Merchants & Marine Bancorp, Inc. (OTCQX: MNMB), the parent company of Merchants & Marine Bank, reported net income through the third quarter of $3.40 million, or $2.55 per share, compared with earnings of $5.17 million, or $3.88 per share, in the same period of the prior year. Gross income through the first nine months of 2024 totaled $37.56 million, an increase of 24.17% from the prior year. Balance sheet footings increased by 12.24% to $725.73 million during the 12 months ended September 30, 2024. Net loans grew to $449.34 million in at September 30, 2024 from $411.36 million at the end of the same period in the prior year, an increase of 9.23%. Total deposits increased 13.25% from the same period in the prior year, from $514.19 million to $582.31 million. Balance sheet growth, and the significant increase in one-time non-interest expenses during the first nine months of 2024, was driven primarily by the acquisition of Mississippi River Bank, which was completed on April 10, 2024.

Selected financial highlights:

• Net loans grew by $37.98 million, or 9.23%, from September 30, 2023.
• Total interest income for the first nine months of the year increased to $29.66 million from $22.99 million during the same period in 2023, a lift of 28.97%. The increase is primarily due to increased interest income on loans, which increased to $23.33 million the first nine months of 2024 from $18.79 million during the same period in 2023. This increase is due both to improved loan yields in the company’s legacy loan portfolio and, to a lesser extent, loan growth from the Mississippi River Bank acquisition.
• The company’s cost of funding its assets also increased through September 30th, though much more slowly than seen in the broader market. Interest expense as a function of total assets grew to 64 basis points (annualized) from 22 basis points (annualized) in the first nine months of 2023. The increase in funding costs is primarily due to the company’s utilization of the Federal Reserve Bank Term Funding Program (BTFP). All liabilities under the BTFP were repaid from excess on balance sheet liquidity in September 2024 in concert with the Federal Reserve lowering its target rate by 50 BPs. This will lower interest expense going forward by roughly half.
• Credit quality remained strong at the end of the third quarter. While the ratio of loans past due 30-89 days increased to 1.13% of total loans, this is almost exclusively due to a single problem loan that is currently being resolved.
• Accumulated Other Comprehensive Income (AOCI) mark-to-market losses in the securities portfolio decreased to ($6.62 million) at the end of the quarter from ($13.20 million) at the end of the same period in 2023. These losses represent just 4.24% and 9.33%, respectively, of the total securities portfolio for these reporting periods.
• On balance sheet liquidity levels remain very healthy, with cash and cash equivalents totaling $43.97 million at the end of the third quarter 2024. In addition to these large cash balances, the Company’s $156 million investment portfolio remains highly liquid, with a significant portion able to be liquidated with minimal losses.
• In addition to the sizeable on-balance sheet liquidity position, the Company has more than $250 million in additional borrowing capacity at the Federal Home Loan Bank of Dallas and the Federal Reserve.

“The company’s core financial performance continues to strengthen,” said Casey Hill, the company’s Chief Financial Officer. He continued, “From an interest income perspective, we are running nearly 30% ahead of the same measurement period last year. Total revenues are on track to approach, if not exceed, $50 million by the end of the fiscal year. We expect to see further revenue lift as we still have a significant amount of loans originated in the zero-target rate environment of 2020-2022 that will continue to reprice materially upward in the coming 12-24 months. This is significant given that the bank is now running above a 1% return on assets each month and did so for all three months of Q3. Our investments are truly starting to yield significant returns, and this should only be accentuated as we continue to find new partners to add to our family of brands.”

The bank repaid the $50 million borrowing it garnered from the Federal Reserve’s Bank Term Funding Program (BTFP) in the third quarter from excess on balance sheet liquidity. “While we were making a small spread on the BTFP funds, that spread evaporated once the Fed lowered its target rate; and, given the strong on-balance sheet liquidity metrics we possessed without BTFP funds, it just didn’t make sense to continue to house it on our balance sheet,” said Hill. This repayment should precipitate a significant decrease in interest expense going forward.

“The continued improvement in our bank’s earnings, which are now consistently above a 1% return on average assets on an annualized monthly basis, is a direct result of our team’s diligent execution of a long-term vision and strategic plan that was adopted in 2021,” remarked Clayton Legear, the company’s Chief Executive Officer. “Our third quarter performance is reflective of the strength of our company, which now includes significantly diversified income streams, a high quality loan portfolio, and robust on-balance sheet liquidity built on a stable and low cost deposit base. Each of these factors is impressive in its own right in the current economic environment, and they’re even more impressive when considered as a whole. While we are pleased with our team’s continued progress, we believe that exciting additional opportunities lie ahead as we continue leveraging our unique operating model and ‘Battle Ready Balance Sheet’ to further grow and scale both our family of brands, our revenue, and our overall profitability.”

Merchants & Marine Bancorp, Inc. (OTCQX: MNMB) is the parent company of Merchants & Marine Bank, a Mississippi chartered community bank serving the Gulf South region. Originally founded in 1899, Merchants & Marine Bank was reborn in 1932 during the middle of the worst economic disaster in the history of the United States: The Great Depression. More than eight decades later, Merchants & Marine Bank has grown from $25,000 to nearly $800 million in assets. The bank offers banking services to customers in Southern Mississippi and Coastal Alabama under its legacy Merchants & Marine Bank brand, and in Southern Louisiana through its Mississippi River Bank division. It offers mortgage financing through its Canvas Mortgage division, medical cannabis banking through its CannaFirst Financial division, and access to government-guaranteed credit through Voyager Lending. It provides bank operational, risk, and support services through its Community of Resources bank services division. For more information on Merchants & Marine Bancorp, Inc., visit https://mandmbank.com/investor-relations.

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