UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41315

John Marshall Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Virginia

81-5424879

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

1943 Isaac Newton Square

Suite 100

Reston, VA 20190

(Address of Principal Executive Offices)

(703) 584-0840

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading symbol	Name of Exchange on which registered
Common Stock, $0.01 par value per share	JMSB	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 5, 2022, there were 14,031,089 shares of the registrant’s common stock outstanding.

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

JOHN MARSHALL BANCORP, INC.

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)


	June 30, 2022		December 31, 2021
Assets
Cash and due from banks	$	12,915	$	2,920
Interest-bearing deposits in banks		107,972		102,879
Total cash and cash equivalents		120,887		105,799
Securities available-for-sale, at fair value		365,134		239,300
Securities held-to-maturity, fair value of $88,862 and $103,258 as of June 30, 2022 and December 31, 2021, respectively		102,265		105,509
Restricted securities, at cost		4,417		4,951
Equity securities, at fair value		2,098		1,869
Loans, net of unearned income		1,692,652		1,666,469
Allowance for loan losses		(20,031)		(20,032)
Net loans		1,672,621		1,646,437
Bank premises and equipment, net		1,443		1,620
Accrued interest receivable		4,451		4,943
Bank owned life insurance		21,188		20,998
Right of use assets		4,281		4,913
Other assets		17,589		12,970
Total assets	$	2,316,374	$	2,149,309
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Non-interest bearing demand deposits	$	512,284	$	488,838
Interest-bearing demand deposits		738,666		633,901
Savings deposits		112,276		101,376
Time deposits		680,515		657,438
Total deposits		2,043,741		1,881,553
Federal Home Loan Bank advances		—		18,000
Subordinated debt		49,560		24,728
Accrued interest payable		896		843
Lease liabilities		4,538		5,182
Other liabilities		10,109		10,533
Total liabilities	$	2,108,844	$	1,940,839
Commitments and contingencies
Shareholders’ Equity
Preferred stock, par value $0.01 per share; authorized 1,000,000 shares; none issued	$	—	$	—
Common stock, nonvoting, par value $0.01 per share; authorized 1,000,000 shares; none issued		—		—
Common stock, voting, par value $0.01 per share; authorized 30,000,000 shares; issued and outstanding, 14,026,589 at June 30, 2022, including 58,536 unvested shares, 13,745,598 shares at December 31, 2021, including 75,826 unvested shares		140		137
Additional paid-in capital		93,935		91,107
Retained earnings		130,383		117,626
Accumulated other comprehensive loss		(16,928)		(400)
Total shareholders’ equity	$	207,530	$	208,470
Total liabilities and shareholders’ equity	$	2,316,374	$	2,149,309

The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Interest and Dividend Income
Interest and fees on loans	$	17,334	$	17,499	$	35,518	$	35,338
Interest on investment securities, taxable		1,893		993		3,273		1,762
Interest on investment securities, tax-exempt		30		30		60		60
Dividends		64		66		124		131
Interest on deposits in banks		234		39		325		83
Total interest and dividend income	$	19,555	$	18,627	$	39,300	$	37,374
Interest Expense
Deposits	$	1,698	$	1,735	$	3,021	$	3,795
Federal Home Loan Bank advances		12		30		42		63
Subordinated debt		537		371		1,013		743
Total interest expense	$	2,247	$	2,136	$	4,076	$	4,601
Net interest income	$	17,308	$	16,491	$	35,224	$	32,773
Provision for loan losses		—		90		—		2,455
Net interest income after provision for loan losses	$	17,308	$	16,401	$	35,224	$	30,318
Non-interest Income
Service charges on deposit accounts	$	84	$	60	$	161	$	118
Bank owned life insurance		95		100		190		207
Other service charges and fees		157		116		294		220
Gains on securities		—		—		—		10
Insurance commissions		44		22		265		177
Other operating income (loss)		(271)		119		(387)		149
Total non-interest income	$	109	$	417	$	523	$	881
Non-interest Expenses
Salaries and employee benefits	$	4,655	$	5,680	$	10,682	$	10,669
Occupancy expense of premises		482		514		975		1,021
Furniture and equipment expenses		341		378		666		700
Other operating expenses		2,203		2,495		4,144		4,570
Total non-interest expenses	$	7,681	$	9,067	$	16,467	$	16,960
Income before income taxes	$	9,736	$	7,751	$	19,280	$	14,239
Income tax expense		1,854		1,672		3,724		3,086
Net income	$	7,882	$	6,079	$	15,556	$	11,153
Earnings per share, basic	$	0.56	$	0.45	$	1.11	$	0.82
Earnings per share, diluted	$	0.56	$	0.44	$	1.10	$	0.80

