John Marshall Bancorp, Inc. Reports First Quarter Results

RESTON, Va.--()--John Marshall Bancorp, Inc. (OTCQB: JMSB) (the “Company”) reported net income of $2.5 million for the three months ended March 31, 2017, an increase of $2.0 million, as compared to net income of $560 thousand for the three months ended March 31, 2016. Net income per diluted share was $0.23 per share during the first three months of 2017, compared to $0.05 per diluted share during the same period in 2016. As of March 31, 2017, the Company’s tangible book value per share was $11.89, up 8.2% compared to $10.99 as of March 31, 2016. As previously disclosed, the Company incurred a $1.9 million charge-off during the first quarter of 2016.

Return on average assets was 0.95% and return on average equity was 8.42% for the first quarter of 2017, compared to 0.24% and 2.03%, respectively, for the first quarter of 2016.

The Company’s capital ratios remain well above regulatory minimums for well capitalized banks. As of March 31, 2017, the Company’s total risk-based capital ratio was 12.3%, compared to 13.2% at March 31, 2016.

In March 2017, the formation of John Marshall Bancorp, Inc. as the holding company for John Marshall Bank (“the Bank”) was completed. As a result of the holding company formation, each share of common stock of the Bank was automatically converted into one share of Company common stock. Financial information as of or for any period prior to January 1, 2017 reflects the financial position and results of the Bank. The Company’s common stock will continue to trade on the OTCQB Marketplace under the symbol “JMSB”.

Balance Sheet Review

At March 31, 2017, total assets were $1.1 billion, an increase of $139.8 million, or 14.8% from total assets of $941.2 million at March 31, 2016. Gross loans increased $65.4 million, or 7.7%, to $920.4 million at March 31, 2017, compared to $896.0 million at December 31, 2016 and increased $126.4 million, or 15.9% year-over-year, from March 31, 2016 to March 31, 2017. Year-over-year net loan growth, from March 31, 2016 to March 31, 2017, was $125.5 million, or 16.0%. The Company’s investment portfolio was $93.9 million at March 31, 2017, compared to $100.3 million at December 31, 2016 and $92.1 million at March 31, 2016. As of March 31, 2017, the Company held $41.9 million of its investment portfolio as held-to-maturity, and $44.1 million as available-for-sale.

The Company purchased $18.0 million of bank owned life insurance during the first quarter of 2016. The cash values of the policies are estimates using information provided by insurance carriers. These policies are carried at their cash surrender value, which approximates their fair value. At March 31, 2017, the estimated fair value was $18.7 million, compared to $18.5 million at December 31, 2016 and $18.1 million at March 31, 2016.

Total deposits were $836.4 million at March 31, 2017, $832.9 million at December 31, 2016 and $738.1 million at March 31, 2016. Year-over-year deposit growth, from March 31, 2016 to March 31, 2017, was $98.3 million, or 13.3%. Total borrowings, consisting of Federal funds purchased, Federal Home Loan Bank advances and customer repurchase agreements, were $116.3 million at March 31, 2017, a decrease of $1.9 million, or 1.6%, compared to $118.2 million at December 31, 2016. Year-over-year, from March 31, 2016 to March 31, 2017, total borrowings increased $23.7 million, or 27.0%.

During the first quarter of 2017, QwickRate certificates of deposits decreased $897 thousand from $22.8 million at December 31, 2016 to $21.9 million at March 31, 2017 and decreased by $632 thousand year-over-year from March 31, 2016 to March 31, 2017. CDARs increased $7.1 million year-over-year. Brokered certificates of deposit increased by $1.6 million from $46.9 million at December 31, 2016 to $48.5 million at March 31, 2017. Year-over-year, brokered certificates increased $27.0 million from March 31, 2016 to March 31, 2017. Customer repurchase agreements decreased by $4.9 million during the first quarter of 2017 and decreased $6.3 million year-over-year from March 31, 2016 to March 31, 2017. During the first quarter of 2017, the Company partnered with Promontory to offer insured cash sweep products (“ICS”). As of March 31, 2017, the Company had $20.9 million in ICS deposits. During the first quarter of 2017, Federal Home Loan Bank advances decreased $2.0 million or 1.9% from December 31, 2016 to March 31, 2017. Year-over-year Federal Home Loan Bank advances increased $30.0 million or 41.7%. Core customer funding sources decreased by $2.1 million, or 0.3%, from December 31, 2016 to March 31, 2017. Year-over-year, core customer funding sources increased by $65.6 million, or 9.2%, from March 31, 2016 to March 31, 2017.

