Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries John Marshall Bancorp, Inc. Reports Third Quarter 2023 Results By: John Marshall via Business Wire October 18, 2023 at 09:00 AM EDT 11.3% Annualized Loan Growth Supported By Strong Balance Sheet John Marshall Bancorp, Inc. (Nasdaq: JMSB) (the “Company”), parent company of John Marshall Bank (the “Bank”), reported its financial results for the three and nine months ended September 30, 2023. Selected Highlights Strong Loan Growth – Loans, net of unearned income, grew $95.0 million or 5.5% from September 30, 2022 to September 30, 2023. Loans, net of unearned income, grew $50.3 million or 11.3% annualized from June 30, 2023 to September 30, 2023. The Company’s loan pipeline headed into the fourth quarter of 2023 continues to be strong as we are seeing increased lending opportunities that meet our underwriting standards and, in many cases, fewer competitors for those loans as some market participants have scaled back lending efforts. Pristine Asset Quality – For the sixteenth consecutive quarter, the Company had no nonperforming loans, no other real estate owned and no loans 30 days or more past due. There were no charge-offs during the quarter. The Company continues to adhere to strict underwriting standards and proactively manages the portfolio. Well Capitalized – Each of the Bank’s regulatory capital ratios is well in excess of the regulatory threshold to be considered well capitalized. The Bank’s equity to assets and total risk-based capital ratios were 10.6% and 15.7%, respectively, as of September 30, 2023. Continued Strength in CRE Loan Portfolio – The Company’s loan portfolio remains a source of strength. As of September 30, 2023, the Company’s commercial real estate (“CRE”) non-owner occupied and owner-occupied portfolios had a weighted average loan-to-values of 50.2% and 55.1%, respectively, and weighted average debt service coverage ratios of 2.1x and 3.5x, respectively. Decreased Wholesale Deposits – The Company reduced wholesale deposits (i.e., Brokered and QwickRate CDs) by $58.7 million or 16.3% during the three months ended September 30, 2023. Year-to-date, the Company reduced wholesale deposits by $73.7 million or 19.7%. As outlined in the deposit detail table included in this release, wholesale deposits have declined in each of the past two quarters by a total of $95.4 million. Increased Core Deposits – During the quarter, the Company grew non-interest bearing demand deposits by $3.9 million or 3.6% annualized. Non-interest bearing deposits as a percentage of total deposits increased from 21.2% at June 30, 2023 to 22.1% as of September 30, 2023. Non-maturing deposits increased $16.5 million during the three months ended September 30, 2023, representing 5.7% annualized growth. Core customer funding sources, as defined in the deposit detail table included with this release, increased from 80.3% as of June 30, 2023 to 82.6% as of September 30, 2023. Stabilizing Net Interest Margin – Net interest margin was 2.08% for the three months ended September 30, 2023 compared to 2.10% for the three months ended June 30, 2023 and 3.10% for the three months ended September 30, 2022. The Company realized the initial benefits of the July 2023 balance sheet restructuring disclosed in the Company’s earnings release and Form 10-Q for the second quarter of 2023 (the “Restructuring”). We continue to redeploy the Restructuring proceeds into higher yielding, high-quality earning assets and pay down higher cost funding sources. As a result of the Restructuring, strong loan growth and reduction of wholesale deposits, net interest margin progressively improved throughout the quarter and ended the month of September at 2.13%. Chris Bergstrom, President and Chief Executive Officer, commented, “By selling low yielding assets through the Restructuring, we increased the flexibility and earnings horsepower of our balance sheet. Part of the proceeds from the Restructuring were redeployed into the loan growth anticipated in last quarter’s earnings release and enabled us to enhance our earning asset yield. Part of the Restructuring proceeds were utilized to pay down higher cost wholesale funding, which we expect will slow the rate of increase on our cost of funds. Part of the proceeds are awaiting redeployment, but are earning a higher yield than they were prior to the Restructuring. We anticipate putting these funds to work in the fourth quarter, as our loan pipeline remains strong. In addition, we are encouraged by our core non-maturing deposit growth and improved funding mix during the quarter. Our balance sheet remains strong. We continue to have excellent asset quality and robust liquidity. While the quarter’s reported results reflect the non-recurring impact of the Restructuring, core operating performance of the Company remains strong and we have enhanced our ability to drive earnings growth.” Balance Sheet, Liquidity and Credit Quality Total assets were $2.30 billion at September 30, 2023, $2.36 billion at June 30, 2023 and $2.31 billion at September 30, 2022. As discussed in more detail below, the Company reduced wholesale deposits by $58.7 million during the quarter. Total loans, net of unearned income, increased $95.0 million or 5.5% to $1.82 billion at September 30, 2023, compared to $1.73 billion at September 30, 2022 and $50.3 million during the quarter ended September 30, 2023 or 11.3% annualized from $1.77 billion at June 30, 2023. The increase in loans during both comparative periods was primarily attributable to growth in the residential mortgage and commercial investor real estate loan portfolios. The carrying value of the Company’s fixed income securities portfolio was $265.4 million at September 30, 2023, $422.7 million at June 30, 2023 and $467.1 million at September 30, 2022. The reduction in the portfolio resulted from the Restructuring, which was previously disclosed in our July 21, 2023 earnings release. As of September 30, 2023, 96.2% of our bond portfolio was covered by the implied guarantee of the United States government or one of its agencies. At September 30, 2023, nearly 67% of the fixed income portfolio was invested in amortizing bonds, which provides the Company with a source of steady cash flow. At September 30, 2023, the fixed income portfolio had an estimated weighted average life of 4.5 years. The available-for-sale portfolio comprised approximately 66% of the fixed income securities portfolio and had a weighted average life of 3.2 years at September 30, 2023. The held-to-maturity portfolio comprised approximately 34% of the fixed income securities portfolio and had a weighted average life of 7.0 years at September 30, 2023. The Company did not purchase any fixed income securities during the three or nine month periods ended September 30, 2023. 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 $742.5 million as of September 30, 2023 compared to $839.4 million as of June 30, 2023 and represented 32.3% and 35.5% of total assets, respectively. Wholesale deposits, defined as brokered and QwickRate certificates of deposit, decreased $58.7 million or 16.3% from $359.1 million at June 30, 2023 to $300.5 million at September 30, 2023. As discussed above, the Company also funded $50.3 million of net loan growth during the quarter ended September 30, 2023. Liquidity Trends September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 (Dollars in thousands) Amount % of Assets Amount % of Assets Amount % of Assets Amount % of Assets Amount % of Assets Cash $ 192,656 8.4 % $ 129,551 5.5 % $ 103,359 4.4 % $ 61,599 2.6 % $ 74,756 3.2 % Unencumbered Securities 80,267 3.5 % 233,695 9.9 % 298,194 12.7 % 313,618 13.4 % 345,987 15.0 % Available Secured Borrowing Capacity 469,524 20.4 % 476,144 20.1 % 451,008 19.2 % 388,257 16.5 % 401,828 17.4 % Total Liquidity $ 742,447 32.3 % $ 839,390 35.5 % $ 852,561 36.3 % $ 763,474 32.5 % $ 822,571 35.6 % If the Company were to avail itself of additional Bank Term Funding Program (“BTFP”) funding, we estimate an incremental increase in our liquidity position of approximately $13.4 million, increasing our potential liquidity to $755.8 million as of September 30, 2023. In addition to available secured borrowing capacity, the Bank had available federal funds lines of $110.0 million at September 30, 2023. Total deposits were $1.98 billion at September 30, 2023, $2.05 billion at June 30, 2023 and $2.06 billion at September 30, 2022. Total deposits decreased $64.7 million or 3.2% when compared to June 30, 2023. The decrease was primarily due to a managed reduction in costlier wholesale deposits of $58.7 million or 16.3% during the quarter. NOW deposits increased $34.3 million or 11.0% to partially offset the decrease in wholesale deposits. As of September 30, 2023, the Company had $614.0 million of deposits that were not insured or not collateralized by securities compared to $697.0 million at June 30, 2023. Deposits that were not insured or not collateralized by securities represented only 31.0% of total deposits at September 30, 2023 compared to 34.1% at June 30, 2023. The Company obtained a $54.0 million advance from the BTFP on May 15, 2023 to secure lower funding costs relative to wholesale deposits. The BTFP advance has a term of one year, bears interest at a fixed rate of 4.80% and can be prepaid without penalty prior to maturity. Total borrowings as of September 30, 2023 consisted of subordinated debt totaling $24.7 million and the BTFP advance totaling $54.0 million. The Company did not have any FHLB advances or federal funds purchased outstanding as of September 30, 2023. Shareholders’ equity increased $18.4 million or 9.1% to $220.6 million at September 30, 2023 compared to $202.2 million at September 30, 2022. Book value per share was $15.61 as of September 30, 2023 compared to $14.37 as of September 30, 2022. The year-over-year change in book value per share was primarily due to the Company’s earnings over the previous twelve months and decrease in accumulated other comprehensive loss, partially offset by increased share count from shareholder option exercises and restricted share award issuances and dividends paid. The decrease in accumulated other comprehensive loss was primarily attributable to the sale of certain available-for-sale investment securities in the July 2023 Restructuring. Book value per share was $15.50 as of June 30, 2023. The Bank’s capital ratios at September 30, 2023 improved when compared to September 30, 2022 and remained well above regulatory thresholds for well-capitalized banks. As of September 30, 2023, the Bank’s total risk-based capital ratio was 15.7%, compared to 15.4% at September 30, 2022 (GAAP). As outlined below, the Bank would continue to remain well above regulatory thresholds for well-capitalized banks at September 30, 2023 in the hypothetical scenario where the entire bond portfolio was sold at fair market value and the 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. Bank Regulatory Capital Ratios (As Reported) Well-Capitalized Threshold September 30, 2023 December 31, 2022 September 30, 2022 Total risk-based capital ratio 10.0 % 15.7 % 15.6 % 15.4 % Tier 1 risk-based capital ratio 8.0 % 14.6 % 14.4 % 14.3 % Common equity tier 1 ratio 6.5 % 14.6 % 14.4 % 14.3 % Leverage ratio 5.0 % 11.3 % 11.3 % 11.0 % Bank Regulatory Capital Ratios (Hypothetical Scenario of Selling All Bonds at Fair Market Value - Non-GAAP) Well-Capitalized Threshold September 30, 2023 December 31, 2022 September 30, 2022 Total risk-based capital ratio 10.0 % 14.1 % 13.8 % 13.4 % Tier 1 risk-based capital ratio 8.0 % 12.9 % 12.6 % 12.2 % Common equity tier 1 ratio 6.5 % 12.9 % 12.6 % 12.2 % Leverage ratio 5.0 % 11.3 % 11.8 % 11.4 % The Company recorded no charge-offs during the third quarter of 2023, during the second quarter of 2023 or during the third quarter of 2022. As of September 30, 2023, the Company had no non-accrual loans, no loans greater than 30 days past due and no other real estate owned assets. At September 30, 2023, the allowance for loan credit losses was $20.0 million or 1.10% of outstanding loans, net of unearned income, compared to $20.6 million or 1.17% of outstanding loans, net of unearned income, at June 30, 2023. The decrease in the allowance as a percentage of outstanding loans, net of unearned income, was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. At September 30, 2023, the allowance for credit losses on unfunded loan commitments was $0.9 million compared to $1.1 million at June 30, 2023. The decrease in the allowance for credit losses on unfunded loan commitments was primarily the result of the updated loss factors utilized on the funded loan portfolio. The Company did not have an allowance for credit losses on held-to-maturity securities as of September 30, 2023 or June 30, 2023. 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 portfolios as of September 30, 2023, demonstrating their strong debt-service-coverage and loan-to-value ratios. Commercial Real Estate Owner Occupied Non-owner Occupied Asset Class Weighted Average Loan-to-Value(1) Weighted Average Debt Service Coverage Ratio(2) Number of Total Loans Principal Balance(3) (Dollars in thousands) Weighted Average Loan-to-Value(1) Weighted Average Debt Service Coverage Ratio(2) Number of Total Loans Principal Balance(3) (Dollars in thousands) Office 60.7 % 4.3 x 129 $ 84,512 47.1 % 1.9 x 64 $ 124,288 Retail 61.0 % 2.3 x 43 61,170 51.2 % 1.9 x 142 396,544 Warehouse 62.3 % 2.4 x 28 37,359 46.5 % 3.0 x 24 33,558 Church 32.4 % 3.1 x 19 37,799 - - - - - - - - Hotel/Motel - - - - - - - - 48.6 % 2.2 x 7 39,282 Industrial 55.8 % 4.7 x 24 37,603 52.8 % 2.5 x 16 66,210 Other(4) 52.5 % 3.6 x 50 104,574 50.0 % 1.8 x 16 23,804 Total 293 $ 363,017 269 $ 683,686 ___________________________ (1) Loan-to-value is determined at origination date and is divided by principal balance as of September 30, 2023. (2) The debt service coverage ratio (“DSCR”) is calculated from the primary source of repayment for the loan. Owner occupied DSCR’s are derived from cash flows from the owner occupant’s business, property and their guarantors, while non-owner occupied DSCR’s are derived from the net operating income of the property. (3) Principal balance excludes deferred fees or costs. (4) Other asset class is primarily comprised of schools, daycares and country clubs. Income Statement Review Quarterly Results The Company reported a net loss of $10.1 million for the third quarter of 2023, a decrease of $18.2 million when compared to the third quarter of 2022. As disclosed in our July 21, 2023 earnings release discussing results for the quarter and year-ended June 30, 2023, during July the Company sold certain lower-yielding available-for-sale investment securities with a total par value of $161.2 million and agreed to surrender $21.4 million of bank owned life insurance (“BOLI”) contracts, resulting in a non-recurring, after-tax loss of $14.6 million that was recorded during the third quarter of 2023. Core net income (Non-GAAP) defined as reported net income excluding the non-recurring after-tax loss and taxes paid in conjunction with the surrender of the Bank’s BOLI policies resulting from the Restructuring, was $4.5 million, a decrease of $3.6 million when compared to the third quarter of 2022 and consistent with net income reported for the second quarter of 2023. Reported (GAAP) and core (Non-GAAP) earnings per share, annualized return on average assets (“ROAA”) and annualized return on average equity (“ROAE”) were as follows: For the Three Months Ended September 30, 2023 June 30, 2023 September 30, 2022 Net income (loss) (GAAP) $ (10,137 ) $ 4,490 $ 8,045 Add: Loss on securities sale, net of tax 13,520 - - Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies 1,101 - - Core net income (Non-GAAP) $ 4,484 $ 4,490 $ 8,045 Earnings per share - diluted (GAAP) $ (0.72 ) $ 0.32 $ 0.57 Core earnings per share - diluted (Non-GAAP) $ 0.32 $ 0.32 $ 0.57 Return on average assets (annualized) (GAAP) (1.73 )% 0.77 % 1.38 % Core return on average assets (annualized) (Non-GAAP) 0.76 % 0.77 % 1.38 % Return on average equity (annualized) (GAAP) (18.24 )% 8.13 % 15.07 % Core return on average equity (annualized) (Non-GAAP) 8.07 % 8.13 % 15.07 % 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. Net interest income for the third quarter of 2023 decreased $5.7 million or 32.3% compared to the third quarter of 2022, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets. The yield on interest earning assets was 4.54% for the third quarter of 2023 compared to 3.71% for the same period in 2022. The increase in yield on interest earning assets was primarily due to higher yields on the Company’s loan and investment portfolios and deposits in banks as a result of increases in interest rates subsequent to the third quarter of 2022. The cost of interest-bearing liabilities was 3.41% for the third quarter of 2023 compared to 0.90% for the same quarter in the prior year. The increase in the cost of interest-bearing liabilities was primarily due to a 2.53% increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the third quarter of 2022. The increase in the overall cost of interest-bearing liabilities in the third quarter of 2023 relative to the same period of the prior year is largely due to rate hikes totaling 5.25% by the Federal Reserve Bank since the beginning of 2022, which has increased cost of funds and compressed net interest margins across the banking industry. The annualized net interest margin for the third quarter of 2023 was 2.08% as compared to 3.10% for the same quarter of the prior year. The decrease in net interest margin was primarily due to the increase in cost of interest-bearing deposits, which was partially offset by an increase in yields on the Company’s interest-earning assets. With a portion of the proceeds from the Restructuring being redeployed to higher yielding assets, the Company’s net interest margin increased each month during the third quarter to 2.13% for the month of September 2023. The Company recorded an $829 thousand release of provision for credit losses for the third quarter of 2023 compared to no provision for the third quarter of 2022. The release of provision for credit losses during the third quarter of 2023 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. Non-interest income decreased $17.3 million during the third quarter of 2023 compared to the third quarter of 2022. The decrease in non-interest income was primarily due to the Restructuring that resulted in a loss of $17.1 million. Core non-interest income (Non-GAAP) defined as reported non-interest income excluding the $17.1 million loss stemming from the bond sale portion of the Restructuring, decreased $151 thousand primarily as a result of a decrease in bank owned life insurance (“BOLI”) income of $232 thousand due to the surrender of all BOLI policies as part of the Restructuring. This decrease was partially offset by favorable variances of $47 thousand related to mark-to-market adjustments on investments related to the Company’s nonqualified deferred compensation plan and gains recorded on the sale of the guaranteed portion of SBA 7(a) loans totaling $27 thousand when compared to the third quarter of 2022. Non-interest expense decreased $298 thousand or 3.7% during the third quarter of 2023 compared to the third quarter of 2022 primarily due to the reversal of a litigation reserve totaling $322 thousand as a result of a favorable verdict received by the Company on a multi-year legal matter that was resolved during the quarter. The decrease was partially offset by increases in FDIC insurance expense and franchise tax expense. The increase in FDIC insurance expense resulted from the FDIC increasing the base assessment rate for all insured depository institutions. The increase in franchise tax expense was due to an increase in the Bank’s equity as that is the basis the Commonwealth of Virginia uses to assess taxes on banking institutions. The decrease in salaries and employee benefits was due to lower benefit costs incurred by the Company. The decrease in occupancy expense of premises was due to a decrease in office rent as a result of the renegotiation of certain leases. The decrease in furniture and equipment expense was due to lower depreciation expense on fixed assets. The Company continues to analyze cost savings opportunities on existing leases and material contracts. For the three months ended September 30, 2023, annualized non-interest expense to average assets was 1.30% compared to 1.36% for the three months ended September 30, 2022. The decrease was primarily due to lower overhead costs as a result of continued cost consciousness. For the three months ended September 30, 2023, the annualized core efficiency ratio (Non-GAAP), which excludes the impact of the Restructuring, was 62.4% compared to 43.9% for the three months ended September 30, 2022. The increase was primarily due to a decrease in net interest income and to a lesser extent a decrease in non-interest income. Year-to-Date Results The Company reported net income of $656 thousand for the nine months ended September 30, 2023, a decrease of $22.9 million when compared to the same period in 2022. This decrease was primarily attributable to the Restructuring, as previously discussed, that resulted in an after-tax loss of $14.6 million. Core net income (Non-GAAP) for the nine months ended September 30, 2023 was $15.3 million, a decrease of $8.3 million when compared to the same period in 2022. Reported (GAAP) and core (Non-GAAP) earnings per share, ROAA and ROAE were as follows: For the Nine Months Ended September 30, 2023 September 30, 2022 Net income (GAAP) $ 656 $ 23,601 Add: Loss on securities sale, net of tax 13,520 - Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies 1,101 - Core net income (Non-GAAP) $ 15,277 $ 23,601 Earnings per share - diluted (GAAP) $ 0.05 $ 1.67 Core earnings per share - diluted (Non-GAAP) $ 1.08 $ 1.67 Return on average assets (annualized) (GAAP) 0.04 % 1.40 % Core return on average assets (annualized) (Non-GAAP) 0.87 % 1.40 % Return on average equity (annualized) (GAAP) 0.40 % 15.03 % Core return on average equity (annualized) (Non-GAAP) 9.25 % 15.03 % 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. Net interest income for the nine months ended September 30, 2023 decreased $14.5 million or 27.3% compared to the same period of 2022, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets. The yield on interest earning assets was 4.32% for the nine months ended September 