020. QwickRate certificates of deposit were $29.8 million at September 30, 2020, $18.0 million at December 31, 2019 and $17.9 million at September 30, 2019. Year-over-year QwickRate certificates of deposit increased $11.9 million from September 30, 2019 to September 30, 2020. Brokered deposits were $161.1 million at September 30, 2020, $125.1 million at December 31, 2019 and $112.7 million at September 30, 2019. Brokered deposits increased $48.4 million from September 30, 2019 to September 30, 2020. The increase in brokered deposits continues to be related to a migration of borrowings from FHLB and Federal funds purchased to brokered deposits.

Borrowings

Total borrowings, consisting of FHLB advances and Federal funds purchased, were $22.0 million at September 30, 2020, $74.0 million at December 31, 2019 and $47.0 million at September 30, 2019. Total borrowings decreased $25.0 million, or 53.2%, from September 30, 2019 to September 30, 2020 and decreased $52.0 million, or 70.3% from December 31, 2019 to September 30, 2020. For the nine months ended September 30, 2020, brokered and QwickRate certificates of deposit in aggregate increased $47.8 million, while borrowings decreased $52.0 million. Wholesale funding represented 12.8% of total funding sources at September 30, 2020, down from 15.4% at December 31, 2019.

Management has chosen to retire FHLB advances as they mature so as to increase contingent funding sources. As of September 30, 2020, the Bank had approximately $255 million remaining in borrowing capacity with the FHLB.

The Company had subordinated notes with a balance of $24.7 million at September 30, 2020 and $24.6 million at December 31, 2019 and September 30, 2019.

Shareholders’ Equity and Capital Levels

Total shareholders’ equity was $181.4 million at September 30, 2020, $162.0 million at December 31, 2019 and $157.3 million at September 30, 2019. Year-over-year shareholders’ equity increased by $24.1 million, or 15.3%. Total common shares outstanding increased from 13,076,081, including 49,068 shares relating to unvested stock awards, at September 30, 2019, to 13,573,601, including 46,483 shares relating to unvested stock awards, at September 30, 2020. The year-over-year increase in shares outstanding was primarily from the exercise of stock options.

The Bank’s capital ratios remain well above regulatory minimums for well-capitalized banks. As of September 30, 2020, the Bank’s total risk-based capital ratio was 14.6%, compared to 13.7% at September 30, 2019.

Income Statement Review

Net Interest Income

Net interest income, the Company’s primary source of revenue, was $14.4 million for the three months ended September 30, 2020, up 16.2% from $12.4 million for the three months ended September 30, 2019. Balance sheet growth, improved funding composition and the downward repricing of our funding base enabled net interest income for the three months ended September 30, 2020 to increase 16.2% when compared to the three months ended September 30, 2019.

The net interest margin was 3.26% for the three months ended September 30, 2020 as compared to 3.38% for the three months ended September 30, 2019. Average loans net of unearned income increased $272.3 million, or 21.8% compared to the three months ended September 30, 2019, with a 76 basis point decline in yield. Average securities increased $20.4 million, or 17.7%, compared to the three months ended September 30, 2019, with a 32 basis point decline in yield. Average interest-bearing deposits in other banks increased $11.5 million, or 12.6% compared to the three months ended September 30, 2019, with a 206 basis point decline in yield. The average yield on interest-bearing assets decreased 79 basis points from 4.84% for the three months ended September 30, 2019, to 4.05% for the three months ended September 30, 2020.

The average cost of funds declined 73 basis points, or 45.9% from 1.59% for the three months ended September 30, 2019, to 0.86% for the three months ended September 30, 2020. The average cost of interest-bearing deposits decreased 85 basis points when comparing the quarter ended September 30, 2019 to the quarter ended September 30, 2020. The average cost of other borrowed funds decreased 88 basis points when comparing the quarter ended September 30, 2019 to the quarter ended September 30, 2020. The average cost of interest-bearing liabilities decreased 84 basis points when comparing the quarter ended September 30, 2019 to the quarter ended September 30, 2020.

