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Economy, Business and Finance

John Marshall Bancorp Inc.

05/08/2026 | Press release | Distributed by Public on 05/08/2026 06:32

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the consolidated financial condition and results of operations of the Company and its subsidiary should be read in conjunction with the consolidated financial statements and related notes presented in Item 1, Financial Statements, of this Form 10-Q. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate results of operations or trends in operations for any future periods.

Use of Non-GAAP Financial Measures

This discussion and analysis contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. 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. The non-GAAP measure used in this report is tax-equivalent net interest income.

These disclosures should not be viewed as a substitute for or more important than financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Where the non-GAAP financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company's reasons for utilizing the non-GAAP financial measure, can be found within this discussion and analysis.

Cautionary Note on Forward-Looking Statements

In addition to historical information, this Form 10-Q of John Marshall Bancorp, Inc. (the "Company") 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. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. These forward-looking statements are based on our beliefs and assumptions and on the information available to us at the time that these disclosures were prepared, and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by such forward-looking statements. Although we believe the expectations reflected in such forward-looking statements are reasonable, we can give no assurance such expectations will prove to have been correct. Should any known or unknown risks and uncertainties develop into actual events, those developments could have material adverse effects on our business, financial condition and results of operations. Factors that could have an adverse effect on the operations of the Company and its wholly-owned subsidiary, John Marshall Bank (the "Bank"), include, but are not limited to, the following:

•

the concentration of our business in the Washington, D.C. metropolitan area and the effect of changes in the economic, political and environmental conditions on this market, including shutdowns and potential reductions in spending by the U.S. Government, and related reductions in the federal workforce;

•

adequacy of our allowance for loan credit losses, allowance for unfunded commitments credit losses, and allowance for credit losses associated with our held-to-maturity and available-for-sale securities portfolios;

•

deterioration of our asset quality;

•

future performance of our loan portfolio with respect to recently originated loans;

•

the level of prepayments on loans and mortgage-backed securities;

•

liquidity, interest rate and operational risks associated with our business;

•

changes in our financial condition or results of operations that reduce capital;

•

our ability to maintain existing deposit relationships or attract new deposit relationships;

•

changes in consumer spending, borrowing and savings habits;

•

inflation and changes in interest rates that may reduce our margins or reduce the fair value of financial instruments;

•

changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System (the "Federal Reserve");

•

additional risks related to new lines of business, products, product enhancements or services;

•

increased competition with other financial institutions and fintech companies;

•

adverse changes in the securities markets;

•

changes in the financial condition or future prospects of issuers of securities that we own;

•

our ability to maintain an effective risk management framework;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory structure and in regulatory fees and capital requirements;

•

compliance with legislative or regulatory requirements;

•

results of examination of us by our regulators, including the possibility that our regulators may require us to increase our allowance for credit losses or to write-down assets or take similar actions;

•

potential claims, damages, and fines related to litigation or government actions;

•

the effectiveness of our internal controls over financial reporting and our ability to remediate any future material weakness in our internal controls over financial reporting;

•

geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, negatively impacting business and economic conditions in the U.S. and abroad;

•

the effects of weather-related or natural disasters, which may negatively affect our operations and/or our loan portfolio and increase our cost of conducting business;

•

public health events (such as the COVID-19 pandemic) and governmental and societal responses thereto;

•

technological risks and developments, and cyber threats, attacks, or events;

•

changes in accounting policies and practices;

•

our ability to successfully capitalize on growth opportunities;

•

our ability to retain key employees;

•

deteriorating economic conditions, either nationally or in our market area, including higher unemployment and lower real estate values;

•

implications of our status as a smaller reporting company and as an emerging growth company; and

•

other factors discussed in Item 1A. Risk Factors in the Company's 2025 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on March 13, 2026.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We do not undertake, and specifically disclaim 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. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary note.

Overview

We are a bank holding company headquartered in Reston, Virginia primarily serving the Washington, D.C. metropolitan area. The material business operations of our organization are performed through the Bank. As a result, the discussion and analysis within this section primarily relate to activities conducted at the Bank.

As with most community banks, the Bank derives a significant portion of its income from interest received on loans and investments. The Bank's primary source of funding is deposits, both interest-bearing and non-interest-bearing. To account for credit risk inherent in all loans, the Bank maintains an allowance for loan credit losses to absorb lifetime losses on existing loans. The Bank establishes and maintains this allowance by recording a provision for credit losses against earnings. In addition to net interest income, the Bank also generates income through service charges on deposits, insurance commission income, merchant services fee income, swap fee income and gain on sale of the guaranteed portion of U.S. Small Business Administration ("SBA") 7(a) loans. In order to maintain its operations, the Bank incurs various operating expenses which are further described within the "Results of Operations" later in this section.

As of March 31, 2026, the Company had total consolidated assets of $2.35 billion, total loans net of unearned income of $1.97 billion, total deposits of $1.99 billion and total shareholders' equity of $268.1 million.

Critical Accounting Policies and Estimates

The Company's accounting and reporting policies conform to GAAP, as well as general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions, and judgments. Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgments and as such may have a greater possibility of producing results that could be materially different than originally reported.

Our most significant accounting policies are described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 to our audited financial statements for the year ended December 31, 2025, included in the Company's 2025 Annual Report on Form 10-K filed with the SEC on March 13, 2026.

Selected Financial Data

The following table contains selected historical consolidated financial data as of the dates and for the periods shown. The selected balance sheet data as of March 31, 2026 and 2025 and the selected income statement data for the three months ended March 31, 2026 and March 31, 2025 have been derived from our consolidated financial statements.