30, 2023 compared to 3.65% for the same period in 2022. The increase in yield on interest earning assets was primarily due to higher yields on the Company’s loan and investment portfolios and deposits in banks as a result of increases in interest rates subsequent to the second quarter of 2022. The cost of interest-bearing liabilities was 2.89% for the nine months ended September 30, 2023 compared to 0.67% for the nine months ended September 30, 2022. The increase in the cost of interest-bearing liabilities was primarily due to a 2.26% increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the third quarter of 2022. The annualized net interest margin for the nine months ended September 30, 2023 was 2.25% as compared to 3.19% for the same period in the prior year. The decrease in net interest margin was primarily due to the increase in cost of interest-bearing deposits, which was partially offset by an increase in yields on the Company’s interest-earning assets. The Company recorded a $2.5 million release of provision for credit losses for the nine months ended September 30, 2023 compared to no provision for the nine months ended September 30, 2022. The release of provision for credit losses during the third quarter of 2023 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. Non-interest income decreased $16.5 million during the nine months ended September 30, 2023 compared to the same period in 2022. The decrease in non-interest income was primarily due to the Restructuring that resulted in a loss of $17.1 million. Core non-interest income (Non-GAAP) increased $577 thousand primarily due to favorable variances of $610 thousand as a result of mark-to-market adjustments on investments related to the Company’s nonqualified deferred compensation plan. The Company also had an increase in other service charges and fee income of $208 thousand primarily as a result of penalty fee income recognized on the early withdrawal of certificates of deposit, a $91 thousand increase in customer interest rate swap fee income and gains recorded on the sale of the guaranteed portion of SBA 7(a) loans totaling $50 thousand. These increases were partially offset by a decrease in BOLI income of $221 thousand due to the surrender of all BOLI policies as part of the Restructuring. Non-interest expense decreased $1.2 million or 4.8% during the nine months ended September 30, 2023 compared to the same period in 2022 primarily due to decreases in salaries and employee benefits expense. The decrease in salaries and employee benefits was primarily due to a reduction in incentive compensation accruals when compared to the same period of the prior year. Incentive compensation accruals can fluctuate materially from quarter to quarter, based upon the Company’s financial performance and conditions measured against, among other evaluation criteria, our strategic plan and budget. At the end of each year, the ultimate determination of the incentive compensation is approved by the Board of Directors. The decrease in other expense was due to the reversal of a litigation reserve previously discussed and lower legal and consulting expenses, partially offset by increases in FDIC insurance expense, franchise tax expense and marketing expense. The increase in FDIC insurance expense resulted from the FDIC increasing the base assessment rate for all insured depository institutions. The increase in franchise tax expense was due to an increase in the Bank’s equity as that is the basis the Commonwealth of Virginia uses to assess taxes on banking institutions. The increase in marketing expense was due to increased marketing and promotional activity. The decrease in occupancy expense of premises was due to a decrease in office rent as a result of the renegotiation of certain leases. The decrease in furniture and equipment expense was due to lower depreciation expense on fixed assets. For the nine months ended September 30, 2023, annualized non-interest expense to average assets was 1.33% compared to 1.45% for the nine months ended September 30, 2022. The decrease was primarily due to lower overhead costs as a result of continued cost consciousness. For the nine months ended September 30, 2023, the annualized core efficiency ratio (Non-GAAP) was 58.1% compared to 45.3% for the nine months ended September 30, 2022. The increase was primarily due to a decrease in net interest income, which more than offset the increase in core non-interest income (Non-GAAP) and decrease in non-interest expense. 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 the impact of unrealized losses in the Company’s bond portfolio on the Bank’s regulatory capital ratios and period-to-period operating performance, respectively. 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: The impact to the Bank’s regulatory capital ratios in the hypothetical scenario where the entire bond portfolio was sold at fair market value and the losses realized. Non-interest income, income before taxes, income tax expense, net income, earnings per share (basic and diluted), return on average assets (annualized), return on average equity (annualized), non-interest income as a percentage of average assets (annualized) and efficiency ratio excluding the impact of losses recognized in July 2023 on the sale of available-for-sale securities and taxes paid on the early surrender of bank owned life insurance policies. These disclosures should not be viewed as a substitute for 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 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 a $2.30 billion asset bank 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. Metro 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. 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; adequacy of our allowance for credit losses; 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 acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, negatively impacting business and economic conditions in the U.S. and abroad; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts or public health events (such as COVID-19), and of governmental and societal responses thereto; technological risks and developments, and cyber threats, attacks, or events; the additional requirements of being a public company; 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. John Marshall Bancorp, Inc. Financial Highlights (Unaudited) (Dollar amounts in thousands, except per share data) At or For the Three Months Ended At or For the Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Selected Balance Sheet Data Cash and cash equivalents $ 192,656 $ 74,756 $ 192,656 $ 74,756 Total investment securities 272,881 473,478 272,881 473,478 Loans, net of unearned income 1,820,132 1,725,114 1,820,132 1,725,114 Allowance for loan credit losses 20,036 20,032 20,036 20,032 Total assets 2,298,202 2,305,540 2,298,202 2,305,540 Non-interest bearing demand deposits 437,880 535,186 437,880 535,186 Interest bearing deposits 1,543,743 1,528,155 1,543,743 1,528,155 Total deposits 1,981,623 2,063,341 1,981,623 2,063,341 Federal funds purchased - - - - - - - - Federal Home Loan Bank advances - - - - - - - - Federal Reserve Bank borrowings 54,000 - - 54,000 - - Shareholders' equity 220,567 202,212 220,567 202,212 Summary Results of Operations Interest income $ 26,263 $ 21,208 $ 74,171 $ 60,509 Interest expense 14,284 3,516 35,715 7,593 Net interest income 11,979 17,692 38,456 52,916 Provision for (recovery of) credit losses (829 ) - - (2,471 ) - - Net interest income after provision for (recovery of) credit losses 12,808 17,692 40,927 52,916 Non-interest income (loss) (16,815 ) 450 (15,564 ) 973 Core non-interest income(1) 299 450 1,550 973 Non-interest expense 7,660 7,958 23,261 24,425 Income (Loss) before income taxes (11,667 ) 10,184 2,102 29,464 Core income before income taxes(1) 5,447 10,184 19,216 29,464 Net income (loss) (10,137 ) 8,045 656 23,601 Core net income(1) 4,484 8,045 15,277 23,601 Per Share Data and Shares Outstanding Earnings (loss) per share - basic $ (0.72 ) $ 0.57 $ 0.05 $ 1.69 Core earnings per share - basic(1) $ 0.32 $ 0.57 $ 1.08 $ 1.69 Earnings (loss) per share - diluted $ (0.72 ) $ 0.57 $ 0.05 $ 1.67 Core earnings per share - diluted(1) $ 0.32 $ 0.57 $ 1.08 $ 1.67 Book value per share $ 15.61 $ 14.37 $ 15.61 $ 14.37 Weighted average common shares (basic) 14,080,026 13,989,414 14,126,522 13,902,324 Weighted average common shares (diluted) 14,080,026 14,108,286 14,199,179 14,065,887 Common shares outstanding at end of period 14,126,084 14,070,080 14,126,084 14,070,080 Performance Ratios Return on average assets (annualized) (1.73 )% 1.38 % 0.04 % 1.40 % Core return on average assets (annualized)(1) 0.76 1.38 0.87 1.40 Return on average equity (annualized) (18.24 )% 15.07 % 0.40 % 15.03 % Core return on average equity (annualized)(1) 8.07 15.07 9.25 15.03 Net interest margin 2.08 % 3.10 % 2.25 % 3.19 % Non-interest income (loss) as a percentage of average assets (annualized) (2.86 )% 0.08 % (0.89 )% 0.06 % Core non-interest income as a percentage of average assets (annualized)(1) 0.05 0.08 0.09 0.06 Non-interest expense to average assets (annualized) 1.30 % 1.36 % 1.33 % 1.45 % Efficiency ratio (158.4 )% 43.9 % 101.6 % 45.3 % Core efficiency ratio(1) 62.4 43.9 58.1 45.3 Asset Quality Non-performing assets to total assets - - % - - % - - % - - % Non-performing loans to total loans - - % - - % - - % - - % Allowance for loan credit losses to non-performing loans N/M N/M N/M N/M Allowance for loan credit losses to total loans 1.10 % 1.16 % 1.10 % 1.16 % Net charge-offs (recoveries) to average loans (annualized) 0.00 % 0.00 % 0.00 % 0.00 % Loans 30-89 days past due and accruing interest $ - - $ - - $ - - $ - - Non-accrual loans - - - - - - - - Other real estate owned - - - - - - - - Non-performing assets (2) - - - - - - - - Capital Ratios (Bank Level) Equity / assets 10.6 % 9.7 % 10.6 % 9.7 % Total risk-based capital ratio 15.7 % 15.4 % 15.7 % 15.4 % Tier 1 risk-based capital ratio 14.6 % 14.3 % 14.6 % 14.3 % Common equity tier 1 ratio 14.6 % 14.3 % 14.6 % 14.3 % Leverage ratio 11.3 % 11.0 % 11.3 % 11.0 % Other Information Number of full time equivalent employees 138 136 138 136 # Full service branch offices 8 8 8 8 # Loan production or limited service branch offices - - 1 - - 1 ___________________________ (1) Non-GAAP financial measure. Refer to “Reconciliation of Certain Non-GAAP Financial Measures” for further details. (2) Non-performing assets consist of non-accrual loans, loans 90 days or more past due and still accruing interest and other real estate owned. John Marshall Bancorp, Inc. Consolidated Balance Sheets (Dollar amounts in thousands, except per share data) % Change September 30, December 31, September 30, Last Nine Year Over 2023 2022 2022 Months Year Assets (Unaudited) * (Unaudited) Cash and due from banks $ 7,642 $ 6,583 $ 14,957 16.1 % (48.9 )% Interest-bearing deposits in banks 185,014 55,016 59,799 236.3 % 209.4 % Securities available-for-sale, at fair value 169,084 357,576 366,546 (52.7 )% (53.9 )% Securities held-to-maturity, fair value of $75,733, $81,161, and $81,765 at 9/30/2023, 12/31/2022, and 9/30/2022, respectively. 96,347 99,415 100,598 (3.1 )% (4.2 )% Restricted securities, at cost 5,007 4,425 4,421 13.2 % 13.3 % Equity securities, at fair value 2,443 2,115 1,913 15.5 % 27.7 % Loans, net of unearned income 1,820,132 1,789,508 1,725,114 1.7 % 5.5 % Allowance for credit losses (20,036 ) (20,208 ) (20,032 ) (0.9 )% 0.0 % Net loans 1,800,096 1,769,300 1,705,082 1.7 % 5.6 % Bank premises and equipment, net 1,264 1,219 1,331 3.7 % (5.0 )% Accrued interest receivable 5,701 5,531 4,744 3.1 % 20.2 % Bank owned life insurance - 21,170 21,071 (100.0 )% (100.0 )% Right of use assets 4,136 4,611 3,936 (10.3 )% 5.1 % Other assets 21,468 21,274 21,142 0.9 % 1.5 % Total assets $ 2,298,202 $ 2,348,235 $ 2,305,540 (2.1 )% (0.3 )% Liabilities and Shareholders' Equity Liabilities Deposits: Non-interest bearing demand deposits $ 437,880 $ 476,697 $ 535,186 (8.1 )% (18.2 )% Interest-bearing demand deposits 675,819 691,945 705,593 (2.3 )% (4.2 )% Savings deposits 57,408 95,241 102,909 (39.7 )% (44.2 )% Time deposits 810,516 803,857 719,653 0.8 % 12.6 % Total deposits 1,981,623 2,067,740 2,063,341 (4.2 )% (4.0 )% Federal funds purchased - - 25,500 - - N/M N/M Federal Reserve Bank borrowings 54,000 - - - - N/M N/M Subordinated debt, net 24,687 24,624 24,603 0.3 % 0.3 % Accrued interest payable 2,610 1,035 643 152.2 % 305.9 % Lease liabilities 4,415 4,858 4,186 (9.1 )% 5.5 % Other liabilities 10,300 11,678 10,555 (11.8 )% (2.4 )% Total liabilities 2,077,635 2,135,435 2,103,328 (2.7 )% (1.2 )% Shareholders' Equity Preferred stock, par value $0.01 per share; authorized 1,000,000 shares; none issued - - - - - - N/M N/M Common stock, nonvoting, par value $0.01 per share; authorized 1,000,000 shares; none issued - - - - - - N/M N/M Common stock, voting, par value $0.01 per share; authorized 30,000,000 shares; issued and outstanding, 14,126,084 at 9/30/2023 including 45,871 unvested shares, 14,098,986 at 12/31/2022 including 55,185 unvested shares, and 14,070,080 at 9/30/2022, including 58,046 unvested shares 141 141 140 - - % 0.7 % Additional paid-in capital 95,510 94,726 94,560 0.8 % 1.0 % Retained earnings 141,886 146,630 138,428 (3.2 )% 2.5 % Accumulated other comprehensive loss (16,970 ) (28,697 ) (30,916 ) (40.9 )% (45.1 )% Total shareholders' equity 220,567 212,800 202,212 3.6 % 9.1 % Total liabilities and shareholders' equity $ 2,298,202 $ 2,348,235 $ 2,305,540 (2.1 )% (0.3 )% * Derived from audited consolidated financial statements. John Marshall Bancorp, Inc. Consolidated Statements of Income (Dollar amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 % Change 2023 2022 % Change (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest and Dividend Income Interest and fees on loans $ 21,925 $ 18,222 20.3 % $ 63,355 $ 53,740 17.9 % Interest on investment securities, taxable 1,507 2,323 (35.1 )% 5,895 5,597 5.3 % Interest on investment securities, tax-exempt 10 30 (66.7 )% 45 90 (50.0 )% Dividends 75 62 21.0 % 222 185 20.0 % Interest on deposits in other banks 2,746 571 N/M 4,654 897 N/M Total interest and dividend income 26,263 21,208 23.8 % 74,171 60,509 22.6 % Interest Expense Deposits 13,273 3,068 N/M 33,590 6,090 N/M Federal funds purchased - - - - N/M 10 - - N/M Federal Home Loan Bank advances - - - - N/M 67 42 59.5 % Federal Reserve Bank borrowings 662 - - N/M 1,001 - - N/M Subordinated debt 349 448 (22.1 )% 1,047 1,461 (28.3 )% Total interest expense 14,284 3,516 306.3 % 35,715 7,593 370.4 % Net interest income 11,979 17,692 (32.3 )% 38,456 52,916 (27.3 )% Provision for (recovery of) Credit Losses (829 ) - - N/M (2,471 ) - - N/M Net interest income after provision for (recovery of) credit losses 12,808 17,692 (27.6 )% 40,927 52,916 (22.7 )% Non-interest Income Service charges on deposit accounts 85 79 7.6 % 239 240 (0.4 )% Bank owned life insurance 23 255 (91.0 )% 224 445 (49.7 )% Other service charges and fees 160 175 (8.6 )% 677 469 44.3 % Losses on sale of available-for-sale securities (17,114 ) - - N/M (17,316 ) - - N/M Insurance commissions 54 47 14.9 % 310 312 (0.6 )% Gain on sale of government guaranteed loans 27 - - N/M 50 - - N/M Non-qualified deferred compensation plan asset gains (losses), net (60 ) (107 ) (43.9 )% 112 (498 ) (122.5 )% Other income 10 1 N/M 140 5 N/M Total non-interest income (loss) (16,815 ) 450 (3,836.7 )% (15,564 ) 973 (1,699.6 )% Non-interest Expenses Salaries and employee benefits 5,052 5,072 (0.4 )% 14,929 15,754 (5.2 )% Occupancy expense of premises 445 461 (3.5 )% 1,363 1,435 (5.0 )% Furniture and equipment expenses 282 323 (12.7 )% 882 989 (10.8 )% Other expenses 1,881 2,102 (10.5 )% 6,087 6,247 (2.6 )% Total non-interest expenses 7,660 7,958 (3.7 )% 23,261 24,425 (4.8 )% Income (Loss) before income taxes (11,667 ) 10,184 (214.6 )% 2,102 29,464 (92.9 )% Income tax Expense (Benefit) (1,530 ) 2,139 (171.5 )% 1,446 5,863 (75.3 )% Net income (loss) $ (10,137 ) $ 8,045 (226.0 )% $ 656 $ 23,601 (97.2 )% Earnings (Loss) Per Share Basic $ (0.72 ) $ 0.57 (226.3 )% $ 0.05 $ 1.69 (97.0 )% Diluted $ (0.72 ) $ 0.57 (226.3 )% $ 0.05 $ 1.67 (97.0 )% John Marshall Bancorp, Inc. Historical Trends - Quarterly Financial Data (Unaudited) (Dollar amounts in thousands, except per share data) 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Profitability for the Quarter: Interest income $ 26,263 $ 24,455 $ 23,453 $ 23,557 $ 21,208 $ 19,555 $ 19,745 Interest expense 14,284 12,446 8,984 6,052 3,516 2,247 1,829 Net interest income 11,979 12,009 14,469 17,505 17,692 17,308 17,916 Provision for (recovery of) credit losses (829 ) (868 ) (774 ) 175 - - - - - - Non-interest income (loss) (16,815 ) 685 566 718 450 109 414 Non-interest expenses 7,660 7,831 7,770 7,449 7,958 7,681 8,786 Income (loss) before income taxes (11,667 ) 5,731 8,039 10,599 10,184 9,736 9,544 Income tax expense (benefit) (1,530 ) 1,241 1,735 2,397 2,139 1,854 1,870 Net income (loss) $ (10,137 ) $ 4,490 $ 6,304 $ 8,202 $ 8,045 $ 7,882 $ 7,674 Financial Performance: Return on average assets (annualized) (1.73 )% 0.77 % 1.10 % 1.40 % 1.38 % 1.41 % 1.40 % Return on average equity (annualized) (18.24 )% 8.13 % 11.83 % 15.65 % 15.07 % 15.28 % 14.76 % Net interest margin 2.08 % 2.10 % 2.57 % 3.05 % 3.10 % 3.16 % 3.34 % Non-interest income (loss) as a percentage of average assets (annualized) (2.86 )% 0.12 % 0.10 % 0.12 % 0.08 % 0.02 % 0.08 % Non-interest expense to average assets (annualized) 1.30 % 1.34 % 1.35 % 1.27 % 1.36 % 1.38 % 1.61 % Efficiency ratio (158.4 )% 61.7 % 51.7 % 40.9 % 43.9 % 44.1 % 47.9 % Per Share Data: Earnings (loss) per share - basic $ (0.72 ) $ 0.32 $ 0.45 $ 0.58 $ 0.57 $ 0.56 $ 0.55 Earnings (loss) per share - diluted $ (0.72 ) $ 0.32 $ 0.44 $ 0.58 $ 0.57 $ 0.56 $ 0.55 Book value per share $ 15.61 $ 15.50 $ 15.63 $ 15.09 $ 14.37 $ 14.80 $ 14.68 Dividends declared per share $ - - $ 0.22 $ - - $ - - $ - - $ - - $ 0.20 Weighted average common shares (basic) 14,080,026 14,077,658 14,067,047 14,019,429 13,989,414 13,932,256 13,783,034 Weighted average common shares (diluted) 14,080,026 14,143,253 14,156,724 14,131,352 14,108,286 14,085,160 13,991,692 Common shares outstanding at end of period 14,126,084 14,126,138 14,125,208 14,098,986 14,070,080 14,026,589 13,950,570 Non-interest Income: Service charges on deposit accounts $ 85 $ 82 $ 72 $ 84 $ 79 $ 84 $ 77 Bank owned life insurance 23 101 100 99 255 95 95 Other service charges and fees 160 314 203 187 175 157 137 Losses on securities (17,114 ) - - (202 ) - - - - - - - - Insurance commissions 54 50 206 70 47 44 221 Gain on sale of government guaranteed loans 27 23 - - - - - - - - - - Non-qualified deferred compensation plan asset gains (losses), net (60 ) 83 89 144 (107 ) (274 ) (117 ) Other income 10 32 98 134 1 3 1 Total non-interest income (loss) $ (16,815 ) $ 685 $ 566 $ 718 $ 450 $ 109 $ 414 Non-interest Expenses: Salaries and employee benefits $ 5,052 $ 4,965 $ 4,912 $ 4,436 $ 5,072 $ 4,655 $ 6,027 Occupancy expense of premises 445 448 470 458 461 482 493 Furniture and equipment expenses 282 304 296 336 323 341 325 Other expenses 1,881 2,114 2,092 2,219 2,102 2,203 1,941 Total non-interest expenses $ 7,660 $ 7,831 $ 7,770 $ 7,449 $ 7,958 $ 7,681 $ 8,786 Balance Sheets at Quarter End: Total loans, net of unearned income $ 1,820,132 $ 1,769,801 $ 1,771,272 $ 1,789,508 $ 1,725,114 $ 1,692,652 $ 1,631,260 Allowance for loan credit losses (20,036 ) (20,629 ) (21,619 ) (20,208 ) (20,032 ) (20,031 ) (20,031 ) Investment securities 272,881 429,954 445,785 463,531 473,478 473,914 409,692 Interest-earning assets 2,278,027 2,315,368 2,312,404 2,308,055 2,258,822 2,274,968 2,217,553 Total assets 2,298,202 2,364,250 2,351,307 2,348,235 2,305,540 2,316,374 2,249,609 Total deposits 1,981,623 2,046,309 2,088,642 2,067,740 2,063,341 2,043,741 1,983,099 Total interest-bearing liabilities 1,622,430 1,691,044 1,665,837 1,641,167 1,552,758 1,581,017 1,530,133 Total shareholders' equity 220,567 218,970 220,823 212,800 202,212 207,530 204,855 Quarterly Average Balance Sheets: Total loans, net of unearned income $ 1,790,720 $ 1,767,831 $ 1,772,922 $ 1,759,747 $ 1,684,796 $ 1,641,914 $ 1,620,533 Investment securities 310,407 441,778 463,254 468,956 488,860 447,688 376,608 Interest-earning assets 2,301,642 2,305,050 2,295,677 2,289,061 2,277,325 2,204,709 2,183,897 Total assets 2,331,403 2,344,712 2,334,695 2,330,307 2,314,825 2,240,119 2,216,131 Total deposits 2,012,934 2,051,702 2,066,139 2,079,161 2,057,640 1,980,231 1,946,882 Total interest-bearing liabilities 1,660,980 1,667,597 1,621,131 1,566,902 1,547,766 1,504,574 1,505,854 Total shareholders' equity 220,473 221,608 220,282 207,906 212,147 206,967 210,900 Financial Measures: Average equity to average assets 9.5 % 9.5 % 9.4 % 8.9 % 9.2 % 9.2 % 9.5 % Investment securities to earning assets 12.0 % 18.6 % 19.3 % 20.1 % 21.0 % 20.8 % 18.5 % Loans to earning assets 79.9 % 76.4 % 76.6 % 77.5 % 76.4 % 74.4 % 73.6 % Loans to assets 79.2 % 74.9 % 75.3 % 76.2 % 74.8 % 73.1 % 72.5 % Loans to deposits 91.9 % 86.5 % 84.8 % 86.5 % 83.6 % 82.8 % 82.3 % Capital Ratios (Bank Level): Equity / assets 10.6 % 10.2 % 10.3 % 10.0 % 9.7 % 9.9 % 10.2 % Total risk-based capital ratio 15.7 % 16.1 % 16.1 % 15.6 % 15.4 % 15.1 % 15.4 % Tier 1 risk-based capital ratio 14.6 % 15.0 % 14.9 % 14.4 % 14.3 % 14.0 % 14.2 % Common equity tier 1 ratio 14.6 % 15.0 % 14.9 % 14.4 % 14.3 % 14.0 % 14.2 % Leverage ratio 11.3 % 11.6 % 11.5 % 11.3 % 11.0 % 11.0 % 10.8 % John Marshall Bancorp, Inc. Loan, Deposit and Borrowing Detail (Unaudited) (Dollar amounts in thousands) 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Loans $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total Commercial business loans $ 37,793 2.1 % $ 40,156 2.3 % $ 41,204 2.3 % $ 44,788 2.5 % $ 44,967 2.6 % $ 47,654 2.8 % $ 52,569 3.2 % Commercial PPP loans 132 0.0 % 133 0.0 % 135 0.0 % 136 0.0 % 138 0.0 % 224 0.0 % 7,781 0.5 % Commercial owner-occupied real estate loans 363,017 20.0 % 360,859 20.4 % 363,495 20.6 % 366,131 20.5 % 362,346 21.1 % 378,457 22.4 % 339,933 20.9 % Total business loans 400,942 22.1 % 401,148 22.7 % 404,834 22.9 % 411,055 23.0 % 407,451 23.7 % 426,335 25.2 % 400,283 24.6 % Investor real estate loans 683,686 37.6 % 654,623 37.0 % 660,740 37.4 % 662,769 37.1 % 622,415 36.1 % 598,501 35.5 % 553,093 34.0 % Construction & development loans 179,570 9.9 % 179,656 10.2 % 179,606 10.2 % 195,027 11.0 % 199,324 11.6 % 189,644 11.2 % 219,160 13.4 % Multi-family loans 86,366 4.8 % 86,061 4.9 % 88,670 5.0 % 89,227 5.0 % 106,460 6.2 % 