On a linked quarterly basis, net interest margin decreased 1 basis point to 3.26% for the three months ended September 30, 2020, with the yield on earning assets declining from 4.25% for the three months ended June 30, 2020, to 4.05% for the three months ended September 30, 2020. The average cost of interest-bearing liabilities declined 29 basis points from 1.43% for the three months ended June 30, 2020, compared to 1.14% for the three months ended September 30, 2020.

For the nine months ended September 30, 2020, net interest income was $41.1 million, up 13.9% from $36.1 million for the nine months ended September 30, 2019. The net interest margin was 3.28% during the first nine months of 2020, compared to 3.43% during the first nine months of 2019. Despite the 150 basis point rate cuts made by the Federal Reserve in March 2020, net interest income increased by 13.9% during the first nine months of 2020, compared to the first nine months of 2020, resulting primarily from a $268.3 million, or 19.1%, increase in average earning assets during the first nine months of 2020, compared to the first nine months of 2019.

Provision for Loan Losses

The Company had a $1.7 million provision for loan losses for the three months ended September 30, 2020, compared to $205 thousand for the same period in 2019. The Company had $1 thousand in net loan recoveries during the third quarter of 2020 and no loan charge-offs during the third quarter of 2019.

During the nine months ended September 30, 2020, the Company recognized a provision for loan losses of $3.6 million, compared to a provision of $810 thousand during the first nine months of 2019. The Company reported $43 thousand in net recoveries during the first nine months of 2020, compared to $145 thousand in net charge-offs during the first nine months of 2019.

The increase in the Company’s provision for loan losses during 2020 periods as compared to the corresponding periods in the prior year is primarily related to COVID and its impact on the qualitative factors included in the allowance estimate. The provision increased the allowance for loan losses as a percentage of total loans from 0.81% at December 31, 2019 to 0.94% at September 30, 2020. Excluding PPP loan balances, the provision increased the allowance for loan losses as a percentage of total loans from 0.93% at June 30, 2020 to 1.04% at September 30, 2020. The Company does not have a reserve on PPP loan balances, as they are 100% guaranteed by the Small Business Administration. The Company continues to monitor and evaluate the adequacy of the allowance for loan losses as additional economic data becomes available and changes to the Company's portfolio as a result of the pandemic become known.

Noninterest Income

The Company’s recurring sources of noninterest income consist primarily of bank owned life insurance income, service charges on deposit accounts and insurance commissions. The majority of loan fees are included in interest income on the loan portfolio and not reported as noninterest income.

For the three months ended September 30, 2020, the Company reported total noninterest income of $357 thousand, compared to $344 thousand during the three months ended September 30, 2019. Service charges on deposit accounts declined $28 thousand and other service charges and fees declined $18 thousand for the three months ended September 30, 2020 when compared to the same period in 2019. The year-over-year decline in service charges and other fees is mostly related to lower ATM fees, overdraft fees and foreign exchange fees when comparing the three months ended September 30, 2020 to the same period in 2019. Other operating income for the three months ended September 30, 2020 increased $68 thousand when compared to the same period in 2019 with $38 thousand in market adjustments recorded on the Company’s equity securities and a $12 thousand increase in insurance commissions in the three months ended September 30, 2020.

For the nine months ended September 30, 2020, the Company reported total noninterest income of $1.2 million, compared to $1.0 million during the first nine months of 2019, an increase of $219 thousand, or 21.5%. Service charges on deposit accounts declined $81 thousand for the nine months ended September 30, 2020 when compared to the same period in 2019. Bank owned life insurance declined $24 thousand for the nine months ended September 30, 2020 when compared to the same period in 2019. Other service charges and fees declined $19 thousand for the nine months ended September 30, 2020 when compared to the same period in 2019. Other operating income for the nine months ended September 30, 2020 increased $48 thousand when compared to the same period in 2019. The increase in noninterest income for the nine months ended September 30, 2020 was primarily attributed to gains on sales of securities totaling $309 thousand. During the second quarter of 2020, the Company sold $10.8 million of fixed income securities, resulting in a pre-tax gain of $297 thousand. Excluding the securities gains, the year-over-year decline in service charges for the nine months ended September 30, 2020 as compared to the same period in 2019 was attributable to lower ATM fees, analysis fees and overdraft fees.

