John Marshall Bancorp, Inc. Reports Strong Quarterly Financial Results

Transcription

1 For Immediate Release Contact: John R. Maxwell April 24, 2018 (703) Reports Strong Quarterly Financial Results Reston, VA (OTCQB: JMSB) (the Company ) reported net income of $3.2 million for the three months ended March 31, 2018, an increase of $733 thousand, or 29.2%, as compared to net income of $2.5 million for the three months ended March 31, Net income per diluted share was $0.24 per share during the first three months of 2018, compared to $0.19 per diluted share during the same period in 2017, as adjusted for the 5 for 4 stock split in the form of a 25% dividend paid September 5, As of March 31, 2018, the Company s tangible book value per share was $10.26, up 7.9% compared to $9.51 as of March 31, 2017, as adjusted for the 5 for 4 stock split in the form of a 25% dividend paid September 5, Income tax expense decreased 32.9% for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 due to the federal corporate tax rate reduction that was effective January 1, For the three months ended March 31, 2018, the Company produced a 1.09% return on average assets and 10.07% on average equity, compared to 0.95% and 8.42%, for the first quarter of The Company s capital ratios remain well above regulatory minimums for well capitalized banks. As of March 31, 2018, the Company s total risk-based capital ratio was 14.9%, compared to 12.3% at March 31, Balance Sheet Review Total assets were $1.23 billion at March 31, 2018, $1.18 billion at December 31, 2017 and $1.08 billion at March 31, During the first three months of 2018 assets increased $57.3 million, or 4.9%. Year-over-year asset growth, from March 31, 2017 to March 31, 2018, was $151.3 million, or 14.0%. Gross loans were $1.012 billion at March 31, 2018, $1.009 billion at December 31, 2017 and $920.4 million at March 31, During the first three months of 2018 gross loans increased $3.5 million, or 0.3%. Year-over-year gross loans increased $91.8 million, or 10.0% from March 31, 2017 to March 31, During the first quarter of 2018, loan originations continued to be strong, but the Company experienced abnormally high levels of payoffs. The Company s investment portfolio comprised of held-to-maturity and available-for-sale securities was $96.4 million at March 31, 2018, $96.3 million at December 31, 2017 and $86.0 million at March 31, As of March 31, 2018, the Company held $40.7 million of its investment portfolio as held-to-maturity, and $55.7 million as available-for-sale. The Company also had restricted securities totaling $8.4 million at March 31, 2018 and December 31, 2017 and $7.9 million at March 31, At March 31, 2018, the estimated fair value of bank owned life insurance was $19.2 million, compared to $19.1 million at December 31, 2017 and $18.7 million at March 31, Total deposits were $967.0 million at March 31, 2018, $896.9 million at December 31, 2017 and $836.4 million at March 31, During the first three months of 2018, deposits increased $70.0 million, or 7.8%. Year-over-year deposit growth, from March 31, 2017 to March 31, 2018, was $130.6 million, or 15.6%. Total borrowings, consisting of Federal Home Loan Bank advances, customer repurchase agreements and Federal funds purchased, were $103.5 million at March 31, 2018, $118.5 million at December 31, 2017 and $116.3 million at March 31, QwickRate certificates of deposit were $26.0 million at March 31, 2018, $24.7 million at December 31, 2017 and $21.9 million at March 31, Year-over-year QwickRate certificates of deposit increased $4.1 million from March 31, 2017 to March 31, CDARs were $91.6 million at March 31, 2018, $77.5 million at December 31, 2017 and $69.9 million at March 31, Year-over-year CDARs increased $21.7 million. Brokered deposits were $50.9 million at March 31, 2018, $42.4 million at December 31, 2017 and $48.5 million at March 31, Year-