106,236 6.3 % 99,100 6.1 % Total commercial real estate loans 949,622 52.3 % 920,340 52.1 % 929,016 52.6 % 947,023 53.1 % 928,199 53.9 % 894,381 53.0 % 871,353 53.5 % Residential mortgage loans 464,509 25.7 % 443,305 25.2 % 433,076 24.5 % 426,841 23.9 % 385,696 22.4 % 368,370 21.8 % 356,331 21.9 % Consumer loans 467 0.0 % 646 0.0 % 324 0.0 % 529 0.0 % 585 0.0 % 651 0.0 % 513 0.0 % Total loans $ 1,815,540 100.0 % $ 1,765,439 100.0 % $ 1,767,250 100.0 % $ 1,785,448 100.0 % $ 1,721,931 100.0 % $ 1,689,737 100.0 % $ 1,628,480 100.0 % Less: Allowance for loan credit losses (20,036 ) (20,629 ) (21,619 ) (20,208 ) (20,032 ) (20,031 ) (20,031 ) Net deferred loan costs (fees) 4,592 4,362 4,022 4,060 3,183 2,915 2,780 Net loans $ 1,800,096 $ 1,749,172 $ 1,749,653 $ 1,769,300 $ 1,705,082 $ 1,672,621 $ 1,611,229 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Deposits $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total Non-interest bearing demand deposits $ 437,880 22.1 % $ 433,931 21.2 % $ 447,450 21.4 % $ 476,697 23.1 % $ 535,186 25.9 % $ 512,284 25.1 % $ 495,811 25.0 % Interest-bearing demand deposits: NOW accounts(1) 345,522 17.4 % 311,225 15.2 % 284,872 13.7 % 253,148 12.3 % 293,558 14.2 % 338,789 16.6 % 345,087 17.4 % Money market accounts(1) 330,297 16.7 % 341,413 16.7 % 392,962 18.8 % 438,797 21.2 % 412,035 20.0 % 399,877 19.6 % 414,987 20.9 % Savings accounts 57,408 3.0 % 68,013 3.4 % 81,150 3.9 % 95,241 4.6 % 102,909 5.0 % 112,276 5.4 % 114,427 5.8 % Certificates of deposit $250,000 or more 364,805 18.4 % 376,899 18.4 % 338,824 16.2 % 314,738 15.2 % 280,027 13.6 % 255,411 12.5 % 241,230 12.1 % Less than $250,000 103,600 5.2 % 105,956 5.2 % 94,429 4.5 % 89,247 4.3 % 88,421 4.3 % 87,505 4.3 % 91,050 4.6 % QwickRate® certificates of deposit 11,526 0.6 % 12,772 0.6 % 16,952 0.8 % 22,163 1.1 % 20,154 1.0 % 20,154 1.0 % 23,136 1.2 % IntraFi® certificates of deposit 41,659 2.1 % 49,729 2.4 % 53,178 2.5 % 25,757 1.2 % 46,305 2.2 % 32,686 1.6 % 39,628 2.0 % Brokered deposits 288,926 14.6 % 346,371 16.9 % 378,825 18.2 % 351,952 17.0 % 284,746 13.8 % 284,759 13.9 % 217,743 11.0 % Total deposits $ 1,981,623 100.0 % $ 2,046,309 100.0 % $ 2,088,642 100.0 % $ 2,067,740 100.0 % $ 2,063,341 100.0 % $ 2,043,741 100.0 % $ 1,983,099 100.0 % Borrowings Federal funds purchased $ - - 0.0 % $ - - 0.0 % $ - - 0.0 % $ 25,500 50.9 % $ - - 0.0 % $ - - 0.0 % $ - - 0.0 % Federal Home Loan Bank advances - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % 18,000 42.0 % Federal Reserve Bank borrowings 54,000 68.6 % 54,000 68.6 % - - 0.0 - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % Subordinated debt 24,687 31.4 % 24,666 31.4 % 24,645 100.0 % 24,624 49.1 % 24,603 100.0 % 49,560 100.0 % 24,845 58.0 % Total borrowings $ 78,687 100.0 % $ 78,666 100.0 % $ 24,645 100.0 % $ 50,124 100.0 % $ 24,603 100.0 % $ 49,560 100.0 % $ 42,845 100.0 % Total deposits and borrowings $ 2,060,310 $ 2,124,975 $ 2,113,287 $ 2,117,864 $ 2,087,944 $ 2,093,301 $ 2,025,944 Core customer funding sources (2) $ 1,681,171 82.6 % $ 1,687,166 80.3 % $ 1,692,865 81.1 % $ 1,693,625 80.9 % $ 1,758,441 85.2 % $ 1,738,828 85.1 % $ 1,742,220 87.1 % Wholesale funding sources (3) 354,452 17.4 % 413,143 19.7 % 395,777 18.9 % 399,615 19.1 % 304,900 14.8 % 304,913 14.9 % 258,879 12.9 % Total funding sources $ 2,035,623 100.0 % $ 2,100,309 100.0 % $ 2,088,642 100.0 % $ 2,093,240 100.0 % $ 2,063,341 100.0 % $ 2,043,741 100.0 % $ 2,001,099 100.0 % _____________________________ (1) Includes IntraFi® accounts. (2) Includes reciprocal IntraFi Demand®, IntraFi Money Market® and IntraFi CD® deposits, which are maintained by customers. (3) Consists of QwickRate® certificates of deposit, brokered deposits, federal funds purchased, Federal Home Loan Bank advances and Federal Reserve Bank borrowings. John Marshall Bancorp, Inc. Average Balance Sheets, Interest and Rates (unaudited) (Dollar amounts in thousands) Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Interest Income / Average Interest Income / Average Average Balance Expense Rate Average Balance Expense Rate Assets: Securities: Taxable $ 401,623 $ 6,117 2.04 % $ 433,128 $ 5,782 1.78 % Tax-exempt(1) 2,678 56 2.80 % 5,002 114 3.05 % Total securities $ 404,301 $ 6,173 2.04 % $ 438,130 $ 5,896 1.80 % Loans, net of unearned income(2): Taxable 1,748,904 62,664 4.79 % 1,626,661 53,192 4.37 % Tax-exempt(1) 28,319 875 4.13 % 22,656 694 4.10 % Total loans, net of unearned income $ 1,777,223 $ 63,539 4.78 % $ 1,649,317 $ 53,886 4.37 % Interest-bearing deposits in other banks $ 119,002 $ 4,654 5.23 % $ 134,874 $ 897 0.89 % Total interest-earning assets $ 2,300,526 $ 74,366 4.32 % $ 2,222,321 $ 60,679 3.65 % Total non-interest earning assets 36,572 35,066 Total assets $ 2,337,098 $ 2,257,387 Liabilities & Shareholders’ Equity: Interest-bearing deposits NOW accounts $ 291,217 $ 4,484 2.06 % $ 325,647 $ 829 0.34 % Money market accounts 374,053 7,560 2.70 % 389,535 1,516 0.52 % Savings accounts 75,273 673 1.20 % 109,740 284 0.35 % Time deposits 855,076 20,873 3.26 % 658,897 3,461 0.70 % Total interest-bearing deposits $ 1,595,619 $ 33,590 2.81 % $ 1,483,819 $ 6,090 0.55 % Federal funds purchased 294 10 4.55 % — — 0.00 % Subordinated debt 24,653 1,047 5.68 % 27,476 1,461 7.11 % Other borrowed funds 29,483 1,068 4.84 % 8,257 42 0.68 % Total interest-bearing liabilities $ 1,650,049 $ 35,715 2.89 % $ 1,519,552 $ 7,593 0.67 % Demand deposits 447,778 511,504 Other liabilities 18,483 16,321 Total liabilities $ 2,116,310 $ 2,047,377 Shareholders’ equity $ 220,788 $ 210,010 Total liabilities and shareholders’ equity $ 2,337,098 $ 2,257,387 Tax-equivalent net interest income and spread $ 38,651 1.43 % $ 53,086 2.98 % 195 170 Net interest income $ 38,456 $ 52,916 Tax-equivalent interest income/earnings assets 4.32 % 3.65 % Interest expense/earning assets 2.08 % 0.46 % Net interest margin(3) 2.25 % 3.19 % ________________________________ (1) Tax-equivalent income has been adjusted using the federal statutory tax rate of 21%. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $195 thousand and $170 thousand for the nine months ended September 30, 2023 and September 30, 2022, respectively. (2) The Company did not have any loans on non-accrual as of September 30, 2023 or September 30, 2022. (3) The net interest margin has been calculated on a tax-equivalent basis. John Marshall Bancorp, Inc. Average Balance Sheets, Interest and Rates (unaudited) (Dollar amounts in thousands) Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Interest Income / Average Interest Income / Average Average Balance Expense Rate Average Balance Expense Rate Assets: Securities: Taxable $ 308,723 $ 1,582 2.03 % $ 483,861 $ 2,385 1.96 % Tax-exempt(1) 1,684 13 3.06 % 4,999 38 3.02 % Total securities $ 310,407 $ 1,595 2.04 % $ 488,860 $ 2,423 1.97 % Loans, net of unearned income(2): Taxable 1,762,653 21,695 4.88 % 1,655,670 17,983 4.31 % Tax-exempt(1) 28,067 292 4.13 % 29,126 302 4.11 % Total loans, net of unearned income $ 1,790,720 $ 21,987 4.87 % $ 1,684,796 $ 18,285 4.31 % Interest-bearing deposits in other banks $ 200,515 $ 2,746 5.43 % $ 103,669 $ 571 2.19 % Total interest-earning assets $ 2,301,642 $ 26,328 4.54 % $ 2,277,325 $ 21,279 3.71 % Total non-interest earning assets 29,761 37,500 Total assets $ 2,331,403 $ 2,314,825 Liabilities & Shareholders’ Equity: Interest-bearing deposits NOW accounts $ 327,309 $ 2,239 2.71 % $ 329,780 $ 404 0.49 % Money market accounts 341,672 2,609 3.03 % 377,736 727 0.76 % Savings accounts 63,956 198 1.23 % 106,647 107 0.40 % Time deposits 849,270 8,227 3.84 % 705,206 1,830 1.03 % Total interest-bearing deposits $ 1,582,207 $ 13,273 3.33 % $ 1,519,369 $ 3,068 0.80 % Federal funds purchased 99 — — % — — 0.00 % Subordinated debt, net 24,674 349 5.61 % 28,397 448 6.26 % Other borrowed funds 54,000 662 4.86 % — — 0.00 % Total interest-bearing liabilities $ 1,660,980 $ 14,284 3.41 % $ 1,547,766 $ 3,516 0.90 % Demand deposits 430,727 538,271 Other liabilities 19,223 16,641 Total liabilities $ 2,110,930 $ 2,102,678 Shareholders’ equity $ 220,473 $ 212,247 Total liabilities and shareholders’ equity $ 2,331,403 $ 2,314,925 Tax-equivalent net interest income and spread $ 12,044 1.13 % $ 17,763 2.81 % Less: tax-equivalent adjustment 65 71 Net interest income $ 11,979 $ 17,692 Tax-equivalent interest income/earnings assets 4.54 % 3.71 % Interest expense/earning assets 2.46 % 0.61 % Net interest margin(3) 2.08 % 3.10 % ____________________________ (1) Tax-equivalent income has been adjusted using the federal statutory tax rate of 21%. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $65 thousand and $71 thousand for the three months ended September 30, 2023 and September 30, 2022, respectively. (2) The Company did not have any loans on non-accrual as of September 30, 2023 or September 30, 2022. (3) The net interest margin has been calculated on a tax-equivalent basis. John Marshall Bancorp, Inc. Reconciliation of Certain Non-GAAP Financial Measures (unaudited) (Dollar amounts in thousands) As of September 30, 2023 December 31, 2022 September 30, 2022 Regulatory Ratios (Bank) Total risk-based capital (GAAP) $ 280,891 $ 283,471 $ 274,611 Less: Unrealized losses on available-for-sale securities, net of tax benefit (1) 17,143 28,942 31,191 Less: Unrealized losses on held-to-maturity securities, net of tax benefit (1) 16,285 14,421 14,878 Total risk-based capital, excluding unrealized losses on available-for-sale and held-to-maturity securities, net of tax benefit (Non-GAAP) $ 247,463 $ 240,108 $ 228,542 Tier 1 capital (GAAP) $ 261,666 $ 262,960 $ 254,226 Less: Unrealized losses on available-for-sale securities, net of tax benefit (1) 17,143 28,942 31,191 Less: Unrealized losses on held-to-maturity securities, net of tax benefit (1) 16,285 14,421 14,878 Tier 1 capital, excluding unrealized losses on available-for-sale and held-to-maturity securities, net of tax benefit (Non-GAAP) $ 228,238 $ 219,597 $ 208,157 Risk weighted assets (GAAP) $ 1,794,603 $ 1,819,305 $ 1,783,344 Less: Risk weighted available-for-sale securities 25,094 60,894 62,969 Less: Risk weighted held-to-maturity securities 17,229 17,762 17,973 Risk weighted assets, excluding available-for-sale and held-to-maturity securities (Non-GAAP) $ 1,752,280 $ 1,740,649 $ 1,702,402 Total average assets for leverage ratio (GAAP) $ 2,326,722 $ 2,327,939 $ 2,312,355 Less: Average available-for-sale securities 206,116 362,024 380,324 Less: Average held-to-maturity securities 96,988 100,050 101,558 Total average assets for leverage ratio, excluding available-for-sale and held-to-maturity securities (Non-GAAP) $ 2,023,618 $ 1,865,865 $ 1,830,473 Total risk-based capital ratio (2) Total risk-based capital ratio (GAAP) 15.7 % 15.6 % 15.4 % Total risk-based capital ratio (Non-GAAP) 14.1 % 13.8 % 13.4 % Tier 1 capital ratio (3) Tier 1 risk-based capital ratio (GAAP) 14.6 % 14.4 % 14.3 % Tier 1 risk-based capital ratio (Non-GAAP) 12.9 % 12.6 % 12.2 % Common equity tier 1 ratio (4) Common equity tier 1 ratio (GAAP) 14.6 % 14.4 % 14.3 % Common equity tier 1 ratio (Non-GAAP) 12.9 % 12.6 % 12.2 % Leverage ratio (5) Leverage ratio (GAAP) 11.3 % 11.3 % 11.0 % Leverage ratio (Non-GAAP) 11.3 % 11.8 % 11.4 % __________________________ (1) Includes tax benefit calculated using the federal statutory tax rate of 21%. (2) The total risk-based capital ratio is calculated by dividing total risk-based capital by risk weighted assets. (3) The tier 1 capital ratio is calculated by dividing tier 1 capital by risk weighted assets. (4) The common equity tier 1 ratio is calculated by dividing tier 1 capital by risk weighted assets. (5) The leverage ratio is calculated by dividing tier 1 capital by total average assets for leverage ratio. John Marshall Bancorp, Inc. Reconciliation of Certain Non-GAAP Financial Measures (unaudited) (Dollar amounts in thousands) For the Three Months Ended For the Nine Months Ended September 30, 2023 September 30, 2023 Non-interest income (loss) (GAAP) $ (16,815 ) $ (15,564 ) Adjustment: Pre-tax loss recognized on sale of available-for-sale securities 17,114 17,114 Core non-interest income (Non-GAAP) $ 299 $ 1,550 Income (loss) before taxes (GAAP) $ (11,667 ) $ 2,102 Adjustment: Pre-tax loss recognized on sale of available-for-sale securities 17,114 17,114 Core income before taxes (Non-GAAP) $ 5,447 $ 19,216 Income tax expense (benefit) (GAAP) $ (1,530 ) $ 1,446 Adjustment: Tax and 10% modified endowment contract penalty on early surrender of BOLI policies (1,101 ) (1,101 ) Adjustment: Tax benefit of loss recognized on sale of available-for-sale securities 3,594 3,594 Core income tax expense (Non-GAAP)(1) $ 963 $ 3,939 Net income (loss) (GAAP) $ (10,137 ) $ 656 Core net income (Non-GAAP)(2) $ 4,484 $ 15,277 Earnings (loss) per share - basic (GAAP) $ (0.72 ) $ 0.05 Core earnings per share - basic (Non-GAAP)(3) $ 0.32 $ 1.08 Earnings (loss) per share - diluted (GAAP) $ (0.72 ) $ 0.05 Core earnings per share - diluted (Non-GAAP)(3) $ 0.32 $ 1.08 Return on average assets (annualized) (GAAP) (1.73 ) % 0.04 % Core return on average assets (annualized) (Non-GAAP)(4) 0.76 % 0.87 % Return on average equity (annualized) (GAAP) (18.24 ) % 0.40 % Core return on average equity (annualized) (Non-GAAP)(5) 8.07 % 9.25 % Non-interest income (loss) as a percentage of average assets (annualized) (GAAP) (2.86 ) % (0.89 ) % Core non-interest income as a percentage of average assets (annualized) (Non-GAAP)(6) 0.05 % 0.09 % Efficiency ratio (GAAP) (158.4 ) % 101.6 % Core efficiency ratio (Non-GAAP)(7) 62.4 % 58.1 % ___________________________ (1) Includes tax benefit (expense) calculated using the federal statutory tax rate of 21%. (2) Core net income reflects net income adjusted for the non-recurring tax effected loss recognized on the sale of available-for-sale securities in and non-recurring tax expense associated with the surrender of the Company’s BOLI policies in July 2023. It is calculated by subtracting core income tax expense from core income before taxes for each period presented. (3) Core earnings per share – basic and core earnings per share – diluted is calculated by dividing core net income by basic weighted average shares outstanding and diluted weighted average shares outstanding, respectively, for each period presented. (4) Core return on average assets (annualized) is calculated by dividing annualizing core net income by average assets for each period presented. (5) Core return on average equity (annualized) is calculated by dividing annualizing core net income by average equity for each period presented. (6) Core non-interest income as a percentage of average assets (annualized) is calculated by dividing annualized core non-interest income by average assets for each period presented. (7) Core efficiency ratio is calculated by dividing non-interest expense by the sum of core non-interest income and net interest income for each period presented. Category: Earnings View source version on businesswire.com: https://www.businesswire.com/news/home/20231018741695/en/Contacts Christopher W. Bergstrom (703) 584-0840 Kent D. Carstater (703) 289-5922 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
John Marshall Bancorp, Inc. Reports Third Quarter 2023 Results By: John Marshall via Business Wire October 18, 2023 at 09:00 AM EDT 11.3% Annualized Loan Growth Supported By Strong Balance Sheet John Marshall Bancorp, Inc. (Nasdaq: JMSB) (the “Company”), parent company of John Marshall Bank (the “Bank”), reported its financial results for the three and nine months ended September 30, 2023. Selected Highlights Strong Loan Growth – Loans, net of unearned income, grew $95.0 million or 5.5% from September 30, 2022 to September 30, 2023. Loans, net of unearned income, grew $50.3 million or 11.3% annualized from June 30, 2023 to September 30, 2023. The Company’s loan pipeline headed into the fourth quarter of 2023 continues to be strong as we are seeing increased lending opportunities that meet our underwriting standards and, in many cases, fewer competitors for those loans as some market participants have scaled back lending efforts. Pristine Asset Quality – For the sixteenth consecutive quarter, the Company had no nonperforming loans, no other real estate owned and no loans 30 days or more past due. There were no charge-offs during the quarter. The Company continues to adhere to strict underwriting standards and proactively manages the portfolio. Well Capitalized – Each of the Bank’s regulatory capital ratios is well in excess of the regulatory threshold to be considered well capitalized. The Bank’s equity to assets and total risk-based capital ratios were 10.6% and 15.7%, respectively, as of September 30, 2023. Continued Strength in CRE Loan Portfolio – The Company’s loan portfolio remains a source of strength. As of September 30, 2023, the Company’s commercial real estate (“CRE”) non-owner occupied and owner-occupied portfolios had a weighted average loan-to-values of 50.2% and 55.1%, respectively, and weighted average debt service coverage ratios of 2.1x and 3.5x, respectively. Decreased Wholesale Deposits – The Company reduced wholesale deposits (i.e., Brokered and QwickRate CDs) by $58.7 million or 16.3% during the three months ended September 30, 2023. Year-to-date, the Company reduced wholesale deposits by $73.7 million or 19.7%. As outlined in the deposit detail table included in this release, wholesale deposits have declined in each of the past two quarters by a total of $95.4 million. Increased Core Deposits – During the quarter, the Company grew non-interest bearing demand deposits by $3.9 million or 3.6% annualized. Non-interest bearing deposits as a percentage of total deposits increased from 21.2% at June 30, 2023 to 22.1% as of September 30, 2023. Non-maturing deposits increased $16.5 million during the three months ended September 30, 2023, representing 5.7% annualized growth. Core customer funding sources, as defined in the deposit detail table included with this release, increased from 80.3% as of June 30, 2023 to 82.6% as of September 30, 2023. Stabilizing Net Interest Margin – Net interest margin was 2.08% for the three months ended September 30, 2023 compared to 2.10% for the three months ended June 30, 2023 and 3.10% for the three months ended September 30, 2022. The Company realized the initial benefits of the July 2023 balance sheet restructuring disclosed in the Company’s earnings release and Form 10-Q for the second quarter of 2023 (the “Restructuring”). We continue to redeploy the Restructuring proceeds into higher yielding, high-quality earning assets and pay down higher cost funding sources. As a result of the Restructuring, strong loan growth and reduction of wholesale deposits, net interest margin progressively improved throughout the quarter and ended the month of September at 2.13%. Chris Bergstrom, President and Chief Executive Officer, commented, “By selling low yielding assets through the Restructuring, we increased the flexibility and earnings horsepower of our balance sheet. Part of the proceeds from the Restructuring were redeployed into the loan growth anticipated in last quarter’s earnings release and enabled us to enhance our earning asset yield. Part of the Restructuring proceeds were utilized to pay down higher cost wholesale funding, which we expect will slow the rate of increase on our cost of funds. Part of the proceeds are awaiting redeployment, but are earning a higher yield than they were prior to the Restructuring. We anticipate putting these funds to work in the fourth quarter, as our loan pipeline remains strong. In addition, we are encouraged by our core non-maturing deposit growth and improved funding mix during the quarter. Our balance sheet remains strong. We continue to have excellent asset quality and robust liquidity. While the quarter’s reported results reflect the non-recurring impact of the Restructuring, core operating performance of the Company remains strong and we have enhanced our ability to drive earnings growth.” Balance Sheet, Liquidity and Credit Quality Total assets were $2.30 billion at September 30, 2023, $2.36 billion at June 30, 2023 and $2.31 billion at September 30, 2022. As discussed in more detail below, the Company reduced wholesale deposits by $58.7 million during the quarter. Total loans, net of unearned income, increased $95.0 million or 5.5% to $1.82 billion at September 30, 2023, compared to $1.73 billion at September 30, 2022 and $50.3 million during the quarter ended September 30, 2023 or 11.3% annualized from $1.77 billion at June 30, 2023. The increase in loans during both comparative periods was primarily attributable to growth in the residential mortgage and commercial investor real estate loan portfolios. The carrying value of the Company’s fixed income securities portfolio was $265.4 million at September 30, 2023, $422.7 million at June 30, 2023 and $467.1 million at September 30, 2022. The reduction in the portfolio resulted from the Restructuring, which was previously disclosed in our July 21, 2023 earnings release. As of September 30, 2023, 96.2% of our bond portfolio was covered by the implied guarantee of the United States government or one of its agencies. At September 30, 2023, nearly 67% of the fixed income portfolio was invested in amortizing bonds, which provides the Company with a source of steady cash flow. At September 30, 2023, the fixed income portfolio had an estimated weighted average life of 4.5 years. The available-for-sale portfolio comprised approximately 66% of the fixed income securities portfolio and had a weighted average life of 3.2 years at September 30, 2023. The held-to-maturity portfolio comprised approximately 34% of the fixed income securities portfolio and had a weighted average life of 7.0 years at September 30, 2023. The Company did not purchase any fixed income securities during the three or nine month periods ended September 30, 2023. 