		As of or for the Three Months Ended
(Dollars in thousands, except per share data)		March 31, 2026			March 31, 2025
Balance Sheet Data:
Loans, net of unearned income		$	1,973,743		$	1,870,472
Allowance for loan credit losses			19,983			18,826
Total assets			2,352,350			2,272,432
Deposits			1,987,728			1,922,175
Shareholders' equity			268,147			252,958
Asset Quality Data:
Net recoveries to average total loans, net of unearned income			0.01	%		0.00	%
Allowance for loan credit losses to nonperforming assets			20.3	x		N/M
Allowance for loan credit losses to total gross loans net of unearned income			1.01	%		1.01	%
Non-performing assets to total assets			0.04	%		0.00	%
Non-performing loans to total loans			0.05	%		0.00	%
Capital Ratios (Bank level):
Equity-to-total assets ratio			12.2	%		11.9	%
Total risk-based capital ratio			16.5	%		16.5	%
Tier 1 risk-based capital ratio			15.4	%		15.4	%
Common equity tier 1 ratio			15.4	%		15.4	%
Leverage ratio			12.6	%		12.6	%
Income Statement Data:
Interest and dividend income		$	29,082		$	27,305
Interest expense			12,573			13,208
Net interest income		$	16,509		$	14,097
Provision for credit losses			23			170
Non-interest income			284			505
Non-interest expense			8,923			8,248
Income before taxes		$	7,847		$	6,184
Income tax expense			1,746			1,374
Net income		$	6,101		$	4,810
Per Share Data and Shares Outstanding:
Weighted average common shares (basic)			14,125,649			14,223,046
Weighted average common shares (diluted)			14,125,649			14,241,114
Common shares outstanding			14,112,259			14,275,885
Earnings per share, basic		$	0.43		$	0.34
Earnings per share, diluted		$	0.43		$	0.34
Book value per share		$	19.00		$	17.72
Performance Ratios:
Return on average assets ("ROAA") ⁽¹⁾			1.06	%		0.87	%
Return on average equity ("ROAE") ⁽²⁾			9.19	%		7.76	%
Net interest margin			2.87	%		2.58	%
Non-interest expense to average assets⁽³⁾			1.54	%		1.50	%
Efficiency ratio⁽⁴⁾			53.1	%		56.5	%

N/M - Not meaningful

(1)	ROAA is calculated by dividing year-to-date net income annualized by year-to-date average assets.

(2)	ROAE is calculated by dividing year-to-date net income annualized by year-to-date average equity.

(3)	Non-interest expense to average assets is calculated by dividing year-to-date annualized non-interest expense by year-to-date average assets.

(4)	The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income.

Results of Operations - Three Months Ended March 31, 2026 and March 31, 2025

Overview

The Company reported net income of $6.1 million for the three months ended March 31, 2026, an increase of $1.3 million or 26.8% when compared to $4.8 million for the three months ended March 31, 2025. Diluted earnings per common share were $0.43 for the three months ended March 31, 2026, compared to diluted earnings per common share of $0.34 for the three months ended March 31, 2025, an increase of 26.5%.

Net interest income for the three months ended March 31, 2026 increased $2.4 million or 17.1% to $16.5 million compared to $14.1 million for the three months ended March 31, 2025, driven primarily by the lower cost of interest-bearing deposits coupled with higher average balances and yields of loans. During the same period, interest income increased $1.8 million or 6.5%, driven by higher interest income on loans, while interest expense declined by $0.6 million or 4.8%, predominantly due to lower interest expense on time deposits, interest-bearing demand deposits, and money market accounts. The annualized net interest margin for the three months ended March 31, 2026 was 2.87% as compared to 2.58% for the same period in 2025.

The Company recorded a $23 thousand provision for credit losses for the three months ended March 31, 2026 compared to a provision for credit losses of $170 thousand for the three months ended March 31, 2025. Additional discussion of the provision for credit losses is included below under the heading Provision for Credit Losses.

Non-interest income decreased $221 thousand during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This decrease was primarily attributable to a $149 thousand decrease in insurance commissions, in combination with a $37 thousand decrease in mark-to-market adjustments on investments related to the Company's nonqualified deferred compensation ("NQDC") plan and a $30 thousand decline in gains recorded on sales of the guaranteed portions of the SBA 7(a) loans.

Non-interest expense increased $0.7 million or 8.2% during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to a $522 thousand or 10.2% increase in salaries and employee benefits, as a result of increases in employee headcount coupled with annual salary merit increases. Other expenses grew $124 thousand due to a combination of higher state franchise taxes and Federal Deposit Insurance Corporation ("FDIC") insurance, due to higher assessment bases, partially offset by lower marketing expense.

The ROAA for the three months ended March 31, 2026 and March 31, 2025 were 1.06% and 0.87%, respectively. The ROAE for the three months ended March 31, 2026 and March 31, 2025 were 9.19% and 7.76%, respectively.

Net Interest Income and Net Interest Margin

The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the three months ended March 31, 2026 and March 31, 2025.

Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities


		For the Three Months Ended								For the Three Months Ended
		March 31, 2026								March 31, 2025
					Interest Income /			Average					Interest Income /			Average
(Dollars in thousands)		Average Balance			Expense			Rate		Average Balance			Expense			Rate
Assets:
Securities:
Taxable		$	224,526		$	1,281		2.31	%	$	230,100		$	1,155		2.04	%
Tax-exempt⁽¹⁾			1,378			11		3.24	%		1,379			11		3.24	%
Total securities		$	225,904		$	1,292		2.32	%	$	231,479		$	1,166		2.04	%
Loans, net of unearned income⁽²⁾:
Taxable			1,953,760			26,403		5.48	%		1,851,627			24,679		5.41	%
Tax-exempt⁽¹⁾			20,405			232		4.61	%		16,676			162		3.94	%
Total loans, net of unearned income		$	1,974,165		$	26,635		5.47	%	$	1,868,303		$	24,841		5.39	%
Interest-bearing deposits in other banks		$	131,744		$	1,206		3.71	%	$	120,948		$	1,334		4.47	%
Total interest-earning assets		$	2,331,813		$	29,133		5.07	%	$	2,220,730		$	27,341		4.99	%
Total non-interest earning assets			11,644								13,031
Total assets		$	2,343,457							$	2,233,761
Liabilities & Shareholders' Equity:
Interest-bearing deposits:
NOW accounts		$	371,418		$	1,926		2.10	%	$	357,206			2,127		2.41	%
Money market accounts			374,848			2,183		2.36	%		339,248			2,281		2.73	%
Savings accounts			34,972			69		0.80	%		43,062			104		0.98	%
Time deposits			756,391			7,495		4.02	%		720,658			7,788		4.38	%
Total interest-bearing deposits		$	1,537,629		$	11,673		3.08	%	$	1,460,174		$	12,300		3.42	%
Federal funds purchased			1			-		N/M			-			-		N/M
Subordinated debt			24,883			349		5.69	%		24,799			349		5.71	%
Federal Home Loan Bank advances			55,834			551		4.00	%		56,001			559		4.05	%
Total interest-bearing liabilities		$	1,618,347		$	12,573		3.15	%	$	1,540,974		$	13,208		3.48	%
Demand deposits			439,692								424,795
Other liabilities			16,091								16,433
Total liabilities		$	2,074,130							$	1,982,202
Shareholders' equity		$	269,327							$	251,559
Total liabilities and shareholders' equity		$	2,343,457							$	2,233,761
Tax-equivalent net interest income and spread (Non-GAAP)⁽¹⁾					$	16,560		1.92	%				$	14,133		1.51	%
Less: tax-equivalent adjustment						51								36
Net interest income and spread (GAAP)					$	16,509		1.91	%				$	14,097		1.51	%

Interest income/earnings assets								5.06	%							4.99	%
Interest expense/earning assets								2.19	%							2.41	%
Net interest margin								2.87	%							2.58	%

N/M - Not meaningful

(1)	Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.

(2)	Non-accrual loans are included in the average balances.

Tax-equivalent net interest income is calculated by adding the tax benefit on certain securities and loans, whose interest is tax-exempt, to total interest income then subtracting total interest expense. The following table, "Tax-Equivalent Net Interest Income," reconciles net interest income to tax-equivalent net interest income, which is a non-GAAP measure.

Tax-Equivalent Net Interest Income


	Three months ended
	March 31,
(Dollars in thousands)	2026		2025
GAAP Financial Measurements:
Interest Income - Loans	$	26,586	$	24,807
Interest Income - Securities and Other Interest-Earning Assets		2,496		2,498
Interest Expense - Deposits		11,673		12,300
Interest Expense - Borrowings		900		908
Total Net Interest Income (GAAP)	$	16,509	$	14,097

Non-GAAP Financial Measurements:
Add: Tax Benefit on Tax-Exempt Interest Income - Loans		49		34
Add: Tax Benefit on Tax-Exempt Interest Income - Securities		2		2
Total Tax Benefit on Tax-Exempt Interest Income ⁽¹⁾	$	51	$	36
Tax-Equivalent Net Interest Income (Non-GAAP)	$	16,560	$	14,133

(1) Tax benefit was calculated using the federal statutory tax rate of 21%.

Tax-equivalent net interest income increased $2.4 million or 17.2% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, driven primarily by higher average balances and yields of the loan portfolio coupled with the lower rates on interest-bearing deposits.

The net interest margin was 2.87% for the three months ended March 31, 2026, compared to 2.58% for the three months ended March 31, 2025. The 29 basis point increase in net interest margin was primarily due to a 34 basis point reduction in rates on interest-bearing deposits and an eight basis point increase in yields on the Company's loans. In addition, average loans increased $105.9 million between the three months ended March 31, 2025 and the three months ended March 31, 2026, which was primarily attributable to origination volume in the construction and development, and residential mortgage loan portfolios subsequent to March 31, 2025.

The loan portfolio's yield for the three months ended March 31, 2026 was 5.47% compared to 5.39% for the three months ended March 31, 2025. The increase of eight basis points was primarily attributable to increase in yield on the Company's residential mortgage portfolio along with higher average loan balances.

The yield on interest-bearing deposits due from banks for the three months ended March 31, 2026 was 3.71% compared to 4.47% for the three months ended March 31, 2025. The decrease of 76 basis points was directly attributable to three fed funds rate cuts totaling 75 basis points over the preceding twelve months.

The cost of interest-bearing liabilities was 3.15% for the three months ended March 31, 2026 compared to 3.48% for the three months ended March 31, 2025. Rates declined across all deposit categories, most notably in money market accounts, time deposits and interest-bearing demand deposits, which declined by 37 basis points, 36 basis points, and 31 basis points, respectively.

The following table presents the effects of changing rates and volumes on tax-equivalent net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.