Total shareholders’ equity was $121.7 million at March 31, 2017, an increase of $2.9 million, or 2.4%, compared to $118.8 million at December 31, 2016 and an increase of $11.5 million, or 10.4%, compared to $110.2 million at March 31, 2016. Of the year-over-year increase in shareholders’ equity, $10.3 million is related to net income retained during the past twelve months. Total common shares outstanding increased from 10,030,599 at March 31, 2016 to 10,235,311, including 67,170 unvested shares, at March 31, 2017.

Income Statement Review

Net interest income

Net interest income, the Company’s primary source of revenue, was $9.6 million for the three months ended March 31, 2017, up 11.2% from $8.6 million for the three months ended March 31, 2016. The net interest margin was 3.74% during the first quarter of 2017, compared to 3.80% during the first quarter of 2016. The decline in the net interest margin year-over-year is attributed to a decline in the Company’s yield on earning assets to 4.44% during the first quarter of 2017 from 4.46% during the first quarter of 2016, which is substantially the result of an 11 basis point year-over-year decline in loan yields. In addition, the cost of funds increased 6 basis points year-over-year from 0.88% at March 31, 2016, compared to 0.94% during the first quarter of 2017. The Federal Reserve increased rates by 25 basis points in December 2016 and March 2017, which is contributing to the higher cost for brokered deposits and other borrowed funds in the first quarter of 2017.

Despite the decline in the net interest margin over the past year, net interest income increased by 11.2% during the first quarter of 2017, compared to the first quarter of 2016, resulting primarily from a $126.4 million, or 13.8%, increase in average earning assets during the first quarter of 2017, compared to the first quarter of 2016.

Provision for loan losses

The Company recognized a provision for loan losses of $265 thousand during the first three months of 2017, compared to a provision of $2.7 million during the first three months of 2016. The Company reported $7 thousand in net recoveries during the first quarter of 2017 and $1.9 million in net loan charge-offs during the first quarter of 2016.

Noninterest income

The Company’s noninterest income consists primarily of bank owned life insurance income and service charges on deposit accounts. Loan fees are included in interest income on the loan portfolio and not reported as noninterest income.

For the three months ended March 31, 2017, the Company reported total noninterest income of $348 thousand compared to $195 thousand during the first quarter of 2016. The year-over-year increase was primarily attributable to the increase in income related to bank owned life insurance that was purchased in the first quarter of 2016 and a $76 thousand gain on sale of a security in the first quarter of 2017.

Noninterest expense

The largest component of the Company’s noninterest expense is employee salaries and benefits. Salary and benefits expense increased by 19.4%, to $3.6 million, during the first quarter of 2017 compared to $3.0 million during the first quarter of 2016. All other operating expenses increased by 3.6%, or $79 thousand, to $2.3 million, during the first quarter of 2017, compared to $2.2 million during the first quarter of 2016.

The increase in salary and benefits is related to additional staff needed to support the growth of the Company. The increase in other operating expenses was mostly related to one-time expenses related to the formation of the Holding Company in March 2017 as well as higher FDIC insurance and franchise tax related to growth.

Asset Quality Review

As of March 31, 2017, non-performing assets were 0.31% of total assets, down from 0.55% at March 31, 2016. The Company’s allowance for loan losses covered non-performing loans by 2.5 times as of March 31, 2017, compared to 1.5 times as of March 31, 2016. In the first quarter of 2017, eight commercial loans relating to one customer relationship totaling $3.3 million were put on non-accrual. These loans are secured by real estate and a specific reserve of $250 thousand was recorded. Included in the first quarter of 2016 there were loans totaling $2.2 million to one borrower which were on non-accrual. Of the $2.2 million, $310 thousand was charged-off and the remaining balance was paid-off after the first quarter of 2016.

