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 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20231018483011/en/
Contacts
John Hinrichs
Executive Vice President
562-437-0011, ext. 4835
Roger Pondel
PondelWilkinson Inc.
Investor Relations
310-279-5980
investor@pondel.com