Rate/Volume Analysis


		For the Three Months Ended March 31,
		2026 and 2025
		Increase
		(Decrease) Due to
(Dollars in thousands)		Volume			Rate			Total Increase (Decrease)
Interest-earning Assets:
Securities:
Taxable		$	(32)		$	158		$	126
Tax-exempt⁽¹⁾			-			-			-
Total securities		$	(32)		$	158		$	126
Loans, net of unearned income:
Taxable			1,380			344			1,724
Tax-exempt⁽¹⁾			42			28			70
Total loans, net of unearned income		$	1,422		$	372		$	1,794
Interest-bearing deposits in other banks		$	97		$	(225)		$	(128)
Total interest-earning assets		$	1,487		$	305		$	1,792
Interest-bearing Liabilities:
Interest-bearing deposits:
NOW accounts		$	30		$	(231)		$	(201)
Money market accounts			191			(289)			(98)
Savings accounts			(16)			(19)			(35)
Time deposits			352			(645)			(293)
Total interest-bearing deposits		$	557		$	(1,184)		$	(627)
Federal funds purchased			-			-			-
Subordinated debt			-			-			-
Federal Reserve Bank borrowings			-			-			-
Federal Home Loan Bank advances			(2)			(6)			(8)
Total interest-bearing liabilities		$	555		$	(1,190)		$	(635)
Change in tax-equivalent net interest income (Non-GAAP)		$	932		$	1,495		$	2,427

(1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.

Interest Income

Interest income increased $1.8 million or 6.6% to $29.1 million on a fully tax-equivalent basis for the three months ended March 31, 2026 compared to $27.3 million for the three months ended March 31, 2025, driven primarily by higher average balances and yields on the Company's loan portfolio.

Fully tax-equivalent interest income on loans increased $1.8 million or 7.2% as a result of volume and rates increases. Average loans increased $105.9 million between the three months ended March 31, 2025 and the three months ended March 31, 2026, which was primarily attributable to origination volume in the construction and development and residential mortgage loan portfolios subsequent to March 31, 2025.

Fully tax-equivalent interest income on investment securities increased $126 thousand or 10.8% primarily as a result of an increase in rates. The yield on investment securities increased to 2.32% at March 31, 2026 from 2.04% at March 31, 2025.

Interest income on interest-bearing deposits in other banks decreased $128 thousand as a result of a decrease in rates, partially offset by an increase in volume. The yield on interest-bearing deposits in other banks decreased from 4.47% to 3.71%, while average balances increased $10.8 million from $120.9 million to $131.7 million between March 31, 2025 and March 31, 2026.

Interest Expense

Interest expense decreased $635 thousand to $12.6 million for the three months ended March 31, 2026 compared to $13.2 million for the three months ended March 31, 2025, primarily due to a decrease in rates on interest-bearing deposits, partially offset by an increase in volume of interest-bearing deposits. The decrease in rates on deposits was mainly a result of the repricing of the Company's deposit accounts in conjunction with the decrease in federal funds benchmark interest rates that took place starting in September of 2025.

Provision for Credit Losses

The Company recorded a $23 thousand provision for credit losses for the three months ended March 31, 2026 compared to a provision for credit losses of $170 thousand for the three months ended March 31, 2025. The provision for credit losses for the three months ended March 31, 2026 that is directly attributable to the funded loan portfolio was $143 thousand, while provision for credit losses on unfunded loan commitments was a recovery of $120 thousand.

The provision for credit losses on funded loans during the most recent quarter reflected the change in the Company's loan portfolio mix quarter-over-quarter along with the updated forecasted economic variables utilized in the quantitative portion of the allowance calculation. Recovery of the provision for credit losses on unfunded loan commitments was due to lower amount of available loan commitments at March 31, 2026 as compared to December 31, 2025.

See "Asset Quality" section below for additional information on the credit quality of the loan portfolio.

Non-interest Income

The following table summarizes non-interest income for the three months ended March 31, 2026 and March 31, 2025.


	Three months ended
	March 31,
(Dollars in thousands)	2026		2025			$ Change	% Change
Service charges on deposit accounts
Overdrawn account fees	$	14	$	18	$	(4)	(22.2)	%
Account service fees		71		64		7	10.9	%
Other service charges and fees
Interchange income		72		80		(8)	(10.0)	%
Other charges and fees		66		73		(7)	(9.6)	%
Net losses on premises and equipment		-		(3)		3	N/M
Insurance commissions		64		213		(149)	(70.0)	%
Gain on sale of government guaranteed loans		6		36		(30)	(83.3)	%
Non-qualified deferred compensation plan asset gains/ (losses), net		(13)		24		(37)	N/M
Other operating income		4		-		4	N/M
Total non-interest income	$	284	$	505	$	(221)	(43.8)	%

N/M - Not meaningful

Non-interest income was $284 thousand for the three months ended March 31, 2026 compared to $505 thousand for the same period in the prior year. The $221 thousand decrease in non-interest income was primarily attributable to a $149 thousand decrease in insurance commissions, in combination with a $37 thousand decrease in mark-to-market adjustments on investments related to the Company's NQDC plan and a $30 thousand decline in gains recorded on sales of the guaranteed portions of the SBA 7(a) loans.

Non-interest Expense

The following table summarizes non-interest expense for the three months ended March 31, 2026 and March 31, 2025.