As of March 31, 2017, there were no loans 30-89 days past due and still accruing interest. As of March 31, 2016, there were $119 thousand in loans 30-89 days past due and still accruing interest.

Troubled debt restructurings were $504 thousand at March 31, 2017, a decrease of $967 thousand, or 65.7%, from $1.5 million at March 31, 2016. All troubled debt restructurings were performing in accordance with modified terms as of March 31, 2017. There was no other real estate owned as of March 31, 2017 and 2016.

John Marshall Bancorp, Inc. is the bank holding company for John Marshall Bank. John Marshall Bank is headquartered in Reston, Virginia and has five full-service branches located in Reston, Leesburg, Arlington, Alexandria and Rockville. The Bank also has a limited-service commercial branch located in Washington, DC and a loan production office located in Tysons Corner, VA. Further information on the Bank can be obtained by visiting its website at www.johnmarshallbank.com.

This press release contains forward-looking statements within the meaning of the Securities and Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as “may,” “will,” “anticipates,” “believes,” “expects,” “plans,” “estimates,” “potential,” “continue,” “should,” and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company’s past results are not necessarily indicative of future performance.

         
John Marshall Bancorp, Inc.
 
Consolidated Balance Sheets
(In thousands)
 
% Change
March 31, December 31, March 31, Last Three Year Over
2017 2016 2016 Months Year
Assets (Unaudited) (Unaudited) (Unaudited)
 
Cash and due from banks $ 5,266 $ 4,898 $ 5,306 7.5% -0.8%
Federal funds sold 52 60 - - -13.3% N/M
Interest-bearing deposits in banks 37,309 49,717 27,154 -25.0% 37.4%
Securities available-for-sale, at fair value 44,068 48,312 37,774 -8.8% 16.7%

Securities held-to-maturity, fair value of $41,997 at 3/31/17, $44,067 at 12/31/16 and $48,660 at 3/31/16

41,939 44,073 47,943 -4.8% -12.5%
Restricted securities, at cost 7,888 7,873 6,380 0.2% 23.6%

Loans, net of allowance for loan losses of $8,474 at 3/31/17; $8,202 at 12/31/16 and $7,929 at 3/31/16

910,204 886,220 784,681 2.7% 16.0%
Bank premises and equipment, net 2,592 2,471 2,736 4.9% -5.3%
Accrued interest receivable 2,778 2,988 2,388 -7.0% 16.3%
Bank owned life insurance 18,680 18,540 18,054 0.8% 3.5%
Other assets   10,220     10,205     8,829 0.1% 15.8%
 
Total assets $ 1,080,996   $ 1,075,357   $ 941,245 0.5% 14.8%
 
Liabilities and Shareholders' Equity
 
Liabilities
Deposits:
Non-interest bearing demand deposits $ 182,371 $ 195,065 $ 129,760 -6.5% 40.5%
Interest bearing demand deposits 225,736 211,495 236,083 6.7% -4.4%
Savings deposits 7,516 6,856 12,077 9.6% -37.8%
Time deposits   420,745     419,449     360,146 0.3% 16.8%
Total deposits 836,368 832,865 738,066 0.4% 13.3%
Federal funds purchased 5,000 - - - - N/M N/M
Repurchase agreements 9,293 14,206 15,638 -34.6% -40.6%
Federal Home Loan Bank advances 102,000 104,000 72,000 -1.9% 41.7%
Accrued interest payable 235 220 132 6.8% 78.0%
Other liabilities   6,407     5,271     5,222 21.6% 22.7%
Total liabilities   959,303     956,562     831,058 0.3% 15.4%
 
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 at 3/31/17 and par value $5 per share at 12/31/16 and 3/31/16; authorized 20,000,000 shares; issued and outstanding, 10,235,311 shares at 3/31/17, including 67,170 unvested shares, 10,137,149 at 12/31/16, and 10,030,599 at 3/31/16

