John Marshall Bancorp, Inc. Reports Margin Expansion Drives 20% Increase in Net Interest Income, Balance Sheet Remains Source of Strength

John Marshall Bancorp, Inc. (NASDAQ:JMSB) (the "Company"), parent company of John Marshall Bank (the "Bank"), reported net income of $4.8 million for the quarter ended March 31, 2025 compared to $4.2 million for the quarter ended March 31, 2024, an increase of $606 thousand or 14.4%. Diluted earnings per share were $0.34 for the quarter ended March 31, 2025 compared to $0.30 for the quarter ended March 31, 2024, an increase of 13.3%. For the quarter ended December 31, 2024, reported net income was $4.8 million or $0.33 per diluted share.

Selected Highlights

• Earnings Accelerating – Pre-tax, pre-provision earnings (Non-GAAP) for the three months ended March 31, 2025 was $6.4 million, representing an increase of $1.7 million or 37.0% when compared to the three months ended March 31, 2024. Refer to "Explanation of Non-GAAP Measures" and the "Reconciliation of Certain Non-GAAP Financial Measures" table for further details about financial measures used in this release that were determined by methods other than in accordance with GAAP.

• Significant Increase in Net Interest Income and Margin – For the three months ended March 31, 2025, the Company reported net interest income of $14.1 million, a $2.4 million or 20.0% increase over the $11.7 million reported for the three months ended March 31, 2024. The increase in net interest income was driven by growth in net interest margin. Net interest margin increased 47 basis points from 2.11% for the three months ended March 31, 2024 to 2.58% for the three months ended March 31, 2025.

• Focused on Core Funding Growth – The Company remains focused on driving value through core funding growth. Non-interest bearing demand deposits grew 8.2% from March 31, 2024 to March 31, 2025. Non-interest bearing demand deposits increased from 21.3% of total deposits as of March 31, 2024 to 22.8% as of March 31, 2025. The Company decreased its wholesale funding sources by 8.8% from March 31, 2024 to March 31, 2025.

• Excellent Asset Quality – As of March 31, 2025 the Company had no loans greater than 30 days past due, no non-accrual loans and no other real estate owned assets. The Company recorded no net charge-offs during the first quarter of 2025. The Company had zero loans classified as substandard as of March 31, 2025.

• Robust Capitalization – Each of the Bank's regulatory capital ratios remained well in excess of the regulatory well-capitalized thresholds as of March 31, 2025. The Company's capitalization positions it well for organic growth, potential acquisitions, share repurchases or cash dividends.

• Growing Book Value per Share – Book value per share increased from $16.51 as of March 31, 2024 to $17.72 as of March 31, 2025, a 7.3% increase. When factoring in the $0.25 cash dividend per share paid in July 2024, the book value per share return was 8.8%.

• 20% Annual Cash Dividend Increase – On April 22, 2025, the Company declared an annual cash dividend of $0.30 per outstanding share of common stock. The dividend will be payable on July 7, 2025 to shareholders of record as of the close of business on June 27, 2025. This per share amount equates to a 20.0% increase over the 2024 annual cash dividend and marks the third consecutive increase in the annual cash dividend per share.

Chris Bergstrom, President and Chief Executive Officer, commented, "Despite a quarter marked by economic volatility, John Marshall Bank continued to expand margin, increase earnings and book loan commitments that are prudently underwritten. In the first quarter of 2025, the Company produced $96.5 million in loan commitments; our strongest first quarter since 2022. In March alone, we booked over $46 million in commitments. The overlay of tariffs and government efficiency initiatives have restrained borrowing by business owners and individuals. We believe that our commitment activity will translate into loan growth once greater economic clarity is realized. The Washington, DC metropolitan statistical area, is one of the most vibrant and resilient metro areas in the country and the percentage of Federal employees that are not in defense or security positions, by our estimates, represents about 4% of the workforce. In addition to solid demographic underpinnings, banking consolidation continues in the Washington, DC area dislocating both customers and experienced bankers. Our balance sheet, represented by our strong capitalization and excellent asset quality, is a source of strength that we intend to use to grow our customer base, attract qualified bankers, increase core funding, grow loans sensibly and continue to drive earnings growth."

Balance Sheet, Liquidity and Credit Quality

Total assets were $2.27 billion at March 31, 2025, $2.23 billion at December 31, 2024, and $2.25 billion at March 31, 2024. Total assets have increased $37.5 million or 1.7% since December 31, 2024 and increased $20.6 million or 0.9% since March 31, 2024.

