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John Marshall Bank Reports First Quarter Results

April 30, 2014

RESTON, Va.--(BUSINESS WIRE)-- John Marshall Bank (OTCQB: JMSB) (the “Bank”) reported net income of $1.9 million for the three months ended March 31, 2014, an increase $233 thousand, or 14.3%, as compared to net income of $1.6 million reported for the three months ended March 31, 2013. Net income per diluted share declined 21.8% to $0.21 per share during the first three months of 2014, compared $0.27 per share during the same period in 2013. The decline in net income per diluted share is primarily attributed to the dilutive effect of the Bank’s November 2013 common stock offering of 2.4 million shares at $13.50 per share, the proceeds of which have not yet been fully deployed in loans. As of March 31, 2014, the Bank’s tangible book value per share was $11.22, up 20.5% compared to $9.31 as of March 31, 2013.

The Bank’s first quarter results produced an annualized return of 1.12% on average assets and 8.16% on average equity, compared to 1.17% and 12.14%, respectively, for the same period a year ago.

The Bank’s capital ratios remain well above regulatory minimums for well capitalized banks. As of March 31, 2014, the Bank’s total risk-based capital ratio was 15.5%, compared 15.7% at December 31, 2013 and 10.8% at March 31, 2013.

Balance Sheet Review

At March 31, 2014, total assets were $685.9 million, an increase of $23.4 million, or 3.5%, from total assets of $662.5 million at December 31, 2013, and an increase of $113.5 million, or 19.8% from total assets of $572.5 million at March 31, 2013. Gross loans increased $18.1 million, or 3.1%, to $591.5 million at March 31, 2014, compared to $573.4 million at December 31, 2013. Year-over-year loan growth, from March 31, 2013 to March 31, 2014, was $73.2 million, or 14.1%. The Bank’s investment portfolio increased to $57.8 million at March 31, 2014, compared to $55.2 million at December 31, 2013, and $40.9 million at March 31, 2013.

Total deposits were $541.7 million at March 31, 2014, representing an increase of 5.2%, or $26.7 million, compared to December 31, 2013. Year-over-year deposit growth, from March 31, 2013 to March 31, 2014, was $77.1 million, or 16.6% Total borrowings, consisting of Federal Home Loan Bank advances and customer repurchase agreements, were $46.9 million at March 31, 2014, a decrease of 10.3%, or $5.4 million, compared to December 31, 2013. Year-over-year, from March 31, 2013 to March 31, 2014, total borrowings declined by $3.8 million, or 7.5%.

During the first quarter certificates of deposit obtained through a deposit listing service provided by QwickRate, Inc. declined by $2.9 million. Year-over-year, QwickRate certificates of deposit declined by $11.5 million. Brokered certificates of deposit declined by $1.2 million during the first quarter and Federal Home Loan Bank advances declined by $4 million. Core customer funding sources increased by $29.5 million during the first quarter, and by $91.5 million, or 21.4%, compared to March 31, 2013.

Total shareholders’ equity was $93.0 million at March 31, 2014, an increase of $2.3 million, or 2.5%%, compared to December 31, 2013. Year-over-year, total shareholders’ equity increased by $38.2 million, or 69.7%, compared to March 31, 3013. The increase in shareholders’ equity over the past year is attributed to net income retained during the period, net proceeds of $30.9 million from the Bank’s November 2013 stock offering, and net proceeds from the exercise of 4,050 employee stock options during the past twelve months. Total common shares outstanding increased from 5,884,786 at March 31, 2013 to 8,288,836 at March 31, 2014.

Income Statement Review

Net interest income

Net interest income, the Bank’s primary source of revenue, was $7.1 million for the three months ended March 31, 2014, up 11.8% from $6.3 million for the three months ended March 31, 2013. The net interest margin was 4.32% during the first quarter of 2014, compared to 4.31% during the fourth quarter of 2013 and 4.61% during the first quarter of 2013. The decline in the net interest margin from year-to-year is primarily attributed to a decline in the Bank’s yield on earning assets to 4.94% during the first quarter of 2014 from 5.29% during the first quarter of 2013, which is substantially the result of an 18 basis point year-to-year decline in loan yields

Notwithstanding the decline in the net interest margin over the past year, net interest income increased by 11.8% during the first quarter of 2014, compared to the first quarter of 2013, resulting primarily from a $107.7 million, or 19.4%, increase in average earning assets during the first quarter of 2014, compared to the first quarter of 2013.

