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John Marshall Bank Reports First Quarter Results

April 27, 2015

RESTON, Va.--(BUSINESS WIRE)-- John Marshall Bank (OTCQB: JMSB) (the “Bank”) reported net income of $2.1 million for the three months ended March 31, 2015, an increase of $249 thousand, or 13.4%, as compared to net income of $1.9 million for the three months ended March 31, 2014. Net income per diluted share increased 14.3% to $0.24 per share during the first three months of 2015, compared to $0.21 per share during the same period in 2014. As of March 31, 2015, the Bank’s tangible book value per share was $12.26, up 9.3% compared to $11.22 as of March 31, 2014.

The Bank’s first quarter results produced an annualized return of 1.08% on average assets and 8.43% on average equity, compared to 1.12% and 8.16%, 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, 2015, the Bank’s total risk-based capital ratio was 13.9%, compared to 14.0% at December 31, 2014 and 15.5% at March 31, 2014.

Balance Sheet Review

At March 31, 2015, total assets were $831.1 million, an increase of $44.2 million, or 5.6%, from total assets of $786.8 million at December 31, 2014, and an increase of $145.1 million, or 21.2% from total assets of $685.9 million at March 31, 2014. Gross loans increased $25.9 million, or 3.8%, to $710.5 million at March 31, 2015, compared to $684.6 million at December 31, 2014. Year-over-year net loan growth, from March 31, 2014 to March 31, 2015, was $117.9 million, or 20.2%. The Bank’s investment portfolio increased to $81.9 million at March 31, 2015, compared to $68.8 million at December 31, 2014, and $57.8 million at March 31, 2014.

Total deposits were $650.7 million at March 31, 2015, representing an increase of 5.4%, or $33.1 million, compared to December 31, 2014. Year-over-year deposit growth, from March 31, 2014 to March 31, 2015, was $109.0 million, or 20.1%. Total borrowings, consisting of Federal Home Loan Bank advances and customer repurchase agreements, were $72.1 million at March 31, 2015, an increase of 11.9%, or $7.7 million, compared to $64.4 million at December 31, 2014. Year-over-year, from March 31, 2014 to March 31, 2015, total borrowings increased by $25.2 million, or 53.6%.

During the first quarter certificates of deposit obtained through a deposit listing service provided by QwickRate, Inc. increased by $8.5 million. Year-over-year, QwickRate certificates of deposit increased by $6.2 million. CDARs declined by $16.3 million during the first quarter due to a seasonal redemption of public funds. Brokered certificates of deposit declined by $1.1 million during the first quarter, customer repurchase agreements increased by $4.7 million and Federal Home Loan Bank advances increased by $3.0 million. Year-over-year Federal Home Loan Bank advances increased $20.0 million or 57.1%. Core customer funding sources increased by $30.3 million during the first quarter, and by $104.0 million, or 20.0%, compared to March 31, 2014.

Total shareholders’ equity was $102.0 million at March 31, 2015, an increase of $2.3 million, or 2.4%, compared to December 31, 2014, and $9.0 million, or 9.7%, compared to March 2014. Substantially all of the increase in shareholders’ equity over the past year is attributed to net income retained during the past twelve months. Total common shares outstanding increased from 8,288,836 at March 31, 2014 to 8,316,461 at March 31, 2015.

Income Statement Review

Net interest income

Net interest income, the Bank’s primary source of revenue, was $8.0 million for the three months ended March 31, 2015, up 13.1% from $7.1 million for the three months ended March 31, 2014. The net interest margin was 4.18% during the first quarter of 2015, compared to 4.24% during the fourth quarter of 2014 and 4.32% during the first quarter of 2014. 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 4.78% during the first quarter of 2015 from 4.94% during the first quarter of 2014, which is substantially the result of a 27 basis point year-to-year decline in loan yields and a 22 basis point year-to-year decline in securities yields.

Notwithstanding the decline in the net interest margin over the past year, net interest income increased by 13.1% during the first quarter of 2015, compared to the first quarter of 2014, resulting primarily from a $111.4 million, or 16.8%, increase in average earning assets during the first quarter of 2015, compared to the first quarter of 2014.