Total loans, net of unearned income, increased $44.5 million or 2.4% to $1.87 billion at March 31, 2025, compared to $1.83 billion at March 31, 2024 and decreased $1.7 million during the quarter ended March 31, 2025 or 0.1% from December 31, 2024. The increase in loans from March 31, 2024, was primarily attributable to growth in the investor real estate loan and the construction & development loan portfolios, partially offset by a decrease in the commercial owner-occupied real estate loan portfolio. Refer to the Loan, Deposit and Borrowing table for further information.

The carrying value of the Company's fixed income securities portfolio was $215.6 million at March 31, 2025, $222.3 million at December 31, 2024 and $253.4 million at March 31, 2024. The decrease in carrying value of the Company's fixed income securities portfolio since March 31, 2024 was primarily attributable to maturities and the amortization of the portfolio. As of March 31, 2025, 95.3% of our bond portfolio carried the implied guarantee of the United States government or one of its agencies. At March 31, 2025, 63% of the fixed income portfolio was invested in amortizing bonds, which provides the Company with a source of steady cash flow. At March 31, 2025, the fixed income portfolio had an estimated weighted average life of 4.2 years. The available-for-sale portfolio comprised approximately 60% of the fixed income securities portfolio and had a weighted average life of 3.1 years at March 31, 2025. The held-to-maturity portfolio comprised approximately 40% of the fixed income securities portfolio and had a weighted average life of 5.8 years at March 31, 2025.

The Company's balance sheet remains highly liquid. The Company's liquidity position, defined as the sum of cash, unencumbered securities and available secured borrowing capacity, totaled $786.9 million as of March 31, 2025 compared to $727.3 million as of December 31, 2024 and represented 34.5% and 32.5% of total assets, respectively. In addition to available secured borrowing capacity, the Bank had available federal funds lines of $110.0 million at March 31, 2025.

Total deposits were $1.92 billion at March 31, 2025, $1.89 billion at December 31, 2024 and $1.90 billion at March 31, 2024. During the quarter, total deposits increased $29.8 million or 1.6% when compared to December 31, 2024. Deposits increased $21.2 million or 1.1% when compared to March 31, 2024. The Bank reduced costlier time deposits by $64.7 million since March 31, 2024. As further detailed in the tables included in this release, core funding sources have increased $35.2 million and wholesale funding sources have decreased $34.2 million since March 31, 2024. As of March 31, 2025, the Company had $660.8 million of deposits that were not insured or not collateralized compared to $627.1 million at March 31, 2024.

On September 3, 2024, the Company paid off its $77.0 million Bank Term Funding Program ("BTFP") advance and concurrently secured three Federal Home Loan Bank ("FHLB") advances totaling $56.0 million. The FHLB advances have a weighted average fixed interest rate of 4.01% compared to 4.76% for the retired BTFP advance. Total borrowings as of March 31, 2025 consisted of subordinated debt totaling $24.8 million and the FHLB advances.

Shareholders' equity increased $18.4 million or 7.8% to $253.0 million at March 31, 2025 compared to $234.6 million at March 31, 2024. Book value per share was $17.72 as of March 31, 2025 compared to $16.51 as of March 31, 2024, an increase of 7.3%. The year-over-year change in book value per share was primarily due to the Company's earnings over the previous twelve months and a decrease in accumulated other comprehensive loss. This increase was partially offset by increased cash dividends paid and increased share count from shareholder option exercises and restricted share award issuances. The decrease in accumulated other comprehensive loss was attributable to decreases in unrealized losses on our available-for-sale investment portfolio due to market value increases.

The Bank's capital ratios remained well above regulatory thresholds for well-capitalized banks. As of March 31, 2025, the Bank's total risk-based capital ratio was 16.5%, compared to 16.1% at March 31, 2024 and 16.2% at December 31, 2024. As outlined below, the Bank would continue to remain well above regulatory thresholds for well-capitalized banks at March 31, 2025 in the hypothetical scenario where the entire bond portfolio was sold at fair market value and any losses realized (Non-GAAP). Refer to "Explanation of Non-GAAP Measures" and the "Reconciliation of Certain Non-GAAP Financial Measures" table for further details about financial measures used in this release that were determined by methods other than in accordance with GAAP.

