Farmers & Merchants Bank of Long Beach Reports 2023 Third-Quarter Results

Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQX: FMBL) today reported financial results for the third quarter and nine months ended September 30, 2023.

“We ended the third quarter with a strong balance sheet, a solid and stable deposit base that grew organically from the preceding second quarter, and capital ratios that remain best-in-class,” said Henry Walker, President of Farmers & Merchants Bank of Long Beach. “Our branches continue to perform well, acquiring new customers who are attracted to F&M due to our responsive, personal-touch service that is difficult to receive elsewhere.

“As anticipated, and as with most regional banks, F&M experienced and continues to foresee further pressure on its cost of funds, which, in turn, will likely impact performance in the near-term. Despite the difficult macro environment, our cost of deposits and cost of funds compare favorably to most regional bank peers. F&M is in the fortunate position of having strong credit quality and a solid cash position.”

Operating Results

For the three months ended September 30, 2023, total interest and dividend income rose to $107.9 million from $88.0 million in the third quarter of 2022. Total interest and dividend income for the nine months period ended September 30, 2023 increased to $307.6 million compared to $244.4 million reported for the first nine months of 2022.

Total interest expense for the 2023 third quarter was $43.0 million, compared with $6.9 million in the third quarter of 2022. Interest expense for the first nine months of 2023 was $106.8 million, versus $12.6 million reported for the corresponding period last year.

Net interest income before provision for credit losses for the 2023 third quarter was $64.9 million versus $81.0 million for the third quarter of 2022. Net interest income before provision for credit losses for the first nine months of 2023 was $200.8 million, compared with $231.7 million for the nine months ended September 30, 2022.

F&M’s net interest margin was 2.14% for the 2023 third quarter, versus 2.83% in the 2022 third quarter. Net interest margin was 2.25% for the first nine months of 2023, compared with 2.75% for the same period in 2022.

For the 2023 third quarter, the Bank recorded a $3.6 million recapture of provision for credit losses, compared with a $4.5 million provision for credit losses in last year’s third quarter. The Bank’s recapture of provision for credit losses was $3.6 million for the first nine months of 2023, compared to a $3.5 million provision for credit losses for the same period in 2022.

Non-interest income was $4.1 million for the 2023 third quarter, compared with $4.6 million in the third quarter of 2022. For the nine-month period ended September 30, 2023, non-interest income was $12.3 million, compared with $14.4 million for the same period in 2022.

Total non-interest expense for the 2023 third quarter was $52.3 million, compared with $47.6 million for the same period last year. Non-interest expense for the first nine months of 2023 was $151.4 million, compared with $138.2 million for the first nine months of 2022.

Net income for the 2023 third quarter was $17.4 million, or $137.57 per diluted share, compared with $26.6 million, or $209.64 per diluted share, for the 2022 third quarter. The Bank’s net income for the first nine months of 2023 was $57.2 million, or $452.11 per diluted share, compared with $83.6 million, or $654.87 per diluted share, for the same period in 2022.

Balance Sheet

At September 30, 2023, gross loans amounted to $6.81 billion, approximately equal to that at December 31, 2022, of $6.77 billion. The Bank’s allowance for loan losses was $96.8 million, or 1.42% of loans held-for-investment at September 30, 2023, compared with $76.5 million, or 1.45% of loans, held-for-investment at December 31, 2022.

The Bank’s deposits were $9.06 billion at the end of the 2023 third quarter, compared with $9.14 billion at December 31, 2022.

Non-interest-bearing deposits represented 33.8% of total deposits at September 30, 2023, versus 36.7% of total deposits at December 31, 2022.

Total assets increased to $12.5 billion as of September 30, 2023, from $12.1 billion at December 31, 2022.