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 $742.5 million as of September 30, 2023 compared to $839.4 million as of June 30, 2023 and represented 32.3% and 35.5% of total assets, respectively. Wholesale deposits, defined as brokered and QwickRate certificates of deposit, decreased $58.7 million or 16.3% from $359.1 million at June 30, 2023 to $300.5 million at September 30, 2023. As discussed above, the Company also funded $50.3 million of net loan growth during the quarter ended September 30, 2023. Liquidity Trends September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 (Dollars in thousands) Amount % of Assets Amount % of Assets Amount % of Assets Amount % of Assets Amount % of Assets Cash $ 192,656 8.4 % $ 129,551 5.5 % $ 103,359 4.4 % $ 61,599 2.6 % $ 74,756 3.2 % Unencumbered Securities 80,267 3.5 % 233,695 9.9 % 298,194 12.7 % 313,618 13.4 % 345,987 15.0 % Available Secured Borrowing Capacity 469,524 20.4 % 476,144 20.1 % 451,008 19.2 % 388,257 16.5 % 401,828 17.4 % Total Liquidity $ 742,447 32.3 % $ 839,390 35.5 % $ 852,561 36.3 % $ 763,474 32.5 % $ 822,571 35.6 % If the Company were to avail itself of additional Bank Term Funding Program (“BTFP”) funding, we estimate an incremental increase in our liquidity position of approximately $13.4 million, increasing our potential liquidity to $755.8 million as of September 30, 2023. In addition to available secured borrowing capacity, the Bank had available federal funds lines of $110.0 million at September 30, 2023. Total deposits were $1.98 billion at September 30, 2023, $2.05 billion at June 30, 2023 and $2.06 billion at September 30, 2022. Total deposits decreased $64.7 million or 3.2% when compared to June 30, 2023. The decrease was primarily due to a managed reduction in costlier wholesale deposits of $58.7 million or 16.3% during the quarter. NOW deposits increased $34.3 million or 11.0% to partially offset the decrease in wholesale deposits. As of September 30, 2023, the Company had $614.0 million of deposits that were not insured or not collateralized by securities compared to $697.0 million at June 30, 2023. Deposits that were not insured or not collateralized by securities represented only 31.0% of total deposits at September 30, 2023 compared to 34.1% at June 30, 2023. The Company obtained a $54.0 million advance from the BTFP on May 15, 2023 to secure lower funding costs relative to wholesale deposits. The BTFP advance has a term of one year, bears interest at a fixed rate of 4.80% and can be prepaid without penalty prior to maturity. Total borrowings as of September 30, 2023 consisted of subordinated debt totaling $24.7 million and the BTFP advance totaling $54.0 million. The Company did not have any FHLB advances or federal funds purchased outstanding as of September 30, 2023. Shareholders’ equity increased $18.4 million or 9.1% to $220.6 million at September 30, 2023 compared to $202.2 million at September 30, 2022. Book value per share was $15.61 as of September 30, 2023 compared to $14.37 as of September 30, 2022. The year-over-year change in book value per share was primarily due to the Company’s earnings over the previous twelve months and decrease in accumulated other comprehensive loss, partially offset by increased share count from shareholder option exercises and restricted share award issuances and dividends paid. The decrease in accumulated other comprehensive loss was primarily attributable to the sale of certain available-for-sale investment securities in the July 2023 Restructuring. Book value per share was $15.50 as of June 30, 2023. The Bank’s capital ratios at September 30, 2023 improved when compared to September 30, 2022 and remained well above regulatory thresholds for well-capitalized banks. As of September 30, 2023, the Bank’s total risk-based capital ratio was 15.7%, compared to 15.4% at September 30, 2022 (GAAP). As outlined below, the Bank would continue to remain well above regulatory thresholds for well-capitalized banks at September 30, 2023 in the hypothetical scenario where the entire bond portfolio was sold at fair market value and the 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. Bank Regulatory Capital Ratios (As Reported) Well-Capitalized Threshold September 30, 2023 December 31, 2022 September 30, 2022 Total risk-based capital ratio 10.0 % 15.7 % 15.6 % 15.4 % Tier 1 risk-based capital ratio 8.0 % 14.6 % 14.4 % 14.3 % Common equity tier 1 ratio 6.5 % 14.6 % 14.4 % 14.3 % Leverage ratio 5.0 % 11.3 % 11.3 % 11.0 % Bank Regulatory Capital Ratios (Hypothetical Scenario of Selling All Bonds at Fair Market Value - Non-GAAP) Well-Capitalized Threshold September 30, 2023 December 31, 2022 September 30, 2022 Total risk-based capital ratio 10.0 % 14.1 % 13.8 % 13.4 % Tier 1 risk-based capital ratio 8.0 % 12.9 % 12.6 % 12.2 % Common equity tier 1 ratio 6.5 % 12.9 % 12.6 % 12.2 % Leverage ratio 5.0 % 11.3 % 11.8 % 11.4 % The Company recorded no charge-offs during the third quarter of 2023, during the second quarter of 2023 or during the third quarter of 2022. As of September 30, 2023, the Company had no non-accrual loans, no loans greater than 30 days past due and no other real estate owned assets. At September 30, 2023, the allowance for loan credit losses was $20.0 million or 1.10% of outstanding loans, net of unearned income, compared to $20.6 million or 1.17% of outstanding loans, net of unearned income, at June 30, 2023. The decrease in the allowance as a percentage of outstanding loans, net of unearned income, was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. At September 30, 2023, the allowance for credit losses on unfunded loan commitments was $0.9 million compared to $1.1 million at June 30, 2023. The decrease in the allowance for credit losses on unfunded loan commitments was primarily the result of the updated loss factors utilized on the funded loan portfolio. The Company did not have an allowance for credit losses on held-to-maturity securities as of September 30, 2023 or June 30, 2023. 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 portfolios as of September 30, 2023, demonstrating their strong debt-service-coverage and loan-to-value ratios. Commercial Real Estate Owner Occupied Non-owner Occupied Asset Class Weighted Average Loan-to-Value(1) Weighted Average Debt Service Coverage Ratio(2) Number of Total Loans Principal Balance(3) (Dollars in thousands) Weighted Average Loan-to-Value(1) Weighted Average Debt Service Coverage Ratio(2) Number of Total Loans Principal Balance(3) (Dollars in thousands) Office 60.7 % 4.3 x 129 $ 84,512 47.1 % 1.9 x 64 $ 124,288 Retail 61.0 % 2.3 x 43 61,170 51.2 % 1.9 x 142 396,544 Warehouse 62.3 % 2.4 x 28 37,359 46.5 % 3.0 x 24 33,558 Church 32.4 % 3.1 x 19 37,799 - - - - - - - - Hotel/Motel - - - - - - - - 48.6 % 2.2 x 7 39,282 Industrial 55.8 % 4.7 x 24 37,603 52.8 % 2.5 x 16 66,210 Other(4) 52.5 % 3.6 x 50 104,574 50.0 % 1.8 x 16 23,804 Total 293 $ 363,017 269 $ 683,686 ___________________________ (1) Loan-to-value is determined at origination date and is divided by principal balance as of September 30, 2023. (2) The debt service coverage ratio (“DSCR”) is calculated from the primary source of repayment for the loan. Owner occupied DSCR’s are derived from cash flows from the owner occupant’s business, property and their guarantors, while non-owner occupied DSCR’s are derived from the net operating income of the property. (3) Principal balance excludes deferred fees or costs. (4) Other asset class is primarily comprised of schools, daycares and country clubs. Income Statement Review Quarterly Results The Company reported a net loss of $10.1 million for the third quarter of 2023, a decrease of $18.2 million when compared to the third quarter of 2022. As disclosed in our July 21, 2023 earnings release discussing results for the quarter and year-ended June 30, 2023, during July the Company sold certain lower-yielding available-for-sale investment securities with a total par value of $161.2 million and agreed to surrender $21.4 million of bank owned life insurance (“BOLI”) contracts, resulting in a non-recurring, after-tax loss of $14.6 million that was recorded during the third quarter of 2023. Core net income (Non-GAAP) defined as reported net income excluding the non-recurring after-tax loss and taxes paid in conjunction with the surrender of the Bank’s BOLI policies resulting from the Restructuring, was $4.5 million, a decrease of $3.6 million when compared to the third quarter of 2022 and consistent with net income reported for the second quarter of 2023. Reported (GAAP) and core (Non-GAAP) earnings per share, annualized return on average assets (“ROAA”) and annualized return on average equity (“ROAE”) were as follows: For the Three Months Ended September 30, 2023 June 30, 2023 September 30, 2022 Net income (loss) (GAAP) $ (10,137 ) $ 4,490 $ 8,045 Add: Loss on securities sale, net of tax 13,520 - - Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies 1,101 - - Core net income (Non-GAAP) $ 4,484 $ 4,490 $ 8,045 Earnings per share - diluted (GAAP) $ (0.72 ) $ 0.32 $ 0.57 Core earnings per share - diluted (Non-GAAP) $ 0.32 $ 0.32 $ 0.57 Return on average assets (annualized) (GAAP) (1.73 )% 0.77 % 1.38 % Core return on average assets (annualized) (Non-GAAP) 0.76 % 0.77 % 1.38 % Return on average equity (annualized) (GAAP) (18.24 )% 8.13 % 15.07 % Core return on average equity (annualized) (Non-GAAP) 8.07 % 8.13 % 15.07 % 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. Net interest income for the third quarter of 2023 decreased $5.7 million or 32.3% compared to the third quarter of 2022, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets. The yield on interest earning assets was 4.54% for the third quarter of 2023 compared to 3.71% for the same period in 2022. The increase in yield on interest earning assets was primarily due to higher yields on the Company’s loan and investment portfolios and deposits in banks as a result of increases in interest rates subsequent to the third quarter of 2022. The cost of interest-bearing liabilities was 3.41% for the third quarter of 2023 compared to 0.90% for the same quarter in the prior year. The increase in the cost of interest-bearing liabilities was primarily due to a 2.53% increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the third quarter of 2022. The increase in the overall cost of interest-bearing liabilities in the third quarter of 2023 relative to the same period of the prior year is largely due to rate hikes totaling 5.25% by the Federal Reserve Bank since the beginning of 2022, which has increased cost of funds and compressed net interest margins across the banking industry. The annualized net interest margin for the third quarter of 2023 was 2.08% as compared to 3.10% for the same quarter of the prior year. The decrease in net interest margin was primarily due to the increase in cost of interest-bearing deposits, which was partially offset by an increase in yields on the Company’s interest-earning assets. With a portion of the proceeds from the Restructuring being redeployed to higher yielding assets, the Company’s net interest margin increased each month during the third quarter to 2.13% for the month of September 2023. The Company recorded an $829 thousand release of provision for credit losses for the third quarter of 2023 compared to no provision for the third quarter of 2022. The release of provision for credit losses during the third quarter of 2023 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. Non-interest income decreased $17.3 million during the third quarter of 2023 compared to the third quarter of 2022. The decrease in non-interest income was primarily due to the Restructuring that resulted in a loss of $17.1 million. Core non-interest income (Non-GAAP) defined as reported non-interest income excluding the $17.1 million loss stemming from the bond sale portion of the Restructuring, decreased $151 thousand primarily as a result of a decrease in bank owned life insurance (“BOLI”) income of $232 thousand due to the surrender of all BOLI policies as part of the Restructuring. This decrease was partially offset by favorable variances of $47 thousand related to mark-to-market adjustments on investments related to the Company’s nonqualified deferred compensation plan and gains recorded on the sale of the guaranteed portion of SBA 7(a) loans totaling $27 thousand when compared to the third quarter of 2022. Non-interest expense decreased $298 thousand or 3.7% during the third quarter of 2023 compared to the third quarter of 2022 primarily due to the reversal of a litigation reserve totaling $322 thousand as a result of a favorable verdict received by the Company on a multi-year legal matter that was resolved during the quarter. The decrease was partially offset by increases in FDIC insurance expense and franchise tax expense. The increase in FDIC insurance expense resulted from the FDIC increasing the base assessment rate for all insured depository institutions. The increase in franchise tax expense was due to an increase in the Bank’s equity as that is the basis the Commonwealth of Virginia uses to assess taxes on banking institutions. The decrease in salaries and employee benefits was due to lower benefit costs incurred by the Company. The decrease in occupancy expense of premises was due to a decrease in office rent as a result of the renegotiation of certain leases. The decrease in furniture and equipment expense was due to lower depreciation expense on fixed assets. The Company continues to analyze cost savings opportunities on existing leases and material contracts. For the three months ended September 30, 2023, annualized non-interest expense to average assets was 1.30% compared to 1.36% for the three months ended September 30, 2022. The decrease was primarily due to lower overhead costs as a result of continued cost consciousness. For the three months ended September 30, 2023, the annualized core efficiency ratio (Non-GAAP), which excludes the impact of the Restructuring, was 62.4% compared to 43.9% for the three months ended September 30, 2022. The increase was primarily due to a decrease in net interest income and to a lesser extent a decrease in non-interest income. Year-to-Date Results The Company reported net income of $656 thousand for the nine months ended September 30, 2023, a decrease of $22.9 million when compared to the same period in 2022. This decrease was primarily attributable to the Restructuring, as previously discussed, that resulted in an after-tax loss of $14.6 million. Core net income (Non-GAAP) for the nine months ended September 30, 2023 was $15.3 million, a decrease of $8.3 million when compared to the same period in 2022. Reported (GAAP) and core (Non-GAAP) earnings per share, ROAA and ROAE were as follows: For the Nine Months Ended September 30, 2023 September 30, 2022 Net income (GAAP) $ 656 $ 23,601 Add: Loss on securities sale, net of tax 13,520 - Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies 1,101 - Core net income (Non-GAAP) $ 15,277 $ 23,601 Earnings per share - diluted (GAAP) $ 0.05 $ 1.67 Core earnings per share - diluted (Non-GAAP) $ 1.08 $ 1.67 Return on average assets (annualized) (GAAP) 0.04 % 1.40 % Core return on average assets (annualized) (Non-GAAP) 0.87 % 1.40 % Return on average equity (annualized) (GAAP) 0.40 % 15.03 % Core return on average equity (annualized) (Non-GAAP) 9.25 % 15.03 % 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. Net interest income for the nine months ended September 30, 2023 decreased $14.5 million or 27.3% compared to the same period of 2022, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets. The yield on interest earning assets was 4.32% for the nine months ended September 30, 2023 compared to 3.65% for the same period in 2022. The increase in yield on interest earning assets was primarily due to higher yields on the Company’s loan and investment portfolios and deposits in banks as a result of increases in interest rates subsequent to the second quarter of 2022. The cost of interest-bearing liabilities was 2.89% for the nine months ended September 30, 2023 compared to 0.67% for the nine months ended September 30, 2022. The increase in the cost of interest-bearing liabilities was primarily due to a 2.26% increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the third quarter of 2022. The annualized net interest margin for the nine months ended September 30, 2023 was 2.25% as compared to 3.19% for the same period in the prior year. The decrease in net interest margin was primarily due to the increase in cost of interest-bearing deposits, which was partially offset by an increase in yields on the Company’s interest-earning assets. The Company recorded a $2.5 million release of provision for credit losses for the nine months ended September 30, 2023 compared to no provision for the nine months ended September 30, 2022. The release of provision for credit losses during the third quarter of 2023 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. Non-interest income decreased $16.5 million during the nine months ended September 30, 2023 compared to the same period in 2022. The decrease in non-interest income was primarily due to the Restructuring that resulted in a loss of $17.1 million. Core non-interest income (Non-GAAP) increased $577 thousand primarily due to favorable variances of $610 thousand as a result of mark-to-market adjustments on investments related to the Company’s nonqualified deferred compensation plan. The Company also had an increase in other service charges and fee income of $208 thousand primarily as a result of penalty fee income recognized on the early withdrawal of certificates of deposit, a $91 thousand increase in customer interest rate swap fee income and gains recorded on the sale of the guaranteed portion of SBA 7(a) loans totaling $50 thousand. These increases were partially offset by a decrease in BOLI income of $221 thousand due to the surrender of all BOLI policies as part of the Restructuring. Non-interest expense decreased $1.2 million or 4.8% during the nine months ended September 30, 2023 compared to the same period in 2022 primarily due to decreases in salaries and employee benefits expense. The decrease in salaries and employee benefits was primarily due to a reduction in incentive compensation accruals when compared to the same period of the prior year. Incentive compensation accruals can fluctuate materially from quarter to quarter, based upon the Company’s financial performance and conditions measured against, among other evaluation criteria, our strategic plan and budget. At the end of each year, the ultimate determination of the incentive compensation is approved by the Board of Directors. The decrease in other expense was due to the reversal of a litigation reserve previously discussed and lower legal and consulting expenses, partially offset by increases in FDIC insurance expense, franchise tax expense and marketing expense. The increase in FDIC insurance expense resulted from the FDIC increasing the base assessment rate for all insured depository institutions. The increase in franchise tax expense was due to an increase in the Bank’s equity as that is the basis the Commonwealth of Virginia uses to assess taxes on banking institutions. The increase in marketing expense was due to increased marketing and promotional activity. The decrease in occupancy expense of premises was due to a decrease in office rent as a result of the renegotiation of certain leases. The decrease in furniture and equipment expense was due to lower depreciation expense on fixed assets. For the nine months ended September 30, 2023, annualized non-interest expense to average assets was 1.33% compared to 1.45% for the nine months ended September 30, 2022. The decrease was primarily due to lower overhead costs as a result of continued cost consciousness. For the nine months ended September 30, 2023, the annualized core efficiency ratio (Non-GAAP) was 58.1% compared to 45.3% for the nine months ended September 30, 2022. The increase was primarily due to a decrease in net interest income, which more than offset the increase in core non-interest income (Non-GAAP) and decrease in non-interest expense. 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 the impact of unrealized losses in the Company’s bond portfolio on the Bank’s regulatory capital ratios and period-to-period operating performance, respectively. 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: The impact to the Bank’s regulatory capital ratios in the hypothetical scenario where the entire bond portfolio was sold at fair market value and the losses realized. Non-interest income, income before taxes, income tax expense, net income, earnings per share (basic and diluted), return on average assets (annualized), return on average equity (annualized), non-interest income as a percentage of average assets (annualized) and efficiency ratio excluding the impact of losses recognized in July 2023 on the sale of available-for-sale securities and taxes paid on the early surrender of bank owned life insurance policies. These disclosures should not be viewed as a substitute for 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 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 a $2.30 billion asset bank 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. Metro 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. 