Provision for loan losses

The Bank recognized a provision for loan losses of $211 thousand during the first three months of 2015, compared to a provision of $302 thousand during the fourth quarter of 2014, and $192 thousand during the first quarter of 2014. The decline in the provision for loan losses from the prior quarter was due to a specific reserve related to one relationship that increased the provision during the fourth quarter of 2014. The Bank reported no net loan charge-offs during either the first quarter of 2015 or the first quarter of 2014.

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 are not reported as noninterest income. For the three months ended March 31, 2015, the Bank reported total noninterest income of $140 thousand, compared to $125 thousand during the fourth quarter of 2014 and $99 thousand during the first quarter of 2014.

Noninterest expense

The largest component of the Bank’s noninterest expense is employee salaries and benefits. Salary and benefits expense increased by 21.0%, to $2.9 million, during the first quarter of 2015 compared to $2.4 million during the first quarter of 2014. All other operating expenses increased by 5.1%, or $87 thousand, to $1.8 million, during the first quarter of 2015, compared to $1.7 million during the first quarter of 2014.

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 occupancy expense and furniture and equipment was associated with the expansion of our Reston corporate/operations office during the past year.

Asset Quality Review

Asset quality remains exceptionally strong and is significantly better than the Bank’s peers. As of March 31, 2015, non-performing assets were 0.21% of total assets, compared to 0.22% at December 31, 2014 and 0.22% at March 31, 2014. The Bank’s allowance for loan losses covered non-performing loans by 3.8 times as of March 31, 2015, compared to 3.7 times at December 31, 2014 and 3.9 times at March 31, 2014.

Non-performing loans were unchanged from December 31, 2014 with a balance of $1.8 million at March 31, 2015. As of March 31, 2015, the Bank had total troubled debt restructurings of $1.8 million, compared to $1.8 million at December 31, 2014 and $1.9 million at March 31, 2014. All restructured loans were performing in accordance with modified terms as of March 31, 2015.

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. 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
201520142014MonthsYear
Assets(Unaudited)(Unaudited)
 
Cash and due from banks $ 10,047 $ 10,799 $ 8,888 -7.0 % 13.0 %
Interest-bearing deposits in banks 24,172 17,786 23,789 35.9 % 1.6 %
Securities available-for-sale, at fair value 28,752 13,482 24,611 113.3 % 16.8 %

Securities held-to-maturity, fair value of $48,648 at 3/31/2015, $50,499 at 12/31/2014 and $28,537 at 3/31/2014

 47,646 49,934 28,422 -4.6 % 67.6 %
Restricted securities, at cost 5,521 5,401 4,722 2.2 % 16.9 %

Loans, net of allowance for loan losses of $6,717 at 3/31/2015; $6,506 at 12/31/2014 and $5,940 at 3/31/2014

 702,385 676,777 584,498 3.8 % 20.2 %
Bank premises and equipment, net 2,963 3,041 2,972 -2.6 % -0.3 %
Accrued interest receivable 2,181 2,168 1,828 0.6 % 19.3 %
Other assets   7,413     7,450     6,218   -0.5 % 19.2 %
 
Total assets $ 831,080   $ 786,838   $ 685,948   5.6 % 21.2 %
 
Liabilities and Shareholders' Equity
 
Liabilities
Deposits:
Non-interest bearing demand deposits $ 122,797 $ 121,219 $ 94,499 1.3 % 29.9 %
Interest bearing demand deposits 222,324 198,438 161,465 12.0 % 37.7 %
Savings deposits 6,562 6,500 4,101 1.0 % 60.0 %
Time deposits   298,988     291,456     281,594   2.6 % 6.2 %
Total deposits 650,671 617,613 541,659 5.4 % 20.1 %
Repurchase agreements 17,085 12,404 11,931 37.7 % 43.2 %
Federal Home Loan Bank advances 55,000 52,000 35,000 5.8 % 57.1 %
Accrued interest payable 123 132 135 -6.8 % -8.9 %
Other liabilities   6,206     5,040     4,250   23.1 % 46.0 %
Total liabilities   729,085     687,189     592,975   6.1 % 23.0 %
 