Capital

At September 30, 2023, all of Farmers & Merchants Bank’s capital ratios exceeded regulatory capital requirements to meet the definition of a “well-capitalized” financial institution. The Bank’s total risk-based capital ratio was 17.30%; its tier 1 risk-based capital ratio was 16.05%, with a common equity tier 1 capital ratio of 16.05%, and a tier 1 leverage ratio of 10.80%, as of September 30, 2023. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

“The F&M brand continues to promote safety, soundness and unparalleled client service,” added Daniel Walker, Chairman and Chief Executive Officer of Farmers & Merchants Bank. “Our team will not waver from its conservative and prudent approach to managing the Bank and working to enhance long-term value for all stakeholders, as we work through today’s challenging times and external business environment.”

Stock Repurchase Program

During the third quarter of 2023, the Bank repurchased 93 shares of its common stock on the open market at an average price of $5,125.78 per share, pursuant to a stock repurchase program announced in January 2022, under which the board of directors authorized the repurchase of up to $20 million of the Bank’s common stock. This single repurchase transaction effectively closed out the remaining balance of the January 2022 authorization. The Bank did not repurchase any shares during the first or second quarter of 2023.

About Farmers & Merchants Bank of Long Beach

Founded in Long Beach in 1907 by C.J. Walker, Farmers & Merchants Bank provides white-glove service to clients at 26 branches from San Clemente to Santa Barbara, as well as through its Online and Mobile Banking platforms. The Bank offers commercial and small business banking, business loan programs, home loans, and a robust offering of consumer retail banking products, including checking, savings and youth accounts. Farmers & Merchants Bank is a California state-chartered bank with deposits insured by the Federal Deposit Insurance Corporation (Member FDIC) and an Equal Housing Lender. For more information about F&M, please visit the website, www.fmb.com.

FARMERS & MERCHANTS BANK OF LONG BEACH
Income Statements (Unaudited)
(In thousands, except per share data)
 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 
Interest and dividend income:

Loans

$

76,184

 

$

63,182

$

223,291

 

$

175,949

Investment securities

 

21,458

 

 

23,477

 

 

66,616

 

 

64,365

 

Investments in FHLB and FRB stock

 

415

 

 

279

 

 

1,229

 

 

837

 

Interest-bearing deposits in financial institutions

 

9,859

 

 

1,013

 

 

16,416

 

 

3,222

 

Total interest and dividend income

 

107,916

 

 

87,951

 

 

307,552

 

 

244,373

 

 
Interest expense:

Deposits

 

23,009

 

 

3,255

 

 

56,578

 

 

7,284

 

Securities sold under repurchase agreements

 

8,918

 

 

2,348

 

 

22,212

 

 

4,023

 

Borrowings

 

11,103

 

 

1,317

 

 

27,984

 

 

1,317

 

Total interest expense

 

43,030

 

 

6,920

 

 

106,774

 

 

12,624

 

 
Net interest income before provision for credit losses

 

64,886

 

 

81,031

 

 

200,778

 

 

231,749

 

 
Provision for credit losses
Loans

 

(1,800

)

 

4,500

 

 

(1,800

)

 

3,500

 

Investment securities

 

-

 

 

-

 

 

100

 

 

-

 

Reserve for unfunded loan commitments

 

(1,800

)

 

-

 

 

(1,900

)

 

-

 

Total provision for credit losses

 

(3,600

)

 

4,500

 

 

(3,600

)

 

3,500

 

 
Net interest income after provision for credit losses

 

68,486

 

 

76,531

 

 

204,378

 

 

228,249

 

 
Non-interest income:
Service charges on deposit accounts

 

1,799

 

 

1,632

 

 

5,153

 

 

4,732

 

Card income

 

357

 

 

257

 

 

957

 

 

2,301

 

Other income

 

1,919

 

 

2,677

 

 

6,186

 

 

7,342

 

Total non-interest income

 

4,075

 

 

4,566

 

 

12,296

 

 

14,375

 

 
Non-interest expense:
Salaries and employee benefits

 

30,831

 

 

29,590

 

 

93,538

 

 

88,137

 

FDIC and other insurance expense

 

2,319

 

 

1,055

 

 

5,923

 

 

3,069

 

Occupancy expense

 

4,103

 

 

4,030

 

 

11,641

 

 