The Company recorded no charge-offs during the first quarter of 2025, the fourth quarter of 2024 or the first quarter of 2024. As of March 31, 2025, the Company had no loans greater than 30 days past due, no non-accrual loans and no other real estate owned assets.

At March 31, 2025, the allowance for loan credit losses was $18.8 million or 1.01% of outstanding loans, net of unearned income, compared to $18.7 million or 1.02% of outstanding loans, net of unearned income, at March 31, 2024. The decrease in the allowance as a percentage of outstanding loans, net of unearned income, resulted from changes in the Company's loss driver analysis and assumptions, changes in the composition of the loan portfolio, and considerations of qualitative factors combined with the continued strong credit performance of our loan portfolio segments.

At March 31, 2025, the allowance for credit losses on unfunded loan commitments was $1.1 million compared to $1.1 million at December 31, 2024.

The Company did not have an allowance for credit losses on held-to-maturity securities as of March 31, 2025 or December 31, 2024. As of March 31, 2025, 93.4% of our held-to-maturity portfolio carried the implied guarantee of the United States Government or one of its agencies.

The Company's owner occupied and non-owner occupied CRE portfolios continue to be of sound credit quality. The following table provides a detailed breakout of the two aforementioned segments as of March 31, 2025, demonstrating their strong debt-service-coverage and loan-to-value ratios.

The following charts provide geographic detail and stated maturity summaries for the Company's non-owner occupied office portfolio as of March 31, 2025:

Income Statement Review

The Company reported net income of $4.8 million for the first quarter of 2025, an increase of $606 thousand or 14.4% when compared to the first quarter of 2024. Pre-tax, pre provision earnings (Non-GAAP) were $6.4 million for the three months ended March 31, 2025, a 37.0% increase compared to the $4.6 million reported for the three months ended March 31, 2024.

Net interest income for the first quarter of 2025 increased $2.4 million or 20.0% compared to the first quarter of 2024, driven primarily by the increase in loan yields, reduction in the average balance of maturing deposits and borrowings, and the increase in the average balance of loans. The annualized net interest margin and tax-equivalent net interest margin (Non-GAAP) for the three months ended March 31, 2025 were 2.58% and 2.58%, as compared to 2.02% and 2.09%, respectively, for the same period in the prior year.

The yield on interest earning assets was 4.99% for the first quarter of 2025 compared to 4.83% for the same period in 2024. The increase in yield on interest earning assets was primarily due to higher yields on the Company's commercial real estate portfolio. The cost of interest-bearing liabilities was 3.48% for the first quarter of 2025 compared to 3.81% for the same quarter in the prior year. The decrease in the cost of interest-bearing liabilities was primarily due to the decrease in the cost of non-maturing deposits, retail time deposits and borrowing costs.

The Company recorded a $170 thousand provision for credit losses for the first quarter of 2025 compared to a recovery of provision for credit losses of $776 thousand for the first quarter of 2024.

Non-interest income was $505 thousand for the first quarter of 2025 compared to $818 thousand for the first quarter of 2024. The $313 thousand decrease in non-interest income was primarily attributable to a decrease of $100 thousand due to unfavorable mark-to-market adjustments on investments related to the Company's nonqualified deferred compensation plan ("NQDC"), a $97 thousand decrease in gains recorded on the sale of the guaranteed portion of SBA 7(a) loans due to decreased sale activity, a $64 thousand decrease in swap fee income and a $39 thousand decrease in insurance commissions.

Non-interest expense increased $324 thousand or 4.1% during the first quarter of 2025 compared to the first quarter of 2024 primarily as a result of an increase in salary and employee benefit expense. The $289 thousand or 6.0% increase in salary and employee benefit expense stemmed from the hiring of additional personnel. The Company hired three business development officers during the three months ended March 31, 2025. The Company's occupancy expense decreased $44 thousand or 9.8% when comparing the three months ended March 31, 2025 to the same period in 2024. The decrease resulted from relocating a branch to a lower cost and more favorable location. Furniture and equipment expenses increased $19 thousand or 6.4% for the three months ended March 31, 2025 versus the comparable quarter a year ago. The increase resulted from investment in and maintenance of technology. Other expenses for the three months ended March 31, 2025 increased $60 thousand or 2.5% when compared to the three months ended March 31, 2024. Increases primarily in data processing and marketing were partially offset by a reduction in professional fees.