2 over-year, brokered deposits increased $2.4 million from March 31, 2017 to March 31, There were no customer repurchase agreements at March 31, 2018 and December 31, 2017 and $9.3 million at March 31, The Company had $68.8 million in ICS deposits as of March 31, 2018, $65.3 million at December 31, 2017 and $20.9 million as of March 31, Federal Home Loan Bank advances were $103.5 million at March 31, 2018, $108.5 million at December 31, 2017 and $102.0 million at March 31, Year-over-year Federal Home Loan Bank advances increased $1.5 million or 1.5%. Core customer funding was $890.1 million at March 31, 2018, $829.8 million at December 31, 2017 and $775.2 million at March 31, Year-over-year core customer funding sources, which include deposits, customer repurchase agreements, ICS and CDARs, increased by $114.8 million, or 14.8%, from March 31, 2017 to March 31, Total shareholders equity was $131.6 million at March 31, 2018, $128.9 million at December 31, 2017 and $121.7 million at March 31, Year-over-year shareholders equity increased by $9.9 million, or 8.2%. Total common shares outstanding increased from 10,235,311 at March 31, 2017 to 12,829,888, including 57,550 unvested shares, at March 31, The majority of the increase in shares year-over-year was related to the 5 for 4 stock split in the form of a 25% dividend paid September 5, The Company completed a private placement of $25.0 million of fixed-to-floating subordinated notes on July 6, Unless redeemed earlier, the notes will mature on July 15, The notes qualify as Tier 2 capital for the Company for regulatory purposes. The notes are carried at their principal amount, less unamortized issuance costs. The balance was $24.5 million at March 31, 2018 and December 31, Net interest income Income Statement Review Net interest income, the Company s primary source of revenue, was $10.4 million for the three months ended March 31, 2018, up 8.5% from $9.6 million for the three months ended March 31, The net interest margin was 3.60% for the three months ended March 31, 2018 as compared to 3.74% for the three months ended March 31, The yield on average net loans increased 17 basis points year-over-year from March 31, 2017 to March 31, The average cost of interest bearing liabilities increased 37 basis points year-over-year from March 31, 2017 to March 31, The increase in cost of liabilities year-over-year 2017 was primarily related to the Company s issuance of subordinated debt and higher cost term funding. During the past twelve months, the Federal Reserve increased rates by 100 basis points to a target of 1.75% as of March 31, Despite the decline in the net interest margin over the past year, net interest income increased by 8.5% during the first quarter of 2018, compared to the first quarter of 2017, resulting primarily from a $132.7 million, or 12.7%, increase in average earning assets for the three months ended March 31, 2017, compared to the three months ended March 31, Provision for loan losses The Company recognized a provision for loan losses of $190 thousand for the three months ended March 31, 2018, compared to provision of $265 thousand for the same period in The Company reported net loan charge-offs of $1 thousand in the first quarter of 2018, compared to net loan recoveries $7 thousand in the first quarter of 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, 2018, the Company reported total noninterest income of $334 thousand, compared to $348 thousand during the three months ended March 31, 2017, a decrease of 4.0%. The year-over-year decrease for the three months ended March 31, 2018 was primarily related to the gain on sale of securities of $76 thousand during the first quarter of Excluding the gain on sale of securities, noninterest income increased 22.8% from the three months ended March 31, 2017 compared to the three months ended March 31, The increase is related to higher CDARs fees collected in the first quarter of 2018.