Provision for loan losses

The Bank recognized a provision for loan losses of $192 thousand during the first three months of 2014, compared to a provision of $211 thousand during the fourth quarter of 2013, and $250 thousand during the first quarter of 2013. The decline in the provision for loan losses was due primarily to a decline in impaired loans, and a resulting decline in the allocation of reserves to cover potential losses on impaired loans. The Bank reported no net loan charge-offs during either the first quarter of 2014 or the first quarter of 2013.

Noninterest income

The Bank’s primary source of noninterest income is 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, 2014, the Bank reported total noninterest income of $99 thousand, compared to $104 thousand during the fourth quarter of 2013 and $94 thousand during the first quarter of 2013.

Noninterest expense

The largest component of the Bank’s noninterest expense is employee salaries and benefits. Salary and benefits expense increased by 12.1%, to $2.4 million, during the first quarter of 2014 compared to $2.1 million during the first quarter of 2013. All other operating expenses increased by 5.1%, or $83 thousand, to $1.7 million, during the first quarter of 2014, compared to $1.6 million during the first quarter of 2013.

The increase in salary and benefits expense was due to additional staffing required to support the Bank’s growth and branch expansion. The increase in other operating expenses was due primarily to increased occupancy and equipment expenses associated with our Alexandria regional office, which opened in December 2013, and increased data processing and technology related expenses associated with a growing customer base.

Asset Quality Review

Asset quality remains exceptionally strong and is significantly better than the Bank’s peers. As of March 31, 2014, non-performing assets were 0.22% of total assets, compared to .04% at December 31, 2013 and .09% at March 31, 2013. The Bank’s allowance for loan losses covered non-performing loans by 3.9 times as of March 31, 2014, compared to 21.4 times at December 31, 2013 and 10.7 times at March 31, 2013.

Non-performing loans increased from $268 thousand at December 31, 2013 to $1.5 million at March 31, 2014. This was due to a $1.3 million commercial real estate loan that matured and is currently in the process of foreclosure. The loan is well secured by the underlying real estate collateral and no loss is expected. As of March 31, 2014 the Bank had total troubled debt restructurings of $1.9 million, compared to $1.8 million at December 31, 2013 and $2.0 million at March 31, 2013. All but one restructured loan for $121 thousand was performing in accordance with modified terms as of March 31, 2014.

John Marshall Bank is headquartered in Reston, Virginia and has six full-service branches located in Reston, Falls Church, Leesburg, Arlington, Alexandria and Rockville. The Bank also has a limited-service commercial branch located in Washington, DC. 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 Bank 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 Bank’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 Bank’s past results are not necessarily indicative of future performance.

 
John Marshall Bank
 
Balance Sheets
(In thousands, except share and per share data)
         
% Change
March 31December 31March 31Last ThreeYear Over
201420132013MonthsYear
Assets(Unaudited)(Unaudited)
 
Cash and due from banks $ 8,888 $ 5,978 $ 3,812 48.7 % 133.2 %
Interest-bearing deposits in banks 23,789 23,198 8,748 2.5 % 171.9 %
Securities available-for-sale, at fair value 24,611 48,743 33,302 -49.5 % -26.1 %

Securities held-to-maturity, fair value of $28,537 at 3/31/2014, $2,625 at 12/31/2013 and $3,551 at 3/31/2013

 28,422 2,466 3,287 1052.6 % 764.7 %
Restricted securities, at cost 4,722 4,005 4,265 17.9 % 10.7 %

Loans, net of allowance for loan losses of $5,940 at 3/31/2014; $5,748 at 12/31/2013 and $5,301 at 3/31/2013

 584,498 566,729 512,153 3.1 % 14.1 %
Bank premises and equipment, net 2,972 3,112 2,432 -4.5 % 22.2 %
Accrued interest receivable 1,828 1,894 1,713 -3.5 % 6.7 %
Other assets   6,218     6,415     2,783 -3.1 % 123.4 %
 