		Three months ended
		March 31,
(Dollars in thousands)		2026			2025			$ Change	% Change
Salaries and employee benefits expense		$	5,621		$	5,099	$	522	10.2	%
Occupancy expense of premises			406			407		(1)	(0.2)	%
Furniture and equipment expenses			346			316		30	9.5	%
Advertising expense			124			162		(38)	(23.5)	%
Data processing			595			589		6	1.0	%
FDIC insurance			276			247		29	12	%
Professional fees			254			221		33	14.9	%
State franchise tax			666			597		69	11.6	%
Bank insurance			63			59		4	6.8	%
Vendor services			151			164		(13)	(7.9)	%
Supplies, printing, and postage			19			23		(4)	(17.4)	%
Director costs			179			169		10	5.9	%
Other operating expenses			223			195		28	14.4	%
Total non-interest expense		$	8,923		$	8,248	$	675	8.2	%

Non-interest expense increased $675 thousand or 8.2% during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily as a result of an increase in salaries and employee benefits expense, which was mainly related to increases in headcount within the Bank during the preceding twelve months and an annual salary merit increase in combination with lower direct loan origination costs when compared to the same period of the prior year. Salaries and employee benefit expense is reduced to account for the portion of salary costs incurred to originate a loan and is subsequently amortized into interest income to match the costs incurred with the economic benefit derived from originating a loan. State franchise taxes and FDIC insurance increased by $69 thousand and $29 thousand, respectively, due to higher assessment bases mainly a result of the growth of the Company's assets and shareholder's equity during the period.

Income Taxes

Income tax expense increased $372 thousand to $1.7 million for the three months ended March 31, 2026 compared to $1.4 million for the three months ended March 31, 2025. Our effective tax rate for the three months ended March 31, 2026 was 22.3% compared to 22.2% for the same period ended March 31, 2025.

Discussion and Analysis of Financial Condition

Assets, Liabilities, and Shareholders' Equity

The Company's total assets increased $19.8 million or 0.8% to $2.35 billion at March 31, 2026 compared to $2.33 billion at December 31, 2025. The increase in total assets was predominantly attributable to an increase in the Company's interest-bearing deposits in banks, which grew by $17.6 million or 14.2%. All other asset categories, including the Company's loan portfolio, stayed relatively unchanged since December 31, 2025.

The Company's total liabilities increased $17.3 million or 0.8% to $2.08 billion at March 31, 2026 compared to $2.07 billion at December 31, 2025. The increase in total liabilities was almost entirely due to a $15.4 million or 0.8% increase in total deposits, predominantly driven by a $25.5 million or 5.9% increase in non-interest bearing deposits.

Shareholders' equity increased $2.5 million or 0.9% to $268.1 million at March 31, 2026 compared to $265.6 million at December 31, 2025. The increase in shareholders' equity was primarily attributable to net income earned during the current year, partially offset by cash dividends paid and a reduction of additional paid-in capital due to the Company's share repurchases during the three months ended March 31, 2026. Book value per share was $19.00 as of March 31, 2026 compared to $18.69 as of December 31, 2025, an increase of 1.7%. During the three months ended March 31, 2026, the Company repurchased 103,507 shares of its common stock at a weighted average price of $19.69.

Investment Securities

The Company maintains a primarily fixed income investment securities portfolio that had a total carrying value of $213.8 million at March 31, 2026 and $212.3 million at December 31, 2025. The investment portfolio provides liquidity, interest income, credit risk diversification, means to manage interest rate sensitivity and collateral for secured public funds and secured credit lines. Investment securities are classified as available-for-sale or held-to-maturity based on management's investment strategy and management's assessment of the intent and ability to hold the securities until maturity. Investment securities that we may sell prior to maturity in response to changes in management's investment strategy, liquidity needs, interest rate risk profile or for other reasons are classified as available-for-sale. The Company also had restricted stock and equity securities within its investment securities portfolio with total carrying values of $7.7 million and $2.9 million, respectively, at March 31, 2026 compared to $7.6 million and $2.8 million, respectively, at December 31, 2025.

The Company purchased seven agency mortgage-backed fixed income securities, designated as available-for-sale, with the total carrying amount of $15.0 million and a weighted average purchase yield of 4.08% during the three months ended March 31, 2026. The Company did not sell any fixed income investment securities during the three months ended March 31, 2026. The Company had $13.1 million in maturities and principal repayments on securities during the three months ended March 31, 2026, which were comprised of $5.7 million of U.S. agency mortgage-backed securities, $4.3 million of U.S. Treasuries, $2.0 million of U.S. government and federal agencies securities and $1.1 million of U.S. agency collateralized mortgage obligation securities.

The following table summarizes the amortized cost and fair value of the Company's fixed income investment portfolio as of March 31, 2026 and December 31, 2025, respectively.


		March 31, 2026						December 31, 2025
		Amortized			Fair			Amortized			Fair
(Dollars in thousands)		Cost			Value			Cost			Value
Held-to-maturity
U.S. Treasuries		$	6,003		$	5,693		$	6,002		$	5,694
U.S. government and federal agencies			35,305			32,279			35,314			32,380
U.S. agency collateralized mortgage obligations			15,807			12,718			16,163			13,157
Taxable municipal			6,020			5,300			6,024			5,270
U.S. agency mortgage-backed			24,463			20,679			24,918			21,074
Total Held-to-maturity Securities		$	87,598		$	76,669		$	88,421		$	77,575
Available-for-sale
U.S. Treasuries		$	8,999		$	8,957		$	13,244		$	13,132
U.S. government and federal agencies			4,986			4,814			6,976			6,820
Corporate bonds			3,000			2,823			3,000			2,820
U.S. agency collateralized mortgage obligations			30,261			24,772			31,019			25,693
Tax-exempt municipal			1,378			1,203			1,378			1,236
U.S. agency mortgage-backed			87,122			83,597			77,306			74,151
Total Available-for-sale Securities		$	135,746		$	126,166		$	132,923		$	123,852