3 Noninterest expense The largest component of the Company s noninterest expense is employee salaries and benefits. For the three months ended March 31, 2018, salaries and employee benefits expense increased 14.1% to $4.1 million, compared to $3.6 million for the same period in All other noninterest expenses increase of 1.9% during the first quarter of 2018, compared to the same period in The increase in salaries and benefits is related to additional staff needed for our new loan production office in Arlington and staff needed for the conversion of our limited service branch to a full service branch in Washington, DC. Additional staff was also hired to support the overall growth of the Company. The increase in other operating expenses was mostly related to additional rent and furniture expense related to the new Washington DC branch location and the loan production office in Arlington, VA. Asset Quality Review As of March 31, 2018, non-performing assets were 0.08% of total assets, compared to 0.31% at March 31, The Company s allowance for loan losses covered non-performing loans by 14.3 times as of March 31, 2018, compared to 2.5 times as of March 31, As of March 31, 2018, non-accrual loans totaled $638 thousand, an 81.2% decrease from $3.4 million at March 31, As of March 31, 2018 and 2017, there were no loans days past due and still accruing interest. Troubled debt restructurings were $491 thousand at March 31, 2018, a decrease of $13 thousand, or 2.6%, from $504 thousand at March 31, All troubled debt restructurings were performing in accordance with modified terms as of March 31, The Company had $379 thousand in other real estate owned as of March 31, 2018 and no other real estate owned as of March 31, is the bank holding company for John Marshall Bank. John Marshall Bank is headquartered in Reston, Virginia and has six full-service branches located in Reston, Leesburg, Arlington, Alexandria, Rockville and Washington DC. The Bank also has two loan production offices located in Tysons Corner, VA and Arlington, VA. Further information on the Bank can be obtained by visiting its website at 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.

4 % Change March 31, December 31, March 31, Last Three Year Over Months Year Assets (Unaudited) (Unaudited) (Unaudited) Cash and due from banks $ 5,178 $ 7,256 $ 5, % -1.7% Interest-bearing deposits in banks 87,098 30,873 37, % 133.5% Federal funds sold % 53.8% Securities available-for-sale, at fair value 55,702 54,699 44, % 26.4% Securities held-to-maturity, fair value of $39,902 at 3/31/2018, $41,500 at 12/31/2017 and $41,997 at 3/31/ ,720 41,570 41, % -2.9% Restricted securities, at cost 8,415 8,447 7, % 6.7% Loans, net of allowance for loan losses of $9,117 at 3/31/2018, $8,927 at 12/31/2017 and $8,474 at 3/31/2017 1,001, , , % 10.0% Bank premises and equipment, net 2,480 2,480 2, % -4.3% Accrued interest receivable 3,125 ` 3,263 2, % 12.5% Bank owned life insurance 19,224 19,093 18, % 2.9% Other real estate owned % N/M Other assets 8,643 8,980 10, % -15.4% Total assets $ 1,232,289 $ 1,175,025 $ 1,080, % 14.0% Liabilities and Shareholders' Equity Consolidated Balance Sheets (Dollar amounts in thousands, except per share data) Liabilities Deposits: Non-interest bearing demand deposits $ 185,151 $ 174,686 $ 182, % 1.5% Interest bearing demand deposits 293, , , % 29.9% Savings deposits 7,163 6,709 7, % -4.7% Time deposits 481, , , % 14.4% Total deposits 966, , , % 15.6% Federal funds purchased ,001 5,000 N/M % Repurchase agreements ,293 N/M N/M Federal Home Loan Bank advances 103, , , % 1.5% Subordinated Debt 24,544 24, % N/M Accrued interest payable % 213.2% Other liabilities 4,929 5,189 6, % -23.1% Total liabilities 1,100,662 1,046, , % 14.7% 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, 12,829,888 at 3/31/2018 including 57,550 unvested shares, 12,824,233 shares at 12/31/2017 including 85,007 unvested shares and 10,235,311 at 3/31/ % 25.5% Additional paid-in capital 84,077 83,867 83, % 1.1% Retained earnings 48,676 45,432 38, % 24.9% Accumulated other comprehensive loss (1,254) (559) (508) % % Total shareholders' equity 131, , , % 8.2% Total liabilities and shareholders' equity $ 1,232,289 $ 1,175,025 $ 1,080, % 14.0%