Total assets $ 685,948   $ 662,540   $ 572,495 3.5 % 19.8 %
 
Liabilities and Shareholders' Equity
 
Liabilities
Deposits:
Non-interest bearing demand deposits $ 94,499 $ 84,350 $ 80,882 12.0 % 16.8 %
Interest bearing demand deposits 161,465 145,354 116,682 11.1 % 38.4 %
Savings deposits 4,101 5,073 7,557 -19.2 % -45.7 %
Time deposits   281,594     280,149     259,488 0.5 % 8.5 %
Total deposits 541,659 514,926 464,609 5.2 % 16.6 %
Repurchase agreements 11,931 13,305 6,728 -10.3 % 77.3 %
Federal Home Loan Bank advances 35,000 39,000 44,000 -10.3 % -20.5 %
Accrued interest payable 135 132 131 2.3 % 3.1 %
Other liabilities   4,250     4,509     2,243 -5.7 % 89.5 %
Total liabilities   592,975     571,872     517,711 3.7 % 14.5 %
 
Shareholders' Equity

Common stock, voting, par value $5 per share; authorized 10,000,000 shares; issued and outstanding, 8,288,836 shares at 3/31/2014, 8,286,336 at 12/31/2013, and 5,884,786 at 3/31/2013

 41,444 41,432 23,539 0.0 % 76.1 %
Additional paid-in capital 38,748 38,605 25,181 0.4 % 53.9 %
Retained earnings 13,126 11,269 5,805 16.5 % 126.1 %
Accumulated other comprehensive income (loss)   (345 )   (638 )   259 45.9 % -233.2 %
 
Total shareholders' equity   92,973     90,668     54,784 2.5 % 69.7 %
 
Total liabilities and shareholders' equity $ 685,948   $ 662,540   $ 572,495 3.5 % 19.8 %
 
     
John Marshall Bank
 
Statements of Income
For the Three Months Ended March 31, 2014 and 2013
(Dollar amounts in thousands, except per share data)
 
Three Months Ended
March 31
20142013% Change
(Unaudited)(Unaudited)
Interest and Dividend Income
Interest and fees on loans $ 7,739 $ 7,046 9.8 %
Interest on investment securities, taxable 261 136 91.9 %
Interest on investment securities, tax-exempt 21 31 -32.3 %
Dividends 42 34 23.5 %
Interest on deposits in banks   18   5 260.0 %
Total interest and dividend income   8,081   7,252 11.4 %
 
Interest Expense
Deposits 896 817 9.7 %
Federal Home Loan Bank advances 100 105 -4.8 %
Other short-term borrowings   14   7 100.0 %
Total interest expense   1,010   929 8.7 %
 
Net interest income 7,071 6,323 11.8 %
 
Provision for loan losses   192   250 -23.2 %
 
Net interest income after provision for loan losses   6,879   6,073 13.3 %
 
Noninterest Income
Service charges on deposit accounts 84 75 12.0 %
Other service charges and fees 15 11 36.4 %
Other operating income   - -   8 N/M  
Total noninterest income   99   94 5.3 %
 
Noninterest Expenses
Salaries and employee benefits 2,380 2,123 12.1 %
Occupancy expense of premises 385 353 9.1 %
Furniture and equipment expenses 229 199 15.1 %
Other operating expenses   1,081   1,060 2.0 %
Total noninterest expenses   4,075   3,735 9.1 %
 
Income before income taxes 2,903 2,432 19.4 %
 
Income tax expense   1,045

 

  807 29.5 %
 
Net income $ 1,858 $ 1,625 14.3 %
 
Earnings Per Share
Basic $ 0.22 $ 0.28 -21.4 %
Diluted $ 0.21 $ 0.27 -22.2 %
 
 
John Marshall Bank
 
Loan, Deposit and Borrowing Detail
(Dollar amounts in thousands)
               
March 31, 2014December 31, 2013March 31, 2013Percentage Change
Loans$ Amount% of Total$ Amount% of Total$ Amount% of TotalLast 3 MosLast 12 Mos
Mortgage loans on real estate
Commercial $ 383,418 64.8 % $ 366,276 63.9 % $ 350,876 67.7 % 4.7 % 9.3 %
Construction and land development 81,723 13.8 % 82,286 14.3 % 55,813 10.8 % -0.7 % 46.4 %
Residential   22,427   3.8 %   19,515   3.4 %   20,181   3.9 % 14.9 % 11.1 %
Total mortgage loans on real estate $ 487,568 82.4 % $ 468,077 81.6 % $ 426,870 82.4 % 4.2 % 14.2 %
Commercial loans 102,725 17.4 % 104,032 18.1 % 90,325 17.4 % -1.3 % 13.7 %
Consumer loans   1,195   0.2 %   1,325   0.2 %   1,101   0.2 % -9.8 % 8.5 %
Total loans $ 591,488 100.0 % $ 573,434 100.0 % $ 518,296 100.0 % 3.1 % 14.1 %
Less: Allowance for loan losses (5,940 ) (5,748 ) (5,301 )
Net deferred loan fees   (1,050 )   (957 )   (842 )
Net loans $ 584,498   $ 566,729   $ 512,153  
 
