John Marshall Bancorp, Inc. Reports Third Quarter 2023 Results

11.3% Annualized Loan Growth Supported By Strong Balance Sheet

October 18, 2023 09:00 AM Eastern Daylight Time

RESTON, Va.--(BUSINESS WIRE)--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	%

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

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Christopher W. Bergstrom (703) 584-0840
Kent D. Carstater (703) 289-5922

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