For the three months ended March 31, 2025, annualized non-interest expense to average assets was 1.50% compared to 1.41% for the three months ended March 31 2024. The increase was primarily due to lower average assets when comparing the two periods. For the three months ended March 31, 2025, the efficiency ratio was 56.5% compared to 63.1% for the three months ended March 31, 2024. This decrease was primarily due to an increase in net interest income.

Explanation of Non-GAAP Financial Measures

This release contains financial information determined by methods other than in accordance with GAAP. Management believes that the supplemental Non-GAAP information provides a better comparison of period-to-period operating performance and unrealized losses in the Company's bond portfolio on the Bank's regulatory capital ratios. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. Non-GAAP measures used in this release consist of the following:

• Tax-equivalent net interest margin reflects adjustments for differences in tax treatment of interest income sources;
• Adjusted Bank regulatory capital ratios in the hypothetical scenario where the entire bond portfolio was sold at fair market value and any losses realized; and
• Pre-tax, pre-provision earnings excludes income tax expense and the provision for (recovery of) credit losses.

These disclosures should not be viewed as a substitute for, or more important than, financial results in accordance with GAAP, nor are they necessarily comparable to Non-GAAP performance measures which may be presented by other companies. Please refer to the Reconciliation of Certain Non-GAAP Financial Measures table and Average Balance Sheets, Interest and Rates tables for the respective periods for a reconciliation of these Non-GAAP measures to the most directly comparable GAAP measure.

About John Marshall Bancorp, Inc.

John Marshall Bancorp, Inc. is the bank holding company for John Marshall Bank. The Bank is headquartered in Reston, Virginia with eight full-service branches located in Alexandria, Arlington, Loudoun, Prince William, Reston, and Tysons, Virginia, as well as Rockville, Maryland, and Washington, D.C. The Bank is dedicated to providing exceptional value, personalized service and convenience to local businesses and professionals in the Washington, D.C. Metropolitan area. The Bank offers a comprehensive line of sophisticated banking products and services that rival those of the largest banks along with experienced staff to help achieve customers' financial goals. Dedicated relationship managers serve as direct points-of-contact, providing subject matter expertise in a variety of niche industries including charter and private schools, government contractors, health services, nonprofits and associations, professional services, property management companies and title companies. Learn more at www.johnmarshallbank.com.

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," "will," "should," "may," "view," "opportunity," "potential," or similar expressions or expressions of confidence. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and the Bank include, but are not limited to, the following: the concentration of our business in the Washington, D.C. metropolitan area and the effect of changes in the economic, political and environmental conditions on this market, including reduction in spending by the U.S. Government; adequacy of our allowance for loan credit losses; allowance for unfunded commitments credit losses, and allowance for credit losses associated with our held-to-maturity and available-for-sale securities portfolios; deterioration of our asset quality; future performance of our loan portfolio with respect to recently originated loans; the level of prepayments on loans and mortgage-backed securities; liquidity, interest rate and operational risks associated with our business; changes in our financial condition or results of operations that reduce capital; our ability to maintain existing deposit relationships or attract new deposit relationships; changes in consumer spending, borrowing and savings habits; inflation and changes in interest rates that may reduce our margins or reduce the fair value of financial instruments; changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; additional risks related to new lines of business, products, product enhancements or services; increased competition with other financial institutions and fintech companies; adverse changes in the securities markets; changes in the financial condition or future prospects of issuers of securities that we own; our ability to maintain an effective risk management framework; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory structure and in regulatory fees and capital requirements; compliance with legislative or regulatory requirements; results of examination of us by our regulators, including the possibility that our regulators may require us to increase our allowance for credit losses or to write-down assets or take similar actions; potential claims, damages, and fines related to litigation or government actions; the effectiveness of our internal controls over financial reporting and our ability to remediate any future material weakness in our internal controls over financial reporting; geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, negatively impacting business and economic conditions in the U.S. and abroad; the effects of weather-related or natural disasters, which may negatively affect our operations and/or our loan portfolio and increase our cost of conducting business; public health events (such as the COVID-19 pandemic) and governmental and societal responses thereto; technological risks and developments, and cyber threats, attacks, or events; changes in accounting policies and practices; our ability to successfully capitalize on growth opportunities; our ability to retain key employees; deteriorating economic conditions, either nationally or in our market area, including higher unemployment and lower real estate values; implications of our status as a smaller reporting company and as an emerging growth company; and other factors discussed in the Company's reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.