 
March 31, 2014December 31, 2013March 31, 2013Percentage Change
Deposits$ Amount% of Total$ Amount% of Total$ Amount% of TotalLast 3 MosLast 12 Mos
Noninterest-bearing demand deposits $ 94,499 17.4 % $ 84,350 16.4 % $ 80,882 17.4 % 12.0 % 16.8 %
Interest-bearing demand deposits:
NOW accounts 8,905 1.6 % 10,903 2.1 % 7,557 1.6 % -18.3 % 17.8 %
Money market accounts 152,560 28.2 % 134,451 26.1 % 112,781 24.3 % 13.5 % 35.3 %
Savings accounts 4,101 0.8 % 5,073 1.0 % 3,902 0.8 % -19.2 % 5.1 %
Certificates of deposit
$100,000 or more 151,502 28.0 % 140,934 27.4 % 124,837 26.9 % 7.5 % 21.4 %
Less than $100,000 28,804 5.3 % 28,252 5.5 % 28,449 6.1 % 2.0 % 1.2 %
QwickRate® Certificates of deposit 17,886 3.3 % 20,761 4.0 % 29,363 6.3 % -13.8 % -39.1 %
CDARS® 67,135 12.4 % 72,690 14.1 % 62,844 13.5 % -7.6 % 6.8 %
Brokered deposits   16,267   3.0 %   17,512   3.4 %   13,994   3.0 % -7.1 % 16.2 %
Total deposits $ 541,659   100.0 % $ 514,926   100.0 % $ 464,609   100.0 % 5.2 % 16.6 %
 
Borrowings
Customer repurchase agreements $ 11,931 25.4 % $ 13,305 25.4 % $ 6,728 13.3 % -10.3 % 77.3 %
Federal Home Loan Bank advances   35,000   74.6 %   39,000   74.6 %   44,000   86.7 % -10.3 % -20.5 %
Total borrowings $ 46,931   100.0 % $ 52,305   100.0 % $ 50,728   100.0 % -10.3 % -7.5 %
 
Total deposits and borrowings $ 588,590   $ 567,231   $ 515,337   3.8 % 14.2 %
 
Core customer funding sources (1) $ 519,437 88.3 % $ 489,958 86.4 % $ 427,980 83.0 % 6.0 % 21.4 %
Wholesale funding sources (2)   69,153   11.7 %   77,273   13.6 %   87,357   17.0 % -10.5 % -20.8 %
Total funding sources $ 588,590   100.0 % $ 567,231   100.0 % $ 515,337   100.0 % 3.8 % 14.2 %
 
(1)   Includes CDARS(r), which are all reciprocal deposits maintained by Bank customers, and repurchase agreements, which represent sweep accounts tied to customer operating accounts.
(2) Consists of QwickRate(r) certificates of deposit, brokered deposits and Federal Home Loan Bank advances
 
 
John Marshall Bank
Average Balances Sheets, Interest and Rates
(Dollar amounts in thousands)
 
3 Months Ended March 31, 2014   3 Months Ended December 31, 2013   3 Months Ended March 31, 2013
  Interest   Average   Interest   Average   Interest   Average
AverageIncome-YieldsAverageIncome-YieldsAverageIncome-Yields
Balance   Expense   /RatesBalance   Expense   /RatesBalance   Expense   /Rates
Assets
Securities $ 56,585 $ 324 2.32 % $ 48,569 $ 286 2.34 % $ 41,882 $ 201 1.95 %
Loans, net of unearned income 576,194 7,739 5.45 % 554,940 7,616 5.44 % 507,383 7,046 5.63 %
Interest-bearing deposits in other banks   30,590   18 0.24 %   33,308   21 0.25 %   6,441   5 0.31 %
Total interest-earning assets $ 663,369 $ 8,081 4.94 % $ 636,817 $ 7,923 4.94 % $ 555,706 $ 7,252 5.29 %
Other assets   10,977   9,125   6,736
Total assets $ 674,346 $ 645,942 $ 562,442
Liabilities & Shareholders' equity
Interest-bearing deposits
NOW accounts $ 9,141 $ 6 0.27 % $ 7,281 $ 5 0.27 % $ 7,127 $ 5 0.28 %
Money market accounts 141,516 187 0.54 % 126,231 159 0.50 % 109,948 134 0.49 %
Savings accounts 6,531 5 0.31 % 6,795 7 0.41 % 3,998 2 0.20 %
Time deposits   278,043   698 1.02 %   286,415   735 1.02 %   251,320   676 1.09 %
Total interest-bearing deposits $ 435,231 $ 896 0.83 % $ 426,722 $ 906 0.84 % $ 372,393 $ 817 0.89 %