Shareholders' Equity

Common stock, voting, par value $5 per share; authorized 10,000,000 shares; issued and outstanding, 8,316,461 shares at 3/31/2015, 8,305,086 at 12/31/2014, and 8,288,836 at 3/31/2014

 41,582 41,525 41,444 0.1 % 0.3 %
Additional paid-in capital 39,126 39,023 38,748 0.3 % 1.0 %
Retained earnings 21,394 19,288 13,126 10.9 % 63.0 %
Accumulated other comprehensive loss   (107 )   (187 )   (345 ) 42.8 % 69.0 %
 
Total shareholders' equity   101,995     99,649     92,973   2.4 % 9.7 %
 
Total liabilities and shareholders' equity $ 831,080   $ 786,838   $ 685,948   5.6 % 21.2 %
 
     
John Marshall Bank
 
Statements of Income
For the Three Months Ended March 31, 2015 and 2014
(Dollar amounts in thousands, except per share data)
 
Three Months Ended
March 31
20152014% Change
(Unaudited)(Unaudited)
Interest and Dividend Income
Interest and fees on loans $ 8,755 $ 7,739 13.1 %
Interest on investment securities, taxable 295 261 13.0 %
Interest on investment securities, tax-exempt 26 21 23.8 %
Dividends 55 42 31.0 %
Interest on deposits in banks   9   18 -50.0 %
Total interest and dividend income   9,140   8,081 13.1 %
 
Interest Expense
Deposits 1,015 896 13.3 %
Federal Home Loan Bank advances 117 100 17.0 %
Other short-term borrowings   14   14 0.0 %
Total interest expense   1,146   1,010 13.5 %
 
Net interest income 7,994 7,071 13.1 %
 
Provision for loan losses   211   192 9.9 %
 
Net interest income after provision for loan losses   7,783   6,879 13.1 %
 
Noninterest Income
Service charges on deposit accounts 118 84 40.5 %
Other service charges and fees   22   15 46.7 %
Total noninterest income   140   99 41.4 %
 
Noninterest Expenses
Salaries and employee benefits 2,880 2,380 21.0 %
Occupancy expense of premises 440 385 14.3 %
Furniture and equipment expenses 258 229 12.7 %
Other operating expenses   1,084   1,081 0.3 %
Total noninterest expenses   4,662   4,075 14.4 %
 
Income before income taxes 3,261 2,903 12.3 %
 
Income tax expense   1,154

 

  1,045 10.4 %
 
Net income $ 2,107 $ 1,858 13.4 %
 
Earnings Per Share
Basic $ 0.25 $ 0.22 13.6 %
Diluted $ 0.24 $ 0.21 14.3 %
 
               
John Marshall Bank
 
Loan, Deposit and Borrowing Detail
(Dollar amounts in thousands)
 
March 31, 2015December 31, 2014March 31, 2014Percentage Change
Loans$ Amount% of Total$ Amount% of Total$ Amount% of TotalLast 3 MosLast 12 Mos
Mortgage loans on real estate
Commercial (1) $ 402,734 56.7 % $ 437,891 64.0 % $ 383,418 64.8 % -8.0 % 5.0 %
Construction and land development 138,745 19.5 % 140,480 20.5 % 81,723 13.8 % -1.2 % 69.8 %
Residential (1)   84,333   11.9 %   23,503   3.4 %   22,427   3.8 % 258.8 % 276.0 %
Total mortgage loans on real estate $ 625,812 88.1 % $ 601,874 87.9 % $ 487,568 82.4 % 4.0 % 28.4 %
Commercial loans 83,631 11.8 % 81,504 11.9 % 102,725 17.4 % 2.6 % -18.6 %
Consumer loans   1,034   0.1 %   1,232   0.2 %   1,195   0.2 % -16.1 % -13.5 %
Total loans $ 710,477 100.0 % $ 684,610 100.0 % $ 591,488 100.0 % 3.8 % 20.1 %
Less: Allowance for loan losses (6,717 ) (6,506 ) (5,940 )
Net deferred loan fees   (1,375 )   (1,327 )   (1,050 )
Net loans $ 702,385   $ 676,777   $ 584,498  
 