Noninterest Expense

For the three months ended September 30, 2020, noninterest expense decreased 2.3%, to $7.2 million, compared to $7.4 million for the same period in 2019. Salary and employee benefit expense was $4.7 million during the three months ended September 30, 2020, up $114 thousand, or 2.5% when compared to $4.6 million during the three months ended September 30, 2019. Occupancy expense decreased 13.7%, or $76 thousand and furniture and equipment expense decreased 6.8% or $24 thousand when comparing the three months ended September 30, 2020 to the same period in 2019. The reduction in occupancy expense was due to the renegotiation of leases at the end of 2019. Other operating expense decreased by 9.9%, or $187 thousand when comparing the three months ended September 30, 2020 to the same period in 2019. For the three months ended September 30, 2020 when compared to the same period in 2019, other operating expense declined with lower marketing and travel expenses and the renegotiation of certain operating contracts.

For the nine months ended September 30, 2020, noninterest expense increased only 0.2% to $21.7 million when compared to the same period in 2019. For the nine months ended September 30, 2020, salaries and employee benefits expense decreased 1.1%, or $158 thousand, compared to the nine months ended September 30, 2019. Occupancy expense decreased 12.4%, or $206 thousand and furniture and equipment expense increased 21.1%, or $219 thousand when comparing the nine months ended September 30, 2020 to the same period in 2019. Furniture and equipment expense increased due to additional software costs and personal protection equipment for offices purchased during the nine months ended September 30, 2020 when compared to the same period in 2019. Other operating expense increased by 3.6%, or $185 thousand, during the nine months ended September 30, 2020, compared to the same period in 2019. The increase in operating expense is related to additional office supplies associated with the COVID pandemic during the nine months ended September 30, 2020 when compared to the same period in 2019.

Asset Quality

For the fourth consecutive quarter, the Company had no non-accrual loans, no loans 30 days or more past due and no other real estate owned at quarter-end September 30, 2020. As of September 30, 2019, non-accrual loans totaled $1.4 million. Non-performing assets were 0.09% of total assets at September 30, 2019. The Company had no other real estate owned as of September 30, 2019.

Troubled debt restructurings were $619 thousand at September 30, 2020, a decline of $1.7 million, compared to $2.3 million at September 30, 2019. All troubled debt restructurings were performing in accordance with their modified terms as of September 30, 2020. There were $909 thousand of the troubled debt restructurings that were performing in accordance with their modified terms as of September 30, 2019.

As of October 16, 2020, six loans with COVID deferrals remained. These six loans totaled $10.6 million and represented 0.76% of total loans (excluding PPP) as of September 30, 2020. The Company has reduced modified loans originally reported as of June 30, 2020 by 97% in terms of number of loans or 96% when measured by dollar volume.

The Company anticipates that the remaining six loans totaling $10.6 million will resume making regularly scheduled monthly payments and expects that the COVID modification process will be materially completed by December 31, 2020. Five of the modified loans amounting to $10.3 million are paying interest and have deferred principal. The remaining modified loan equaled $297 thousand and has deferred both principal and interest.

Anticipated Resumption Schedule (10/16/2020)

Expected Activity

Month

# of Loans

$ (millions)

Oct-20

2

$

2.5

Nov-20

2

0.6

Dec-20

2

7.5

Remaining

6

$

10.6

Of the remaining loans subject to COVID loan modifications as of October 16, 2020, there was one commercial and industrial loan totaling $153 thousand and five commercial real estate (CRE) loans totaling $10.4 million. The following table summarizes the CRE loans still subject to COVID loan modifications as of October 16, 2020:

Loan-To-Value

Weighted

Range:

Collateral

# of Loans

$ (millions)

Average

Low

High

Retail

2

$

2.6

60%

59%

70%

Office

1

0.3

70%

70%

70%

Multifamily

2

7.5

63%

63%

64%

5

$

10.4

62%

The loan-to-value ratios in the table above were based on the most recent appraisals in each individual credit file.

The Company has not approved any new COVID loan modifications since June 30, 2020. The two relationships that were previously granted second deferrals, as disclosed on September 10, 2020, resumed making their regularly scheduled payments in October 2020. The resumption rate on loan modifications that have expired as of October 16, 2020 equaled 100% in terms of number of loans and 100% in terms of loan balances.