102 50,686 50,153 N/M N/M
Additional paid-in capital 83,134 32,112 31,443 N/M N/M
Retained earnings 38,965 36,454 28,713 6.9% 35.7%
Accumulated other comprehensive loss   (508 )   (457 )   (122 ) -11.2% -316.4%
 
Total shareholders' equity   121,693     118,795     110,187 2.4% 10.4%
 
Total liabilities and shareholders' equity $ 1,080,996   $ 1,075,357   $ 941,245 0.5% 14.8%
 
     
John Marshall Bancorp, Inc
 
Consolidated Statements of Income
For the Three Months Ended March 31, 2017 and 2016
(Dollar amounts in thousands, except per share data)
 
Three Months Ended
March 31,
2017 2016 % Change
(Unaudited) (Unaudited)
Interest and Dividend Income
Interest and fees on loans $ 10,812 $ 9,659 11.9%
Interest on investment securities, taxable 361 322 12.1%
Interest on investment securities, tax-exempt 52 33 57.6%
Dividends 98 79 24.1%
Interest on deposits in banks   79   53 49.1%
Total interest and dividend income   11,402   10,146 12.4%
 
Interest Expense
Deposits 1,474 1,318 11.8%
Federal Home Loan Bank advances 301 168 79.2%
Other short-term borrowings   12   15 -20.0%
Total interest expense   1,787   1,501 19.1%
 
Net interest income 9,615 8,645 11.2%
 
Provision for loan losses   265   2,735 -90.3%
 
Net interest income after provision for loan losses   9,350   5,910 58.2%
 
Noninterest Income
Service charges on deposit accounts 97 122 -20.5%
Bank owned life insurance 140 54 159.3%
Other service charges and fees 24 19 26.3%
Gain on sale of securities available-for-sale 76 - - N/M
Gain on sale of fixed assets 1 - - N/M
Other operating income   10   - - N/M
Total noninterest income   348   195 78.5%
 
Noninterest Expenses
Salaries and employee benefits 3,636 3,044 19.4%
Occupancy expense of premises 435 419 3.8%
Furniture and equipment expenses 277 332 -16.6%
Other operating expenses   1,582   1,464 8.1%
Total noninterest expenses   5,930   5,259 12.8%
 
Income before income taxes 3,768 846 345.4%
 
Income tax expense   1,257   286 339.5%
 
Net income $ 2,511 $ 560 348.4%
 
Earnings Per Share
Basic $ 0.25 $ 0.06 316.7%
Diluted $ 0.23 $ 0.05 360.0%
 
               
John Marshall Bancorp, Inc
 
Loan, Deposit and Borrowing Detail (Unaudited)
(Dollar amounts in thousands)
 
March 31, 2017 December 31, 2016 March 31, 2016 Percentage Change
Loans $ Amount % of Total $ Amount % of Total $ Amount % of Total Last 3 Mos Last 12 Mos

Mortgage loans on real estate

Commercial

$ 544,473 59.2 % $ 519,857 58.0 % $ 457,784 57.6 % 4.7 % 18.9 %
Construction and land development 177,439 19.3 % 180,318 20.1 % 157,102 19.8 % -1.6 % 12.9 %
Residential   118,256   12.8 %   107,534   12.0 %   95,136   12.0 % 10.0 % 24.3 %
Total mortgage loans on real estate $ 840,168 91.3 % $ 807,709 90.1 % $ 710,022 89.4 % 4.0 % 18.3 %
Commercial loans 78,565 8.5 % 86,498 9.7 % 82,709 10.4 % -9.2 % -5.0 %
Consumer loans   1,665   0.2 %   1,820   0.2 %   1,259   0.2 % -8.5 % 32.2 %
Total loans $ 920,398 100.0 % $ 896,027 100.0 % $ 793,990 100.0 % 2.7 % 15.9 %
Less: Allowance for loan losses (8,474 ) (8,202 ) (7,929 )
Net deferred loan fees   (1,720 )   (1,605 )   (1,380 )
Net loans $ 910,204   $ 886,220   $ 784,681  
 