In the prevailing rate environments as of both March 31, 2026 and December 31, 2025, the Company's fixed income investment portfolio had an estimated weighted average remaining life of approximately 3.9 years. The available-for-sale investment portfolio had an estimated weighted average remaining life of approximately 3.2 years and 3.1 years at March 31, 2026 and December 31, 2025, respectively. The held-to-maturity investment portfolio had an estimated weighted average remaining life of approximately 4.9 years and 5.2 years as of March 31, 2026 and December 31, 2025, respectively.

The following table summarizes the maturity composition of our fixed income investment securities as of March 31, 2026, including the weighted average yield of each maturity band. Maturities are based on the final contractual payment date, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security.


		March 31, 2026
		Amortized			Fair			Weighted-Average
(Dollars in thousands)		Cost			Value			Yield
Held-to-maturity
Due in one year or less		$	-		$	-		-
Due after one year through five years			41,920			38,919		1.28	%
Due after five years through ten years			8,015			6,886		2.02	%
Due after ten years			37,663			30,864		1.44	%
Total Held-to-maturity Securities		$	87,598		$	76,669		1.42	%
Available-for-sale
Due in one year or less		$	10,999		$	10,954		1.30	%
Due after one year through five years			26,630			25,847		2.74	%
Due after five years through ten years			46,277			45,152		3.70	%
Due after ten years			51,840			44,213		1.93	%
Total Available-for-sale Securities		$	135,746		$	126,166		2.64	%

Loan Portfolio

Gross loans, net of unearned income, decreased $1.6 million to $1.97 billion as of March 31, 2026 compared to $1.98 billion as of December 31, 2025. The decrease in loans from December 31, 2025, was primarily attributable to a decline in residential real estate loans, partially offset by a growth in construction and development loans. The Company continues to maintain its disciplined underwriting standards while prudently pursuing loan growth opportunities that provide acceptable risk-adjusted returns.

The following table presents the Company's composition of loans held for investment, net of deferred fees and costs, in dollar amounts and as a percentage of total gross loans as of March 31, 2026 and December 31, 2025.


		March 31, 2026					December 31, 2025
(Dollars in thousands)		Amount			Percent		Amount			Percent
Real Estate Loans:
Commercial		$	1,176,929		59.78	%	$	1,173,617		59.57	%
Construction and land development			228,591		11.61	%		222,659		11.30	%
Residential			513,650		26.09	%		522,990		26.54	%
Commercial - Non Real Estate:
Commercial loans			48,905		2.48	%		49,967		2.54	%
Consumer - Non-Real Estate:
Consumer loans			760		0.04	%		1,043		0.05	%
Total Gross Loans		$	1,968,835		100.00	%	$	1,970,276		100.00	%
Allowance for loan credit losses			(19,983)					(19,805)
Net deferred loan costs			4,908					5,084
Total net loans		$	1,953,760				$	1,955,555

Asset Quality

The Company maintains policies and procedures to promote sound underwriting and to mitigate credit risk. The Chief Credit Officer is responsible for establishing credit risk policies and procedures, including underwriting and hold guidelines and credit approval authority, and monitoring credit exposure and performance of the Company's lending-related transactions.

The Company's asset quality remained strong during the quarter ended March 31, 2026. The Company recorded no charge-offs during the period and had no other real estate owned assets as of March 31, 2026. During the most recent quarter, management placed one SBA 7(a) loan in the total amount of $984 thousand on non-accrual status, representing the Company's only non-accrual loan as of March 31, 2026. As a result, the Company reversed uncollected accrued interest receivable in the total amount of $9 thousand. The entire outstanding loan amount is fully guaranteed by the SBA. This is the only non-accrual loan since the third quarter of 2019. The Company charged-off the unguaranteed portion of the loan in the total amount of $361 thousand during the fourth quarter of 2025. The Company has submitted the guaranty purchase to the SBA and expects to receive the full guarantee payment. The Company did not have any nonaccrual loans as of December 31, 2025. A loan is placed on nonaccrual status when (i) the Company is advised by the borrower that scheduled principal or interest payments cannot be met, (ii) when management's best judgment indicates that payment in full of principal and interest can no longer be expected, or (iii) when any such loan or obligation becomes delinquent for 90 days, unless it is both well-secured and in the process of collection.

The following table summarizes the Company's asset quality as of March 31, 2026 and December 31, 2025.


(Dollars in thousands)		March 31, 2026			December 31, 2025
Nonaccrual loans		$	984		$	-
Loans past due 90 days and accruing interest			-			1,084
Other real estate owned and repossessed assets			-			-
Total nonperforming assets		$	984		$	1,084

Allowance for loan credit losses to nonperforming assets			20.3	x		18.3	x
Nonaccrual loans to total loans			0.05	%		0.00	%
Nonperforming loans to total loans			0.05	%		0.05	%

Allowance for Loan Credit Losses

Refer to the discussion in Note 1 of the audited financial statements and notes for the year ended December 31, 2025 contained in the Company's 2025 Annual Report on Form 10-K for management's approach to estimating the allowance for loan credit losses.