Securities sold under agreement to repurchase and federal funds purchased

$ 12,809 $ 14 0.44 % $ 10,808 $ 11 0.40 % $ 6,906 $ 7 0.41 %
Other borrowed funds   37,378   100 1.09 %   40,783   111 1.08 %   45,806   105 0.93 %
Total interest-bearing liabilities $ 485,418 $ 1,010 0.84 % $ 478,313 $ 1,028 0.85 % $ 425,105 $ 929 0.89 %
Demand deposits and other liabilities   96,567   92,432   83,029
Total liabilities $ 581,985 $ 570,745 $ 508,134
Shareholders' equity   92,361   75,197   54,308
Total liabilities and shareholders' equity $ 674,346 $ 645,942 $ 562,442
Interest rate spread 4.10 % 4.09 % 4.40 %
Net interest income and margin $ 7,071 4.32 % $ 6,895 4.31 % $ 6,323 4.61 %
 
 
John Marshall Bank
Financial Highlights (Unaudited)
(Dollar amounts in thousands, except per share data)
   
At or For the Quarter Ended
March 31
20142013
Per share Data and Shares Outstanding (1)
Earnings per share - basic $ 0.22 $ 0.28
Earnings per share - diluted $ 0.21 $ 0.27
Tangible book value per share $ 11.22 $ 9.31
Weighted average common shares (basic) 8,286,725 5,884,786
Weighted average common shares (diluted) 8,679,643 5,935,246
Common shares outstanding at end of period 8,288,836 5,884,786
 
Performance Ratios
Return on average assets (annualized) 1.12 % 1.17 %
Return on average equity (annualized) 8.16 % 12.14 %
Yield on earning assets (annualized) 4.94 % 5.29 %
Cost of interest bearing liabilities (annualized) 0.84 % 0.89 %
Net interest spread 4.10 % 4.40 %
Net interest margin 4.32 % 4.61 %
Noninterest income as a percentage of average assets (annualized) 0.06 % 0.07 %
Noninterest expense to average assets (annualized) 2.45 % 2.69 %
Efficiency ratio 56.8 % 58.2 %
 
Asset Quality
Loans 30-89 days past due and accruing interest $ 112 $ -
Non-performing assets (2) $ 1,523 $ 497
Non-performing assets to total assets 0.22 % 0.09 %
Allowance for loan losses to total loans 1.00 % 1.02 %
Allowance for loan losses to non-performing loans 3.9 10.7
Net loan chargeoffs (recoveries) $ - $ -
Net charge-offs to average loans (annualized) 0.00 % 0.00 %
Troubled debt restructurings (total) $ 1,927 $ 2,006
Performing in accordance with modified terms $ 1,806 $ 1,873
Not performing in accordance with modified terms $ 121 $ 133
Other real estate owned $ - $ -
 
Regulatory Capital Ratios
Total risk-based capital ratio 15.5 % 10.8 %
Tier 1 risk-based capital ratio 14.5 % 9.9 %
Leverage ratio 13.8 % 9.7 %
 
Other Information
Effective income tax rate 36.0 % 33.2 %
Tangible equity / tangible assets 13.6 % 9.6 %
Average tangible equity / average tangible assets 13.7 % 9.7 %
Number of full time equivalent employees 90 76
# Full service branch offices 6 5
# Loan production offices 1 2
 
(1)   Shares and per share amounts for all periods have been adjusted to reflect a 5 for 4 stock split in the form of a 25% stock dividend paid on July 22, 2013.
(2) Non-performing assets consist of non-accrual loans, loans 90 day or more past due and still accruing interest, and foreclosed properties. Does not include troubled debt restructurings ("TDRs") which were accruing interest at the date indicated.

John Marshall Bank
John R. Maxwell, 703-584-0840

Source: John Marshall Bank

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