About John Marshall Bancorp, Inc.

John Marshall Bancorp, Inc. is the bank holding company for John Marshall Bank. John Marshall Bank is headquartered in Reston, Virginia with eight full-service branches located in Alexandria, Arlington, Loudoun, Prince William, Reston, Rockville, Tysons, and Washington, D.C. and one loan production office in Arlington, Virginia. The Company is dedicated to providing an exceptional customer experience and value to local businesses, business owners and consumers in the Washington D.C. Metro area. The Bank offers a comprehensive line of sophisticated banking products, services and a digital platform that rival those of the largest banks. Dedicated relationship managers serving as direct point-of-contact along with an experienced staff help achieve customer’s financial goals. Learn more at www.johnmarshallbank.com.

In addition to historical information, this press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which 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. The Company’s 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 its subsidiary include, but are not limited to the following: changes in interest rates, general economic conditions, public health crises (such as the governmental, social and economic effects of COVID), levels of unemployment in the Bank’s lending area, real estate market values in the Bank’s lending area, future natural disasters, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, 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, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, accounting principles and guidelines, and other conditions which by their nature are not susceptible to accurate forecast, and are subject to significant uncertainty. 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,

2020

2019

2020

2019

Selected Balance Sheet Data

Cash and cash equivalents

$

7,918

$

11,305

$

7,918

11,305

Total investment securities

137,715

114,879

137,715

114,879

Loans net of unearned income

1,532,713

1,255,877

1,532,713

1,255,877

Allowance for loan losses

14,441

10,396

14,441

10,396

Total assets

1,861,904

1,513,223

1,861,904

1,513,223

Non-interest bearing demand deposits

385,885

254,359

385,885

254,359

Interest bearing deposits

1,236,261

1,016,575

1,236,261

1,016,575

Total deposits

1,622,146

1,270,934

1,622,146

1,270,934

Shareholders' equity

181,427

157,339

181,427

157,339

Summary Results of Operations

Interest income

$

17,907

$

17,738

$

53,780

$

51,194

Interest expense

3,487

5,328

12,660

15,105

Net interest income

14,420

12,410

41,120

36,089

Provision for loan losses

1,716

205

3,642

810

Net interest income after provision for loan losses

12,704

12,205

37,478

35,279

Noninterest income

357

344

1,239

1,020

Noninterest expense

7,217

7,390

21,723

21,683

Income before income taxes

5,844

5,159

16,994

14,616

Net income

4,662

4,030

13,722

11,449

Per Share Data and Shares Outstanding

Earnings per share - basic

$

0.34

$

0.31

$

1.02

$

0.88

Earnings per share - diluted

$

0.34

$

0.29

$

1.00

$

0.84

Tangible book value per share

$

13.37

$

12.03

$

13.37

$

12.03

Weighted average common shares (basic)

13,526,792

13,026,739

13,438,286

12,974,104

Weighted average common shares (diluted)

13,638,644

13,611,615

13,642,607

13,574,417

Common shares outstanding at end of period

13,573,601

13,076,081

13,573,601

13,076,081

Performance Ratios

Return on average assets (annualized)

1.03%

1.07%

1.07%

1.06%

Return on average equity (annualized)

10.30%

10.26%

10.55%

10.18%

Net interest margin

3.26%

3.38%

3.28%

3.43%

Noninterest income as a percentage of average assets (annualized)

0.08%

0.09%

0.10%

0.09%

Noninterest expense to average assets (annualized)

1.60%

1.96%

1.70%

2.01%

Efficiency ratio

48.8%

57.9%

51.3%

58.4%

Asset Quality

Non-performing assets to total assets

0.00%

0.09%

0.00%

0.09%

Non-performing loans to total loans

0.00%

0.11%

0.00%

0.11%

Allowance for loan losses to non-performing loans

N/M

7.4x

N/M

7.4x

Allowance for loan losses to total loans (2)

0.94%

0.83%

0.94%

0.83%

Net charge-offs (recoveries) to average loans (annualized)

0.00%

0.00%

0.00%

0.02%

Loans 30-89 days past due and accruing interest

$

- -

$

406

$

- -

$

406

Non-accrual loans

$

- -

$

1,406

$

- -

$

1,406

Other real estate owned

$

- -

$

- -

$

- -

$

- -

Non-performing assets (1)

