John Marshall's Net Interest Margin Expansion Ends

The Tip Desk · October 28, 2026 · 3 min read

Net interest margin fell 8 bps to 2.91% after nine straight quarters of expansion, while net income reached $7.5 million, the ninth consecutive quarterly increase.

John Marshall Bancorp (JMSB), parent of John Marshall Bank, reported net income of $7.5 million for the quarter ended September 30, 2026, up 39.5% from $5.4 million a year earlier, and diluted earnings of $0.53 a share. That marked the ninth consecutive quarter of net income growth and the highest profit since the fourth quarter of 2022. Core net income, excluding $332 thousand of merger and acquisition expenses tied to a pending deal with Eagle Financial Services, was $7.8 million, up 22.7% from $6.4 million in the linked quarter.

The quarter’s inflection was in the margin. Net interest margin declined 8 basis points to 2.91% from 2.99% in the second quarter, reversing nine consecutive quarters of expansion. The company said the drop was mainly due to a 7 basis point increase in the cost of interest-bearing deposits. Net interest income of $17.8 million rose $0.5 million, or 10.4% annualized, from the prior quarter, a slower sequential pace than the $0.8 million, or 20.0% annualized, increase to $17.3 million in the second quarter. Year-over-year net interest income growth slowed to 14.0% from 16.1% in the second quarter.

Loan growth stalled at the period-end. Loans, net of unearned income, were unchanged at $2.01 billion versus June 30, 2026, after a $41.2 million, or 8.4% annualized, increase in the second quarter. The company said it had booked a significant amount of loans near the end of the second quarter. Average loan balances still rose $33.1 million, or 6.6% annualized. Versus a year earlier, loans increased $73.0 million, or 3.8%, with the company attributing the twelve-month rise primarily to residential mortgage, investor real estate and construction & development loans.

Funding moved in the opposite direction. Total deposits increased $71.3 million, or 14.2% annualized, to $2.06 billion. Core deposits rose $83.3 million, or 19.8% annualized, while wholesale funding sources decreased $52.0 million, or 12.5%. Non-interest-bearing deposits increased $20.1 million, or 17.7% annualized. The company fully paid off $40.0 million of federal funds purchased that had been outstanding at June 30, 2026. FHLB advances remained unchanged at $56.0 million.

Credit quality stayed tight. The company recorded no charge-offs in the third quarter and had no other real estate owned assets. Management placed one $267 thousand SBA 7(a) loan on non-accrual, fully guaranteed by the SBA; the company said it expects the full guarantee payment. The allowance for loan credit losses fell to $19.8 million, or 0.98% of loans, from $20.2 million, or 1.00%, at June 30, 2026. Provision for credit losses swung to a $318 thousand recovery from a $356 thousand expense a year earlier, which the company tied to loan-mix change and improved unemployment and GDP forecasts.

Total revenue grew 11.1% year over year while non-interest expense fell 3.9%, improving the efficiency ratio to 48.1% from 55.6%. Core efficiency was 46.2% excluding merger costs. Non-interest income decreased $385 thousand, or 59.0%, from a year earlier, driven by lower mark-to-market on deferred-compensation investments, swap fees, SBA loan-sale gains and bankers’ insurance commissions after the Bearing Insurance unit sale. Annualized return on average assets was 1.23% and return on average equity 10.78%.

On September 8, 2026, the company signed a definitive all-stock merger with Eagle Financial Services, parent of Bank of Clarke. The combined entity is projected to have approximately $4.3 billion in assets and 23 banking offices, with closing expected in the first quarter of 2027, subject to regulatory and shareholder approvals. The board declared a $0.10 quarterly cash dividend, bringing 2026 dividends to $0.38 a share.