John Marshall Bancorp, Inc. (NASDAQ:JMSB) is a bank holding company headquartered in Reston, Virginia, primarily serving the Washington, D.C. metropolitan area through its wholly-owned subsidiary, John Marshall Bank. The company has demonstrated strong financial performance, with annual net income of $5,158,000, annual revenue of $85,497,000, annual operating cash flow of $18,004,000, and annual free cash flow of $17,392,000.
Recent Developments
In the first quarter of 2024, the company reported net income of $4,204,000, a decrease of $2,100,000 compared to the same period in 2023. Diluted earnings per share were $0.30, down from $0.44 in the prior year quarter. The decrease in net income was primarily driven by a rise in interest expense, which more than offset an increase in interest and non-interest income.
Financials
Net interest income, on a fully tax-equivalent basis, decreased by $2,745,000 or 18.9% to $11,790,000 for the first quarter of 2024, compared to $14,535,000 in the same period of 2023. The net interest margin declined to 2.11% from 2.57% due to an increase in the cost of interest-bearing liabilities, which outpaced the rise in yields on interest-earning assets.
The company recorded a $776,000 recovery of provision for credit losses in the first quarter of 2024, compared to a $774,000 recovery in the same period of 2023. The recovery was primarily due to changes in the loan portfolio composition, improved economic forecasts, and the continued strong credit performance of the company's loan segments.
Non-interest income increased by $252,000 or 44.5% to $818,000 in the first quarter of 2024, compared to $566,000 in the same period of 2023. The increase was mainly attributable to gains on the sale of government-guaranteed loans and higher insurance commission income, partially offset by the absence of a non-recurring loss on the sale of available-for-sale securities recorded in the prior year quarter.
Non-interest expense increased by $154,000 or 2.0% to $7,924,000 in the first quarter of 2024, compared to $7,770,000 in the same period of 2023. The increase was primarily due to higher professional fees and director costs related to a strategic opportunity that was explored but did not materialize, as well as an increase in data processing expenses.
Balance Sheet
The company's total assets increased by $9,288,000 or 0.4% to $2,251,837,000 as of March 31, 2024, compared to $2,242,549,000 as of December 31, 2023. The increase was primarily driven by a $55,739,000 rise in interest-bearing deposits in banks, partially offset by a $33,164,000 decrease in loans, net of unearned income, and a $12,036,000 decline in investments.
Total liabilities increased by $4,652,000 or 0.2% to $2,017,287,000 as of March 31, 2024, compared to $2,012,635,000 as of December 31, 2023. The increase was mainly attributable to a $23,000,000 rise in Federal Reserve Bank borrowings, partially offset by a $5,610,000 decrease in deposits.
Shareholders' equity increased by $4,636,000 or 2.0% to $234,550,000 as of March 31, 2024, compared to $229,914,000 as of December 31, 2023. The increase was primarily due to an increase in net income and additional paid-in capital from stock option exercises, partially offset by a decrease in accumulated other comprehensive income.
Loan Portfolio
The company's loan portfolio, net of unearned income, decreased by $34,036,000 or 1.8% to $1,825,931,000 as of March 31, 2024, compared to $1,859,967,000 as of December 31, 2023. The decrease was primarily driven by a $29,446,000 decline in the commercial real estate and construction and land development loan segments.
Investment Securities
The company's investment securities portfolio, including available-for-sale and held-to-maturity securities, decreased by $12,036,000 or 4.5% to $253,419,000 as of March 31, 2024, compared to $265,455,000 as of December 31, 2023. The decrease was mainly due to maturities, calls, and principal repayments of $11,643,000 during the first quarter of 2024.
Asset Quality
The company's asset quality remained strong, with no nonperforming assets or nonaccrual loans as of March 31, 2024, and December 31, 2023. The allowance for loan credit losses decreased to $18,671,000 or 1.02% of outstanding loans, net of unearned income, as of March 31, 2024, compared to $19,543,000 or 1.05% as of December 31, 2023.
Liquidity
The company's liquidity position remained robust, with total liquidity, defined as cash and cash equivalents, unencumbered securities at fair value, and available secured borrowing capacity, increasing to $788,700,000 as of March 31, 2024, compared to $638,900,000 as of December 31, 2023. The company's liquidity position represented 125.7% of uninsured, non-collateralized deposits as of March 31, 2024.
Capital Ratios
The company's regulatory capital ratios remained well above the well-capitalized thresholds set by the Federal Reserve. As of March 31, 2024, the company's total risk-based capital ratio was 16.1%, the tier 1 risk-based capital ratio was 15.1%, and the common equity tier 1 ratio was 15.1%. These ratios demonstrate the company's strong capital position and ability to support future growth and withstand potential economic challenges.
Conclusion
John Marshall Bancorp, Inc. (NASDAQ:JMSB) is a well-positioned community bank serving the Washington, D.C. metropolitan area. Despite the challenges of the current interest rate environment, the company has maintained a strong financial profile, with solid asset quality, ample liquidity, and a robust capital base. As the company navigates the evolving banking landscape, investors should closely monitor its ability to manage interest rate risk, maintain credit quality, and capitalize on growth opportunities in its target market.