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; adequacy of our allowance for credit losses; 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 acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, negatively impacting business and economic conditions in the U.S. and abroad; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts or public health events (such as COVID-19), and of governmental and societal responses thereto; technological risks and developments, and cyber threats, attacks, or events; the additional requirements of being a public company; 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. John Marshall Bancorp, Inc. Financial Highlights (Unaudited) (Dollar amounts in thousands, except per share data) At or For the Three Months Ended At or For the Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Selected Balance Sheet Data Cash and cash equivalents $ 192,656 $ 74,756 $ 192,656 $ 74,756 Total investment securities 272,881 473,478 272,881 473,478 Loans, net of unearned income 1,820,132 1,725,114 1,820,132 1,725,114 Allowance for loan credit losses 20,036 20,032 20,036 20,032 Total assets 2,298,202 2,305,540 2,298,202 2,305,540 Non-interest bearing demand deposits 437,880 535,186 437,880 535,186 Interest bearing deposits 1,543,743 1,528,155 1,543,743 1,528,155 Total deposits 1,981,623 2,063,341 1,981,623 2,063,341 Federal funds purchased - - - - - - - - Federal Home Loan Bank advances - - - - - - - - Federal Reserve Bank borrowings 54,000 - - 54,000 - - Shareholders' equity 220,567 202,212 220,567 202,212 Summary Results of Operations Interest income $ 26,263 $ 21,208 $ 74,171 $ 60,509 Interest expense 14,284 3,516 35,715 7,593 Net interest income 11,979 17,692 38,456 52,916 Provision for (recovery of) credit losses (829 ) - - (2,471 ) - - Net interest income after provision for (recovery of) credit losses 12,808 17,692 40,927 52,916 Non-interest income (loss) (16,815 ) 450 (15,564 ) 973 Core non-interest income(1) 299 450 1,550 973 Non-interest expense 7,660 7,958 23,261 24,425 Income (Loss) before income taxes (11,667 ) 10,184 2,102 29,464 Core income before income taxes(1) 5,447 10,184 19,216 29,464 Net income (loss) (10,137 ) 8,045 656 23,601 Core net income(1) 4,484 8,045 15,277 23,601 Per Share Data and Shares Outstanding Earnings (loss) per share - basic $ (0.72 ) $ 0.57 $ 0.05 $ 1.69 Core earnings per share - basic(1) $ 0.32 $ 0.57 $ 1.08 $ 1.69 Earnings (loss) per share - diluted $ (0.72 ) $ 0.57 $ 0.05 $ 1.67 Core earnings per share - diluted(1) $ 0.32 $ 0.57 $ 1.08 $ 1.67 Book value per share $ 15.61 $ 14.37 $ 15.61 $ 14.37 Weighted average common shares (basic) 14,080,026 13,989,414 14,126,522 13,902,324 Weighted average common shares (diluted) 14,080,026 14,108,286 14,199,179 14,065,887 Common shares outstanding at end of period 14,126,084 14,070,080 14,126,084 14,070,080 Performance Ratios Return on average assets (annualized) (1.73 )% 1.38 % 0.04 % 1.40 % Core return on average assets (annualized)(1) 0.76 1.38 0.87 1.40 Return on average equity (annualized) (18.24 )% 15.07 % 0.40 % 15.03 % Core return on average equity (annualized)(1) 8.07 15.07 9.25 15.03 Net interest margin 2.08 % 3.10 % 2.25 % 3.19 % Non-interest income (loss) as a percentage of average assets (annualized) (2.86 )% 0.08 % (0.89 )% 0.06 % Core non-interest income as a percentage of average assets (annualized)(1) 0.05 0.08 0.09 0.06 Non-interest expense to average assets (annualized) 1.30 % 1.36 % 1.33 % 1.45 % Efficiency ratio (158.4 )% 43.9 % 101.6 % 45.3 % Core efficiency ratio(1) 62.4 43.9 58.1 45.3 Asset Quality Non-performing assets to total assets - - % - - % - - % - - % Non-performing loans to total loans - - % - - % - - % - - % Allowance for loan credit losses to non-performing loans N/M N/M N/M N/M Allowance for loan credit losses to total loans 1.10 % 1.16 % 1.10 % 1.16 % Net charge-offs (recoveries) to average loans (annualized) 0.00 % 0.00 % 0.00 % 0.00 % Loans 30-89 days past due and accruing interest $ - - $ - - $ - - $ - - Non-accrual loans - - - - - - - - Other real estate owned - - - - - - - - Non-performing assets (2) - - - - - - - - Capital Ratios (Bank Level) Equity / assets 10.6 % 9.7 % 10.6 % 9.7 % Total risk-based capital ratio 15.7 % 15.4 % 15.7 % 15.4 % Tier 1 risk-based capital ratio 14.6 % 14.3 % 14.6 % 14.3 % Common equity tier 1 ratio 14.6 % 14.3 % 14.6 % 14.3 % Leverage ratio 11.3 % 11.0 % 11.3 % 11.0 % Other Information Number of full time equivalent employees 138 136 138 136 # Full service branch offices 8 8 8 8 # Loan production or limited service branch offices - - 1 - - 1 ___________________________ (1) Non-GAAP financial measure. Refer to “Reconciliation of Certain Non-GAAP Financial Measures” for further details. (2) Non-performing assets consist of non-accrual loans, loans 90 days or more past due and still accruing interest and other real estate owned. John Marshall Bancorp, Inc. Consolidated Balance Sheets (Dollar amounts in thousands, except per share data) % Change September 30, December 31, September 30, Last Nine Year Over 2023 2022 2022 Months Year Assets (Unaudited) * (Unaudited) Cash and due from banks $ 7,642 $ 6,583 $ 14,957 16.1 % (48.9 )% Interest-bearing deposits in banks 185,014 55,016 59,799 236.3 % 209.4 % Securities available-for-sale, at fair value 169,084 357,576 366,546 (52.7 )% (53.9 )% Securities held-to-maturity, fair value of $75,733, $81,161, and $81,765 at 9/30/2023, 12/31/2022, and 9/30/2022, respectively. 96,347 99,415 100,598 (3.1 )% (4.2 )% Restricted securities, at cost 5,007 4,425 4,421 13.2 % 13.3 % Equity securities, at fair value 2,443 2,115 1,913 15.5 % 27.7 % Loans, net of unearned income 1,820,132 1,789,508 1,725,114 1.7 % 5.5 % Allowance for credit losses (20,036 ) (20,208 ) (20,032 ) (0.9 )% 0.0 % Net loans 1,800,096 1,769,300 1,705,082 1.7 % 5.6 % Bank premises and equipment, net 1,264 1,219 1,331 3.7 % (5.0 )% Accrued interest receivable 5,701 5,531 4,744 3.1 % 20.2 % Bank owned life insurance - 21,170 21,071 (100.0 )% (100.0 )% Right of use assets 4,136 4,611 3,936 (10.3 )% 5.1 % Other assets 21,468 21,274 21,142 0.9 % 1.5 % Total assets $ 2,298,202 $ 2,348,235 $ 2,305,540 (2.1 )% (0.3 )% Liabilities and Shareholders' Equity Liabilities Deposits: Non-interest bearing demand deposits $ 437,880 $ 476,697 $ 535,186 (8.1 )% (18.2 )% Interest-bearing demand deposits 675,819 691,945 705,593 (2.3 )% (4.2 )% Savings deposits 57,408 95,241 102,909 (39.7 )% (44.2 )% Time deposits 810,516 803,857 719,653 0.8 % 12.6 % Total deposits 1,981,623 2,067,740 2,063,341 (4.2 )% (4.0 )% Federal funds purchased - - 25,500 - - N/M N/M Federal Reserve Bank borrowings 54,000 - - - - N/M N/M Subordinated debt, net 24,687 24,624 24,603 0.3 % 0.3 % Accrued interest payable 2,610 1,035 643 152.2 % 305.9 % Lease liabilities 4,415 4,858 4,186 (9.1 )% 5.5 % Other liabilities 10,300 11,678 10,555 (11.8 )% (2.4 )% Total liabilities 2,077,635 2,135,435 2,103,328 (2.7 )% (1.2 )% Shareholders' Equity Preferred stock, par value $0.01 per share; authorized 1,000,000 shares; none issued - - - - - - N/M N/M Common stock, nonvoting, par value $0.01 per share; authorized 1,000,000 shares; none issued - - - - - - N/M N/M Common stock, voting, par value $0.01 per share; authorized 30,000,000 shares; issued and outstanding, 14,126,084 at 9/30/2023 including 45,871 unvested shares, 14,098,986 at 12/31/2022 including 55,185 unvested shares, and 14,070,080 at 9/30/2022, including 58,046 unvested shares 141 141 140 - - % 0.7 % Additional paid-in capital 95,510 94,726 94,560 0.8 % 1.0 % Retained earnings 141,886 146,630 138,428 (3.2 )% 2.5 % Accumulated other comprehensive loss (16,970 ) (28,697 ) (30,916 ) (40.9 )% (45.1 )% Total shareholders' equity 220,567 212,800 202,212 3.6 % 9.1 % Total liabilities and shareholders' equity $ 2,298,202 $ 2,348,235 $ 2,305,540 (2.1 )% (0.3 )% * Derived from audited consolidated financial statements. John Marshall Bancorp, Inc. Consolidated Statements of Income (Dollar amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 % Change 2023 2022 % Change (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest and Dividend Income Interest and fees on loans $ 21,925 $ 18,222 20.3 % $ 63,355 $ 53,740 17.9 % Interest on investment securities, taxable 1,507 2,323 (35.1 )% 5,895 5,597 5.3 % Interest on investment securities, tax-exempt 10 30 (66.7 )% 45 90 (50.0 )% Dividends 75 62 21.0 % 222 185 20.0 % Interest on deposits in other banks 2,746 571 N/M 4,654 897 N/M Total interest and dividend income 26,263 21,208 23.8 % 74,171 60,509 22.6 % Interest Expense Deposits 13,273 3,068 N/M 33,590 6,090 N/M Federal funds purchased - - - - N/M 10 - - N/M Federal Home Loan Bank advances - - - - N/M 67 42 59.5 % Federal Reserve Bank borrowings 662 - - N/M 1,001 - - N/M Subordinated debt 349 448 (22.1 )% 1,047 1,461 (28.3 )% Total interest expense 14,284 3,516 306.3 % 35,715 7,593 370.4 % Net interest income 11,979 17,692 (32.3 )% 38,456 52,916 (27.3 )% Provision for (recovery of) Credit Losses (829 ) - - N/M (2,471 ) - - N/M Net interest income after provision for (recovery of) credit losses 12,808 17,692 (27.6 )% 40,927 52,916 (22.7 )% Non-interest Income Service charges on deposit accounts 85 79 7.6 % 239 240 (0.4 )% Bank owned life insurance 23 255 (91.0 )% 224 445 (49.7 )% Other service charges and fees 160 175 (8.6 )% 677 469 44.3 % Losses on sale of available-for-sale securities (17,114 ) - - N/M (17,316 ) - - N/M Insurance commissions 54 47 14.9 % 310 312 (0.6 )% Gain on sale of government guaranteed loans 27 - - N/M 50 - - N/M Non-qualified deferred compensation plan asset gains (losses), net (60 ) (107 ) (43.9 )% 112 (498 ) (122.5 )% Other income 10 1 N/M 140 5 N/M Total non-interest income (loss) (16,815 ) 450 (3,836.7 )% (15,564 ) 973 (1,699.6 )% Non-interest Expenses Salaries and employee benefits 5,052 5,072 (0.4 )% 14,929 15,754 (5.2 )% Occupancy expense of premises 445 461 (3.5 )% 1,363 1,435 (5.0 )% Furniture and equipment expenses 282 323 (12.7 )% 882 989 (10.8 )% Other expenses 1,881 2,102 (10.5 )% 6,087 6,247 (2.6 )% Total non-interest expenses 7,660 7,958 (3.7 )% 23,261 24,425 (4.8 )% Income (Loss) before income taxes (11,667 ) 10,184 (214.6 )% 2,102 29,464 (92.9 )% Income tax Expense (Benefit) (1,530 ) 2,139 (171.5 )% 1,446 5,863 (75.3 )% Net income (loss) $ (10,137 ) $ 8,045 (226.0 )% $ 656 $ 23,601 (97.2 )% Earnings (Loss) Per Share Basic $ (0.72 ) $ 0.57 (226.3 )% $ 0.05 $ 1.69 (97.0 )% Diluted $ (0.72 ) $ 0.57 (226.3 )% $ 0.05 $ 1.67 (97.0 )% John Marshall Bancorp, Inc. Historical Trends - Quarterly Financial Data (Unaudited) (Dollar amounts in thousands, except per share data) 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Profitability for the Quarter: Interest income $ 26,263 $ 24,455 $ 23,453 $ 23,557 $ 21,208 $ 19,555 $ 19,745 Interest expense 14,284 12,446 8,984 6,052 3,516 2,247 1,829 Net interest income 11,979 12,009 14,469 17,505 17,692 17,308 17,916 Provision for (recovery of) credit losses (829 ) (868 ) (774 ) 175 - - - - - - Non-interest income (loss) (16,815 ) 685 566 718 450 109 414 Non-interest expenses 7,660 7,831 7,770 7,449 7,958 7,681 8,786 Income (loss) before income taxes (11,667 ) 5,731 8,039 10,599 10,184 9,736 9,544 Income tax expense (benefit) (1,530 ) 1,241 1,735 2,397 2,139 1,854 1,870 Net income (loss) $ (10,137 ) $ 4,490 $ 6,304 $ 8,202 $ 8,045 $ 7,882 $ 7,674 Financial Performance: Return on average assets (annualized) (1.73 )% 0.77 % 1.10 % 1.40 % 1.38 % 1.41 % 1.40 % Return on average equity (annualized) (18.24 )% 8.13 % 11.83 % 15.65 % 15.07 % 15.28 % 14.76 % Net interest margin 2.08 % 2.10 % 2.57 % 3.05 % 3.10 % 3.16 % 3.34 % Non-interest income (loss) as a percentage of average assets (annualized) (2.86 )% 0.12 % 0.10 % 0.12 % 0.08 % 0.02 % 0.08 % Non-interest expense to average assets (annualized) 1.30 % 1.34 % 1.35 % 1.27 % 1.36 % 1.38 % 1.61 % Efficiency ratio (158.4 )% 61.7 % 51.7 % 40.9 % 43.9 % 44.1 % 47.9 % Per Share Data: Earnings (loss) per share - basic $ (0.72 ) $ 0.32 $ 0.45 $ 0.58 $ 0.57 $ 0.56 $ 0.55 Earnings (loss) per share - diluted $ (0.72 ) $ 0.32 $ 0.44 $ 0.58 $ 0.57 $ 0.56 $ 0.55 Book value per share $ 15.61 $ 15.50 $ 15.63 $ 15.09 $ 14.37 $ 14.80 $ 14.68 Dividends declared per share $ - - $ 0.22 $ - - $ - - $ - - $ - - $ 0.20 Weighted average common shares (basic) 14,080,026 14,077,658 14,067,047 14,019,429 13,989,414 13,932,256 13,783,034 Weighted average common shares (diluted) 14,080,026 14,143,253 14,156,724 14,131,352 14,108,286 14,085,160 13,991,692 Common shares outstanding at end of period 14,126,084 14,126,138 14,125,208 14,098,986 14,070,080 14,026,589 13,950,570 Non-interest Income: Service charges on deposit accounts $ 85 $ 82 $ 72 $ 84 $ 79 $ 84 $ 77 Bank owned life insurance 23 101 100 99 255 95 95 Other service charges and fees 160 314 203 187 175 157 137 Losses on securities (17,114 ) - - (202 ) - - - - - - - - Insurance commissions 54 50 206 70 47 44 221 Gain on sale of government guaranteed loans 27 23 - - - - - - - - - - Non-qualified deferred compensation plan asset gains (losses), net (60 ) 83 89 144 (107 ) (274 ) (117 ) Other income 10 32 98 134 1 3 1 Total non-interest income (loss) $ (16,815 ) $ 685 $ 566 $ 718 $ 450 $ 109 $ 414 Non-interest Expenses: Salaries and employee benefits $ 5,052 $ 4,965 $ 4,912 $ 4,436 $ 5,072 $ 4,655 $ 6,027 Occupancy expense of premises 445 448 470 458 461 482 493 Furniture and equipment expenses 282 304 296 336 323 341 325 Other expenses 1,881 2,114 2,092 2,219 2,102 2,203 1,941 Total non-interest expenses $ 7,660 $ 7,831 $ 7,770 $ 7,449 $ 7,958 $ 7,681 $ 8,786 Balance Sheets at Quarter End: Total loans, net of unearned income $ 1,820,132 $ 1,769,801 $ 1,771,272 $ 1,789,508 $ 1,725,114 $ 1,692,652 $ 1,631,260 Allowance for loan credit losses (20,036 ) (20,629 ) (21,619 ) (20,208 ) (20,032 ) (20,031 ) (20,031 ) Investment securities 272,881 429,954 445,785 463,531 473,478 473,914 409,692 Interest-earning assets 2,278,027 2,315,368 2,312,404 2,308,055 2,258,822 2,274,968 2,217,553 Total assets 2,298,202 2,364,250 2,351,307 2,348,235 2,305,540 2,316,374 2,249,609 Total deposits 1,981,623 2,046,309 2,088,642 2,067,740 2,063,341 2,043,741 1,983,099 Total interest-bearing liabilities 1,622,430 1,691,044 1,665,837 1,641,167 1,552,758 1,581,017 1,530,133 Total shareholders' equity 220,567 218,970 220,823 212,800 202,212 207,530 204,855 Quarterly Average Balance Sheets: Total loans, net of unearned income $ 1,790,720 $ 1,767,831 $ 1,772,922 $ 1,759,747 $ 1,684,796 $ 1,641,914 $ 1,620,533 Investment securities 310,407 441,778 463,254 468,956 488,860 447,688 376,608 Interest-earning assets 2,301,642 2,305,050 2,295,677 2,289,061 2,277,325 2,204,709 2,183,897 Total assets 2,331,403 2,344,712 2,334,695 2,330,307 2,314,825 2,240,119 2,216,131 Total deposits 2,012,934 2,051,702 2,066,139 2,079,161 2,057,640 1,980,231 1,946,882 Total interest-bearing liabilities 1,660,980 1,667,597 1,621,131 1,566,902 1,547,766 1,504,574 1,505,854 Total shareholders' equity 220,473 221,608 220,282 207,906 212,147 206,967 210,900 Financial Measures: Average equity to average assets 9.5 % 9.5 % 9.4 % 8.9 % 9.2 % 9.2 % 9.5 % Investment securities to earning assets 12.0 % 18.6 % 19.3 % 20.1 % 21.0 % 20.8 % 18.5 % Loans to earning assets 79.9 % 76.4 % 76.6 % 77.5 % 76.4 % 74.4 % 73.6 % Loans to assets 79.2 % 74.9 % 75.3 % 76.2 % 74.8 % 73.1 % 72.5 % Loans to deposits 91.9 % 86.5 % 84.8 % 86.5 % 83.6 % 82.8 % 82.3 % Capital Ratios (Bank Level): Equity / assets 10.6 % 10.2 % 10.3 % 10.0 % 9.7 % 9.9 % 10.2 % Total risk-based capital ratio 15.7 % 16.1 % 16.1 % 15.6 % 15.4 % 15.1 % 15.4 % Tier 1 risk-based capital ratio 14.6 % 15.0 % 14.9 % 14.4 % 14.3 % 14.0 % 14.2 % Common equity tier 1 ratio 14.6 % 15.0 % 14.9 % 14.4 % 14.3 % 14.0 % 14.2 % Leverage ratio 11.3 % 11.6 % 11.5 % 11.3 % 11.0 % 11.0 % 10.8 % John Marshall Bancorp, Inc. Loan, Deposit and Borrowing Detail (Unaudited) (Dollar amounts in thousands) 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Loans $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total Commercial business loans $ 37,793 2.1 % $ 40,156 2.3 % $ 41,204 2.3 % $ 44,788 2.5 % $ 44,967 2.6 % $ 47,654 2.8 % $ 52,569 3.2 % Commercial PPP loans 132 0.0 % 133 0.0 % 135 0.0 % 136 0.0 % 138 0.0 % 224 0.0 % 7,781 0.5 % Commercial owner-occupied real estate loans 363,017 20.0 % 360,859 20.4 % 363,495 20.6 % 366,131 20.5 % 362,346 21.1 % 378,457 22.4 % 339,933 20.9 % Total business loans 400,942 22.1 % 401,148 22.7 % 404,834 22.9 % 411,055 23.0 % 407,451 23.7 % 426,335 25.2 % 400,283 24.6 % Investor real estate loans 683,686 37.6 % 654,623 37.0 % 660,740 37.4 % 662,769 37.1 % 622,415 36.1 % 598,501 35.5 % 553,093 34.0 % Construction & development loans 179,570 9.9 % 179,656 10.2 % 179,606 10.2 % 195,027 11.0 % 199,324 11.6 % 189,644 11.2 % 219,160 13.4 % Multi-family loans 86,366 4.8 % 86,061 4.9 % 88,670 5.0 % 89,227 5.0 % 106,460 6.2 % 106,236 6.3 % 99,100 6.1 % Total commercial real estate loans 949,622 52.3 % 920,340 52.1 % 929,016 52.6 % 947,023 53.1 % 928,199 53.9 % 894,381 53.0 % 871,353 53.5 % Residential mortgage loans 464,509 25.7 % 443,305 25.2 % 433,076 24.5 % 426,841 23.9 % 385,696 22.4 % 368,370 21.8 % 356,331 21.9 % Consumer loans 467 0.0 % 646 0.0 % 324 0.0 % 529 0.0 % 585 0.0 % 651 0.0 % 513 0.0 % Total loans $ 1,815,540 100.0 % $ 1,765,439 100.0 % $ 1,767,250 100.0 % $ 1,785,448 100.0 % $ 1,721,931 100.0 % $ 1,689,737 100.0 % $ 1,628,480 100.0 % Less: Allowance for loan credit losses (20,036 ) (20,629 ) (21,619 ) (20,208 ) (20,032 ) (20,031 ) (20,031 ) Net deferred loan costs (fees) 4,592 4,362 4,022 4,060 3,183 2,915 2,780 Net loans $ 1,800,096 $ 1,749,172 $ 1,749,653 $ 1,769,300 $ 1,705,082 $ 1,672,621 $ 1,611,229 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Deposits $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total Non-interest bearing demand deposits $ 437,880 22.1 % $ 433,931 21.2 % $ 447,450 21.4 % $ 476,697 23.1 % $ 535,186 25.9 % $ 512,284 25.1 % $ 495,811 25.0 % Interest-bearing demand deposits: NOW accounts(1) 345,522 17.4 % 311,225 15.2 % 284,872 13.7 % 253,148 12.3 % 293,558 14.2 % 338,789 16.6 % 345,087 17.4 % Money market accounts(1) 330,297 16.7 % 341,413 16.7 % 392,962 18.8 % 438,797 21.2 % 412,035 20.0 % 399,877 19.6 % 414,987 20.9 % Savings accounts 57,408 3.0 % 68,013 3.4 % 81,150 3.9 % 95,241 4.6 % 102,909 5.0 % 112,276 5.4 % 114,427 5.8 % Certificates of deposit $250,000 or more 364,805 18.4 % 376,899 18.4 % 338,824 16.2 % 314,738 15.2 % 280,027 13.6 % 255,411 12.5 % 241,230 12.1 % Less than $250,000 103,600 5.2 % 105,956 5.2 % 94,429 4.5 % 89,247 4.3 % 88,421 4.3 % 87,505 4.3 % 91,050 4.6 % QwickRate® certificates of deposit 11,526 0.6 % 12,772 0.6 % 16,952 0.8 % 22,163 1.1 % 20,154 1.0 % 20,154 1.0 % 23,136 1.2 % IntraFi® certificates of deposit 41,659 2.1 % 49,729 2.4 % 53,178 2.5 % 25,757 1.2 % 46,305 2.2 % 32,686 1.6 % 39,628 2.0 % Brokered deposits 288,926 14.6 % 346,371 16.9 % 378,825 18.2 % 351,952 17.0 % 284,746 13.8 % 284,759 13.9 % 217,743 11.0 % Total deposits $ 1,981,623 100.0 % $ 2,046,309 100.0 % $ 2,088,642 100.0 % $ 2,067,740 100.0 % $ 2,063,341 100.0 % $ 2,043,741 100.0 % $ 1,983,099 100.0 % Borrowings Federal funds purchased $ - - 0.0 % $ - - 0.0 % $ - - 0.0 % $ 25,500 50.9 % $ - - 0.0 % $ - - 0.0 % $ - - 0.0 % Federal Home Loan Bank advances - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % 18,000 42.0 % Federal Reserve Bank borrowings 54,000 68.6 % 54,000 68.6 % - - 0.0 - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % Subordinated debt 24,687 31.4 % 24,666 31.4 % 24,645 100.0 % 24,624 49.1 % 24,603 100.0 % 49,560 100.0 % 24,845 58.0 % Total borrowings $ 78,687 100.0 % $ 78,666 100.0 % $ 24,645 100.0 % $ 50,124 100.0 % $ 24,603 100.0 % $ 49,560 100.0 % $ 42,845 100.0 % Total deposits and borrowings $ 2,060,310 $ 2,124,975 $ 2,113,287 $ 2,117,864 $ 2,087,944 $ 2,093,301 $ 2,025,944 Core customer funding sources (2) $ 1,681,171 82.6 % $ 1,687,166 80.3 % $ 1,692,865 81.1 % $ 1,693,625 80.9 % $ 1,758,441 85.2 % $ 1,738,828 85.1 % $ 1,742,220 87.1 % Wholesale funding sources (3) 354,452 17.4 % 413,143 19.7 % 395,777 18.9 % 399,615 19.1 % 304,900 14.8 % 304,913 14.9 % 258,879 12.9 % Total funding sources $ 2,035,623 100.0 % $ 2,100,309 100.0 % $ 2,088,642 100.0 % $ 2,093,240 100.0 % $ 2,063,341 100.0 % $ 2,043,741 100.0 % $ 2,001,099 100.0 % _____________________________ (1) Includes IntraFi® accounts. (2) Includes reciprocal IntraFi Demand®, IntraFi Money Market® and IntraFi CD® deposits, which are maintained by customers. (3) Consists of QwickRate® certificates of deposit, brokered deposits, federal funds purchased, Federal Home Loan Bank advances and Federal Reserve Bank borrowings. John Marshall Bancorp, Inc. Average Balance Sheets, Interest and Rates (unaudited) (Dollar amounts in thousands) Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Interest Income / Average Interest Income / Average Average Balance Expense Rate Average Balance Expense Rate Assets: Securities: Taxable $ 401,623 $ 6,117 2.04 % $ 433,128 $ 5,782 1.78 % Tax-exempt(1) 2,678 56 2.80 % 5,002 114 3.05 % Total securities $ 404,301 $ 6,173 2.04 % $ 438,130 $ 5,896 1.80 % Loans, net of unearned income(2): Taxable 1,748,904 62,664 4.79 % 1,626,661 53,192 4.37 % Tax-exempt(1) 28,319 875 4.13 % 22,656 694 4.10 % Total loans, net of unearned income $ 1,777,223 $ 63,539 4.78 % $ 1,649,317 $ 53,886 4.37 % Interest-bearing deposits in other banks $ 119,002 $ 4,654 5.23 % $ 134,874 $ 897 0.89 % Total interest-earning assets $ 2,300,526 $ 74,366 4.32 % $ 2,222,321 $ 60,679 3.65 % Total non-interest earning assets 36,572 35,066 Total assets $ 2,337,098 $ 2,257,387 Liabilities & Shareholders’ Equity: Interest-bearing deposits NOW accounts $ 291,217 $ 4,484 2.06 % $ 325,647 $ 829 0.34 % Money market accounts 374,053 7,560 2.70 % 389,535 1,516 0.52 % Savings accounts 75,273 673 1.20 % 109,740 284 0.35 % Time deposits 855,076 20,873 3.26 % 658,897 3,461 0.70 % Total interest-bearing deposits $ 1,595,619 $ 33,590 2.81 % $ 1,483,819 $ 6,090 0.55 % Federal funds purchased 294 10 4.55 % — — 0.00 % Subordinated debt 24,653 1,047 5.68 % 27,476 1,461 7.11 % Other borrowed funds 29,483 1,068 4.84 % 8,257 42 0.68 % Total interest-bearing liabilities $ 1,650,049 $ 35,715 2.89 % $ 1,519,552 $ 7,593 0.67 % Demand deposits 447,778 511,504 Other liabilities 18,483 16,321 Total liabilities $ 2,116,310 $ 2,047,377 Shareholders’ equity $ 220,788 $ 210,010 Total liabilities and shareholders’ equity $ 2,337,098 $ 2,257,387 Tax-equivalent net interest income and spread $ 38,651 1.43 % $ 53,086 2.98 % 195 170 Net interest income $ 38,456 $ 52,916 Tax-equivalent interest income/earnings assets 4.32 % 3.65 % Interest expense/earning assets 2.08 % 0.46 % Net interest margin(3) 2.25 % 3.19 % ________________________________ (1) Tax-equivalent income has been adjusted using the federal statutory tax rate of 21%. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $195 thousand and $170 thousand for the nine months ended September 30, 2023 and September 30, 2022, respectively. (2) The Company did not have any loans on non-accrual as of September 30, 2023 or September 30, 2022. (3) The net interest margin has been calculated on a tax-equivalent basis. John Marshall Bancorp, Inc. Average Balance Sheets, Interest and Rates (unaudited) (Dollar amounts in thousands) Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Interest Income / Average Interest Income / Average Average Balance Expense Rate Average Balance Expense Rate Assets: Securities: Taxable $ 308,723 $ 1,582 2.03 % $ 483,861 $ 2,385 1.96 % Tax-exempt(1) 1,684 13 3.06 % 4,999 38 3.02 % Total securities $ 310,407 $ 1,595 2.04 % $ 488,860 $ 2,423 1.97 % Loans, net of unearned income(2): Taxable 1,762,653 21,695 4.88 % 1,655,670 17,983 4.31 % Tax-exempt(1) 28,067 292 4.13 % 29,126 302 4.11 % Total loans, net of unearned income $ 1,790,720 $ 21,987 4.87 % $ 1,684,796 $ 18,285 4.31 % Interest-bearing deposits in other banks $ 200,515 $ 2,746 5.43 % $ 103,669 $ 571 2.19 % Total interest-earning assets $ 2,301,642 $ 26,328 4.54 % $ 2,277,325 $ 21,279 3.71 % Total non-interest earning assets 29,761 37,500 Total assets $ 2,331,403 $ 2,314,825 Liabilities & Shareholders’ Equity: Interest-bearing deposits NOW accounts $ 327,309 $ 2,239 2.71 % $ 329,780 $ 404 0.49 % Money market accounts 341,672 2,609 3.03 % 377,736 727 0.76 % Savings accounts 63,956 198 1.23 % 106,647 107 0.40 % Time deposits 849,270 8,227 3.84 % 705,206 1,830 1.03 % Total interest-bearing deposits $ 1,582,207 $ 13,273 3.33 % $ 1,519,369 $ 3,068 0.80 % Federal funds purchased 99 — — % — — 0.00 % Subordinated debt, net 24,674 349 5.61 % 28,397 448 6.26 % Other borrowed funds 54,000 662 4.86 % — — 0.00 % Total interest-bearing liabilities $ 1,660,980 $ 14,284 3.41 % $ 1,547,766 $ 3,516 0.90 % Demand deposits 430,727 538,271 Other liabilities 19,223 16,641 Total liabilities $ 2,110,930 $ 2,102,678 Shareholders’ equity $ 220,473 $ 212,247 Total liabilities and shareholders’ equity $ 2,331,403 $ 2,314,925 Tax-equivalent net interest income and spread $ 12,044 1.13 % $ 17,763 2.81 % Less: tax-equivalent adjustment 65 71 Net interest income $ 11,979 $ 17,692 Tax-equivalent interest income/earnings assets 4.54 % 3.71 % Interest expense/earning assets 2.46 % 0.61 % Net interest margin(3) 2.08 % 3.10 % ____________________________ (1) Tax-equivalent income has been adjusted using the federal statutory tax rate of 21%. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $65 thousand and $71 thousand for the three months ended September 30, 2023 and September 30, 2022, respectively. (2) The Company did not have any loans on non-accrual as of September 30, 2023 or September 30, 2022. (3) The net interest margin has been calculated on a tax-equivalent basis. John Marshall Bancorp, Inc. Reconciliation of Certain Non-GAAP Financial Measures (unaudited) (Dollar amounts in thousands) As of September 30, 2023 December 31, 2022 September 30, 2022 Regulatory Ratios (Bank) Total risk-based capital (GAAP) $ 280,891 $ 283,471 $ 274,611 Less: Unrealized losses on available-for-sale securities, net of tax benefit (1) 17,143 28,942 31,191 Less: Unrealized losses on held-to-maturity securities, net of tax benefit (1) 16,285 14,421 14,878 Total risk-based capital, excluding unrealized losses on available-for-sale and held-to-maturity securities, net of tax benefit (Non-GAAP) $ 247,463 $ 240,108 $ 228,542 Tier 1 capital (GAAP) $ 261,666 $ 262,960 $ 254,226 Less: Unrealized losses on available-for-sale securities, net of tax benefit (1) 17,143 28,942 31,191 Less: Unrealized losses on held-to-maturity securities, net of tax benefit (1) 16,285 14,421 14,878 Tier 1 capital, excluding unrealized losses on available-for-sale and held-to-maturity securities, net of tax benefit (Non-GAAP) $ 228,238 $ 219,597 $ 208,157 Risk weighted assets (GAAP) $ 1,794,603 $ 1,819,305 $ 1,783,344 Less: Risk weighted available-for-sale securities 25,094 60,894 62,969 Less: Risk weighted held-to-maturity securities 17,229 17,762 17,973 Risk weighted assets, excluding available-for-sale and held-to-maturity securities (Non-GAAP) $ 1,752,280 $ 1,740,649 $ 1,702,402 Total average assets for leverage ratio (GAAP) $ 2,326,722 $ 2,327,939 $ 2,312,355 Less: Average available-for-sale securities 206,116 362,024 380,324 Less: Average held-to-maturity securities 96,988 100,050 101,558 Total average assets for leverage ratio, excluding available-for-sale and held-to-maturity securities (Non-GAAP) $ 2,023,618 $ 1,865,865 $ 1,830,473 Total risk-based capital ratio (2) Total risk-based capital ratio (GAAP) 15.7 % 15.6 % 15.4 % Total risk-based capital ratio (Non-GAAP) 14.1 % 13.8 % 13.4 % Tier 1 capital ratio (3) Tier 1 risk-based capital ratio (GAAP) 14.6 % 14.4 % 14.3 % Tier 1 risk-based capital ratio (Non-GAAP) 12.9 % 12.6 % 12.2 % Common equity tier 1 ratio (4) Common equity tier 1 ratio (GAAP) 14.6 % 14.4 % 14.3 % Common equity tier 1 ratio (Non-GAAP) 12.9 % 12.6 % 12.2 % Leverage ratio (5) Leverage ratio (GAAP) 11.3 % 11.3 % 11.0 % Leverage ratio (Non-GAAP) 11.3 % 11.8 % 11.4 % __________________________ (1) Includes tax benefit calculated using the federal statutory tax rate of 21%. (2) The total risk-based capital ratio is calculated by dividing total risk-based capital by risk weighted assets. (3) The tier 1 capital ratio is calculated by dividing tier 1 capital by risk weighted assets. (4) The common equity tier 1 ratio is calculated by dividing tier 1 capital by risk weighted assets. (5) The leverage ratio is calculated by dividing tier 1 capital by total average assets for leverage ratio. John Marshall Bancorp, Inc. Reconciliation of Certain Non-GAAP Financial Measures (unaudited) (Dollar amounts in thousands) For the Three Months Ended For the Nine Months Ended September 30, 2023 September 30, 2023 Non-interest income (loss) (GAAP) $ (16,815 ) $ (15,564 ) Adjustment: Pre-tax loss recognized on sale of available-for-sale securities 17,114 17,114 Core non-interest income (Non-GAAP) $ 299 $ 1,550 Income (loss) before taxes (GAAP) $ (11,667 ) $ 2,102 Adjustment: Pre-tax loss recognized on sale of available-for-sale securities 17,114 17,114 Core income before taxes (Non-GAAP) $ 5,447 $ 19,216 Income tax expense (benefit) (GAAP) $ (1,530 ) $ 1,446 Adjustment: Tax and 10% modified endowment contract penalty on early surrender of BOLI policies (1,101 ) (1,101 ) Adjustment: Tax benefit of loss recognized on sale of available-for-sale securities 3,594 3,594 Core income tax expense (Non-GAAP)(1) $ 963 $ 3,939 Net income (loss) (GAAP) $ (10,137 ) $ 656 Core net income (Non-GAAP)(2) $ 4,484 $ 15,277 Earnings (loss) per share - basic (GAAP) $ (0.72 ) $ 0.05 Core earnings per share - basic (Non-GAAP)(3) $ 0.32 $ 1.08 Earnings (loss) per share - diluted (GAAP) $ (0.72 ) $ 0.05 Core earnings per share - diluted (Non-GAAP)(3) $ 0.32 $ 1.08 Return on average assets (annualized) (GAAP) (1.73 ) % 0.04 % Core return on average assets (annualized) (Non-GAAP)(4) 0.76 % 0.87 % Return on average equity (annualized) (GAAP) (18.24 ) % 0.40 % Core return on average equity (annualized) (Non-GAAP)(5) 8.07 % 9.25 % Non-interest income (loss) as a percentage of average assets (annualized) (GAAP) (2.86 ) % (0.89 ) % Core non-interest income as a percentage of average assets (annualized) (Non-GAAP)(6) 0.05 % 0.09 % Efficiency ratio (GAAP) (158.4 ) % 101.6 % Core efficiency ratio (Non-GAAP)(7) 62.4 % 58.1 % ___________________________ (1) Includes tax benefit (expense) calculated using the federal statutory tax rate of 21%. (2) Core net income reflects net income adjusted for the non-recurring tax effected loss recognized on the sale of available-for-sale securities in and non-recurring tax expense associated with the surrender of the Company’s BOLI policies in July 2023. It is calculated by subtracting core income tax expense from core income before taxes for each period presented. (3) Core earnings per share – basic and core earnings per share – diluted is calculated by dividing core net income by basic weighted average shares outstanding and diluted weighted average shares outstanding, respectively, for each period presented. (4) Core return on average assets (annualized) is calculated by dividing annualizing core net income by average assets for each period presented. (5) Core return on average equity (annualized) is calculated by dividing annualizing core net income by average equity for each period presented. (6) Core non-interest income as a percentage of average assets (annualized) is calculated by dividing annualized core non-interest income by average assets for each period presented. (7) Core efficiency ratio is calculated by dividing non-interest expense by the sum of core non-interest income and net interest income for each period presented. Category: Earnings View source version on businesswire.com: https://www.businesswire.com/news/home/20231018741695/en/Contacts Christopher W. Bergstrom (703) 584-0840 Kent D. Carstater (703) 289-5922
John Marshall Bancorp, Inc. (Nasdaq: JMSB) (the “Company”), parent company of John Marshall Bank (the “Bank”), reported its financial results for the three and nine months ended September 30, 2023. Selected Highlights Strong Loan Growth – Loans, net of unearned income, grew $95.0 million or 5.5% from September 30, 2022 to September 30, 2023. Loans, net of unearned income, grew $50.3 million or 11.3% annualized from June 30, 2023 to September 30, 2023. The Company’s loan pipeline headed into the fourth quarter of 2023 continues to be strong as we are seeing increased lending opportunities that meet our underwriting standards and, in many cases, fewer competitors for those loans as some market participants have scaled back lending efforts. Pristine Asset Quality – For the sixteenth consecutive quarter, the Company had no nonperforming loans, no other real estate owned and no loans 30 days or more past due. There were no charge-offs during the quarter. The Company continues to adhere to strict underwriting standards and proactively manages the portfolio. Well Capitalized – Each of the Bank’s regulatory capital ratios is well in excess of the regulatory threshold to be considered well capitalized. The Bank’s equity to assets and total risk-based capital ratios were 10.6% and 15.7%, respectively, as of September 30, 2023. Continued Strength in CRE Loan Portfolio – The Company’s loan portfolio remains a source of strength. As of September 30, 2023, the Company’s commercial real estate (“CRE”) non-owner occupied and owner-occupied portfolios had a weighted average loan-to-values of 50.2% and 55.1%, respectively, and weighted average debt service coverage ratios of 2.1x and 3.5x, respectively. Decreased Wholesale Deposits – The Company reduced wholesale deposits (i.e., Brokered and QwickRate CDs) by $58.7 million or 16.3% during the three months ended September 30, 2023. Year-to-date, the Company reduced wholesale deposits by $73.7 million or 19.7%. As outlined in the deposit detail table included in this release, wholesale deposits have declined in each of the past two quarters by a total of $95.4 million. Increased Core Deposits – During the quarter, the Company grew non-interest bearing demand deposits by $3.9 million or 3.6% annualized. Non-interest bearing deposits as a percentage of total deposits increased from 21.2% at June 30, 2023 to 22.1% as of September 30, 2023. Non-maturing deposits increased $16.5 million during the three months ended September 30, 2023, representing 5.7% annualized growth. Core customer funding sources, as defined in the deposit detail table included with this release, increased from 80.3% as of June 30, 2023 to 82.6% as of September 30, 2023. Stabilizing Net Interest Margin – Net interest margin was 2.08% for the three months ended September 30, 2023 compared to 2.10% for the three months ended June 30, 2023 and 3.10% for the three months ended September 30, 2022. The Company realized the initial benefits of the July 2023 balance sheet restructuring disclosed in the Company’s earnings release and Form 10-Q for the second quarter of 2023 (the “Restructuring”). We continue to redeploy the Restructuring proceeds into higher yielding, high-quality earning assets and pay down higher cost funding sources. As a result of the Restructuring, strong loan growth and reduction of wholesale deposits, net interest margin progressively improved throughout the quarter and ended the month of September at 2.13%. Chris Bergstrom, President and Chief Executive Officer, commented, “By selling low yielding assets through the Restructuring, we increased the flexibility and earnings horsepower of our balance sheet. Part of the proceeds from the Restructuring were redeployed into the loan growth anticipated in last quarter’s earnings release and enabled us to enhance our earning asset yield. Part of the Restructuring proceeds were utilized to pay down higher cost wholesale funding, which we expect will slow the rate of increase on our cost of funds. Part of the proceeds are awaiting redeployment, but are earning a higher yield than they were prior to the Restructuring. We anticipate putting these funds to work in the fourth quarter, as our loan pipeline remains strong. In addition, we are encouraged by our core non-maturing deposit growth and improved funding mix during the quarter. Our balance sheet remains strong. We continue to have excellent asset quality and robust liquidity. While the quarter’s reported results reflect the non-recurring impact of the Restructuring, core operating performance of the Company remains strong and we have enhanced our ability to drive earnings growth.” Balance Sheet, Liquidity and Credit Quality Total assets were $2.30 billion at September 30, 2023, $2.36 billion at June 30, 2023 and $2.31 billion at September 30, 2022. As discussed in more detail below, the Company reduced wholesale deposits by $58.7 million during the quarter. Total loans, net of unearned income, increased $95.0 million or 5.5% to $1.82 billion at September 30, 2023, compared to $1.73 billion at September 30, 2022 and $50.3 million during the quarter ended September 30, 2023 or 11.3% annualized from $1.77 billion at June 30, 2023. The increase in loans during both comparative periods was primarily attributable to growth in the residential mortgage and commercial investor real estate loan portfolios. The carrying value of the Company’s fixed income securities portfolio was $265.4 million at September 30, 2023, $422.7 million at June 30, 2023 and $467.1 million at September 30, 2022. The reduction in the portfolio resulted from the Restructuring, which was previously disclosed in our July 21, 2023 earnings release. As of September 30, 2023, 96.2% of our bond portfolio was covered by the implied guarantee of the United States government or one of its agencies. At September 30, 2023, nearly 67% of the fixed income portfolio was invested in amortizing bonds, which provides the Company with a source of steady cash flow. At September 30, 2023, the fixed income portfolio had an estimated weighted average life of 4.5 years. The available-for-sale portfolio comprised approximately 66% of the fixed income securities portfolio and had a weighted average life of 3.2 years at September 30, 2023. The held-to-maturity portfolio comprised approximately 34% of the fixed income securities portfolio and had a weighted average life of 7.0 years at September 30, 2023. The Company did not purchase any fixed income securities during the three or nine month periods ended September 30, 2023. 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 $742.5 million as of September 30, 2023 compared to $839.4 million as of June 30, 2023 and represented 32.3% and 35.5% of total assets, respectively. Wholesale deposits, defined as brokered and QwickRate certificates of deposit, decreased $58.7 million or 16.3% from $359.1 million at June 30, 2023 to $300.5 million at September 30, 2023. As discussed above, the Company also funded $50.3 million of net loan growth during the quarter ended September 30, 2023. Liquidity Trends September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 (Dollars in thousands) Amount % of Assets Amount % of Assets Amount % of Assets Amount % of Assets Amount % of Assets Cash $ 192,656 8.4 % $ 129,551 5.5 % $ 103,359 4.4 % $ 61,599 2.6 % $ 74,756 3.2 % Unencumbered Securities 80,267 3.5 % 233,695 9.9 % 298,194 12.7 % 313,618 13.4 % 345,987 15.0 % Available Secured Borrowing Capacity 469,524 20.4 % 476,144 20.1 % 451,008 19.2 % 388,257 16.5 % 401,828 17.4 % Total Liquidity $ 742,447 32.3 % $ 839,390 35.5 % $ 852,561 36.3 % $ 763,474 32.5 % $ 822,571 35.6 % If the Company were to avail itself of additional Bank Term Funding Program (“BTFP”) funding, we estimate an incremental increase in our liquidity position of approximately $13.4 million, increasing our potential liquidity to $755.8 million as of September 30, 2023. In addition to available secured borrowing capacity, the Bank had available federal funds lines of $110.0 million at September 30, 2023. Total deposits were $1.98 billion at September 30, 2023, $2.05 billion at June 30, 2023 and $2.06 billion at September 30, 2022. Total deposits decreased $64.7 million or 3.2% when compared to June 30, 2023. The decrease was primarily due to a managed reduction in costlier wholesale deposits of $58.7 million or 16.3% during the quarter. NOW deposits increased $34.3 million or 11.0% to partially offset the decrease in wholesale deposits. As of September 30, 2023, the Company had $614.0 million of deposits that were not insured or not collateralized by securities compared to $697.0 million at June 30, 2023. Deposits that were not insured or not collateralized by securities represented only 31.0% of total deposits at September 30, 2023 compared to 34.1% at June 30, 2023. The Company obtained a $54.0 million advance from the BTFP on May 15, 2023 to secure lower funding costs relative to wholesale deposits. The BTFP advance has a term of one year, bears interest at a fixed rate of 4.80% and can be prepaid without penalty prior to maturity. Total borrowings as of September 30, 2023 consisted of subordinated debt totaling $24.7 million and the BTFP advance totaling $54.0 million. The Company did not have any FHLB advances or federal funds purchased outstanding as of September 30, 2023. Shareholders’ equity increased $18.4 million or 9.1% to $220.6 million at September 30, 2023 compared to $202.2 million at September 30, 2022. Book value per share was $15.61 as of September 30, 2023 compared to $14.37 as of September 30, 2022. The year-over-year change in book value per share was primarily due to the Company’s earnings over the previous twelve months and decrease in accumulated other comprehensive loss, partially offset by increased share count from shareholder option exercises and restricted share award issuances and dividends paid. The decrease in accumulated other comprehensive loss was primarily attributable to the sale of certain available-for-sale investment securities in the July 2023 Restructuring. Book value per share was $15.50 as of June 30, 2023. The Bank’s capital ratios at September 30, 2023 improved when compared to September 30, 2022 and remained well above regulatory thresholds for well-capitalized banks. As of September 30, 2023, the Bank’s total risk-based capital ratio was 15.7%, compared to 15.4% at September 30, 2022 (GAAP). As outlined below, the Bank would continue to remain well above regulatory thresholds for well-capitalized banks at September 30, 2023 in the hypothetical scenario where the entire bond portfolio was sold at fair market value and the 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. Bank Regulatory Capital Ratios (As Reported) Well-Capitalized Threshold September 30, 2023 December 31, 2022 September 30, 2022 Total risk-based capital ratio 10.0 % 15.7 % 15.6 % 15.4 % Tier 1 risk-based capital ratio 8.0 % 14.6 % 14.4 % 14.3 % Common equity tier 1 ratio 6.5 % 14.6 % 14.4 % 14.3 % Leverage ratio 5.0 % 11.3 % 11.3 % 11.0 % Bank Regulatory Capital Ratios (Hypothetical Scenario of Selling All Bonds at Fair Market Value - Non-GAAP) Well-Capitalized Threshold September 30, 2023 December 31, 2022 September 30, 2022 Total risk-based capital ratio 10.0 % 14.1 % 13.8 % 13.4 % Tier 1 risk-based capital ratio 8.0 % 12.9 % 12.6 % 12.2 % Common equity tier 1 ratio 6.5 % 12.9 % 12.6 % 12.2 % Leverage ratio 5.0 % 11.3 % 11.8 % 11.4 % The Company recorded no charge-offs during the third quarter of 2023, during the second quarter of 2023 or during the third quarter of 2022. As of September 30, 2023, the Company had no non-accrual loans, no loans greater than 30 days past due and no other real estate owned assets. At September 30, 2023, the allowance for loan credit losses was $20.0 million or 1.10% of outstanding loans, net of unearned income, compared to $20.6 million or 1.17% of outstanding loans, net of unearned income, at June 30, 2023. The decrease in the allowance as a percentage of outstanding loans, net of unearned income, was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. At September 30, 2023, the allowance for credit losses on unfunded loan commitments was $0.9 million compared to $1.1 million at June 30, 2023. The decrease in the allowance for credit losses on unfunded loan commitments was primarily the result of the updated loss factors utilized on the funded loan portfolio. The Company did not have an allowance for credit losses on held-to-maturity securities as of September 30, 2023 or June 30, 2023. 