 
March 31, 2017 December 31, 2016 March 31, 2016 Percentage Change
Deposits $ Amount % of Total $ Amount % of Total $ Amount % of Total Last 3 Mos Last 12 Mos
Noninterest-bearing demand deposits $ 182,371 21.8 % $ 195,065 23.4 % $ 129,760 17.6 % -6.5 % 40.5 %
Interest-bearing demand deposits:
NOW accounts 17,124 2.0 % 12,739 1.5 % 20,436 2.8 % 34.4 % -16.2 %
Money market accounts 176,677 21.1 % 187,748 22.6 % 215,647 29.2 % -5.9 % -18.1 %
Savings accounts 7,516 0.9 % 6,856 0.8 % 12,077 1.6 % 9.6 % -37.8 %
Certificates of deposit
$250,000 or more 188,712 22.6 % 187,568 22.5 % 156,109 30.1 % 0.6 % 20.9 %
Less than $250,000 102,753 12.3 % 101,368 12.2 % 97,175 4.2 % 1.4 % 5.7 %
QwickRate® Certificates of deposit 21,947 2.6 % 22,844 2.8 % 22,579 3.1 % -3.9 % -2.8 %
ICS® 20,922 2.5 % - 0.0 % - 0.0 % N/M N/M
CDARS® 69,877 8.4 % 71,799 8.6 % 62,766 8.5 % -2.7 % 11.3 %
Brokered deposits   48,469   5.8 %   46,878   5.6 %   21,517   2.9 % 3.4 % 125.3 %
Total deposits $ 836,368   100.0 % $ 832,865   100.0 % $ 738,066   100.0 % 0.4 % 13.3 %
 
Borrowings
Federal funds purchased $ 5,000 4.3 % $ - 0.0 % $ - 0.0 % N/M N/M
Customer repurchase agreements 9,293 8.0 % 14,206 12.0 % 15,638 17.8 % -34.6 % -40.6 %
Federal Home Loan Bank advances   102,000   87.7 %   104,000   88.0 %   72,000   82.2 % -1.9 % 41.7 %
Total borrowings $ 116,293   100.0 % $ 118,206   100.0 % $ 87,638   100.0 % -1.6 % 32.7 %
 
Total deposits and borrowings $ 952,661   $ 951,071   $ 825,704   0.2 % 15.4 %
 
Core customer funding sources (1) $ 775,245 81.4 % $ 777,349 81.7 % $ 709,608 85.9 % -0.3 % 9.2 %
Wholesale funding sources (2)   177,416   18.6 %   173,722   18.3 %   116,096   14.1 % 2.1 % 52.8 %
Total funding sources $ 952,661   100.0 % $ 951,071   100.0 % $ 825,704   100.0 % 0.2 % 15.4 %
 
(1)   Includes ICS and CDARS(r), which are all reciprocal deposits maintained by customers, and repurchase agreements, which represent sweep accounts tied to customer operating accounts.
(2) Consists of QwickRate(r) certificates of deposit, brokered deposits,Federal Home Loan Bank advances and Federal funds purchased.
 
             
John Marshall Bancorp, Inc.
Average Balance Sheets, Interest and Rates (unaudited)
(Dollar amounts in thousands)
 
Three Months Ended March 31, 2017 Three Months Ended March 31, 2016
Interest Average Interest Average
Average Income- Yields Average Income- Yields
Balance Expense /Rates Balance Expense /Rates
Assets
Securities $ 95,883 $ 511 2.16 % $ 87,230 $ 434 2.00 %
Loans, net of unearned income 907,948 10,812 4.83 % 786,727 9,659 4.94 %
Interest-bearing deposits in other banks 37,799 79 0.85 % 41,340 53 0.52 %
Federal funds sold   56   - - 0.00 %   - -   - - 0.00 %
Total interest-earning assets $ 1,041,686 $ 11,402 4.44 % $ 915,297 $ 10,146 4.46 %
Other assets   31,939   19,217
Total assets $ 1,073,625 $ 934,514
Liabilities & Shareholders' equity
Interest-bearing deposits
NOW accounts $ 17,552 $ 15 0.35 % $ 21,301 $ 16 0.30 %
Money market accounts 207,961 255 0.50 % 211,399 282 0.54 %
Savings accounts 7,239 4 0.22 % 14,915 20 0.54 %
Time deposits   424,357   1,200 1.15 %   357,151   1,000 1.13 %
Total interest-bearing deposits $ 657,109 $ 1,474 0.91 % $ 604,766 $ 1,318 0.88 %