 
March 31, 2015December 31, 2014March 31, 2014Percentage Change
Deposits$ Amount% of Total$ Amount% of Total$ Amount% of TotalLast 3 MosLast 12 Mos
Noninterest-bearing demand deposits $ 122,797 18.9 % $ 121,219 19.6 % $ 94,499 17.4 % 1.3 % 29.9 %
Interest-bearing demand deposits:
NOW accounts 17,350 2.7 % 12,774 2.1 % 8,905 1.6 % 35.8 % 94.8 %
Money market accounts 204,974 31.5 % 185,664 30.1 % 152,560 28.2 % 10.4 % 34.4 %
Savings accounts 6,562 1.0 % 6,500 1.0 % 4,101 0.8 % 0.9 % 60.0 %
Certificates of deposit
$100,000 or more 167,166 25.7 % 151,435 24.5 % 151,502 28.0 % 10.4 % 10.3 %
Less than $100,000 30,484 4.7 % 29,733 4.8 % 28,804 5.3 % 2.5 % 5.8 %
QwickRate® Certificates of deposit 24,043 3.7 % 15,592 2.5 % 17,886 3.3 % 54.2 % 34.4 %
CDARS® 57,036 8.8 % 73,376 11.9 % 67,135 12.4 % -22.3 % -15.0 %
Brokered deposits   20,259   3.1 %   21,320   3.5 %   16,267   3.0 % -5.0 % 24.5 %
Total deposits $ 650,671   100.0 % $ 617,613   100.0 % $ 541,659   100.0 % 5.4 % 20.1 %
 
Borrowings
Customer repurchase agreements $ 17,085 23.7 % $ 12,404 19.3 % $ 11,931 25.4 % 37.7 % 43.2 %
Federal Home Loan Bank advances   55,000   76.3 %   52,000   80.7 %   35,000   74.6 % 5.8 % 57.1 %
Total borrowings $ 72,085   100.0 % $ 64,404   100.0 % $ 46,931   100.0 % 11.9 % 53.6 %
 
Total deposits and borrowings $ 722,756   $ 682,017   $ 588,590   6.0 % 22.8 %
 
Core customer funding sources (2) $ 623,454 86.3 % $ 593,105 87.0 % $ 519,437 88.3 % 5.1 % 20.0 %
Wholesale funding sources (3)   99,302   13.7 %   88,912   13.0 %   69,153   11.7 % 11.7 % 43.6 %
Total funding sources $ 722,756   100.0 % $ 682,017   100.0 % $ 588,590   100.0 % 6.0 % 22.8 %
 

(1) Loan balances totaling $58.8 million were reclassified from the commercial real estate segment to residential real estate segment of the portfolio as of March 31, 2015.

(2) Includes CDARS(r), which are all reciprocal deposits maintained by Bank customers, and repurchase agreements, which represent sweep accounts tied to customer operating accounts.
(3) Consists of QwickRate(r) certificates of deposit, brokered deposits and Federal Home Loan Bank advances
 
                 
John Marshall Bank
Average Balance Sheets, Interest and Rates
(Dollar amounts in thousands)
 
3 Months Ended March 31, 20153 Months Ended December 31, 20143 Months Ended March 31, 2014
InterestAverageInterestAverageInterestAverage
AverageIncome-YieldsAverageIncome-YieldsAverageIncome-Yields
BalanceExpense/RatesBalanceExpense/RatesBalanceExpense/Rates
Assets
Securities $ 72,751 $ 376 2.10 % $ 65,220 $ 371 2.26 % $ 56,585 $ 324 2.32 %
Loans, net of unearned income 685,876 8,755 5.18 % 663,460 8,755 5.24 % 576,194 7,739 5.45 %
Interest-bearing deposits in other banks   16,122   9 0.23 %   19,390   13 0.27 %   30,590   18 0.24 %
Total interest-earning assets $ 774,749 $ 9,140 4.78 % $ 748,070 $ 9,139 4.85 % $ 663,369 $ 8,081 4.94 %
Other assets   16,589   15,614   10,977
Total assets $ 791,338 $ 763,684 $ 674,346
Liabilities & Shareholders' equity
Interest-bearing deposits
NOW accounts $ 13,866 $ 9 0.27 % $ 11,885 $ 8 0.27 % $ 9,141 $ 6 0.27 %
Money market accounts 192,392 251 0.53 % 187,470 252 0.53 % 141,516 187 0.54 %
Savings accounts 7,328 6 0.34 % 7,023 7 0.40 % 6,531 5 0.31 %
Time deposits   292,329   749 1.04 %   290,893   757 1.03 %   278,043   698 1.02 %
Total interest-bearing deposits $ 505,915 $ 1,015 0.81 % $ 497,271 $ 1,024 0.82 % $ 435,231 $ 896 0.83 %