The Company recorded $35 thousand of net recoveries during the three months ended March 31, 2026 and had no net charge-offs or recoveries during the three months ended March 31, 2025. At March 31, 2026, the allowance for loan credit losses was $20.0 million or 1.01% of outstanding loans, net of unearned income, compared to $19.8 million or 1.00% of outstanding loans, net of unearned income, at December 31, 2025. Management continues to assess credit risk exposure and monitor macroeconomic indicators that may impact borrower behavior and repayment capacity. Management believes the current allowance for credit losses is appropriate given the composition and performance of the loan portfolio.

The following table summarizes the Company's loan loss experience by loan portfolio for the three months ended March 31, 2026 and March 31, 2025.


	Three Months Ended
	March 31, 2026					March 31, 2025
	Net		Net			Net		Net
	(charge-offs)		(charge-off)			(charge-offs)		(charge-off)
(Dollars in thousands)	recoveries		recovery rate ⁽¹⁾			recoveries		recovery rate ⁽¹⁾
Real estate loans:
Commercial	$	-		-		$	-	-
Construction and land development		-		-			-	-
Residential		-		-			-	-
Commercial loans		35		0.30	%		-	-
Consumer loans		-		-			-	-
Total	$	35				$	-

Average loans outstanding during the period	$	1,974,165				$	1,868,303
Allowance coverage ratio ⁽²⁾				1.01	%			1.01	%
Total net (charge-off) recovery rate (annualized)				0.01	%			-	%
Allowance to nonaccrual loans ratio⁽³⁾				20.3	x			N/M

N/M - Not meaningful

(1)	The net (charge-off) recovery rate is calculated by dividing annualized total net (charge-offs) recoveries during the period by average gross loans outstanding during the period.

(2)	The allowance coverage ratio is calculated by dividing the allowance for loan credit losses at the end of the period by gross loans, net of unearned income at the end of the period.

(3)	The allowance to nonaccrual loans ratio is calculated by dividing the allowance for loan credit losses at the end of the period by nonaccrual loans at the end of the period.

The following tables summarize the allowance for loan credit losses by portfolio with a comparison of the percentage composition in relation to total allowance for loan credit losses and total loans as of March 31, 2026 and December 31, 2025.


		March 31, 2026
		Allowance		Percent of Allowance		Percent of Loans in
		for Loan Credit		in Each Category to		Each Category to Total
(Dollars in thousands)		Losses		Total Allocated Allowance		Loans
Real Estate Loans:
Commercial		$	11,033	55.21	%	59.78	%
Construction and land development			3,073	15.38	%	11.61	%
Residential			5,292	26.48	%	26.09	%
Commercial - Non-Real Estate:
Commercial loans			581	2.91	%	2.48	%
Consumer - Non-Real Estate:
Consumer loans			4	0.02	%	0.04	%
Total		$	19,983	100.00	%	100.00	%


		December 31, 2025
		Allowance			Percent of Allowance		Percent of Loans in
		for Loan Credit			in Each Category to		Each Category to Total
(Dollars in thousands)		Losses			Total Allocated Allowance		Loans
Real Estate Loans:
Commercial		$	11,177		56.43	%	59.57	%
Construction and land development			3,014		15.22	%	11.30	%
Residential			5,018		25.34	%	26.54	%
Commercial - Non-Real Estate:
Commercial loans			564		2.85	%	2.54	%
Consumer - Non-Real Estate:
Consumer loans			32		0.16	%	0.05	%
Total		$	19,805		100.00	%	100.00	%

Management believes that the allowance for loan credit losses is adequate to absorb lifetime expected credit losses inherent in the portfolio as of March 31, 2026. There can be no assurance, however, that adjustments to the provision for (recovery of) credit losses will not be required in the future. Changes in the economic assumptions underlying management's estimates and judgments; adverse developments in the economy, on a national basis or in the Company's market area; or changes in the circumstances of particular borrowers are criteria that could change and make adjustments to the provision for (recovery of) credit losses necessary.

Deposits

Total deposits increased $15.4 million or 0.8% to $1.99 billion as of March 31, 2026 compared to $1.97 billion as of December 31, 2025.

Non-interest bearing demand deposits increased $25.5 million or 5.9% to $458.2 million as of March 31, 2026 compared to $432.7 million at December 31, 2025. Non-interest bearing demand deposits represented 23.1% and 21.9% of total deposits at March 31, 2026 and December 31, 2025, respectively.

Interest-bearing deposits, which include NOW accounts, regular savings accounts, money market accounts, and time deposits, decreased $10.0 million or 0.7% to $1.53 billion as of March 31, 2026 compared to $1.54 billion as of December 31, 2025. Interest-bearing deposits represented 76.9% and 78.1% of total deposits at March 31, 2026 and December 31, 2025, respectively.

The Company focuses on funding asset growth with deposit accounts, with an emphasis on core deposit growth, as its primary source of deposits. Core deposits consist of checking accounts, NOW accounts, money market accounts, regular savings accounts, time deposits, reciprocal IntraFi Demand^® deposits, reciprocal IntraFi Money Market^® deposits and reciprocal IntraFi CD^® deposits. Core deposits totaled $1.69 billion or 84.8% of total deposits and $1.67 billion or 84.7% of total deposits at March 31, 2026 and December 31, 2025, respectively.

The following table sets forth the average balances of deposits and the average interest rates paid for the three months ended March 31, 2026 and 2025.


