November 15, 2024
Dear Marine Bank Shareholders:
As we previously announced, Marine Bancorp of Florida has entered into a definitive agreement to merge with ELGA Credit Union of Grand Blanc, Michigan. The agreement was signed and announced in June 2024. Both parties have filed regulatory applications, with an expected closing date in the first half of 2025. The indicated price per share to the Marine Bancorp shareholders is $43.75, to be paid in cash to shareholders of record as of the closing date.
I am pleased to announce that on October 30, 2024, the Marine Shareholders voted to approve the merger, with more than 84% voting FOR the transaction.
Our advice to all our shareholders is to locate your evidence of ownership (stock certificate or brokerage statement if held in the street name) in preparation to turn it over to our transfer agent at closing. More on that later in this letter.
This is a rewarding outcome not only for our shareholders but also for our employees, clients and the communities we serve. ELGA Credit Union will retain all our employees who will have the opportunity to offer ELGA Credit Union’s extensive suite of consumer banking services, which will enhance our current offerings. Our commitment to our communities will not waiver.
As we prepare for the upcoming merger, it is important to mention that our focus on providing our clients with an exceptional banking experience will continue throughout the merger and after its completion. Our efforts have been acknowledged by Bauer Financial, a leading bank-rating organization, which has given Marine Bank a 5-Star "Superior" rating. Below are the financial results for Marine Bank's parent company, Marine Bancorp of Florida, Inc.
First Nine Months of 2024 Financial Summary:
|
million $ |
Nine Months Ended 9/30/2024 |
Nine months Ended 9/30/2023 |
% change |
|
Net Income |
2,037 |
3,625 |
(44) |
|
Total Assets |
652 |
639 |
2 |
|
million $ |
|
|
|
|
Total Loans |
442 |
435 |
2 |
|
Total Deposits |
566 |
578 |
(2) |
|
Total Checking + NOW |
239 |
285 |
(16) |
|
|
|
|
|
|
Marine Bancorp Tangible Book Value Per Common Share |
$22.62 |
$16.12 |
40 |
|
Actual YTD Earnings Per Share |
$1.11 |
$1.98 |
(44) |
|
Return on Shareholders’ Equity |
7.80% |
17.71% |
(55) |
|
million $ |
|
|
|
|
Non-Performing Assets |
0.120 |
1.490 |
(92) |
Quarter Over Quarter 2024 Financial Summary:
|
million $ |
Quarter Ended 9/30/2024 |
Quarter Ended 6/31/24 |
|
Quarterly Net Income |
0.565 |
0.597 |
|
Total Assets |
652 |
640 |
|
million $ |
|
|
|
Total Loans |
442 |
436 |
|
Total Deposits |
566 |
567 |
|
Total Checking + NOW |
239 |
233 |
|
|
|
|
|
Year-to-Date Earnings Per Share |
$1.11 |
$0.81 |
Financial Results
Net income for the nine months ending September 30, 2024, was $2.037 million, down from $3.625 million for the nine months ending September 30, 2023, for a 44% year-over-year decrease. The decrease in earnings is due primarily to the continued high-interest rate environment and the competition for deposits. Additionally, as previously announced, the Bank has entered into a definitive agreement to be acquired by ELGA Credit Union, which has resulted in $257 thousand in merger-related expenses.
The third quarter net income is slightly lower than the second quarter due to slowing loan growth, reduced mortgage origination income, the increasing cost of funds, and merger expenses.
Asset and Loan Growth
Total Assets increased $13 million, or 2%, from September 2023 to September 2024. During the same period, Total Loans were up slightly.
Total Assets increased by $12 million in the third quarter of 2024 over the second quarter of 2024, and total loans remained relatively flat quarter-over-quarter.
Deposit Growth
Total Deposits as of September 30, 2024, were $566 million compared to $578 million the same time last year, a decrease of $12 million or 2%.
Our non-interest and interest-bearing checking accounts declined to $239 million as of September 30, 2024, compared to $285 million as of September 30, 2023, a decrease of $46 million or 16%.
This is a repeat statement from last quarter, but it is still relevant. It is worth noting that we are opening new personal and business accounts and increasing the number of accounts. However, the average balances per account are decreasing as clients spend their COVID relief money and use cash instead of borrowing, mainly due to the higher cost of credit. This is having a negative impact on both loans and deposits.
Maintaining core deposit growth and controlling our cost of funds is the ongoing challenge in 2024. Our core checking account deposit base is still a respectable 42% of total deposits.
Credit Quality
Credit Quality continues to be very strong. As of September 30, 2024, we had one loan with a balance of $120 thousand in non-accrual. This loan was paid off in full, including all collection expenses, in October 2024. At this writing there are no non-performing assets.
Profitability
For the nine months ending September 30, 2024, the Return on Shareholders’ Equity (ROE) was 7.80% as compared to 17.71% for the nine months ended September 30, 2023.
Earnings per share were $1.11 for the nine months ending September 30, 2024, compared to $1.98 for the same period in 2023.
Common Stock Book Value
The common stock tangible book value increased to $22.62 per share on September 30, 2024, from $16.12 in the same period last year.
The Current Economic and Banking Situation
Last quarter we discussed the uncertain interest rate environment with the possibility of the FED reducing the short-term interest rates. This has happened, which lowers the market interest rates for deposits. Interestingly the current economic sentiment favors improving economic activity with the hint of continued inflation. This has driven up the long end of the yield curve. The ten-year Treasury typically sets the pace for mortgage rates, and this has increased, driving up mortgage rates with a corresponding damper on the housing market.
This may lead to a more normalized yield curve, with short-term interest rates lower than long-term interest rates. A normalized yield curve is generally more favorable for bank earnings.
More On Our Merger with ELGA Credit Union
These comments from last quarter’s shareholders letter are worth repeating. We are pleased to have received a positive response from our employees and clients regarding the announcement. ELGA Credit Union's focus on employees, clients, and the community aligns well with Marine's culture. We have complementary business lines, allowing both parties to benefit; Marine gains access to ELGA Credit Union's consumer banking expertise, while ELGA Credit Union gains access to Marine's business banking expertise, including our advanced treasury management services.
When people ask me, 'what will change?' My answer is “You will continue banking with the same people, at the same locations, but with the addition of more services and potentially more locations in the future. We have an exciting year ahead, so please stay tuned!
Marine Stock Ownership Evidence
This is a good time to ensure that you have your Marine Bancorp stock certificates safely in your possession (a Marine Bank safe deposit box) or that the account at your broker is accessible. Also please ensure the owner’s name on the certificate is valid, i.e. not a deceased person or discontinued business. This will ensure you can easily negotiate the proceeds check after you have surrendered the stock at closing. Again, the stock certificate replacement process is arduous and costly.
Wealth Management
Through our partnership with Warren Capital Management, Marine Bank customers can manage their financial needs in one convenient location – Marine Bank. Led by partner and Senior Financial Advisor Sue Tompkins, Warren Capital Management provides our customers with financial planning, investment management, trust, and estate services. Please contact us at (772) 231-6611 to schedule an appointment to review your portfolio and investment goals.
What You Can Do
While the merger is in process, we will continue to run the Bank as if we will own it forever, so please continue to refer your friends, family members, business associates or someone you think will be a good customer of your Bank. As our clients tell us, they are in for five-star experience currently and after the merger with ELGA Credit Union.
Please check our social media pages on Facebook and LinkedIn. They provide value-added banking and financial related information and news about your Bank. Your “likes” and “shares” are important so please follow us!
Sincerely yours,
William J. Penney
Chief Executive Officer and President
Daniel R. Richey
Chairman of the Board