News Details

Asset, Loan and Deposit Growth Establish Company Records

RESTON, Va.--(BUSINESS WIRE)-- 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, 2018.

Selected Highlights

• Record Quarterly Asset Growth - Total assets surpassed $1.32 billion at September 30, 2018, an increase of $94.9 million or 30.7% (annualized) since June 30, 2018. Total Assets increased $148.0 million or 12.6% since December 31, 2017 and $169.7 million or 14.7% from a year ago.
• Record Quarterly Loan Growth - Gross loans exceeded $1.11 billion at September 30, 2018. Net Loans surpassed $1.10 billion at September 30, 2018. Net Loans increased $67.7 million or 26.1% (annualized) since June 30, 2018. Net loans increased $99.2 million or 9.9% since December 31, 2017 and $136.3 million or 14.2% from a year ago.
• Record Quarterly Deposit Growth - Total deposits topped $1.09 billion at September 30, 2018, an increase of $112.2 million or 45.7% (annualized) since June 30, 2018. Total Deposits increased $189.7 or 21.2% since December 31, 2017 and $189.1 million or 21.1% from a year ago.
• Improved Funding Composition - Non-interest bearing deposits grew $11.3 million or 21.8% (annualized) during the third quarter and represent 21.6% of core customer funding compared to 21.1% at December 31, 2017 and 21.2% a year ago. In addition, wholesale funding decreased $9.9 million or 6.3% during the quarter. Wholesale funding represents 12.5% of total funding sources at September 30, 2018 compared to 17.1% at December 31, 2017 and 15.7% at September 30, 2017.
• Excellent Asset Quality – Non-performing assets represented 0.07% of total assets and non-performing loans were 0.05% of total loans as of September 30, 2018. There were no charge-offs during the third quarter of 2018 and only $86 thousand in charge-offs, or 0.01% of loans for the nine month period ended September 30, 2018.
• Record Quarterly Net Interest Income – The Company reported Net Interest Income of $10.9 million for the 3^rd quarter of 2018; also a record. On a year-to-date basis, total funding sources growth has exceeded Net Loan growth by $41.1 million. The Company anticipates that interest income will improve as the balances in interest-bearing deposits in banks are deployed to fund higher yielding loans.
• Increased Earnings – Net income totaled $2.8 million or $0.21 per diluted share for the three months ended September 30, 2018. This compares to $2.7 million or $0.19 per diluted share for the three months ended September 30, 2017. The quarterly Return on Average Assets (ROAA) was 0.86% and the quarterly Return on Average Equity (ROAE) was 8.09%. On a year-to-date basis, net income was $9.1 million or $0.67 per diluted share, a 16.2% increase compared to the $7.9 million or $0.58 per diluted share for the nine months ended September 30, 2017. Year-to-date ROAA and ROAE were 0.98% and 9.13%, respectively.
  
  The record quarterly growth in assets, loans and deposits, improved funding composition and record quarterly net interest income stem from business development investments in both personnel and new banking center locations. Year to date, the number of full-time equivalent employees has increased by 20 or 16%. The Company believes these new hires have expanded its capacity for future growth. In addition, the Company opened a full-service branch in Washington, DC in January 2018. In September 2018, a new loan production office opened in Woodbridge, Virginia and a loan production office in Tysons Corner, Virginia was converted into a full-service branch. The Company expects its operating efficiency will improve as our business development officers, aided by the new locations, grow their portfolios.

Balance Sheet Review

Assets

Total assets were $1.32 billion at September 30, 2018, $1.18 billion at December 31, 2017 and $1.15 billion at September 30, 2017. During the first nine months of 2018 assets increased $148.0 million, or 12.6%. Year-over-year asset growth, from September 30, 2017 to September 30, 2018, was $169.7 million, or 14.7%.

Loans

Gross loans were $1.108 billion at September 30, 2018, $1.009 billion at December 31, 2017 and $971.8 million at September 30, 2017. During the third quarter, gross loans grew $68.3 million or 6.6%. During the first nine months of 2018 gross loans increased $99.8 million, or 9.9%. Year-over-year gross loans increased $136.7 million, or 14.1% from September 30, 2017 to September 30, 2018.

Investment Securities

The Company’s investment portfolio comprised of held-to-maturity and available-for-sale securities was $97.7 million at September 30, 2018, $96.3 million at December 31, 2017 and $96.6 million at September 30, 2017. Year-over-year the investment portfolio growth, from September 30, 2017 to September 30, 2018, was $1.1 million, or 1.1%. As of September 30, 2018, the Company held $36.8 million of its investment portfolio as held-to-maturity, and $60.9 million as available-for-sale. The Company also had restricted securities totaling $7.4 million at September 30, 2018, $8.4 million at December 31, 2017 and $7.7 million at September 30, 2017.