$

- -

$

1,406

$

- -

$

1,406

Troubled debt restructurings (total)

$

619

$

2,315

$

619

$

2,315

Performing in accordance with modified terms

$

619

$

909

$

619

$

909

Not performing in accordance with modified terms

$

- -

$

1,406

$

- -

$

1,406

Bank Capital Ratios

Tangible equity / tangible assets

10.9%

11.9%

10.9%

11.9%

Total risk-based capital ratio

14.6%

13.7%

14.6%

13.7%

Tier 1 risk-based capital ratio

13.6%

12.9%

13.6%

12.9%

Leverage ratio

11.1%

11.9%

11.1%

11.9%

Common equity tier 1 ratio

13.6%

12.9%

13.6%

12.9%

Other Information

Number of full time equivalent employees

134

131

134

131

# Full service branch offices

8

8

8

8

# Loan production or limited service branch offices

1

1

1

1

(1) Non-performing assets consist of non-accrual loans, loans 90 day or more past due and still accruing interest, and other real estate owned. Does not include troubled debt restructurings which were accruing interest at the date indicated.

(2) The allowance for loan losses to total loans, excluding PPP loans of $148.2 million was 1.04% at September 30, 2020. PPP loans received no allocations in the allowance estimate due to the underlying guarantees.

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

2020

2019

2019

Months

Year

Assets

(Unaudited)

(Unaudited)

(Unaudited)

Cash and due from banks

$

7,918

$

7,471

$

11,305

6.0%

-30.0%

Interest-bearing deposits in banks

154,581

87,019

98,000

77.6%

57.7%

Securities available-for-sale, at fair value

131,211

122,729

107,951

6.9%

21.5%

Restricted securities, at cost

5,673

7,188

6,544

-21.1%

-13.3%

Equity securities, at fair value

831

431

384

92.8%

116.4%

Loans net of unearned income

1,532,713

1,325,532

1,255,877

15.6%

22.0%

Allowance for loan losses

(14,441)

(10,756)

(10,396)

34.3%

38.9%

Net loans

1,518,272

1,314,776

1,245,481

15.5%

21.9%

Bank premises and equipment, net

2,209

2,318

2,391

-4.7%

-7.6%

Accrued interest receivable

5,708

4,010

3,715

42.3%

53.6%

Bank owned life insurance

20,470

20,118

19,993

1.7%

2.4%

Right of use assets

6,274

7,254

8,515

-13.5%

-26.3%

Other assets

8,757

8,569

8,944

2.2%

-2.1%

Total assets

$

1,861,904

$

1,581,883

$

1,513,223

17.7%

23.0%

Liabilities and Shareholders' Equity

Liabilities

Deposits:

Non-interest bearing demand deposits

$

385,885

$

273,459

$

254,359

41.1%

51.7%

Interest bearing demand deposits

549,576

428,529

424,690

28.2%

29.4%

Savings deposits

60,418

29,208

26,198

106.9%

130.6%

Time deposits

626,267

577,508

565,687

8.4%

10.7%

Total deposits

1,622,146

1,308,704

1,270,934

24.0%

27.6%

Federal funds purchased

- -

12,000

- -

N/M

N/M

Federal Home Loan Bank advances

22,000

62,000

47,000

-64.5%

-53.2%

Subordinated debt

24,667

24,630

24,618

0.2%

0.2%

Accrued interest payable

770

1,106

1,086

-30.4%

-29.1%

Lease liabilities

6,532

7,474

8,782

-12.6%

-25.6%

Other liabilities

4,362

3,987

3,464

9.4%

25.9%

Total liabilities

1,680,477

1,419,901

1,355,884

18.4%

23.9%

Shareholders' Equity

Preferred stock, par value $0.01 per share; authorized 1,000,000 shares; none issued

- -

- -

- -

- -

- -

Common stock, nonvoting, par value $0.01 per share; authorized 1,000,000 shares; none issued

- -

- -

- -

- -

- -

Common stock, voting, par value $0.01 per share; authorized 20,000,000 shares; issued and outstanding, 13,573,601 at 9/30/2020 including 46,483 unvested shares, 13,127,661 shares at 12/31/2019 including 51,548 unvested shares and 13,076,081 at 9/30/2019, including 49,068 unvested shares