		March 31, 2026					March 31, 2025
		Average					Average
(Dollars in thousands)		Amount			Rate		Amount			Rate
Non-interest bearing		$	439,692				$	424,795
Interest bearing:
NOW accounts			371,418		2.10	%		357,206		2.41	%
Money market accounts			374,848		2.36	%		339,248		2.73	%
Savings accounts			34,972		0.80	%		43,062		0.98	%
Time deposits			756,391		4.02	%		720,658		4.38	%
Total interest-bearing			1,537,629		3.08	%		1,460,174		3.42	%
Total		$	1,977,321		2.39	%	$	1,884,969		2.65	%

The following table sets forth the maturity ranges of certificates of deposit with balances of $250,000 or more as of March 31, 2026.


		March 31, 2026
(Dollars in thousands)		Total			Uninsured
Three months or less		$	54,074		$	36,574
Over three through 6 months			82,432			66,182
Over 6 through 12 months			84,473			76,973
Over 12 months			119,872			92,872
Total		$	340,851		$	272,601

The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) was estimated at $887.3 million at March 31, 2026 and $853.4 million at December 31, 2025. Included in these amounts were $162.8 million and $161.8 million of public fund deposits that are collateralized as of March 31, 2026 and December 31, 2025, respectively. Deposits that were not insured or not collateralized represented 36.5% and 35.1% of total deposits at March 31, 2026 and December 31, 2025, respectively.

Capital Resources

The Company is a bank holding company with less than $3 billion in assets and does not (i) have significant off balance sheet exposure, (ii) engage in significant non-banking activities, or (iii) have a material amount of securities registered under the Exchange Act. As a result, the Company qualifies as a small bank holding company under the Federal Reserve's Small Bank Holding Company Policy Statement and is currently not subject to consolidated regulatory capital requirements.

The Bank is subject to capital adequacy standards adopted by the Federal Reserve, including the capital rules that implemented the Basel III regulatory capital reforms developed by the Basel Committee on Banking Supervision.

Note 11 to the Consolidated Financial Statements, included in Item 1 of this Form 10-Q, contains additional discussion and analysis regarding the Company and Bank's regulatory capital requirements.

Shareholders' equity increased $2.5 million or 0.9% to $268.1 million at March 31, 2026 compared to $265.6 million at December 31, 2025. During the three months ended March 31, 2026, the increase in shareholders' equity was primarily attributable to a $4.8 million increase in retained earnings, partially offset by a $1.9 million decrease in additional paid-in capital due to the Company's share repurchases coupled with a $0.4 million increase in accumulated other comprehensive loss on the Company's available-for-sale securities. Book value per share was $19.00 as of March 31, 2026 compared to $18.69 as of December 31, 2025.

In August of 2025, the Company's Board of Directors authorized the extension of the Company's stock repurchase program that was originally adopted in August of 2021. Under the stock repurchase program, the Company may repurchase up to 700,000 shares of its common stock, par value of $0.01 per share, or approximately 5% of its outstanding shares of common stock. The stock repurchase program will expire on August 31, 2026, or earlier if all the authorized shares have been repurchased. The Company repurchased 103,507 shares of its outstanding common stock under the program during the three months ended March 31, 2026.

Liquidity

Liquidity reflects a financial institution's ability to fund assets and meet current and future financial obligations. Liquidity is essential in all banks to meet customer withdrawals, compensate for balance sheet fluctuations, and provide funds for growth. Monitoring and managing both liquidity measurements is critical in developing prudent and effective balance sheet management. Management conducts liquidity stress testing on a quarterly basis to prepare for unexpected adverse scenarios and contemporaneously develops mitigating strategies to reduce losses in the event of an economic downturn.

The Company's principal source of liquidity and funding is its deposit base. The level of deposits necessary to support the Company's lending and investment activities is determined through monitoring loan demand.

In addition to the liquidity provided by balance sheet cash flows, the Company supplements its liquidity with additional sources such as secured borrowing credit lines with the FHLB and the Federal Reserve Bank. Specifically, the Company has pledged a portion of its commercial real estate and residential real estate loan portfolios to the FHLB and commercial loans to the Federal Reserve Bank. Based on collateral pledged as of March 31, 2026, the remaining FHLB available borrowing capacity was $470.6 million. Additional borrowing capacity with the Federal Reserve Bank was approximately $157.5 million as of March 31, 2026.

During the first quarter of 2026, a $15.0 million FHLB advance, carrying an interest rate of 4.14%, matured and was replaced with the FHLB advance of the same principal amount at an interest rate of 3.61%. At March 31, 2026, the Company had three outstanding FHLB advances totaling $56.0 million with interest rates ranging from 3.61% to 3.98%.

Total liquidity, defined as cash and cash equivalents, unencumbered securities at fair value, and available secured borrowing capacity, was $881.0 million at March 31, 2026 compared to $827.0 million at December 31, 2025.

In addition to available secured borrowing capacity, the Company had available federal funds lines with correspondent banks of $110.0 million at March 31, 2026.

Off-Balance Sheet Arrangements

The Company enters into certain off-balance sheet arrangements in the normal course of business to meet the financing needs of its customers. These off-balance sheet arrangements include commitments to extend credit, standby letters of credit and financial guarantees which would impact the Company's liquidity and capital resources to the extent customers accept and or use these commitments. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. With the exception of these off-balance sheet arrangements, the Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources, that is material to investors. For further information, see Note 7 to the Consolidated Financial Statements, included in Item 1 of this Form 10-Q, for further discussion of the nature, business purpose and elements of risk involved with these off-balance sheet arrangements.

John Marshall Bancorp Inc. published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 12:32 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]

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