Interest Bearing Deposits in Banks

Interest-bearing deposits in banks were $75.0 million at September 30, 2018, $30.9 million at December 31, 2017 and $46.5 million at September 30, 2017. The higher cash balances at the period ending September 30, 2018 are a result of the deposit growth and will be deployed into higher earning assets as we continue to implement our strategic initiatives.

Bank Owned Life Insurance

At September 30, 2018, the estimated fair value of bank owned life insurance was $19.5 million, compared to $19.1 million at December 31, 2017 and $19.0 million at September 30, 2017.

Deposits

Total deposits were $1.087 billion at September 30, 2018, $896.9 million at December 31, 2017 and $897.6 million at September 30, 2017. During the third quarter, deposits grew $112.2 million or 11.5%. During the first nine months of 2018, deposits increased $189.7 million, or 21.2%. Year-over-year deposit growth, from September 30, 2017 to September 30, 2018, was $189.1 million, or 21.1%. Core customer funding was $1.008 billion at September 30, 2018, $829.8 million at December 31, 2017 and $835.9 million at September 30, 2017. Year-over-year core customer funding sources, which include deposits, ICS and CDARs, increased by $171.7 million, or 20.5%, from September 30, 2017 to September 30, 2018. With the strategic initiatives implemented earlier this year, the Company continues to grow core deposits and loans while expanding our locations to better serve our customers.

QwickRate certificates of deposit were $24.1 million at September 30, 2018, $24.7 million at December 31, 2017 and $22.2 million at September 30, 2017. Year-over-year QwickRate certificates of deposit increased $1.9 million from September 30, 2017 to September 30, 2018. ICS deposits were $94.1 million at September 30, 2018, $65.3 million at December 31, 2017 and $56.4 million as of September 30, 2017. Year-over-year, ICS deposits increased $37.7 million from September 30, 2017 to September 30, 2018. CDARs were $112.9 million at September 30, 2018, $77.5 million at December 31, 2017 and $86.5 million at September 30, 2017. Year-over-year CDARs increased $26.4 million from September 30, 2017 to September 30, 2018. Brokered deposits were $55.0 million at September 30, 2018, $42.4 million at December 31, 2017 and $39.5 million at September 30, 2017. Brokered deposits increased $15.5 million from September 30, 2017 to September 30, 2018.

Borrowings

Total borrowings, consisting of Federal Home Loan Bank advances and Federal funds purchased, were $69.0 million at September 30, 2018, $118.5 million at December 31, 2017 and $98.0 million at September 30, 2017. Total borrowings decreased $29.0 million, or 29.6%, from September 30, 2017 to September 30, 2018. Federal Home Loan Bank advances were $69.0 million at September 30, 2018, $108.5 million at December 31, 2017 and $98.0 million at September 30, 2017. The 20.3% decrease year-to-date in borrowings was a result of the significant growth in core customer deposits.

The Company had subordinated notes with a balance of $24.6 million at September 30, 2018 and $24.5 million at December 31, 2017 and September 30, 2017. The notes qualify as Tier 2 capital for the Company for regulatory purposes.

Shareholders’ Equity and Capital Levels

Total shareholders’ equity was $138.0 million at September 30, 2018, $128.9 million at December 31, 2017 and $127.8 million at September 30, 2017. Year-over-year shareholders’ equity increased by $10.2 million, or 8.0%. Total common shares outstanding increased from 12,824,047, including 85,269 unvested shares, at September 30, 2017, to 12,888,350, including 86,725 unvested shares, at September 30, 2018.

The Company’s capital ratios remain well above regulatory minimums for well capitalized banks. As of September 30, 2018, the Company’s total risk-based capital ratio was 14.3%, compared to 14.6% at September 30, 2017.

Income Statement Review

Net Interest Income

Net interest income, the Company’s primary source of revenue, was $10.9 million for the three months ended September 30, 2018, up 5.8% from $10.3 million for the three months ended September 30, 2017. The net interest margin was 3.43% for the three months ended September 30, 2018 as compared to 3.65% for the three months ended September 30, 2017. Average net loans increased $106.6 million from September 30, 2017, with a 10 basis point increase in yield. Average interest-bearing deposits in other banks increased $30.2 million from September 30, 2017, with a 68 basis point increase in yield. Higher interest-bearing deposit balances continue to impact the margin. These funds continue to be deployed into higher earning assets. The average cost of interest bearing liabilities increased 47 basis points when comparing the quarter ended September 30, 2017 to the quarter ended September 30, 2018. Average interest bearing deposits increased $116.6 million with a 51 basis point increase. During the twelve months ended September 30, 2018, the Federal Reserve increased rates by 125 basis points to a target of 2.25%. The change in the target rate along with market pressure has had an impact on the cost of deposits.