135

131

130

3.1%

3.8%

Additional paid-in capital

89,821

87,435

86,766

2.7%

3.5%

Retained earnings

87,361

73,639

69,168

18.6%

26.3%

Accumulated other comprehensive income

4,110

777

1,275

429.0%

222.4%

Total shareholders' equity

181,427

161,982

157,339

12.0%

15.3%

Total liabilities and shareholders' equity

$

1,861,904

$

1,581,883

$

1,513,223

17.7%

23.0%

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,

2020

2019

% Change

2020

2019

% Change

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Interest and Dividend Income

Interest and fees on loans

$

17,079

$

16,463

3.7%

$

50,869

$

47,389

7.3%

Interest on investment securities, taxable

697

652

6.9%

2,213

1,813

22.1%

Interest on investment securities, tax-exempt

32

17

88.2%

84

116

-27.6%

Dividends

65

102

-36.3%

247

329

-24.9%

Interest on federal funds sold

- -

- -

N/M

- -

1

N/M

Interest on deposits in banks

34

504

-93.3%

367

1,546

-76.3%

Total interest and dividend income

17,907

17,738

1.0%

53,780

51,194

5.1%

Interest Expense

Deposits

3,052

4,733

-35.5%

11,209

13,172

-14.9%

Federal Home Loan Bank advances

63

224

-71.9%

335

816

-58.9%

Subordinated debt

372

371

0.3%

1,115

1,115

0.0%

Other short-term borrowings

- -

- -

N/M

1

2

-50.0%

Total interest expense

3,487

5,328

-34.6%

12,660

15,105

-16.2%

Net interest income

14,420

12,410

16.2%

41,120

36,089

13.9%

Provision for loan losses

1,716

205

737.1%

3,642

810

349.6%

Net interest income after provision for loan losses

12,704

12,205

4.1%

37,478

35,279

6.2%

Noninterest Income

Service charges on deposit accounts

107

135

-20.7%

343

424

-19.1%

Bank owned life insurance

118

126

-6.3%

352

376

-6.4%

Other service charges and fees

38

56

-32.1%

120

139

-13.7%

Gain on sale of securities

- -

1

N/M

309

14

2107.1%

Other operating income

94

26

261.5%

115

67

71.6%

Total noninterest income

357

344

3.8%

1,239

1,020

21.5%

Noninterest Expenses

Salaries and employee benefits

4,703

4,589

2.5%

13,631

13,789

-1.1%

Occupancy expense of premises

480

556

-13.7%

1,456

1,662

-12.4%

Furniture and equipment expenses

331

355

-6.8%

1,257

1,038

21.1%

Other operating expenses

1,703

1,890

-9.9%

5,379

5,194

3.6%

Total noninterest expenses

7,217

7,390

-2.3%

21,723

21,683

0.2%

Income before income taxes

5,844

5,159

13.3%

16,994

14,616

16.3%

Income tax expense

1,182

1,129

4.7%

3,272

##

3,167

3.3%

Net income

$

4,662

$

4,030

15.7%

$

13,722

$

11,449

19.9%

Earnings Per Share

Basic

$

0.34

$

0.31

9.7%

$

1.02

$

0.88

15.9%

Diluted

$

0.34

$

0.29

17.2%

$

1.00

$

0.84

19.0%

John Marshall Bancorp, Inc.

Loan, Deposit and Borrowing Detail (Unaudited)

(Dollar amounts in thousands)