The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Net Income	$	7,882	$	6,079	$	15,556	$	11,153
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities, net of tax of $(1,582) and $29 for the three months ended June 30, 2022 and June 30, 2021, respectively net of tax of $(4,370) and $(647) for the six months ended June 30, 2022 and June 30, 2021, respectively		(5,961)		110		(16,449)		(2,434)
Reclassification adjustment for gains on available-for-sale securities included in net income, net of tax of $(2) for the six months ended June 30, 2021		—		—		—		(8)
Amortization of unrealized gains on securities transferred to held-to-maturity, net of tax of $(10) and $(21) for the three and six months ended June 30, 2022, respectively		(38)		—		(79)		—
Total other comprehensive income (loss)	$	(5,999)	$	110	$	(16,528)	$	(2,442)
Total comprehensive income (loss)	$	1,883	$	6,189	$	(972)	$	8,711

The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Shareholders’ Equity

For the Three Months Ended June 30, 2022 and 2021

(In thousands, except share and per share data)

(Unaudited)


								Accumulated
								Other		Total
				Additional Paid- In		Retained		Comprehensive		Shareholders’
	Shares	Common Stock		Capital		Earnings		Income (Loss)		Equity
Balance, March 31, 2021	13,566,379	$	136	$	90,295	$	97,239	$	1,234	$	188,904
Net income	—		—		—		6,079		—		6,079
Other comprehensive income	—		—		—		—		110		110
Exercise of stock options	3,437		—		25		—		—		25
Restricted stock vesting, net of 18 shares surrendered	8,362		—		—		—		—		—
Share-based compensation	—		—		128		—		—		128
Balance, June 30, 2021	13,578,178	$	136	$	90,448	$	103,318	$	1,344	$	195,246

Balance, March 31, 2022	13,890,204	$	139	$	93,135	$	122,510	$	(10,929)	$	204,855
Net income	—		—		—		7,882		—		7,882
Other comprehensive loss	—		—		—		—		(5,999)		(5,999)
Cash dividends attributable to changes in common shares through the record date	—		—		—		(9)		—		(9)
Exercise of stock options	75,562		1		670		—		—		671
Restricted stock vesting, net of 43 shares surrendered	2,287		—		—		—		—		—
Share-based compensation	—		—		130		—		—		130
Balance, June 30, 2022	13,968,053	$	140	$	93,935	$	130,383	$	(16,928)	$	207,530

The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Shareholders’ Equity

For the Six Months Ended June 30, 2022 and 2021

(In thousands, except share and per share data)

(Unaudited)


								Accumulated
								Other		Total
				Additional Paid- In		Retained		Comprehensive		Shareholders’
	Shares	Common Stock		Capital		Earnings		Income (Loss)		Equity
Balance, December 31, 2020	13,532,558	$	135	$	89,995	$	92,165	$	3,786	$	186,081
Net income	—		—		—		11,153		—		11,153
Other comprehensive loss	—		—		—		—		(2,442)		(2,442)
Exercise of stock options	24,687		1		176		—		—		177
Restricted stock vesting, net of 18 shares surrendered	20,933		—		—		—		—		—
Share-based compensation	—		—		277		—		—		277
Balance, June 30, 2021	13,578,178	$	136	$	90,448	$	103,318	$	1,344	$	195,246