For the nine months ended September 30, 2018, net interest income was $32.1 million, up 7.1% from $29.9 million for the nine months ended September 30, 2017. The net interest margin was 3.52% during the first nine months of 2018, compared to 3.73% during the first nine months of 2017. Despite the decline in the net interest margin over the past year, net interest income increased by 7.1% during the first nine months of 2018, compared to the first nine months of 2017, resulting primarily from a $147.4 million, or 13.8%, increase in average earning assets during the first nine months of 2018, compared to the first nine months of 2017.

Provision for Loan Losses

The Company had $476 thousand in provision for loan losses for the three months ended September 30, 2018, compared to a provision of $500 thousand for the same period in 2017. The Company had no loan charge-offs during the third quarter of 2018, compared to net loan charge-offs of $345 thousand in the third quarter of 2017.

During the first nine months of 2018, the Company recognized a provision for loan losses of $666 thousand, compared to a provision of $1.1 million during the first nine months of 2017. The Company reported $86 thousand in net loan charge-offs during the first nine months of 2018, compared to $331 thousand in net loan charge-offs during the first nine months of 2017.

Asset quality remained strong and the Company’s historical loss factors used in the allowance for loan losses calculation have declined, thus resulting in lower provisions for loan losses in 2018 as compared to 2017.

Noninterest Income

The Company’s noninterest income consists primarily of bank owned life insurance income and service charges on deposit accounts. 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, 2018, the Company reported total noninterest income of $307 thousand, compared to $305 thousand during the three months ended September 30, 2017.

For the nine months ended September 30, 2018, the Company reported total noninterest income of $934 thousand, compared to $963 thousand during the first nine months of 2017, a decrease of $29 thousand, or 3.0%.

The year-over-year change for the nine month period ended September 30, 2018 was primarily attributable to gains on sales of securities totaling $134 thousand during the same time period in 2017. There was no gain on sale of securities during the first nine months of 2018. Service charges on deposit accounts increased $45 thousand, or 47.9%, for the three months ended September 30, 2018 and $87 thousand, or 30.9%, for the nine months ended September 30, 2018 as compared to the same periods in the prior year. The increase in other service charges and fees for the nine months ended September 30, 2018 was related to higher fees earned on CDARs balances.

Noninterest Expense

In pursuing its growth strategy, the Company has hired experienced local banking professionals and has expanded our footprint to new locations. The increases in noninterest expenses are expected to drive significant growth in assets and profitability. The balance sheet growth is evident in the third quarter results, as noted above.

For the three months ended September 30, 2018, salaries and employee benefits expense increased 27.3% to $4.7 million, compared to $3.7 million for the same period in 2017. All other noninterest expenses increased by 11.9%, or $269 thousand during the third quarter of 2018, compared to the same period in 2017.

During the first nine months of 2018, salaries and employee benefits expense increased by 23.9%, to $13.4 million, compared to $10.8 million during the first nine months of 2017. All other operating expenses increased by 7.3%, or $507 thousand, to $7.4 million, during the first nine months of 2018, compared to $6.9 million during the first nine months of 2017.

The increase in salaries and benefits for both the three and nine month periods ended September 30, 2018 was primarily attributable to the addition of 20 positions year-over-year including staff for: expansion of our Arlington office space in December 2017 owing to growth, our full service branch in Washington, DC that opened in January 2018, our loan production office in Woodbridge, Virginia that opened in September 2018 and our Tysons Corner, Virginia loan production office which moved into a larger space and converted to a full service branch on October 1, 2018. In addition to the staff needed at our new locations, we hired key executives, loan and business development officers as well as support staff in our operations office. The new employees are complementary to the overall growth initiatives for the Company. The increase in occupancy and furniture and equipment expenses was mostly related to additional rent and furniture expense related to the new locations listed above.

Asset Quality

As of September 30, 2018, non-performing assets were 0.07% of total assets, compared to 0.23% at September 30, 2017. The Company’s allowance for loan losses covered non-performing loans by 17.6 times as of September 30, 2018, compared to 3.9 times as of September 30, 2017. As of September 30, 2018, non-accrual loans totaled $390 thousand, an 82.9% decrease from $2.3 million at September 30, 2017. As of September 30, 2018, there were $372 thousand in loans past due and still accruing interest and $20 thousand as of September 30, 2017. The balance of accruing past due loans consisted of loans in the process of renewal at September 30, 2018.

Troubled debt restructurings were $484 thousand at September 30, 2018, a decrease of $14 thousand, or 2.8%, from $498 thousand at September 30, 2017. All troubled debt restructurings were performing in accordance with modified terms as of September 30, 2018. The Company had $379 thousand in other real estate owned as of September 30, 2018 and December 31, 2017 and $392 thousand as of September 30, 2017.

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 and has seven full-service banking centers located in Reston, Leesburg, Arlington Alexandria and Tysons Corner, Virginia; Rockville, Maryland; Washington, DC and two loan production offices in Arlington and Woodbridge, Virginia. 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.

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John Marshall Bancorp, Inc.
Chris Bergstrom, 703-584-0840

Source: John Marshall Bancorp, Inc.