September 30, 2020

December 31, 2019

September 30, 2019

Percentage Change

Loans

$ Amount

% of Total

$ Amount

% of Total

$ Amount

% of Total

Last 9 Mos

Last 12 Mos

Mortgage loans on real estate

Commercial

$

808,204

52.7

%

$

794,142

59.9

%

$

761,004

60.6

%

1.8

%

6.2

%

Construction and land development

237,195

15.4

%

252,079

19.0

%

246,561

19.6

%

-5.9

%

-3.8

%

Residential

262,049

17.1

%

202,512

15.3

%

176,661

14.0

%

29.4

%

48.3

%

Total mortgage loans on real estate

$

1,307,448

85.2

%

$

1,248,733

94.2

%

$

1,184,226

94.2

%

4.7

%

10.4

%

Commercial loans

225,865

14.7

%

76,096

5.8

%

71,416

5.7

%

196.8

%

216.3

%

Consumer loans

1,208

0.1

%

653

0.0

%

855

0.1

%

85.0

%

41.3

%

Total loans

$

1,534,521

100.0

%

$

1,325,482

100.0

%

$

1,256,497

100.0

%

15.8

%

22.1

%

Less: Allowance for loan losses

(14,441

)

(10,756

)

(10,396

)

Net deferred loan costs (fees)

(1,808

)

50

(620

)

Net loans

$

1,518,272

$

1,314,776

$

1,245,481

September 30, 2020

December 31, 2019

September 30, 2019

Percentage Change

Deposits

$ Amount

% of Total

$ Amount

% of Total

$ Amount

% of Total

Last 9 Mos

Last 12 Mos

Noninterest-bearing demand deposits

$

385,885

23.8

%

$

273,459

20.9

%

$

254,359

20.0

%

41.1

%

51.7

%

Interest-bearing demand deposits:

NOW accounts

101,792

6.3

%

60,835

4.7

%

66,015

5.2

%

67.3

%

54.2

%

Money market accounts

214,701

13.3

%

180,253

13.8

%

183,324

14.4

%

19.1

%

17.1

%

Savings accounts

60,418

3.7

%

29,208

2.2

%

26,198

2.0

%

106.9

%

130.6

%

Certificates of deposit

$250,000 or more

281,302

17.3

%

255,220

19.5

%

245,173

19.3

%

10.2

%

14.7

%

Less than $250,000

117,171

7.2

%

128,283

9.8

%

124,109

9.8

%

-8.7

%

-5.6

%

QwickRate® Certificates of deposit

29,781

1.8

%

18,030

1.4

%

17,851

1.4

%

65.2

%

66.8

%

ICS®

233,083

14.4

%

187,439

14.3

%

175,349

13.8

%

24.4

%

32.9

%

CDARS®

36,909

2.3

%

50,884

3.9

%

65,877

5.2

%

-27.5

%

-44.0

%

Brokered deposits

161,104

9.9

%

125,093

9.6

%

112,679

8.9

%

28.8

%

43.0

%

Total deposits

$

1,622,146

100.0

%

$

1,308,704

100.0

%

$

1,270,934

100.0

%

24.0

%

27.6

%

Borrowings

Federal funds purchased

$

- -

0.0

%

$

12,000

12.1

%

$

- -

0.0

%

N/M

N/M

Federal Home Loan Bank advances

22,000

47.1

%

62,000

62.9

%

47,000

65.6

%

-64.5

%

-53.2

%

Subordinated debt

24,667

52.9

%

24,630

25.0

%

24,618

34.4

%

0.2

%

0.2

%

Total borrowings

$

46,667

100.0

%

$

98,630

100.0

%

$

71,618

100.0

%

-52.7

%

-34.8

%

Total deposits and borrowings

$

1,668,813

$

1,407,334

$

1,342,552

18.6

%

24.3

%

Core customer funding sources (1)

$

1,431,261

85.8

%

$

1,165,581

82.8

%

$

1,140,404

85.0

%

22.8

%

25.5

%

Wholesale funding sources (2)

212,885

12.8

%

217,123

15.4

%

177,530

13.2

%

-2.0

%

19.9

%

Subordinated debt (3)

24,667

1.5

%

24,630

1.8

%

24,618

1.8

%

0.2

%

0.2

%

Total funding sources

$

1,668,813

100.0

%

$

1,407,334

100.0

%

$

1,342,552

100.0

%

18.6

%

24.3

%

(1) Includes ICS and CDARS(r), which are all reciprocal deposits maintained by customers.

(2) Consists of QwickRate(r) certificates of deposit, brokered deposits, federal funds purchased and Federal Home Loan Bank advances.

(3) Subordinated debt obligation qualifies as Tier 2 capital.

John Marshall Bancorp, Inc.