Balance, December 31, 2021	13,669,772	$	137	$	91,107	$	117,626	$	(400)	$	208,470
Net income	—		—		—		15,556		—		15,556
Other comprehensive loss	—		—		—		—		(16,528)		(16,528)
Dividend declared on common stock ($0.20 per share)	—		—		—		(2,799)		—		(2,799)
Exercise of stock options	282,034		3		2,559		—		—		2,562
Restricted stock vesting, net of 43 shares surrendered	16,247		—		—		—		—		—
Share-based compensation	—		—		269		—		—		269
Balance, June 30, 2022	13,968,053	$	140	$	93,935	$	130,383	$	(16,928)	$	207,530

The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six months ended
	June 30,
	2022		2021
Cash Flows from Operating Activities
Net income	$	15,556	$	11,153
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation		298		423
Right of use asset amortization		688		721
Provision for loan losses		—		2,455
Share-based compensation expense		269		277
Net amortization of securities		146		200
Fair value adjustment on equity securities		391		(99)
Amortization of debt issuance costs		236		25
Gains on sales and calls of available-for-sale securities		—		(10)
Deferred tax expense (benefit)		375		(1,375)
Increase in cash surrender value of life insurance		(190)		(207)
Changes in assets and liabilities:
Decrease in accrued interest receivable		492		795
Increase in other assets		(603)		(195)
Increase in accrued interest payable		53		7
Decrease in other liabilities		(1,124)		(95)
Net cash provided by operating activities	$	16,587	$	14,075
Cash Flows from Investing Activities
Net increase in loans	$	(26,184)	$	(4,679)
Purchase of available-for-sale securities		(173,362)		(167,907)
Purchase of held-to-maturity securities		(1,003)		—
Proceeds from maturities, calls and principal repayments of available-for-sale securities		26,601		17,041
Proceeds from maturities, calls and principal repayments of held-to-maturity securities		4,109		—
Net redemption of restricted securities		534		737
Purchase of equity securities		(620)		(540)
Purchases of bank premises and equipment		(121)		(269)
Net cash (used in) investing activities	$	(170,046)	$	(155,617)
Cash Flows from Financing Activities
Net increase in deposits	$	162,188	$	174,912
Net repayment of Federal Home Loan Bank advances		(18,000)		(4,000)
Issuance of subordinated debt		24,596		—
Cash dividends paid		(2,799)		—
Issuance of common stock for share options exercised		2,562		177
Net cash provided by investing activities	$	168,547	$	171,089
Net increase in cash and cash equivalents	$	15,088	$	29,547
Cash and cash equivalents, beginning of period		105,799		138,457
Cash and cash equivalents, end of period	$	120,887	$	168,004
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest	$	3,787	$	4,569
Income taxes		2,360		3,867
Supplemental Disclosures of Noncash Transactions
Unrealized loss on securities available-for-sale	$	(20,819)	$	(3,091)
Right of use asset obtained in exchange for new operating lease liability		56		385

The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Notes to Consolidated Financial Statements

(Dollars in thousands, unless otherwise stated)

(Unaudited)

Note 1— Nature of Business and Summary of Significant Accounting Policies

Nature of Banking Activities

John Marshall Bancorp, Inc. (the “Company”), headquartered in Reston, Virginia, became the registered bank holding company under the Bank Holding Company Act of 1956 for its wholly-owned subsidiary, John Marshall Bank (the “Bank”), on March 1, 2017. This reorganization was completed through a one-for-one share exchange in which the Bank’s shareholders received one share of voting common stock of the Company in exchange for each share of the Bank’s voting common stock. The Company was formed on April 21, 2016 under the laws of the Commonwealth Virginia. The Bank was formed on April 5, 2005 under the laws of the Commonwealth of Virginia and was chartered as a bank on February 9, 2006, by the Virginia Bureau of Financial Institutions. The Bank is a member of the Federal Reserve System and is subject to the rules and regulations of the Virginia Bureau of Financial Institutions, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Federal Deposit Insurance Corporation (“FDIC”). The Bank opened for business on April 17, 2006 and provides banking services to its customers primarily in the Washington, D.C. metropolitan area.