5 Consolidated Statements of Income (Dollar amounts in thousands, except per share data) Three Months Ended March 31, % Change (Unaudited) (Unaudited) Interest and Dividend Income Interest and fees on loans $ 12,436 $ 10, % Interest on investment securities, taxable % Interest on investment securities, tax-exempt % Dividends % Interest on deposits in banks % Total interest and dividend income 13,281 11, % Interest Expense Deposits 2,068 1, % Federal Home Loan Bank advances % Subordinated debt N/M Other short-term borrowings % Total interest expense 2,853 1, % Net interest income 10,428 9, % Provision for loan losses % Net interest income after provision for loan losses 10,238 9, % Noninterest Income Service charges on deposit accounts % Bank owned life insurance % Other service charges and fees % Gain on sale of securities available for sale N/M Other operating income % Total noninterest income % Noninterest Expenses Salaries and employee benefits 4,148 3, % Occupancy expense of premises % Furniture and equipment expenses % Other operating expenses 1,524 1, % Total noninterest expenses 6,485 5, % Income before income taxes 4,087 3, % Income tax expense 843 1, % Net income $ 3,244 $ 2, % Earnings Per Share Basic $ 0.25 $ % Diluted $ 0.24 $ %

6 Loan, Deposit and Borrowing Detail (Unaudited) (Dollar amounts in thousands) March 31, 2018 December 31, 2017 March 31, 2017 Percentage Change Loans $ Amount % of Total $ Amount % of Total $ Amount % of Total Last 3 Mos Last 12 Mos Mortgage loans on real estate Commercial $ 610, % $ 577, % $ 544, % 5.8% 12.2% Construction and land development 197, % 218, % 177, % -9.5% 11.5% Residential 140, % 135, % 118, % 3.5% 18.9% Total mortgage loans on real estate $ 949, % $ 931, % $ 840, % 1.9% 13.0% Commercial loans 61, % 76, % 78, % -19.4% -21.4% Consumer loans 1, % % 1, % 67.8% -21.7% Total loans $ 1,012, % $ 1,008, % $ 920, % 0.3% 10.0% Less: Allowance for loan losses (9,117) (8,927) (8,474) Net deferred loan fees (1,801) (1,823) (1,720) Net loans $ 1,001,245 $ 997,945 $ 910,204 March 31, 2018 December 31, 2017 March 31, 2017 Percentage Change Deposits $ Amount % of Total $ Amount % of Total $ Amount % of Total Last 3 Mos Last 12 Mos Noninterest-bearing demand deposits $ 185, % $ 174, % $ 182, % 6.0% 1.5% Interest-bearing demand deposits: NOW accounts 46, % 33, % 17, % 37.7% 169.5% Money market accounts 171, % 159, % 176, % 7.5% -2.9% Savings accounts 7, % 6, % 7, % 6.8% -4.7% Certificates of deposit $250,000 or more 207, % 199, % 188, % 4.1% 9.9% Less than $250, , % 113, % 102, % -0.9% 9.4% QwickRate Certificates of deposit 26, % 24, % 21, % 5.2% 18.6% ICS 68, % 65, % 20, % 5.4% 228.8% CDARS 91, % 77, % 69, % 18.1% 31.0% Brokered deposits 50, % 42, % 48, % 19.8% 4.9% Total deposits $ 966, % $ 896, % $ 836, % 7.8% 15.6% Borrowings Federal funds purchased $ % $ 10, % $ 5, % % % Customer repurchase agreements % % 9, % N/M % Federal Home Loan Bank advances 103, % 108, % 102, % -4.6% 1.5% Subordinated debt 24, % 24, % % 0.1% N/M Total borrowings $ 128, % $ 143, % $ 116, % -10.5% 10.1% Total deposits and borrowings $ 1,094,997 $ 1,039,973 $ 952, % 14.9% Core customer funding sources (1) $ 890, % $ 829, % $ 775, % 7.3% 14.8% Wholesale funding sources (2) 180, % 185, % 177, % -2.9% 1.7% Subordinated debt (3) 24, % 24, % % 0.1% N/M Total funding sources $ 1,094, % $ 1,039, % $ 952, % 5.3% 14.9% (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 and Federal Home Loan Bank advances. (3) Subordinated debt obligation qualifies as Tier 2 capital.

