Company Website: http://www.johnmarshallbank.com
RESTON, Va. -- (Business Wire)

John Marshall Bank (OTCQB: JMSB) (the “Bank”) reported net income of $5.8 million for the nine months ended September 30, 2014, an increase of $642 thousand, or 12.4%, as compared to net income of $5.2 million reported for the nine months ended September 30, 2013. Net income per diluted share declined 23.0% to $0.67 per share during the first nine months of 2014, compared to $0.87 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. As of September 30, 2014, the Bank’s tangible book value per share was $11.73, up 19.3% compared to $9.83 as of September 30, 2013.

The Bank’s nine month results produced an annualized return of 1.10% on average assets and 8.24% on average equity, compared to 1.18% and 12.42%, respectively, for the same period a year ago.

The Bank’s capital ratios remain well above regulatory minimums for well capitalized banks. As of September 30, 2014, the Bank’s total risk-based capital ratio was 14.4%, compared 10.6% at September 30, 2013.

The increase in the Bank’s capital ratios, and declines in return on average assets and average equity, are similarly reflective of the impact of the November 2013 common stock offering.

Balance Sheet Review

At September 30, 2014, total assets were $758.3 million, an increase of $95.7 million, or 14.4%, from total assets of $662.5 million at December 31, 2013, and an increase of $130.8 million, or 20.9% from total assets of $627.4 million at September 30, 2013. Gross loans increased $79.6 million, or 13.9%, to $653.1 million at September 30, 2014, compared to $573.4 million at December 31, 2013. Year-over-year loan growth, from September 30, 2013 to September 30, 2014, was $105.2 million, or 19.2%. The Bank’s investment portfolio increased to $62.9 million at September 30, 2014, compared to $55.2 million at December 31, 2013, and $40.5 million at September 30, 2013. It should be noted that during the first and second quarters of 2014 the Bank reclassified $48 million of its investment securities portfolio from available-for-sale to held-to-maturity. As of September 30, 2014 the Bank held $48.3 million of its investment portfolio as held-to-maturity, and $9.5 million as available-for-sale. The reclassification will help protect the Bank’s book value from deterioration in a rising interest rate environment.

Total deposits were $598.1 million at September 30, 2014, representing an increase of 16.1%, or $83.2 million, compared to December 31, 2013. Year-over-year deposit growth, from September 30, 2013 to September 30, 2014, was $82.7 million, or 16.0%. Total borrowings, consisting of Federal Home Loan Bank advances and customer repurchase agreements, were $58.3 million at September 30, 2014, an increase of 11.4%, or $6.0 million, compared to December 31, 2013. Year-over-year, from September 30, 2013 to September 30, 2014, total borrowings increased by $5.8 million, or 11.0%.

During the first nine months of 2014 certificates of deposit obtained through a deposit listing service provided by QwickRate, Inc. declined by $6.9 million. Year-over-year, QwickRate certificates of deposit declined by $14.1 million. Brokered certificates of deposit declined by $596 thousand during the first nine months of 2014 and declined by $1.7 million, or 9.2% since September 30, 2013. Federal Home Loan Bank advances increased by $7.0 million during the first nine months of 2014, and by $3.0 million, or 7.0%, compared to September 30, 2013. Core customer funding sources increased by $89.6 million during the first nine months of 2014, and by $101.3 million, or 21.2%, compared to September 30, 2013.

Total shareholders’ equity was $97.4 million at September 30, 2014, an increase of $6.7 million, or 7.4%, compared to December 31, 2013. Year-over-year, total shareholders’ equity increased by $39.6 million, or 68.4%, compared to September 30, 2013. 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 20,150 employee stock options during the past twelve months. Total common shares outstanding increased from 5,884,811 at September 30, 2013 to 8,304,961 at September 30, 2014.

Income Statement Review

Net interest income

Net interest income, the Bank’s primary source of revenue, was $22.0 million for the nine months ended September 30, 2014, up 12.7% from $19.5 million for the nine months ended September 30, 2013. The net interest margin was 4.23% during the first nine months of 2014, compared to 4.50% during the first nine months 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 4.86% during the first nine months of 2014 from 5.18% during the first nine months of 2013, which is substantially the result of a 21 basis point year-to-year decline in loan yields. In addition, there was a $16.6 million increase in average interest-bearing deposits in other banks, at a yield of 0.25%, during the first nine months of 2014. The large increase in interest-bearing deposits at other banks is primarily attributed to net proceeds from the Bank’s November 2013 stock offering, and an $88.5 million increase in total deposits and borrowings over the past twelve months.

Notwithstanding the decline in the net interest margin over the past year, net interest income increased by 12.7% during the first nine months of 2014, compared to the first nine months of 2013, resulting primarily from a $115.2 million, or 19.9%, increase in average earning assets during the first nine months of 2014, compared to the first nine months of 2013.

Provision for loan losses

The Bank recognized a provision for loan losses of $716 thousand during the first nine months of 2014, compared to a provision of $549 thousand during the first nine months of 2013. The increase in the provision for loan losses primarily reflects the relative growth of the Bank’s loan portfolio of $79.6 million during the first nine months of 2014, compared to $49.3 million during the first nine months of 2013. In addition, the Bank reported net loan charge-offs of $261 thousand during the first nine months of 2014, compared to $11 thousand during the first nine months of 2013. The loan charge-offs reported in 2014 were on two commercial loans that had been in non-accrual status and fully reserved in prior periods.

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 nine months ended September 30, 2014, the Bank reported total noninterest income of $340 thousand, compared to $276 thousand during the first nine months of 2013, an increase of 23.2%.

Noninterest expense

The largest component of the Bank’s noninterest expense is employee salaries and benefits. Salary and employee benefits expense increased by 14.9%, to $7.5 million, during the first nine months of 2014 compared to $6.5 million during the first nine months of 2013. All other operating expenses increased by 6.8%, or $323 thousand, to $5.1 million, during the first nine months of 2014, compared to $4.7 million during the first nine months 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 September 30, 2014, non-performing assets were 0.09% of total assets, compared to 0.04% at December 31, 2013 and 0.10% at September 30, 2013. The Bank’s allowance for loan losses covered non-performing loans by 9.6 times as of September 30, 2014, compared to 21.4 times at December 31, 2013 and 8.9 times at September 30, 2013.

Non-performing loans increased from $268 thousand at December 31, 2013 to $645 thousand at September 30, 2014. This was due to the addition of four commercial loan relationships totaling $645 thousand to non-performing status during the second and third quarters of 2014. One of the relationships, totaling $291 thousand, is well secured and the collateral is in the process of being sold by the borrower. Another loan, totaling $174 thousand has since been paid in full through a foreclosure sale of the underlying collateral. The remaining loans totaling $180 thousand have been fully reserved and are in the process of collection negotiations with the borrowers. In addition, two non-performing loans with a balance of $263 thousand were charged off during the third quarter of 2014. As of September 30, 2014 the Bank had total troubled debt restructurings of $1.5 million, compared to $2.2 million at September 30, 2013. All restructured loans were performing in accordance with modified terms as of September 30, 2014.

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.

Contacts:

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

Source: John Marshall Bank