Basis of Presentation

The accounting and reporting policies of John Marshall Bancorp, Inc. conform to generally accepted accounting principles in the United States of America (“GAAP”) and reflect practices of the banking industry. The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and with applicable quarterly reporting regulations of the U.S. Securities and Exchange Commission (“SEC”). They do not include all of the information and notes required by GAAP for complete financial statements. As such, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ending December 31, 2021, included in the Company’s Registration Statement on Form 10 as amended, filed with the SEC on April 18, 2022.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions between the Company and the Bank have been eliminated. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any other interim period or for the full year. All amounts and disclosures included in this quarterly report as of December 31, 2021, were derived from the Company’s audited consolidated financial statements. Certain items in the prior period financial statements have been reclassified to conform to the current presentation. These reclassifications had no effect on prior year net income or shareholders’ equity.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit

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Note 2— Investment Securities

The following table summarizes the amortized cost and fair value of securities held-to-maturity and available-for-sale and the corresponding amounts of gross unrealized gains and losses at June 30, 2022 and December 31, 2021.


	June 30, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		(Losses)		Value
Held-to-maturity
U.S Treasuries	$	6,001	$	—	$	(651)	$	5,350
U.S. government and federal agencies		35,630		—		(4,245)		31,385
Collateralized mortgage obligations		22,930		—		(3,020)		19,910
Taxable municipal		6,081		—		(1,010)		5,071
Mortgage-backed		31,623		—		(4,477)		27,146
Total Held-to-maturity Securities	$	102,265	$	—	$	(13,403)	$	88,862
Available-for-sale
U.S Treasuries	$	63,331	$	22	$	(2,890)	$	60,463
U.S. government and federal agencies		37,685		2		(2,611)		35,076
Corporate bonds		3,000		—		(132)		2,868
Collateralized mortgage obligations		45,425		21		(4,143)		41,303
Tax-exempt municipal		5,000		—		(405)		4,595
Taxable municipal		1,650		6		(21)		1,635
Mortgage-backed		230,862		99		(11,767)		219,194
Total Available-for-sale Securities	$	386,953	$	150	$	(21,969)	$	365,134


	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		(Losses)		Value
Held-to-maturity
U.S Treasuries	$	6,000	$	—	$	(150)	$	5,850
U.S. government and federal agencies		35,720		—		(726)		34,994
Collateralized mortgage obligations		25,606		—		(534)		25,072
Taxable municipal		6,089		—		(194)		5,895
Mortgage-backed		32,094		—		(647)		31,447
Total Held-to-maturity Securities	$	105,509	$	—	$	(2,251)	$	103,258
Available-for-sale
U.S Treasuries	$	30,954	$	—	$	(411)	$	30,543
U.S. government and federal agencies		34,803		258		(524)		34,537
Corporate bonds		1,000		31		—		1,031
Collateralized mortgage obligations		39,596		179		(726)		39,049
Tax-exempt municipal		5,007		255		—		5,262
Taxable municipal		1,653		37		(5)		1,685
Mortgage-backed		127,287		1,232

		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (Unaudited)	3

	Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021 (Unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021 (Unaudited)	5

	Consolidated Statements of Shareholders’ Equity for the three months ended June 30, 2022 and 2021 (Unaudited)	6

	Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2022 and 2021 (Unaudited)	7

	Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (Unaudited)	8

	Notes to Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56

Item 4.	Controls and Procedures	57

Part II	Other Information

Item 1.	Legal Proceedings	58

Item 1A.	Risk Factors	58

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 3.	Defaults Upon Senior Securities	58

Item 4.	Mine Safety Disclosures	58

Item 5.	Other Information	58

Item 6.	Exhibits	58

Signatures