Average Balance Sheets, Interest and Rates (unaudited)

(Dollar amounts in thousands)

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Interest

Average

Interest

Average

Average

Income-

Yields

Average

Income-

Yields

Balance

Expense

/Rates

Balance

Expense

/Rates

Assets

Securities

$

135,242

$

794

2.34%

$

114,872

$

771

2.66%

Loans, net of unearned income

1,521,091

17,079

4.47%

1,248,779

16,463

5.23%

Interest-bearing deposits in other banks

102,984

34

0.13%

91,497

504

2.19%

Federal funds sold

- -

- -

0.00%

10

- -

0.00%

Total interest-earning assets

$

1,759,317

$

17,907

4.05%

$

1,455,158

$

17,738

4.84%

Other assets

37,594

41,135

Total assets

$

1,796,911

$

1,496,293

Liabilities & Shareholders' equity

Interest-bearing deposits

NOW accounts

$

213,608

$

240

0.45%

$

145,841

$

456

1.24%

Money market accounts

313,281

387

0.49%

281,700

1,101

1.55%

Savings accounts

56,379

74

0.52%

26,025

98

1.49%

Time deposits

584,229

2,351

1.60%

540,207

3,078

2.26%

Total interest-bearing deposits

$

1,167,497

$

3,052

1.04%

$

993,773

$

4,733

1.89%

Federal funds purchased

$

1

$

- -

0.00%

$

- -

$

- -

0.00%

Subordinated debt

24,659

372

6.00%

24,610

371

5.98%

Other borrowed funds

25,337

63

0.99%

47,418

224

1.87%

Total interest-bearing liabilities

$

1,217,494

$

3,487

1.14%

$

1,065,801

$

5,328

1.98%

Demand deposits

386,509

260,940

Other liabilities

12,827

13,755

Total liabilities

$

1,616,830

$

1,340,496

Shareholders' equity

180,081

155,797

Total liabilities and shareholders' equity

$

1,796,911

$

1,496,293

Interest rate spread

2.91%

2.86%

Net interest income and margin

$

14,420

3.26%

$

12,410

3.38%

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Interest

Average

Interest

Average

Average

Income-

Yields

Average

Income-

Yields

Balance

Expense

/Rates

Balance

Expense

/Rates

Assets

Securities

$

136,831

$

2,544

2.48%

$

111,397

$

2,258

2.71%

Loans, net of unearned income

1,436,699

50,869

4.73%

1,205,221

47,389

5.26%

Interest-bearing deposits in other banks

99,706

367

0.49%

88,223

1,546

2.34%

Federal funds sold

- -

- -

0.00%

72

1

1.86%

Total interest-earning assets

$

1,673,236

$

53,780

4.29%

$

1,404,913

$

51,194

4.87%

Other assets

37,581

38,891

Total assets

$

1,710,817

$

1,443,804

Liabilities & Shareholders' equity

Interest-bearing deposits

NOW accounts

$

185,124

$

867

0.63%

$

135,600

$

1,248

1.23%

Money market accounts

302,281

1,843

0.81%

277,172

3,173

1.53%

Savings accounts

42,151

265

0.84%

19,469

194

1.33%

Time deposits

586,637

8,234

1.87%

523,495

8,557

2.19%

Total interest-bearing deposits

$

1,116,193

$

11,209

1.34%

$

955,736

$

13,172

1.84%

Federal funds purchased

$

245

$

1

0.55%

$

99

$

2

2.70%

Subordinated debt

24,647

1,115

6.04%

24,598

1,115

6.06%

Other borrowed funds

35,157

335

1.27%

54,852

816

1.99%

Total interest-bearing liabilities

$

1,176,242

$

12,660

1.44%

$

1,035,285

$

15,105

1.95%

Demand deposits

348,572

247,396

Other liabilities

12,256

10,787

Total liabilities

$

1,537,070

$

1,293,468

Shareholders' equity

173,747

150,336

Total liabilities and shareholders' equity

$

1,710,817

$

1,443,804

Interest rate spread

2.85%

2.92%

Net interest income and margin

$

41,120

3.28%

$

36,089

3.43%

View source version on businesswire.com: https://www.businesswire.com/news/home/20201021005176/en/

Contacts

Chris Bergstrom
(703) 584-0840