Securities sold under agreement to repurchase and federal funds purchased

$ 13,280 $ 14 0.43 % $ 12,155 $ 12 0.39 % $ 12,809 $ 14 0.44 %
Other borrowed funds   48,711   117 0.97 %   43,979   109 0.98 %   37,378   100 1.09 %
Total interest-bearing liabilities $ 567,906 $ 1,146 0.82 % $ 553,405 $ 1,145 0.82 % $ 485,418 $ 1,010 0.84 %
Demand deposits 116,588 106,543 91,629
Other liabilities   5,491   4,749   4,938
Total liabilities $ 689,985 $ 664,697 $ 581,985
Shareholders' equity   101,353   98,987   92,361
Total liabilities and shareholders' equity $ 791,338 $ 763,684 $ 674,346
Interest rate spread 3.96 % 4.03 % 4.10 %
Net interest income and margin $ 7,994 4.18 % $ 7,994 4.24 % $ 7,071 4.32 %
   
John Marshall Bank
Financial Highlights (Unaudited)
(Dollar amounts in thousands, except per share data)
 
At or For the Quarter Ended
March 31
  2015     2014  
Per share Data and Shares Outstanding (1)
Earnings per share - basic $ 0.25 $ 0.22
Earnings per share - diluted $ 0.24 $ 0.21
Tangible book value per share $ 12.26 $ 11.22
Weighted average common shares (basic) 8,312,708 8,286,725
Weighted average common shares (diluted) 8,704,859 8,679,643
Common shares outstanding at end of period 8,316,461 8,288,836
 
Performance Ratios
Return on average assets (annualized) 1.08 % 1.12 %
Return on average equity (annualized) 8.43 % 8.16 %
Yield on earning assets (annualized) 4.78 % 4.94 %
Cost of interest bearing liabilities (annualized) 0.82 % 0.84 %
Net interest spread 3.97 % 4.10 %
Net interest margin 4.18 % 4.32 %
Noninterest income as a percentage of average assets (annualized) 0.07 % 0.06 %
Noninterest expense to average assets (annualized) 2.39 % 2.45 %
Efficiency ratio 57.3 % 56.8 %
 
Asset Quality
Loans 30-89 days past due and accruing interest $ - $ 112
Non-performing assets (2) $ 1,756 $ 1,523
Non-performing assets to total assets 0.21 % 0.22 %
Allowance for loan losses to total loans 0.95 % 1.00 %
Allowance for loan losses to non-performing loans 3.8 3.9
Net loan chargeoffs (recoveries) $ - $ -
Net charge-offs to average loans (annualized) 0.00 % 0.00 %
Troubled debt restructurings (total) $ 1,801 $ 1,927
Performing in accordance with modified terms $ 1,801 $ 1,806
Not performing in accordance with modified terms $ - $ 121
Other real estate owned $ - $ -
 
Regulatory Capital Ratios
Total risk-based capital ratio 13.9 % 15.5 %
Tier 1 risk-based capital ratio 13.1 % 14.5 %
Leverage ratio 12.8 % 13.8 %
 
Other Information
Effective income tax rate 35.4 % 36.0 %
Tangible equity / tangible assets 12.3 % 13.6 %
Average tangible equity / average tangible assets 12.8 % 13.7 %
Number of full time equivalent employees 98 90
# Full service branch offices 5 6
# Loan production offices and limited service branches 1 1
 
(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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