Securities sold under agreement to repurchase and federal funds purchased

$ 12,876 $ 12 0.38 % $ 13,955 $ 15 0.43 %
Other borrowed funds   103,267   301 1.18 %   67,603   168 1.00 %
Total interest-bearing liabilities $ 773,252 $ 1,787 0.94 % $ 686,324 $ 1,501 0.88 %
Demand deposits and other liabilities   179,405   137,066
Total liabilities $ 952,657 $ 823,390
Shareholders' equity   120,968   111,124
Total liabilities and shareholders' equity $ 1,073,625 $ 934,514
Interest rate spread 3.50 % 3.58 %
Net interest income and margin $ 9,615 3.74 % $ 8,645 3.80 %
 
       
John Marshall Bancorp, Inc
Financial Highlights (Unaudited)
(Dollar amounts in thousands, except per share data)
 
At or For the Three Months Ended
March 31,
2017 2016
Per share Data and Shares Outstanding
Earnings per share - basic $ 0.25 $ 0.06
Earnings per share - diluted $ 0.23 $ 0.05
Tangible book value per share $ 11.89 $ 10.99
Weighted average common shares (basic) 10,205,154 10,026,765
Weighted average common shares (diluted) 10,806,877 10,544,156
Common shares outstanding at end of period(1) 10,235,311 10,030,599
 
Performance Ratios
Return on average assets (annualized) 0.95% 0.24%
Return on average equity (annualized) 8.42% 2.03%
Yield on earning assets (annualized) 4.44% 4.46%
Cost of interest bearing liabilities (annualized) 0.94% 0.88%
Net interest spread 3.50% 3.58%
Net interest margin 3.74% 3.80%
Noninterest income as a percentage of average assets (annualized) 0.13% 0.08%
Noninterest expense to average assets (annualized) 2.24% 2.26%
Efficiency ratio 59.5% 59.5%
 
Asset Quality
Loans 30-89 days past due and accruing interest $ - $ 119
Non-accrual loans $ 3,398 $ 5,154
Other real estate owned $ -

$

-
Non-performing assets (2) $ 3,398 $ 5,154
Non-performing assets to total assets 0.31% 0.55%
Allowance for loan losses to total loans 0.92% 1.00%
Allowance for loan losses to non-performing loans 2.5 1.5
Net loan chargeoffs (recoveries) $ (7) $ 1,935
Net charge-offs (recoveries) to average loans (annualized) 0.00% 0.99%
Troubled debt restructurings (total) $ 504 $ 1,471
Performing in accordance with modified terms $ 504 $ 1,471
Not performing in accordance with modified terms $ - $ -
 
Regulatory Capital Ratios
Total risk-based capital ratio 12.3% 13.2%
Tier 1 risk-based capital ratio 11.5% 12.3%
Leverage ratio 11.4% 11.8%
Common equity tier 1 ratio 11.5% 12.3%
 
Other Information
Effective income tax rate 33.4% 33.8%
Tangible equity / tangible assets 11.3% 11.7%
Average tangible equity / average tangible assets 11.3% 11.9%
Number of full time equivalent employees 117 108
# Full service branch offices 5 5
# Loan production or limited service branch offices 2 1
 
(1) Includes 67,170 unvested shares per balance sheet.
(2) 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 ("TDRs") which were accruing interest at the date indicated.
 

Contacts

John Marshall Bancorp, Inc.
John R. Maxwell, 703-584-0840

Contacts

John Marshall Bancorp, Inc.
John R. Maxwell, 703-584-0840