Merchants & Marine Bancorp, Inc. Reports Third Quarter Financial Performance and Highlights Strategic Positioning Ahead of Planned Merger
Merchants & Marine Bancorp, Inc. (OTCQX: MNMB), the holding company of Merchants & Marine Bank, released its financial results for the third quarter of 2025, reflecting both continued balance sheet growth and a period of strategic transition as the company prepares for its merger with Farmers-Merchants Bank & Trust Company. While net income for the quarter declined compared with the same period a year earlier, the company reported substantial growth in total assets, gross income, and loan balances, alongside progress in executing a temporary balance sheet strategy designed to generate stable interest income while minimizing risk.
For the third quarter of 2025, Merchants & Marine Bancorp recorded net income of $1.42 million, or $1.07 per share. This compares to earnings of $1.93 million, or $1.45 per share, in the third quarter of 2024. Despite the year-over-year decline in bottom-line earnings, gross income rose 14.17%, reaching $14.88 million in the quarter. The company also reported significant expansion across its consolidated balance sheet, with total assets — described as balance sheet footings — growing 30.55% year-over-year to $947.47 million as of September 30, 2025.
Loan growth continued at a measured pace. Net loans reached $466.73 million, up from $449.34 million a year earlier, representing an increase of 3.87%. Deposit balances also expanded during the period, increasing 3.69% year-over-year from $582.31 million to $603.81 million. The company noted that these increases, combined with the effects of its interest rate positioning strategy, contributed to the overall balance sheet and gross income improvements seen throughout the year.
Temporary Balance Sheet Strategy Generating Positive Yield
During the second quarter, the company implemented a balance sheet strategy aimed at enhancing earnings while avoiding exposure to interest rate or credit risk. This strategy involved purchasing $200 million in floating-rate Ginnie Mae–guaranteed Home Equity Conversion Mortgage (HECM) mortgage-backed securities. These securities reprice monthly, and the company funded the purchase with a matching amount of Federal Home Loan Bank of Dallas borrowings that also adjust monthly.
By “match-funding” the securities with borrowings that reprice on the same cycle, the company effectively eliminated interest rate risk, since changes in interest rates affect both the assets and liabilities in parallel. Furthermore, because the securities are explicitly guaranteed by Ginnie Mae, there is no credit risk associated with the investment. This structure generated an estimated 80 basis point yield spread, providing a stable source of incremental income.
Management has stated that it intends to unwind this position following the completion of the merger with Farmers-Merchants Bank & Trust, announced earlier in October. The transaction is expected to expand the combined organization’s market footprint and balance sheet scale, pushing consolidated assets above the $1 billion regulatory threshold that triggers compliance with the Federal Deposit Insurance Corporation Improvement Act (FDICIA).
Financial Performance Highlights
The company provided several key performance metrics demonstrating continued operational strength:
- Loan Growth: Net loans increased by $17.39 million year-over-year. Growth occurred across multiple business units, including Merchants & Marine Bank, Mississippi River Bank, Voyager Lending’s SBA program, and Canvas Mortgage.
- Interest Income: Total interest income for the first nine months of 2025 reached $33.83 million, up from $29.66 million in the prior-year period. This improvement was driven by higher yields on securities and the repricing of maturing loans at higher market rates.
- Cost of Funds: The company’s cost of funds rose to 1.13% in the third quarter, compared with 0.66% in the prior year. However, management emphasized that the increase was almost entirely attributable to the borrowings used to fund the HECM securities strategy. Interest-bearing deposit costs remained low, averaging just 0.46% during the first nine months of the year.
- Credit Quality: Asset quality remains strong, with loans past due 30–89 days representing 0.77% of total loans, down from 1.09% the prior year. Non-accrual loans rose to 1.59%, which management attributed to proactive efforts to resolve a small group of troubled loans rather than broad-based deterioration in credit performance. Management cautioned that uncertainties in the broader economic environment, including persistent inflation, interest rate shifts, and federal policy disputes, may require future provisions for credit losses.
- Securities Portfolio: Mark-to-market losses in Accumulated Other Comprehensive Income (AOCI) stood at ($7.77 million), compared with ($6.62 million) the year before. These losses represented 2.30% of the total securities portfolio — significantly lower than peer averages and considered manageable.
Management Commentary: Preparing for Scaled Growth
Casey Hill, Chief Financial Officer, emphasized that core financial performance remained resilient through the first nine months of the year. He noted that improving loan yields and a strong low-cost deposit base have supported net interest margin expansion. Hill acknowledged that operating expenses were elevated during the year, but stressed that these expenses were tied to strategic investments made ahead of the merger and future growth.
“We made the conscious decision to prepare early for the operating environment and regulatory requirements that come with surpassing $1 billion in assets,” Hill stated. “While the short-term effect is a reduction in reported earnings, we expect clear long-term benefits in operational efficiency and organizational readiness.”
Hill further explained that the company sought to avoid the common scenario where banks surpass the regulatory threshold unprepared and experience operational strain and slowed growth as a result.
Chairman and Chief Executive Officer Clayton Legear echoed this sentiment, highlighting the strategic importance of the upcoming merger with Farmers-Merchants Bank & Trust Company. He noted that the partnership brings together two community banking organizations with aligned missions, complementary markets, and shared commitments to local customer service.
Legear commented, “Joining with Farmers-Merchants Bank & Trust Company expands our brand family and strengthens our geographic and business diversification. We are confident that the combined company will be well-positioned to deliver sustainable growth and enhanced value for customers, employees, and shareholders alike.”
Legacy and Market Presence
Founded in 1899 and re-established during the Great Depression, Merchants & Marine Bank has evolved into a multifaceted financial services provider with nearly $1 billion in assets as of September 30, 2025. In addition to its core community banking operations in Mississippi, Alabama, and Louisiana, the company operates specialized lending and service divisions including Canvas Mortgage, CannaFirst Financial, Voyager Lending, and Community of Resources.
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