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 portfolios as of September 30, 2023, demonstrating their strong debt-service-coverage and loan-to-value ratios. Commercial Real Estate Owner Occupied Non-owner Occupied Asset Class Weighted Average Loan-to-Value(1) Weighted Average Debt Service Coverage Ratio(2) Number of Total Loans Principal Balance(3) (Dollars in thousands) Weighted Average Loan-to-Value(1) Weighted Average Debt Service Coverage Ratio(2) Number of Total Loans Principal Balance(3) (Dollars in thousands) Office 60.7 % 4.3 x 129 $ 84,512 47.1 % 1.9 x 64 $ 124,288 Retail 61.0 % 2.3 x 43 61,170 51.2 % 1.9 x 142 396,544 Warehouse 62.3 % 2.4 x 28 37,359 46.5 % 3.0 x 24 33,558 Church 32.4 % 3.1 x 19 37,799 - - - - - - - - Hotel/Motel - - - - - - - - 48.6 % 2.2 x 7 39,282 Industrial 55.8 % 4.7 x 24 37,603 52.8 % 2.5 x 16 66,210 Other(4) 52.5 % 3.6 x 50 104,574 50.0 % 1.8 x 16 23,804 Total 293 $ 363,017 269 $ 683,686 ___________________________ (1) Loan-to-value is determined at origination date and is divided by principal balance as of September 30, 2023. (2) The debt service coverage ratio (“DSCR”) is calculated from the primary source of repayment for the loan. Owner occupied DSCR’s are derived from cash flows from the owner occupant’s business, property and their guarantors, while non-owner occupied DSCR’s are derived from the net operating income of the property. (3) Principal balance excludes deferred fees or costs. (4) Other asset class is primarily comprised of schools, daycares and country clubs. Income Statement Review Quarterly Results The Company reported a net loss of $10.1 million for the third quarter of 2023, a decrease of $18.2 million when compared to the third quarter of 2022. As disclosed in our July 21, 2023 earnings release discussing results for the quarter and year-ended June 30, 2023, during July the Company sold certain lower-yielding available-for-sale investment securities with a total par value of $161.2 million and agreed to surrender $21.4 million of bank owned life insurance (“BOLI”) contracts, resulting in a non-recurring, after-tax loss of $14.6 million that was recorded during the third quarter of 2023. Core net income (Non-GAAP) defined as reported net income excluding the non-recurring after-tax loss and taxes paid in conjunction with the surrender of the Bank’s BOLI policies resulting from the Restructuring, was $4.5 million, a decrease of $3.6 million when compared to the third quarter of 2022 and consistent with net income reported for the second quarter of 2023. Reported (GAAP) and core (Non-GAAP) earnings per share, annualized return on average assets (“ROAA”) and annualized return on average equity (“ROAE”) were as follows: For the Three Months Ended September 30, 2023 June 30, 2023 September 30, 2022 Net income (loss) (GAAP) $ (10,137 ) $ 4,490 $ 8,045 Add: Loss on securities sale, net of tax 13,520 - - Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies 1,101 - - Core net income (Non-GAAP) $ 4,484 $ 4,490 $ 8,045 Earnings per share - diluted (GAAP) $ (0.72 ) $ 0.32 $ 0.57 Core earnings per share - diluted (Non-GAAP) $ 0.32 $ 0.32 $ 0.57 Return on average assets (annualized) (GAAP) (1.73 )% 0.77 % 1.38 % Core return on average assets (annualized) (Non-GAAP) 0.76 % 0.77 % 1.38 % Return on average equity (annualized) (GAAP) (18.24 )% 8.13 % 15.07 % Core return on average equity (annualized) (Non-GAAP) 8.07 % 8.13 % 15.07 % 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. Net interest income for the third quarter of 2023 decreased $5.7 million or 32.3% compared to the third quarter of 2022, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets. The yield on interest earning assets was 4.54% for the third quarter of 2023 compared to 3.71% for the same period in 2022. The increase in yield on interest earning assets was primarily due to higher yields on the Company’s loan and investment portfolios and deposits in banks as a result of increases in interest rates subsequent to the third quarter of 2022. The cost of interest-bearing liabilities was 3.41% for the third quarter of 2023 compared to 0.90% for the same quarter in the prior year. The increase in the cost of interest-bearing liabilities was primarily due to a 2.53% increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the third quarter of 2022. The increase in the overall cost of interest-bearing liabilities in the third quarter of 2023 relative to the same period of the prior year is largely due to rate hikes totaling 5.25% by the Federal Reserve Bank since the beginning of 2022, which has increased cost of funds and compressed net interest margins across the banking industry. The annualized net interest margin for the third quarter of 2023 was 2.08% as compared to 3.10% for the same quarter of the prior year. The decrease in net interest margin was primarily due to the increase in cost of interest-bearing deposits, which was partially offset by an increase in yields on the Company’s interest-earning assets. With a portion of the proceeds from the Restructuring being redeployed to higher yielding assets, the Company’s net interest margin increased each month during the third quarter to 2.13% for the month of September 2023. The Company recorded an $829 thousand release of provision for credit losses for the third quarter of 2023 compared to no provision for the third quarter of 2022. The release of provision for credit losses during the third quarter of 2023 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. Non-interest income decreased $17.3 million during the third quarter of 2023 compared to the third quarter of 2022. The decrease in non-interest income was primarily due to the Restructuring that resulted in a loss of $17.1 million. Core non-interest income (Non-GAAP) defined as reported non-interest income excluding the $17.1 million loss stemming from the bond sale portion of the Restructuring, decreased $151 thousand primarily as a result of a decrease in bank owned life insurance (“BOLI”) income of $232 thousand due to the surrender of all BOLI policies as part of the Restructuring. This decrease was partially offset by favorable variances of $47 thousand related to mark-to-market adjustments on investments related to the Company’s nonqualified deferred compensation plan and gains recorded on the sale of the guaranteed portion of SBA 7(a) loans totaling $27 thousand when compared to the third quarter of 2022. Non-interest expense decreased $298 thousand or 3.7% during the third quarter of 2023 compared to the third quarter of 2022 primarily due to the reversal of a litigation reserve totaling $322 thousand as a result of a favorable verdict received by the Company on a multi-year legal matter that was resolved during the quarter. The decrease was partially offset by increases in FDIC insurance expense and franchise tax expense. The increase in FDIC insurance expense resulted from the FDIC increasing the base assessment rate for all insured depository institutions. The increase in franchise tax expense was due to an increase in the Bank’s equity as that is the basis the Commonwealth of Virginia uses to assess taxes on banking institutions. The decrease in salaries and employee benefits was due to lower benefit costs incurred by the Company. The decrease in occupancy expense of premises was due to a decrease in office rent as a result of the renegotiation of certain leases. The decrease in furniture and equipment expense was due to lower depreciation expense on fixed assets. The Company continues to analyze cost savings opportunities on existing leases and material contracts. For the three months ended September 30, 2023, annualized non-interest expense to average assets was 1.30% compared to 1.36% for the three months ended September 30, 2022. The decrease was primarily due to lower overhead costs as a result of continued cost consciousness. For the three months ended September 30, 2023, the annualized core efficiency ratio (Non-GAAP), which excludes the impact of the Restructuring, was 62.4% compared to 43.9% for the three months ended September 30, 2022. The increase was primarily due to a decrease in net interest income and to a lesser extent a decrease in non-interest income. Year-to-Date Results The Company reported net income of $656 thousand for the nine months ended September 30, 2023, a decrease of $22.9 million when compared to the same period in 2022. This decrease was primarily attributable to the Restructuring, as previously discussed, that resulted in an after-tax loss of $14.6 million. Core net income (Non-GAAP) for the nine months ended September 30, 2023 was $15.3 million, a decrease of $8.3 million when compared to the same period in 2022. Reported (GAAP) and core (Non-GAAP) earnings per share, ROAA and ROAE were as follows: For the Nine Months Ended September 30, 2023 September 30, 2022 Net income (GAAP) $ 656 $ 23,601 Add: Loss on securities sale, net of tax 13,520 - Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies 1,101 - Core net income (Non-GAAP) $ 15,277 $ 23,601 Earnings per share - diluted (GAAP) $ 0.05 $ 1.67 Core earnings per share - diluted (Non-GAAP) $ 1.08 $ 1.67 Return on average assets (annualized) (GAAP) 0.04 % 1.40 % Core return on average assets (annualized) (Non-GAAP) 0.87 % 1.40 % Return on average equity (annualized) (GAAP) 0.40 % 15.03 % Core return on average equity (annualized) (Non-GAAP) 9.25 % 15.03 % 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. Net interest income for the nine months ended September 30, 2023 decreased $14.5 million or 27.3% compared to the same period of 2022, driven primarily by the increase in costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets. The yield on interest earning assets was 4.32% for the nine months ended September 30, 2023 compared to 3.65% for the same period in 2022. The increase in yield on interest earning assets was primarily due to higher yields on the Company’s loan and investment portfolios and deposits in banks as a result of increases in interest rates subsequent to the second quarter of 2022. The cost of interest-bearing liabilities was 2.89% for the nine months ended September 30, 2023 compared to 0.67% for the nine months ended September 30, 2022. The increase in the cost of interest-bearing liabilities was primarily due to a 2.26% increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the third quarter of 2022. The annualized net interest margin for the nine months ended September 30, 2023 was 2.25% as compared to 3.19% for the same period in the prior year. The decrease in net interest margin was primarily due to the increase in cost of interest-bearing deposits, which was partially offset by an increase in yields on the Company’s interest-earning assets. The Company recorded a $2.5 million release of provision for credit losses for the nine months ended September 30, 2023 compared to no provision for the nine months ended September 30, 2022. The release of provision for credit losses during the third quarter of 2023 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions. The review resulted in a lower modeled probability of default, changes in prepayment and curtailment rates, and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments. Non-interest income decreased $16.5 million during the nine months ended September 30, 2023 compared to the same period in 2022. The decrease in non-interest income was primarily due to the Restructuring that resulted in a loss of $17.1 million. Core non-interest income (Non-GAAP) increased $577 thousand primarily due to favorable variances of $610 thousand as a result of mark-to-market adjustments on investments related to the Company’s nonqualified deferred compensation plan. The Company also had an increase in other service charges and fee income of $208 thousand primarily as a result of penalty fee income recognized on the early withdrawal of certificates of deposit, a $91 thousand increase in customer interest rate swap fee income and gains recorded on the sale of the guaranteed portion of SBA 7(a) loans totaling $50 thousand. These increases were partially offset by a decrease in BOLI income of $221 thousand due to the surrender of all BOLI policies as part of the Restructuring. Non-interest expense decreased $1.2 million or 4.8% during the nine months ended September 30, 2023 compared to the same period in 2022 primarily due to decreases in salaries and employee benefits expense. The decrease in salaries and employee benefits was primarily due to a reduction in incentive compensation accruals when compared to the same period of the prior year. Incentive compensation accruals can fluctuate materially from quarter to quarter, based upon the Company’s financial performance and conditions measured against, among other evaluation criteria, our strategic plan and budget. At the end of each year, the ultimate determination of the incentive compensation is approved by the Board of Directors. The decrease in other expense was due to the reversal of a litigation reserve previously discussed and lower legal and consulting expenses, partially offset by increases in FDIC insurance expense, franchise tax expense and marketing expense. The increase in FDIC insurance expense resulted from the FDIC increasing the base assessment rate for all insured depository institutions. The increase in franchise tax expense was due to an increase in the Bank’s equity as that is the basis the Commonwealth of Virginia uses to assess taxes on banking institutions. The increase in marketing expense was due to increased marketing and promotional activity. The decrease in occupancy expense of premises was due to a decrease in office rent as a result of the renegotiation of certain leases. The decrease in furniture and equipment expense was due to lower depreciation expense on fixed assets. For the nine months ended September 30, 2023, annualized non-interest expense to average assets was 1.33% compared to 1.45% for the nine months ended September 30, 2022. The decrease was primarily due to lower overhead costs as a result of continued cost consciousness. For the nine months ended September 30, 2023, the annualized core efficiency ratio (Non-GAAP) was 58.1% compared to 45.3% for the nine months ended September 30, 2022. The increase was primarily due to a decrease in net interest income, which more than offset the increase in core non-interest income (Non-GAAP) and decrease in non-interest expense. 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 the impact of unrealized losses in the Company’s bond portfolio on the Bank’s regulatory capital ratios and period-to-period operating performance, respectively. 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: The impact to the Bank’s regulatory capital ratios in the hypothetical scenario where the entire bond portfolio was sold at fair market value and the losses realized. Non-interest income, income before taxes, income tax expense, net income, earnings per share (basic and diluted), return on average assets (annualized), return on average equity (annualized), non-interest income as a percentage of average assets (annualized) and efficiency ratio excluding the impact of losses recognized in July 2023 on the sale of available-for-sale securities and taxes paid on the early surrender of bank owned life insurance policies. These disclosures should not be viewed as a substitute for 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 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 a $2.30 billion asset bank 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. Metro 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. 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; adequacy of our allowance for credit losses; 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 acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, negatively impacting business and economic conditions in the U.S. and abroad; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, geopolitical conflicts or public health events (such as COVID-19), and of governmental and societal responses thereto; technological risks and developments, and cyber threats, attacks, or events; the additional requirements of being a public company; 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. John Marshall Bancorp, Inc. Financial Highlights (Unaudited) (Dollar amounts in thousands, except per share data) At or For the Three Months Ended At or For the Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Selected Balance Sheet Data Cash and cash equivalents $ 192,656 $ 74,756 $ 192,656 $ 74,756 Total investment securities 272,881 473,478 272,881 473,478 Loans, net of unearned income 1,820,132 1,725,114 1,820,132 1,725,114 Allowance for loan credit losses 20,036 20,032 20,036 20,032 Total assets 2,298,202 2,305,540 2,298,202 2,305,540 Non-interest bearing demand deposits 437,880 535,186 437,880 535,186 Interest bearing deposits 1,543,743 1,528,155 1,543,743 1,528,155 Total deposits 1,981,623 2,063,341 1,981,623 2,063,341 Federal funds purchased - - - - - - - - Federal Home Loan Bank advances - - - - - - - - Federal Reserve Bank borrowings 54,000 - - 54,000 - - Shareholders' equity 220,567 202,212 220,567 202,212 Summary Results of Operations Interest income $ 26,263 $ 21,208 $ 74,171 $ 60,509 Interest expense 14,284 3,516 35,715 7,593 Net interest income 11,979 17,692 38,456 52,916 Provision for (recovery of) credit losses (829 ) - - (2,471 ) - - Net interest income after provision for (recovery of) credit losses 12,808 17,692 40,927 52,916 Non-interest income (loss) (16,815 ) 450 (15,564 ) 973 Core non-interest income(1) 299 450 1,550 973 Non-interest expense 7,660 7,958 23,261 24,425 Income (Loss) before income taxes (11,667 ) 10,184 2,102 29,464 Core income before income taxes(1) 5,447 10,184 19,216 29,464 Net income (loss) (10,137 ) 8,045 656 23,601 Core net income(1) 4,484 8,045 15,277 23,601 Per Share Data and Shares Outstanding Earnings (loss) per share - basic $ (0.72 ) $ 0.57 $ 0.05 $ 1.69 Core earnings per share - basic(1) $ 0.32 $ 0.57 $ 1.08 $ 1.69 Earnings (loss) per share - diluted $ (0.72 ) $ 0.57 $ 0.05 $ 1.67 Core earnings per share - diluted(1) $ 0.32 $ 0.57 $ 1.08 $ 1.67 Book value per share $ 15.61 $ 14.37 $ 15.61 $ 14.37 Weighted average common shares (basic) 14,080,026 13,989,414 14,126,522 13,902,324 Weighted average common shares (diluted) 14,080,026 14,108,286 14,199,179 14,065,887 Common shares outstanding at end of period 14,126,084 14,070,080 14,126,084 14,070,080 Performance Ratios Return on average assets (annualized) (1.73 )% 1.38 % 0.04 % 1.40 % Core return on average assets (annualized)(1) 0.76 1.38 0.87 1.40 Return on average equity (annualized) (18.24 )% 15.07 % 0.40 % 15.03 % Core return on average equity (annualized)(1) 8.07 15.07 9.25 15.03 Net interest margin 2.08 % 3.10 % 2.25 % 3.19 % Non-interest income (loss) as a percentage of average assets (annualized) (2.86 )% 0.08 % (0.89 )% 0.06 % Core non-interest income as a percentage of average assets (annualized)(1) 0.05 0.08 0.09 0.06 Non-interest expense to average assets (annualized) 1.30 % 1.36 % 1.33 % 1.45 % Efficiency ratio (158.4 )% 43.9 % 101.6 % 45.3 % Core efficiency ratio(1) 62.4 43.9 58.1 45.3 Asset Quality Non-performing assets to total assets - - % - - % - - % - - % Non-performing loans to total loans - - % - - % - - % - - % Allowance for loan credit losses to non-performing loans N/M N/M N/M N/M Allowance for loan credit losses to total loans 1.10 % 1.16 % 1.10 % 1.16 % Net charge-offs (recoveries) to average loans (annualized) 0.00 % 0.00 % 0.00 % 0.00 % Loans 30-89 days past due and accruing interest $ - - $ - - $ - - $ - - Non-accrual loans - - - - - - - - Other real estate owned - - - - - - - - Non-performing assets (2) - - - - - - - - Capital Ratios (Bank Level) Equity / assets 10.6 % 9.7 % 10.6 % 9.7 % Total risk-based capital ratio 15.7 % 15.4 % 15.7 % 15.4 % Tier 1 risk-based capital ratio 14.6 % 14.3 % 14.6 % 14.3 % Common equity tier 1 ratio 14.6 % 14.3 % 14.6 % 14.3 % Leverage ratio 11.3 % 11.0 % 11.3 % 11.0 % Other Information Number of full time equivalent employees 138 136 138 136 # Full service branch offices 8 8 8 8 # Loan production or limited service branch offices - - 1 - - 1 ___________________________ (1) Non-GAAP financial measure. Refer to “Reconciliation of Certain Non-GAAP Financial Measures” for further details. (2) Non-performing assets consist of non-accrual loans, loans 90 days or more past due and still accruing interest and other real estate owned. John Marshall Bancorp, Inc. Consolidated Balance Sheets (Dollar amounts in thousands, except per share data) % Change September 30, December 31, September 30, Last Nine Year Over 2023 2022 2022 Months Year Assets (Unaudited) * (Unaudited) Cash and due from banks $ 7,642 $ 6,583 $ 14,957 16.1 % (48.9 )% Interest-bearing deposits in banks 185,014 55,016 59,799 236.3 % 209.4 % Securities available-for-sale, at fair value 169,084 357,576 366,546 (52.7 )% (53.9 )% Securities held-to-maturity, fair value of $75,733, $81,161, and $81,765 at 9/30/2023, 12/31/2022, and 9/30/2022, respectively. 96,347 99,415 100,598 (3.1 )% (4.2 )% Restricted securities, at cost 5,007 4,425 4,421 13.2 % 13.3 % Equity securities, at fair value 2,443 2,115 1,913 15.5 % 27.7 % Loans, net of unearned income 1,820,132 1,789,508 1,725,114 1.7 % 5.5 % Allowance for credit losses (20,036 ) (20,208 ) (20,032 ) (0.9 )% 0.0 % Net loans 1,800,096 1,769,300 1,705,082 1.7 % 5.6 % Bank premises and equipment, net 1,264 1,219 1,331 3.7 % (5.0 )% Accrued interest receivable 5,701 5,531 4,744 3.1 % 20.2 % Bank owned life insurance - 21,170 21,071 (100.0 )% (100.0 )% Right of use assets 4,136 4,611 3,936 (10.3 )% 5.1 % Other assets 21,468 21,274 21,142 0.9 % 1.5 % Total assets $ 2,298,202 $ 2,348,235 $ 2,305,540 (2.1 )% (0.3 )% Liabilities and Shareholders' Equity Liabilities Deposits: Non-interest bearing demand deposits $ 437,880 $ 476,697 $ 535,186 (8.1 )% (18.2 )% Interest-bearing demand deposits 675,819 691,945 705,593 (2.3 )% (4.2 )% Savings deposits 57,408 95,241 102,909 (39.7 )% (44.2 )% Time deposits 810,516 803,857 719,653 0.8 % 12.6 % Total deposits 1,981,623 2,067,740 2,063,341 (4.2 )% (4.0 )% Federal funds purchased - - 25,500 - - N/M N/M Federal Reserve Bank borrowings 54,000 - - - - N/M N/M Subordinated debt, net 24,687 24,624 24,603 0.3 % 0.3 % Accrued interest payable 2,610 1,035 643 152.2 % 305.9 % Lease liabilities 4,415 4,858 4,186 (9.1 )% 5.5 % Other liabilities 10,300 11,678 10,555 (11.8 )% (2.4 )% Total liabilities 2,077,635 2,135,435 2,103,328 (2.7 )% (1.2 )% Shareholders' Equity Preferred stock, par value $0.01 per share; authorized 1,000,000 shares; none issued - - - - - - N/M N/M Common stock, nonvoting, par value $0.01 per share; authorized 1,000,000 shares; none issued - - - - - - N/M N/M Common stock, voting, par value $0.01 per share; authorized 30,000,000 shares; issued and outstanding, 14,126,084 at 9/30/2023 including 45,871 unvested shares, 14,098,986 at 12/31/2022 including 55,185 unvested shares, and 14,070,080 at 9/30/2022, including 58,046 unvested shares 141 141 140 - - % 0.7 % Additional paid-in capital 95,510 94,726 94,560 0.8 % 1.0 % Retained earnings 141,886 146,630 138,428 (3.2 )% 2.5 % Accumulated other comprehensive loss (16,970 ) (28,697 ) (30,916 ) (40.9 )% (45.1 )% Total shareholders' equity 220,567 212,800 202,212 3.6 % 9.1 % Total liabilities and shareholders' equity $ 2,298,202 $ 2,348,235 $ 2,305,540 (2.1 )% (0.3 )% * Derived from audited consolidated financial statements. John Marshall Bancorp, Inc. Consolidated Statements of Income (Dollar amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 % Change 2023 2022 % Change (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest and Dividend Income Interest and fees on loans $ 21,925 $ 18,222 20.3 % $ 63,355 $ 53,740 17.9 % Interest on investment securities, taxable 1,507 2,323 (35.1 )% 5,895 5,597 5.3 % Interest on investment securities, tax-exempt 10 30 (66.7 )% 45 90 (50.0 )% Dividends 75 62 21.0 % 222 185 20.0 % Interest on deposits in other banks 2,746 571 N/M 4,654 897 N/M Total interest and dividend income 26,263 21,208 23.8 % 74,171 60,509 22.6 % Interest Expense Deposits 13,273 3,068 N/M 33,590 6,090 N/M Federal funds purchased - - - - N/M 10 - - N/M Federal Home Loan Bank advances - - - - N/M 67 42 59.5 % Federal Reserve Bank borrowings 662 - - N/M 1,001 - - N/M Subordinated debt 349 448 (22.1 )% 1,047 1,461 (28.3 )% Total interest expense 14,284 3,516 306.3 % 35,715 7,593 370.4 % Net interest income 11,979 17,692 (32.3 )% 38,456 52,916 (27.3 )% Provision for (recovery of) Credit Losses (829 ) - - N/M (2,471 ) - - N/M Net interest income after provision for (recovery of) credit losses 12,808 17,692 (27.6 )% 40,927 52,916 (22.7 )% Non-interest Income Service charges on deposit accounts 85 79 7.6 % 239 240 (0.4 )% Bank owned life insurance 23 255 (91.0 )% 224 445 (49.7 )% Other service charges and fees 160 175 (8.6 )% 677 469 44.3 % Losses on sale of available-for-sale securities (17,114 ) - - N/M (17,316 ) - - N/M Insurance commissions 54 47 14.9 % 310 312 (0.6 )% Gain on sale of government guaranteed loans 27 - - N/M 50 - - N/M Non-qualified deferred compensation plan asset gains (losses), net (60 ) (107 ) (43.9 )% 112 (498 ) (122.5 )% Other income 10 1 N/M 140 5 N/M Total non-interest income (loss) (16,815 ) 450 (3,836.7 )% (15,564 ) 973 (1,699.6 )% Non-interest Expenses Salaries and employee benefits 5,052 5,072 (0.4 )% 14,929 15,754 (5.2 )% Occupancy expense of premises 445 461 (3.5 )% 1,363 1,435 (5.0 )% Furniture and equipment expenses 282 323 (12.7 )% 882 989 (10.8 )% Other expenses 1,881 2,102 (10.5 )% 6,087 6,247 (2.6 )% Total non-interest expenses 7,660 7,958 (3.7 )% 23,261 24,425 (4.8 )% Income (Loss) before income taxes (11,667 ) 10,184 (214.6 )% 2,102 29,464 (92.9 )% Income tax Expense (Benefit) (1,530 ) 2,139 (171.5 )% 1,446 5,863 (75.3 )% Net income (loss) $ (10,137 ) $ 8,045 (226.0 )% $ 656 $ 23,601 (97.2 )% Earnings (Loss) Per Share Basic $ (0.72 ) $ 0.57 (226.3 )% $ 0.05 $ 1.69 (97.0 )% Diluted $ (0.72 ) $ 0.57 (226.3 )% $ 0.05 $ 1.67 (97.0 )% John Marshall Bancorp, Inc. Historical Trends - Quarterly Financial Data (Unaudited) (Dollar amounts in thousands, except per share data) 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Profitability for the Quarter: Interest income $ 26,263 $ 24,455 $ 23,453 $ 23,557 $ 21,208 $ 19,555 $ 19,745 Interest expense 14,284 12,446 8,984 6,052 3,516 2,247 1,829 Net interest income 11,979 12,009 14,469 17,505 17,692 17,308 17,916 Provision for (recovery of) credit losses (829 ) (868 ) (774 ) 175 - - - - - - Non-interest income (loss) (16,815 ) 685 566 718 450 109 414 Non-interest expenses 7,660 7,831 7,770 7,449 7,958 7,681 8,786 Income (loss) before income taxes (11,667 ) 5,731 8,039 10,599 10,184 9,736 9,544 Income tax expense (benefit) (1,530 ) 1,241 1,735 2,397 2,139 1,854 1,870 Net income (loss) $ (10,137 ) $ 4,490 $ 6,304 $ 8,202 $ 8,045 $ 7,882 $ 7,674 Financial Performance: Return on average assets (annualized) (1.73 )% 0.77 % 1.10 % 1.40 % 1.38 % 1.41 % 1.40 % Return on average equity (annualized) (18.24 )% 8.13 % 11.83 % 15.65 % 15.07 % 15.28 % 14.76 % Net interest margin 2.08 % 2.10 % 2.57 % 3.05 % 3.10 % 3.16 % 3.34 % Non-interest income (loss) as a percentage of average assets (annualized) (2.86 )% 0.12 % 0.10 % 0.12 % 0.08 % 0.02 % 0.08 % Non-interest expense to average assets (annualized) 1.30 % 1.34 % 1.35 % 1.27 % 1.36 % 1.38 % 1.61 % Efficiency ratio (158.4 )% 61.7 % 51.7 % 40.9 % 43.9 % 44.1 % 47.9 % Per Share Data: Earnings (loss) per share - basic $ (0.72 ) $ 0.32 $ 0.45 $ 0.58 $ 0.57 $ 0.56 $ 0.55 Earnings (loss) per share - diluted $ (0.72 ) $ 0.32 $ 0.44 $ 0.58 $ 0.57 $ 0.56 $ 0.55 Book value per share $ 15.61 $ 15.50 $ 15.63 $ 15.09 $ 14.37 $ 14.80 $ 14.68 Dividends declared per share $ - - $ 0.22 $ - - $ - - $ - - $ - - $ 0.20 Weighted average common shares (basic) 14,080,026 14,077,658 14,067,047 14,019,429 13,989,414 13,932,256 13,783,034 Weighted average common shares (diluted) 14,080,026 14,143,253 14,156,724 14,131,352 14,108,286 14,085,160 13,991,692 Common shares outstanding at end of period 14,126,084 14,126,138 14,125,208 14,098,986 14,070,080 14,026,589 13,950,570 Non-interest Income: Service charges on deposit accounts $ 85 $ 82 $ 72 $ 84 $ 79 $ 84 $ 77 Bank owned life insurance 23 101 100 99 255 95 95 Other service charges and fees 160 314 203 187 175 157 137 Losses on securities (17,114 ) - - (202 ) - - - - - - - - Insurance commissions 54 50 206 70 47 44 221 Gain on sale of government guaranteed loans 27 23 - - - - - - - - - - Non-qualified deferred compensation plan asset gains (losses), net (60 ) 83 89 144 (107 ) (274 ) (117 ) Other income 10 32 98 134 1 3 1 Total non-interest income (loss) $ (16,815 ) $ 685 $ 566 $ 718 $ 450 $ 109 $ 414 Non-interest Expenses: Salaries and employee benefits $ 5,052 $ 4,965 $ 4,912 $ 4,436 $ 5,072 $ 4,655 $ 6,027 Occupancy expense of premises 445 448 470 458 461 482 493 Furniture and equipment expenses 282 304 296 336 323 341 325 Other expenses 1,881 2,114 2,092 2,219 2,102 2,203 1,941 Total non-interest expenses $ 7,660 $ 7,831 $ 7,770 $ 7,449 $ 7,958 $ 7,681 $ 8,786 Balance Sheets at Quarter End: Total loans, net of unearned income $ 1,820,132 $ 1,769,801 $ 1,771,272 $ 1,789,508 $ 1,725,114 $ 1,692,652 $ 1,631,260 Allowance for loan credit losses (20,036 ) (20,629 ) (21,619 ) (20,208 ) (20,032 ) (20,031 ) (20,031 ) Investment securities 272,881 429,954 445,785 463,531 473,478 473,914 409,692 Interest-earning assets 2,278,027 2,315,368 2,312,404 2,308,055 2,258,822 2,274,968 2,217,553 Total assets 2,298,202 2,364,250 2,351,307 2,348,235 2,305,540 2,316,374 2,249,609 Total deposits 1,981,623 2,046,309 2,088,642 2,067,740 2,063,341 2,043,741 1,983,099 Total interest-bearing liabilities 1,622,430 1,691,044 1,665,837 1,641,167 1,552,758 1,581,017 1,530,133 Total shareholders' equity 220,567 218,970 220,823 212,800 202,212 207,530 204,855 Quarterly Average Balance Sheets: Total loans, net of unearned income $ 1,790,720 $ 1,767,831 $ 1,772,922 $ 1,759,747 $ 1,684,796 $ 1,641,914 $ 1,620,533 Investment securities 310,407 441,778 463,254 468,956 488,860 447,688 376,608 Interest-earning assets 2,301,642 2,305,050 2,295,677 2,289,061 2,277,325 2,204,709 2,183,897 Total assets 2,331,403 2,344,712 2,334,695 2,330,307 2,314,825 2,240,119 2,216,131 Total deposits 2,012,934 2,051,702 2,066,139 2,079,161 2,057,640 1,980,231 1,946,882 Total interest-bearing liabilities 1,660,980 1,667,597 1,621,131 1,566,902 1,547,766 1,504,574 1,505,854 Total shareholders' equity 220,473 221,608 220,282 207,906 212,147 206,967 210,900 Financial Measures: Average equity to average assets 9.5 % 9.5 % 9.4 % 8.9 % 9.2 % 9.2 % 9.5 % Investment securities to earning assets 12.0 % 18.6 % 19.3 % 20.1 % 21.0 % 20.8 % 18.5 % Loans to earning assets 79.9 % 76.4 % 76.6 % 77.5 % 76.4 % 74.4 % 73.6 % Loans to assets 79.2 % 74.9 % 75.3 % 76.2 % 74.8 % 73.1 % 72.5 % Loans to deposits 91.9 % 86.5 % 84.8 % 86.5 % 83.6 % 82.8 % 82.3 % Capital Ratios (Bank Level): Equity / assets 10.6 % 10.2 % 10.3 % 10.0 % 9.7 % 9.9 % 10.2 % Total risk-based capital ratio 15.7 % 16.1 % 16.1 % 15.6 % 15.4 % 15.1 % 15.4 % Tier 1 risk-based capital ratio 14.6 % 15.0 % 14.9 % 14.4 % 14.3 % 14.0 % 14.2 % Common equity tier 1 ratio 14.6 % 15.0 % 14.9 % 14.4 % 14.3 % 14.0 % 14.2 % Leverage ratio 11.3 % 11.6 % 11.5 % 11.3 % 11.0 % 11.0 % 10.8 % John Marshall Bancorp, Inc. Loan, Deposit and Borrowing Detail (Unaudited) (Dollar amounts in thousands) 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Loans $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total Commercial business loans $ 37,793 2.1 % $ 40,156 2.3 % $ 41,204 2.3 % $ 44,788 2.5 % $ 44,967 2.6 % $ 47,654 2.8 % $ 52,569 3.2 % Commercial PPP loans 132 0.0 % 133 0.0 % 135 0.0 % 136 0.0 % 138 0.0 % 224 0.0 % 7,781 0.5 % Commercial owner-occupied real estate loans 363,017 20.0 % 360,859 20.4 % 363,495 20.6 % 366,131 20.5 % 362,346 21.1 % 378,457 22.4 % 339,933 20.9 % Total business loans 400,942 22.1 % 401,148 22.7 % 404,834 22.9 % 411,055 23.0 % 407,451 23.7 % 426,335 25.2 % 400,283 24.6 % Investor real estate loans 683,686 37.6 % 654,623 37.0 % 660,740 37.4 % 662,769 37.1 % 622,415 36.1 % 598,501 35.5 % 553,093 34.0 % Construction & development loans 179,570 9.9 % 179,656 10.2 % 179,606 10.2 % 195,027 11.0 % 199,324 11.6 % 189,644 11.2 % 219,160 13.4 % Multi-family loans 86,366 4.8 % 86,061 4.9 % 88,670 5.0 % 89,227 5.0 % 106,460 6.2 % 106,236 6.3 % 99,100 6.1 % Total commercial real estate loans 949,622 52.3 % 920,340 52.1 % 929,016 52.6 % 947,023 53.1 % 928,199 53.9 % 894,381 53.0 % 871,353 53.5 % Residential mortgage loans 464,509 25.7 % 443,305 25.2 % 433,076 24.5 % 426,841 23.9 % 385,696 22.4 % 368,370 21.8 % 356,331 21.9 % Consumer loans 467 0.0 % 646 0.0 % 324 0.0 % 529 0.0 % 585 0.0 % 651 0.0 % 513 0.0 % Total loans $ 1,815,540 100.0 % $ 1,765,439 100.0 % $ 1,767,250 100.0 % $ 1,785,448 100.0 % $ 1,721,931 100.0 % $ 1,689,737 100.0 % $ 1,628,480 100.0 % Less: Allowance for loan credit losses (20,036 ) (20,629 ) (21,619 ) (20,208 ) (20,032 ) (20,031 ) (20,031 ) Net deferred loan costs (fees) 4,592 4,362 4,022 4,060 3,183 2,915 2,780 Net loans $ 1,800,096 $ 1,749,172 $ 1,749,653 $ 1,769,300 $ 1,705,082 $ 1,672,621 $ 1,611,229 2023 2022 September 30 June 30 March 31 December 31 September 30 June 30 March 31 Deposits $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total $ Amount % of Total Non-interest bearing demand deposits $ 437,880 22.1 % $ 433,931 21.2 % $ 447,450 21.4 % $ 476,697 23.1 % $ 535,186 25.9 % $ 512,284 25.1 % $ 495,811 25.0 % Interest-bearing demand deposits: NOW accounts(1) 345,522 17.4 % 311,225 15.2 % 284,872 13.7 % 253,148 12.3 % 293,558 14.2 % 338,789 16.6 % 345,087 17.4 % Money market accounts(1) 330,297 16.7 % 341,413 16.7 % 392,962 18.8 % 438,797 21.2 % 412,035 20.0 % 399,877 19.6 % 414,987 20.9 % Savings accounts 57,408 3.0 % 68,013 3.4 % 81,150 3.9 % 95,241 4.6 % 102,909 5.0 % 112,276 5.4 % 114,427 5.8 % Certificates of deposit $250,000 or more 364,805 18.4 % 376,899 18.4 % 338,824 16.2 % 314,738 15.2 % 280,027 13.6 % 255,411 12.5 % 241,230 12.1 % Less than $250,000 103,600 5.2 % 105,956 5.2 % 94,429 4.5 % 89,247 4.3 % 88,421 4.3 % 87,505 4.3 % 91,050 4.6 % QwickRate® certificates of deposit 11,526 0.6 % 12,772 0.6 % 16,952 0.8 % 22,163 1.1 % 20,154 1.0 % 20,154 1.0 % 23,136 1.2 % IntraFi® certificates of deposit 41,659 2.1 % 49,729 2.4 % 53,178 2.5 % 25,757 1.2 % 46,305 2.2 % 32,686 1.6 % 39,628 2.0 % Brokered deposits 288,926 14.6 % 346,371 16.9 % 378,825 18.2 % 351,952 17.0 % 284,746 13.8 % 284,759 13.9 % 217,743 11.0 % Total deposits $ 1,981,623 100.0 % $ 2,046,309 100.0 % $ 2,088,642 100.0 % $ 2,067,740 100.0 % $ 2,063,341 100.0 % $ 2,043,741 100.0 % $ 1,983,099 100.0 % Borrowings Federal funds purchased $ - - 0.0 % $ - - 0.0 % $ - - 0.0 % $ 25,500 50.9 % $ - - 0.0 % $ - - 0.0 % $ - - 0.0 % Federal Home Loan Bank advances - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % 18,000 42.0 % Federal Reserve Bank borrowings 54,000 68.6 % 54,000 68.6 % - - 0.0 - - 0.0 % - - 0.0 % - - 0.0 % - - 0.0 % Subordinated debt 24,687 31.4 % 24,666 31.4 % 24,645 100.0 % 24,624 49.1 % 24,603 100.0 % 49,560 100.0 % 24,845 58.0 % Total borrowings $ 78,687 100.0 % $ 78,666 100.0 % $ 24,645 100.0 % $ 50,124 100.0 % $ 24,603 100.0 % $ 49,560 100.0 % $ 42,845 100.0 % Total deposits and borrowings $ 2,060,310 $ 2,124,975 $ 2,113,287 $ 2,117,864 $ 2,087,944 $ 2,093,301 $ 2,025,944 Core customer funding sources (2) $ 1,681,171 82.6 % $ 1,687,166 80.3 % $ 1,692,865 81.1 % $ 1,693,625 80.9 % $ 1,758,441 85.2 % $ 1,738,828 85.1 % $ 1,742,220 87.1 % Wholesale funding sources (3) 354,452 17.4 % 413,143 19.7 % 395,777 18.9 % 399,615 19.1 % 304,900 14.8 % 304,913 14.9 % 258,879 12.9 % Total funding sources $ 2,035,623 100.0 % $ 2,100,309 100.0 % $ 2,088,642 100.0 % $ 2,093,240 100.0 % $ 2,063,341 100.0 % $ 2,043,741 100.0 % $ 2,001,099 100.0 % _____________________________ (1) Includes IntraFi® accounts. (2) Includes reciprocal IntraFi Demand®, IntraFi Money Market® and IntraFi CD® deposits, which are maintained by customers. (3) Consists of QwickRate® certificates of deposit, brokered deposits, federal funds purchased, Federal Home Loan Bank advances and Federal Reserve Bank borrowings. John Marshall Bancorp, Inc. Average Balance Sheets, Interest and Rates (unaudited) (Dollar amounts in thousands) Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Interest Income / Average Interest Income / Average Average Balance Expense Rate Average Balance Expense Rate Assets: Securities: Taxable $ 401,623 $ 6,117 2.04 % $ 433,128 $ 5,782 1.78 % Tax-exempt(1) 2,678 56 2.80 % 5,002 114 3.05 % Total securities $ 404,301 $ 6,173 2.04 % $ 438,130 $ 5,896 1.80 % Loans, net of unearned income(2): Taxable 1,748,904 62,664 4.79 % 1,626,661 53,192 4.37 % Tax-exempt(1) 28,319 875 4.13 % 22,656 694 4.10 % Total loans, net of unearned income $ 1,777,223 $ 63,539 4.78 % $ 1,649,317 $ 53,886 4.37 % Interest-bearing deposits in other banks $ 119,002 $ 4,654 5.23 % $ 134,874 $ 897 0.89 % Total interest-earning assets $ 2,300,526 $ 74,366 4.32 % $ 2,222,321 $ 60,679 3.65 % Total non-interest earning assets 36,572 35,066 Total assets $ 2,337,098 $ 2,257,387 Liabilities & Shareholders’ Equity: Interest-bearing deposits NOW accounts $ 291,217 $ 4,484 2.06 % $ 325,647 $ 829 0.34 % Money market accounts 374,053 7,560 2.70 % 389,535 1,516 0.52 % Savings accounts 75,273 673 1.20 % 109,740 284 0.35 % Time deposits 855,076 20,873 3.26 % 658,897 3,461 0.70 % Total interest-bearing deposits $ 1,595,619 $ 33,590 2.81 % $ 1,483,819 $ 6,090 0.55 % Federal funds purchased 294 10 4.55 % — — 0.00 % Subordinated debt 24,653 1,047 5.68 % 27,476 1,461 7.11 % Other borrowed funds 29,483 1,068 4.84 % 8,257 42 0.68 % Total interest-bearing liabilities $ 1,650,049 $ 35,715 2.89 % $ 1,519,552 $ 7,593 0.67 % Demand deposits 447,778 511,504 Other liabilities 18,483 16,321 Total liabilities $ 2,116,310 $ 2,047,377 Shareholders’ equity $ 220,788 $ 210,010 Total liabilities and shareholders’ equity $ 2,337,098 $ 2,257,387 Tax-equivalent net interest income and spread $ 38,651 1.43 % $ 53,086 2.98 % 195 170 Net interest income $ 38,456 $ 52,916 Tax-equivalent interest income/earnings assets 4.32 % 3.65 % Interest expense/earning assets 2.08 % 0.46 % Net interest margin(3) 2.25 % 3.19 % ________________________________ (1) Tax-equivalent income has been adjusted using the federal statutory tax rate of 21%. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $195 thousand and $170 thousand for the nine months ended September 30, 2023 and September 30, 2022, respectively. (2) The Company did not have any loans on non-accrual as of September 30, 2023 or September 30, 2022. (3) The net interest margin has been calculated on a tax-equivalent basis. John Marshall Bancorp, Inc. Average Balance Sheets, Interest and Rates (unaudited) (Dollar amounts in thousands) Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Interest Income / Average Interest Income / Average Average Balance Expense Rate Average Balance Expense Rate Assets: Securities: Taxable $ 308,723 $ 1,582 2.03 % $ 483,861 $ 2,385 1.96 % Tax-exempt(1) 1,684 13 3.06 % 4,999 38 3.02 % Total securities $ 310,407 $ 1,595 2.04 % $ 488,860 $ 2,423 1.97 % Loans, net of unearned income(2): Taxable 1,762,653 21,695 4.88 % 1,655,670 17,983 4.31 % Tax-exempt(1) 28,067 292 4.13 % 29,126 302 4.11 % Total loans, net of unearned income $ 1,790,720 $ 21,987 4.87 % $ 1,684,796 $ 18,285 4.31 % Interest-bearing deposits in other banks $ 200,515 $ 2,746 5.43 % $ 103,669 $ 571 2.19 % Total interest-earning assets $ 2,301,642 $ 26,328 4.54 % $ 2,277,325 $ 21,279 3.71 % Total non-interest earning assets 29,761 37,500 Total assets $ 2,331,403 $ 2,314,825 Liabilities & Shareholders’ Equity: Interest-bearing deposits NOW accounts $ 327,309 $ 2,239 2.71 % $ 329,780 $ 404 0.49 % Money market accounts 341,672 2,609 3.03 % 377,736 727 0.76 % Savings accounts 63,956 198 1.23 % 106,647 107 0.40 % Time deposits 849,270 8,227 3.84 % 705,206 1,830 1.03 % Total interest-bearing deposits $ 1,582,207 $ 13,273 3.33 % $ 1,519,369 $ 3,068 0.80 % Federal funds purchased 99 — — % — — 0.00 % Subordinated debt, net 24,674 349 5.61 % 28,397 448 6.26 % Other borrowed funds 54,000 662 4.86 % — — 0.00 % Total interest-bearing liabilities $ 1,660,980 $ 14,284 3.41 % $ 1,547,766 $ 3,516 0.90 % Demand deposits 430,727 538,271 Other liabilities 19,223 16,641 Total liabilities $ 2,110,930 $ 2,102,678 Shareholders’ equity $ 220,473 $ 212,247 Total liabilities and shareholders’ equity $ 2,331,403 $ 2,314,925 Tax-equivalent net interest income and spread $ 12,044 1.13 % $ 17,763 2.81 % Less: tax-equivalent adjustment 65 71 Net interest income $ 11,979 $ 17,692 Tax-equivalent interest income/earnings assets 4.54 % 3.71 % Interest expense/earning assets 2.46 % 0.61 % Net interest margin(3) 2.08 % 3.10 % ____________________________ (1) Tax-equivalent income has been adjusted using the federal statutory tax rate of 21%. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $65 thousand and $71 thousand for the three months ended September 30, 2023 and September 30, 2022, respectively. (2) The Company did not have any loans on non-accrual as of September 30, 2023 or September 30, 2022. (3) The net interest margin has been calculated on a tax-equivalent basis. John Marshall Bancorp, Inc. Reconciliation of Certain Non-GAAP Financial Measures (unaudited) (Dollar amounts in thousands) As of September 30, 2023 December 31, 2022 September 30, 2022 Regulatory Ratios (Bank) Total risk-based capital (GAAP) $ 280,891 $ 283,471 $ 274,611 Less: Unrealized losses on available-for-sale securities, net of tax benefit (1) 17,143 28,942 31,191 Less: Unrealized losses on held-to-maturity securities, net of tax benefit (1) 16,285 14,421 14,878 Total risk-based capital, excluding unrealized losses on available-for-sale and held-to-maturity securities, net of tax benefit (Non-GAAP) $ 247,463 $ 240,108 $ 228,542 Tier 1 capital (GAAP) $ 261,666 $ 262,960 $ 254,226 Less: Unrealized losses on available-for-sale securities, net of tax benefit (1) 17,143 28,942 31,191 Less: Unrealized losses on held-to-maturity securities, net of tax benefit (1) 16,285 14,421 14,878 Tier 1 capital, excluding unrealized losses on available-for-sale and held-to-maturity securities, net of tax benefit (Non-GAAP) $ 228,238 $ 219,597 $ 208,157 Risk weighted assets (GAAP) $ 1,794,603 $ 1,819,305 $ 1,783,344 Less: Risk weighted available-for-sale securities 25,094 60,894 62,969 Less: Risk weighted held-to-maturity securities 17,229 17,762 17,973 Risk weighted assets, excluding available-for-sale and held-to-maturity securities (Non-GAAP) $ 1,752,280 $ 1,740,649 $ 1,702,402 Total average assets for leverage ratio (GAAP) $ 2,326,722 $ 2,327,939 $ 2,312,355 Less: Average available-for-sale securities 206,116 362,024 380,324 Less: Average held-to-maturity securities 96,988 100,050 101,558 Total average assets for leverage ratio, excluding available-for-sale and held-to-maturity securities (Non-GAAP) $ 2,023,618 $ 1,865,865 $ 1,830,473 Total risk-based capital ratio (2) Total risk-based capital ratio (GAAP) 15.7 % 15.6 % 15.4 % Total risk-based capital ratio (Non-GAAP) 14.1 % 13.8 % 13.4 % Tier 1 capital ratio (3) Tier 1 risk-based capital ratio (GAAP) 14.6 % 14.4 % 14.3 % Tier 1 risk-based capital ratio (Non-GAAP) 12.9 % 12.6 % 12.2 % Common equity tier 1 ratio (4) Common equity tier 1 ratio (GAAP) 14.6 % 14.4 % 14.3 % Common equity tier 1 ratio (Non-GAAP) 12.9 % 12.6 % 12.2 % Leverage ratio (5) Leverage ratio (GAAP) 11.3 % 11.3 % 11.0 % Leverage ratio (Non-GAAP) 11.3 % 11.8 % 11.4 % __________________________ (1) Includes tax benefit calculated using the federal statutory tax rate of 21%. (2) The total risk-based capital ratio is calculated by dividing total risk-based capital by risk weighted assets. (3) The tier 1 capital ratio is calculated by dividing tier 1 capital by risk weighted assets. (4) The common equity tier 1 ratio is calculated by dividing tier 1 capital by risk weighted assets. (5) The leverage ratio is calculated by dividing tier 1 capital by total average assets for leverage ratio. John Marshall Bancorp, Inc. Reconciliation of Certain Non-GAAP Financial Measures (unaudited) (Dollar amounts in thousands) For the Three Months Ended For the Nine Months Ended September 30, 2023 September 30, 2023 Non-interest income (loss) (GAAP) $ (16,815 ) $ (15,564 ) Adjustment: Pre-tax loss recognized on sale of available-for-sale securities 17,114 17,114 Core non-interest income (Non-GAAP) $ 299 $ 1,550 Income (loss) before taxes (GAAP) $ (11,667 ) $ 2,102 Adjustment: Pre-tax loss recognized on sale of available-for-sale securities 17,114 17,114 Core income before taxes (Non-GAAP) $ 5,447 $ 19,216 Income tax expense (benefit) (GAAP) $ (1,530 ) $ 1,446 Adjustment: Tax and 10% modified endowment contract penalty on early surrender of BOLI policies (1,101 ) (1,101 ) Adjustment: Tax benefit of loss recognized on sale of available-for-sale securities 3,594 3,594 Core income tax expense (Non-GAAP)(1) $ 963 $ 3,939 Net income (loss) (GAAP) $ (10,137 ) $ 656 Core net income (Non-GAAP)(2) $ 4,484 $ 15,277 Earnings (loss) per share - basic (GAAP) $ (0.72 ) $ 0.05 Core earnings per share - basic (Non-GAAP)(3) $ 0.32 $ 1.08 Earnings (loss) per share - diluted (GAAP) $ (0.72 ) $ 0.05 Core earnings per share - diluted (Non-GAAP)(3) $ 0.32 $ 1.08 Return on average assets (annualized) (GAAP) (1.73 ) % 0.04 % Core return on average assets (annualized) (Non-GAAP)(4) 0.76 % 0.87 % Return on average equity (annualized) (GAAP) (18.24 ) % 0.40 % Core return on average equity (annualized) (Non-GAAP)(5) 8.07 % 9.25 % Non-interest income (loss) as a percentage of average assets (annualized) (GAAP) (2.86 ) % (0.89 ) % Core non-interest income as a percentage of average assets (annualized) (Non-GAAP)(6) 0.05 % 0.09 % Efficiency ratio (GAAP) (158.4 ) % 101.6 % Core efficiency ratio (Non-GAAP)(7) 62.4 % 58.1 % ___________________________ (1) Includes tax benefit (expense) calculated using the federal statutory tax rate of 21%. (2) Core net income reflects net income adjusted for the non-recurring tax effected loss recognized on the sale of available-for-sale securities in and non-recurring tax expense associated with the surrender of the Company’s BOLI policies in July 2023. It is calculated by subtracting core income tax expense from core income before taxes for each period presented. (3) Core earnings per share – basic and core earnings per share – diluted is calculated by dividing core net income by basic weighted average shares outstanding and diluted weighted average shares outstanding, respectively, for each period presented. (4) Core return on average assets (annualized) is calculated by dividing annualizing core net income by average assets for each period presented. (5) Core return on average equity (annualized) is calculated by dividing annualizing core net income by average equity for each period presented. (6) Core non-interest income as a percentage of average assets (annualized) is calculated by dividing annualized core non-interest income by average assets for each period presented. (7) Core efficiency ratio is calculated by dividing non-interest expense by the sum of core non-interest income and net interest income for each period presented. Category: Earnings View source version on businesswire.com: https://www.businesswire.com/news/home/20231018741695/en/