Merchants & Marine Sees Profit Dip in Strategic Bet on Future Growth

PASCAGOULA, MS – February 17, 2026 – Merchants & Marine Bancorp, Inc. (OTCQX: MNMB) announced a significant decline in fourth-quarter net income, a result that belies a story of strategic investment and preparation for what executives are calling a "transformative year." While top-line revenues grew, the company consciously absorbed substantial expenses related to a pending merger and executed a temporary, large-scale balance sheet maneuver, positioning the Gulf South institution for future expansion and increased profitability.

For the fourth quarter of 2025, the parent company of Merchants & Marine Bank reported net income of $973 thousand, a steep drop from the $2.262 million earned in the same period of 2024. This decrease occurred even as Q4 gross income climbed 10.86% to $14.39 million, highlighting a deliberate squeeze on the bottom line. For the full year, net income available to common shareholders was $3.27 million, down from $5.41 million in the prior year.

Company officials attribute the reduced profitability primarily to costs associated with its upcoming merger with Farmers-Merchants Bank and Trust Company (FM Bank), which was announced in late 2025. These include significant operational preparation and legal expenses.

“While revenues saw significant improvement, keeping with the trends of recent years, those gains did not translate to our bottom line due to operational preparation and legal expenses associated with our pending acquisition of Farmers-Merchants Bank & Trust,” stated Casey Hill, the company’s Chief Financial Officer. He expressed confidence that the short-term pain would lead to long-term gain, expecting the merger's consummation in the second quarter of 2026 to unlock "significant efficiencies and materially higher net income."

The $200 Million Balance Sheet Play

A primary driver behind the bank's dramatically altered financial landscape was a sophisticated, temporary balance sheet strategy deployed in the second quarter. The bank purchased $200 million in variable-rate Ginnie Mae guaranteed Home Equity Conversion Mortgage (HECM) mortgage-backed securities. To fund this purchase without taking on undue risk, the company used a match-funding approach, securing an equivalent amount in monthly-repricing borrowings from the Federal Home Loan Bank of Dallas.

This maneuver allowed the company to capture an approximate 80 basis point spread with what management describes as "virtually zero interest rate risk and no credit risk," thanks to the Ginnie Mae guarantee. The strategy had a profound impact on the balance sheet, causing total assets to swell by 31.29% to $941.19 million over the 12-month period. It also explains the sharp rise in interest expense, which jumped to $8.65 million for the year from $4.12 million in 2024, as the FHLB borrowings were accounted for. Management has clarified that this is a temporary position, with plans to liquidate some or all of it following the FM Bank merger, freeing up capital and simplifying the balance sheet.

This strategy also contributed to a 23.96% increase in total interest income for the year, which reached $46.14 million. The bank also managed to improve its position on unrealized losses in its securities portfolio. Accumulated Other Comprehensive Income (AOCI) losses shrank by 29.05% to $6.58 million, a significant achievement given that the HECM strategy more than doubled the size of the company's securities portfolio during the year.

Building a Diversified 'Family of Brands'

The pending acquisition and the complex balance sheet strategy are both components of a broader vision articulated by the bank's leadership. The goal is to transform the institution from a traditional community bank into a diversified financial services company with multiple, repeatable lines of business.

“We have been intentional in using the strength of our balance sheet to build capacity for sustainable growth across our Family of Brands,” said Clayton Legear, President & CEO of the company. “As a result, we are now able to approach expanding our Family of Brands through mergers and acquisitions as a disciplined, repeatable line of business — pairing organic momentum with strategic expansion – like our partnership with FM Bank – to create long-term value for our shareholders and the communities we serve.”

This 'Family of Brands' includes its legacy Merchants & Marine Bank and its Louisiana-focused Mississippi River Bank brand. It also encompasses more specialized ventures that demonstrate a forward-looking approach. These include Canvas Mortgage, a national mortgage financing arm; Voyager Lending, which focuses on government-guaranteed credit for small businesses; and CannaFirst Financial, a niche brand providing compliant banking services to the medical cannabis industry in Mississippi and Alabama. According to CFO Casey Hill, these ancillary brands are showing promise, with healthy pipelines pushing them toward scalable profitability.

Strong Fundamentals Underpin Strategic Moves

Despite the headline drop in net income, a closer look at the bank's core operations reveals a foundation of stability. Total deposits grew a healthy 4.32% to $598.28 million, providing a solid funding base. Crucially, the company’s cost of deposits remained exceptionally low, totaling just 0.49% during the fourth quarter, a figure significantly below industry averages. This low-cost funding is a key strength that enables the bank to pursue its strategic initiatives.

Credit quality also remains a bright spot. The ratio of loans past due between 30 and 89 days improved, falling to 0.87% of total loans at the end of 2025 from 1.13% a year prior. This indicates disciplined underwriting and a healthy loan book.

Even a slight 4.05% retreat in net loans, which ended the year at $445.54 million, was explained as a planned event. The decrease was attributed to the scheduled payoff of two large transactional loans, rather than a slowdown in lending activity. With the FM Bank merger on the horizon and ancillary brands gaining momentum, Merchants & Marine Bancorp is betting that its current strategic spending will pave the way for a more robust and profitable future.