7 Average Balance Sheets, Interest and Rates (unaudited) (Dollar amounts in thousands) Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 Interest Average Interest Average Average Income- Yields Average Income- Yields Balance Expense /Rates Balance Expense /Rates Assets Securities $ 105,009 $ % $ 95,883 $ % Loans, net of unearned income 1,009,332 12, % 907,948 10, % Interest-bearing deposits in other banks 60, % 37, % Federal funds sold % % Total interest-earning assets $ 1,174,433 $ 13, % $ 1,041,686 $ 11, % Other assets 31,154 31,939 Total assets $ 1,205,587 $ 1,073,625 Liabilities & Shareholders' equity Interest-bearing deposits NOW accounts $ 58,152 $ % $ 17,552 $ % Money market accounts 210, % 207, % Savings accounts 6, % 7, % Time deposits 469,297 1, % 424,357 1, % Total interest-bearing deposits $ 744,720 $ 2, % $ 657,109 $ 1, % Securities sold under agreement to repurchase and federal funds purchased $ 333 $ % $ 12,876 $ % Subordinated debt 24, % % Other borrowed funds 114, % 103, % Total interest-bearing liabilities $ 883,717 $ 2, % $ 773,252 $ 1, % Demand deposits and other liabilities 191, ,405 Total liabilities $ 1,074,885 $ 952,657 Shareholders' equity 130, ,968 Total liabilities and shareholders' equity $ 1,205,587 $ 1,073,625 Interest rate spread 3.28% 3.50% Net interest income and margin $ 10, % $ 9, %

8 Financial Highlights (Unaudited) (Dollar amounts in thousands, except per share data) At or For the Three Months Ended March 31, Per share Data and Shares Outstanding(1) Earnings per share - basic $ 0.25 $ 0.20 Earnings per share - diluted $ 0.24 $ 0.19 Tangible book value per share $ $ 9.51 Weighted average common shares (basic) 12,826,941 12,756,443 Weighted average common shares (diluted) 13,572,417 13,508,596 Common shares outstanding at end of period 12,829,888 12,794,139 Performance Ratios Return on average assets (annualized) 1.09% 0.95% Return on average equity (annualized) 10.07% 8.42% Yield on earning assets (annualized) 4.59% 4.44% Cost of interest bearing liabilities (annualized) 1.31% 0.94% Net interest spread 3.28% 3.50% Net interest margin 3.60% 3.74% Noninterest income as a percentage of average assets (annualized) 0.11% 0.13% Noninterest expense to average assets (annualized) 2.18% 2.24% Efficiency ratio 60.3% 59.5% Asset Quality Loans days past due and accruing interest $ - - $ - - Non-accrual loans $ 638 $ 3,398 Other real estate owned $ 379 $ - - Non-performing assets (2) $ 1,017 $ 3,398 Non-performing assets to total assets 0.08% 0.31% Allowance for loan losses to total loans 0.90% 0.92% Allowance for loan losses to non-performing loans Net loan chargeoffs (recoveries) $ 1 $ (7) Net charge-offs (recoveries) to average loans (annualized) 0.00% 0.00% Troubled debt restructurings (total) $ 491 $ 504 Performing in accordance with modified terms $ 491 $ 504 Not performing in accordance with modified terms $ - - $ - - Regulatory Capital Ratios Total risk-based capital ratio 14.9% 12.3% Tier 1 risk-based capital ratio 11.9% 11.5% Leverage ratio 11.0% 11.4% Common equity tier 1 ratio 11.9% 11.5% Other Information Effective income tax rate 20.6% 33.4% Tangible equity / tangible assets 10.7% 11.3% Average tangible equity / average tangible assets 10.8% 11.3% Number of full time equivalent employees # Full service branch offices 6 5 # Loan production or limited service branch offices 2 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 September 5, (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.