Merchants & Marine Bancorp, Inc. Announces Fourth Quarter Financial Results

Merchants & Marine Bancorp, Inc. (OTCQX: MNMB), the parent company of Merchants & Marine Bank, reported net income for the final quarter of 2022 of $1.170 million, or $0.88 per share, compared with earnings of $103 thousand, or $0.08 per share, for the same period in the prior year. Fourth quarter gross income increased 34.76% to $8.637 million from $6.409 million for the same period in 2021. Total deposits decreased by 5.46% from the same period in the prior year, from $586 million to $553 million at the end of the fourth quarter 2022. However, when adjusting for planned runoff in high-cost public funds that exited the bank during the second and third quarters of 2022, total deposits declined by just 0.53%, or $3.01 million, from the previous year. Total interest expense for the quarter decreased by 33.89% compared to the same period in 2021.

Selected financial highlights:

• Gross revenues increased by 4.85% from the previous quarter, to $8.64 million. Improved interest income on loans and securities was the primary driver, with these two categories increasing by 10.29% and 15.54%, respectively, over the prior quarter. Year to date gross revenues increased by $2.33 million, or 7.93%, from the same period last year.
• Net loans grew by $51.63 million, or 14.87%, from the end of 2021, and by $33.15 million, or 9.07% in the fourth quarter alone. These values contain no PPP loans, as all PPP loans were either forgiven or sold during the second quarter of 2021.
• Credit quality metrics remained strong during the fourth quarter of 2022. The ratio of loans past due 30-89 days decreased to 0.74% of total loans at the end of the fourth quarter of 2022 from 1.08% at the end of the linked quarter. The ratio of non-accrual loans decreased slightly to 1.29% of total loans at the end of the fourth quarter of 2022, from 1.43% at the end of the linked quarter.
• Interest expense declined precipitously year over year. Interest expense totaled $273 thousand during the fourth quarter of 2022, a decline of 33.89% from $412 thousand in the same quarter in 2021. This was driven by the planned exit of high-cost public funds, a decrease in non-relationship CD balances, and adherence to the bank’s dynamic deposit pricing strategy. The bank did, however, see 21.84% lift in cost of funds over the linked quarter.
• Accumulated Other Comprehensive Income (AOCI) mark-to-market losses in the securities portfolio lessened to ($10.09 million) at the end the fourth quarter from ($12.99 million) at the end of the linked quarter. Tangible equity at the bank subsidiary stands at a robust 13.09% of total assets even when including AOCI unrealized losses.
• Total capital at the holding company as of December 31, 2022, inclusive of preferred stock issued through the US Treasury Department’s Community Development Financial Institution (CDFI) Emergency Capital Investment Program (ECIP), stands at $120.89 million, or 17.61% of total assets.

“This year has proved a turning point, financially speaking, in the history of the company,” said Casey Hill, the company’s Chief Financial Officer. “In early 2021 we asked our board to approve what amounted to a financial turnaround plan that called for heavy investments that year and through the first half of 2022. We’re now reaping the fruits of these investments, with the last few months of 2022 bringing record core earnings,” he continued. “We’re now nearing our targeted loan-to-deposit ratio, and we’ve been able to manage our securities book in such a way that, thus far, we’ve not had to raise high-cost deposits to fund loan growth as many other banks across the country have. As we enter a new year, we’re keeping an eye on the dot plot and the general economy, with the intent of flattening the positivity in our gap position such to maintain earnings as interest rates likely begin to fall – albeit gradually – by the end of the year or soon thereafter.”

The company experienced slight balance sheet growth of $7.03 million, or 1.03% over the past twelve months. The composition of the balance sheet, however, was changed significantly in that time through active management. The loan portfolio grew $51.59 million during the same period, or 14.71% on a gross basis. Deposits decreased somewhat when compared with the prior year, declining 5.46%, or $31.97 million from the same period last year. However, when excluding the planned roll off of higher cost public funds, the total deposit portfolio declined by just 0.53%, or $3.01 million. Furthermore, the year-end 2022 deposit portfolio mix is much more advantageous than in the same time period last year:

• Demand deposits, exempting public funds, grew by $11.51 million, or 3.15%
• Savings account balances grew by $5.64 million, or 6.04%,
• Higher-cost public funds balances declined by $28.87 million, or 61.59%, and
• Certificates of Deposit balances declined by $20.25 million, or 25.44%.

The company continues to maintain a robust liquidity position compared to peer banks. In addition to cash on the balance sheet, the company has more than $43 million in securities that will mature during the first quarter of 2023, and another $19 million maturing in the second quarter. “As we see significant market strains on liquidity and capital in the banking system due to the confluence of deposit runoff and AOCI losses in securities portfolios, we are very thankful for the position of strength that we’ve built,” remarked Hill. “Our company is liquid, and we have structured our securities in a way to continue to bolster that liquidity through planned maturities in the near term. In addition, our capital position is exceedingly strong and allows for continued avenues of liquidity that some have found themselves to be without in recent months. It is a very desirable place to be given the economic uncertainty that we are likely to face in the new year.”

“Make no mistake; our Company’s rapid acceleration in earnings, sustained high quality loan growth, diversification in revenue streams, ample liquidity and robust capital position are no accident. Each is the result of a willingness to challenge industry norms, thoughtful planning, and skillful execution by our talented bankers,” remarked Clayton Legear, the company’s Chief Executive Officer. “As planned, our core earnings have not only returned to pre-investment levels, they have surpassed them. At the same time, we have materially diversified our Company’s revenue streams and expanded its reach through the launch of three new divisions while also building a Battle-Ready Balance Sheet. While we don’t know what the future holds in terms of market instability, we do know that our team is exceptionally well positioned to capitalize on opportunities that emerge.

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 $700 million in assets, and from 2 offices to 16 offices serving the Mississippi & Alabama Gulf Coast region, as well as the Mississippi Pine Belt. The bank 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. For more information on Merchants & Marine Bancorp, Inc., visit https://mandmbank.com/investor-relations.

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