July 24, 2024
Dear Marine Bank Shareholders:
We are pleased to announce once more that 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 early June 2024. The regulatory applications have been filed by both parties with an expected closing date in the first quarter 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.
This is a rewarding outcome not only for our shareholders but also our employees, clients and the communities we serve. ELGA will retain all our employees who will have the opportunity to offer ELGA’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's important to note 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 4-Star "Excellent" rating. Below are the financial results for Marine Bank's parent company, Marine Bancorp of Florida, Inc.
First Six Months of 2024 Financial Summary:
|
million $ |
Six months Ended 6/30/2024 |
Six months Ended 6/30/2023 |
% change |
|
Net Income |
1.472 |
2.596 |
-43% |
|
Total Assets |
640 |
656 |
-2% |
|
million $ |
|
|
|
|
Total Loans |
443 |
442 |
>1% |
|
Total Deposits |
567 |
583 |
-3% |
|
Total Checking + NOW |
233 |
292 |
-20% |
|
|
|
|
|
|
Marine Bancorp Tangible Book Value Per Common Share |
$20.03 |
$17.12 |
17% |
|
Actual Q1 Earnings Per Share |
$0.81 |
$1.42 |
-43% |
|
Return on Shareholders’ Equity |
5.43% |
10.28% |
-47% |
|
million $ |
|
|
|
|
Non-Performing Assets |
0.120 |
1.492 |
-92% |
Quarter Over Quarter 2024 Financial Summary:
|
million $ |
Quarter Ended 6/30/2024 |
Quarter Ended 3/31/24 |
|
Quarterly Net Income |
0.596 |
0.876 |
|
Total Assets |
640 |
666 |
|
million $ |
|
|
|
Total Loans |
443 |
444 |
|
Total Deposits |
567 |
594 |
|
Total Checking + NOW |
233 |
259 |
|
|
|
|
|
Year-to-Date Earnings Per Share |
$0.81 |
$0.48 |
Financial Results
Net income for the six months ending June 30, 2024, was $1.472 million, down from $2.596 million for the six months ending June 30, 2023, for a 43% year-over-year decrease. The decrease in earnings is due primarily to the high 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 $129 thousand of merger-related expenses.
The second quarter's net income is slightly lower than the first quarter's due to slowing loan growth, reduced mortgage origination income, the increasing cost of funds, and merger expenses.
Asset and Loan Growth
Total Assets decreased $16 million, or 2%, from June 2023 to June 2024. During the same period, Total Loans remained relatively flat.
This decline continued in the second quarter of 2024 over the first quarter of 2024 as total assets decreased $26 million and total loans remained relatively flat quarter over quarter.
Deposit Growth
Total Deposits as of June 30, 2024, were $567 million compared to $583 million the same time last year, a decrease of $16 million or 3%.
Our non-interest and interest-bearing checking accounts declined to $233 million as of June 30, 2024, compared to $292 million as of June 30, 2023, a decrease of $59 million or 20%.
It's 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. This is where our deposit base of 40%+ in checking accounts benefits the shareholders.
Credit Quality
Credit quality continues to be very strong. As of June 30, 2024, we had one loan with a balance of $120 thousand in non-accrual with no loss expected.
Profitability
For the six months ended June 30, 2024, Return on Shareholders’ Equity (ROE) was 5.43% as compared to 10.28% for the six months ended June 30, 2023.
For the six months ended June 30, 2024, the earnings per share was $0.81, versus $1.42 for the same period in 2023, a decrease of $0.61 per share or 43%.
Common Stock Book Value
The common stock tangible book value increased to $20.03 per share on June 30, 2024, from $17.12 in the same period last year, an increase of 17%.
The Current Economic and Banking Situation
This year will continue to be challenging. The economy constantly sends mixed signals, e.g., the direction of market interest rates over the next year will depend on many factors including unemployment, inflation, recession risk, and this being an election year.
The Federal Reserve seems to be preparing to cut interest rates, but the number and timing of those reductions is in question. Can the Fed achieve the desired soft landing, or do they overshoot and create a recession? We are managing the Bank to prepare for either outcome.
As we discussed last quarter, the ongoing inverted yield curve, where short-term interest rates are higher than long term interest rates, is currently the biggest challenge to the banking industry. Banks typically borrow short and lend long, thus earning a spread on the funding cost difference and the credit risk. The inverted yield curve eliminates this funding cost advantage. It is also a fairly accurate predictor of a future recession, but so far this does not seem to be the case.
Meanwhile, the Florida economy, and our communities, continue to grow, adding new residents, albeit at a seemingly slower pace. With our fanatical devotion to client service levels, we believe that Marine Bank is in a strong position to benefit from the growth in our communities.
More On Our Merger with ELGA Credit Union
We are pleased to have received a positive response from our employees and clients regarding the announcement. ELGA'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's consumer banking expertise, while ELGA 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 Trading
Your Marine Bancorp of Florida stock is listed on the OTC exchange under the ticker symbol of MBOF. Mike Acampora of DA Davidson is our market maker. If you have an interest in buying or selling Marine stock, please contact Mike at 904-456-6153 or macampora@dadco.com.
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 the account at your broker is accessible. You will need to surrender the stock to receive the cash when the merger closes.
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 set up an appointment to review your portfolio and investment goals.
What You Can Do
Please continue to refer your friends, family members, business associates or someone you think will be a good customer of your Bank. I promise they will have the best banking experience ever and if they don’t, please call me directly.
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