11,431

 

Software and equipment expense

 

3,891

 

 

3,909

 

 

11,554

 

 

11,322

 

Professional and legal services

 

2,113

 

 

2,121

 

 

5,597

 

 

5,548

 

Marketing expense

 

2,694

 

 

1,997

 

 

6,245

 

 

5,214

 

Other expense

 

6,357

 

 

4,889

 

 

16,924

 

 

13,466

 

Total non-interest expense

 

52,308

 

 

47,591

 

 

151,422

 

 

138,187

 

 
Income before income tax expense

 

20,253

 

 

33,506

 

 

65,252

 

 

104,437

 

 
Income tax expense

 

2,866

 

 

6,872

 

 

8,093

 

 

20,879

 

 
Net income

$

17,387

 

$

26,634

 

$

57,159

 

$

83,558

 

 
Basic earnings per common share

$

141.11

 

$

214.68

 

$

463.86

 

$

669.90

 

Diluted earnings per common share

$

137.57

 

$

209.64

 

$

452.11

 

$

654.87

 

Basic weighted-average shares outstanding

 

123,216

 

 

124,067

 

 

123,224

 

 

124,732

 

Diluted weighted-average shares outstanding

 

126,389

 

 

127,047

 

 

126,428

 

 

127,595

 

FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
   
  Sept. 30, 2023 Dec. 31, 2022
   
Assets  
Cash and due from banks:  
Noninterest-bearing balances  

$

80,830

 

$

75,489

 

Interest-bearing balances  

 

817,988

 

 

67,369

 

Total cash and due from banks  

 

898,818

 

 

142,858

 

Securities available-for-sale, at fair value  

 

111,232

 

 

123,919

 

Securities held-to-maturity, at amortized cost  

 

4,428,668

 

 

4,789,522

 

Loans held for sale  

 

521

 

 

-

 

Gross loans  

 

6,809,407

 

 

6,765,391

 

Allowance for loan losses  

 

(96,812

)

 

(76,503

)

Unamortized deferred loan fees, net  

 

(12,401

)

 

(14,429

)

Loans, net  

 

6,700,194

 

 

6,674,459

 

Investments in FHLB and FRB stock, at cost  

 

22,757

 

 

27,088

 

Bank premises and equipment, net  

 

125,421

 

 

118,228

 

Deferred tax assets, net  

 

45,436

 

 

31,538

 

Other assets  

 

131,182

 

 

147,132

 

Total assets  

$

12,464,229

 

$

12,054,744

 

   
Liabilities and Stockholders' Equity  
   
Liabilities:  
Deposits:  
Noninterest-bearing demand deposits  

$

3,058,711

 

$

3,355,298

 

Interest-bearing demand deposits  

 

2,195,985

 

 

2,212,509

 

Savings and money market savings  

 

2,759,651

 

 

2,668,334

 

Time deposits  

 

1,041,243

 

 

906,355

 

Total deposits  

 

9,055,590

 

 

9,142,496

 

Securities sold under repurchase agreements  

 

943,908

 

 

785,912

 

Borrowings  

 

1,000,000

 

 

700,000

 

Other liabilities  

 

127,335

 

 

113,254

 

Total liabilities  

 

11,126,833

 

 

10,741,662

 

   
Stockholders' Equity:  
Common Stock, par value $20; authorized 250,000 shares; 123,135 and 123,228 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively  

 

2,463

 

 

2,465

 

Additional paid-in capital  

 

182,464

 

 

177,433

 

Retained earnings  

 

1,162,207

 

 

1,140,897

 

Accumulated other comprehensive loss  

 

(9,738

)

 

(7,713

)

Total stockholders' equity  

 

1,337,396

 

 

1,313,082

 

Total liabilities and stockholders' equity  

$

12,464,229

 

$

12,054,744

 

 

Contacts

John Hinrichs

Executive Vice President

562-437-0011, ext. 4835

Roger Pondel

PondelWilkinson Inc.

Investor Relations

310-279-5980

investor@pondel.com

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