Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQX: FMBL) today reported financial results for the first quarter ended March 31, 2023.
“The stability of F&M’s deposit base, the quality composition of our loan portfolio and conservative management disciplines are allowing the Bank to register profitable operations and maintain solid financial health,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “Amidst one of the banking sector’s most challenging and volatile external environments in recent history, F&M stood out among its peers during the first quarter of 2023 and remained well capitalized, far exceeding all regulatory requirements.”
Income Statement
For the three months ended March 31, 2023, interest and dividend income rose to $97.3 million from $75.3 million a year ago. Interest expense for the 2023 first quarter amounted to $26.5 million, compared with $2.7 million for the same period last year.
Net interest income for the 2023 first quarter was $70.8 million, versus $72.6 million for the first quarter of 2022. Net interest margin was 2.33% for the 2023 first quarter, compared with 2.60% for the same period last year.
There was no net provision for credit losses for the 2023 first quarter under the Current Expected Credit Losses (CECL) methodology. This compares with a recapture of provision for loan losses under the prior incurred loss methodology of $1.0 million for the 2022 first quarter.
Non-interest income was $3.8 million for the 2023 first quarter, compared with $5.1 million in the 2022 first quarter. Non-interest expense for the 2023 first quarter was $48.3 million, versus $43.7 million for the same period last year.
The Bank registered net income for the 2023 first quarter of $21.6 million, or $170.86 per diluted share, compared with $27.8 million, or $217.02 per diluted share, for the 2022 first quarter.
Balance Sheet
At March 31, 2023, gross loans totaled $6.83 billion, compared with $6.77 billion at December 31, 2022. The Bank adopted the CECL accounting standard effective as of January 1, 2023 and recognized a Day 1 adjustment of its Allowance for Credit Losses (ACL) for loans of $22.5 million. The Bank’s allowance for credit losses was $99.0 million or 1.45% of loans held-for-investment at March 31, 2023, compared with $76.5 million or 1.13% of loans held-for-investment at December 31, 2022.
The Bank’s total deposits were $8.97 billion at the end of the 2023 first quarter, versus $9.14 billion at December 31, 2022. Non-interest-bearing deposits represented 35.3% of total deposits at March 31, 2023, versus 36.7% of total deposits at the end of 2022. Total assets were $12.02 billion at the close of the 2023 first quarter, compared with $12.05 billion at December 31, 2022.
At March 31, 2023, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 16.63%, a tier 1 risk-based capital ratio of 15.38%, a common equity tier 1 capital ratio of 15.38%, and a tier 1 leverage ratio of 10.87%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.
“Remaining true to our core principles, F&M withstood the turbulence that reverberated throughout the banking sector during the first quarter,” said Daniel Walker, chief executive officer and chairman of the board. “Compared with most other regional and community banks, F&M’s total deposits were down only minimally from year-end, reflecting the loyalty of our core depositors and attracting new accounts, which were up 17% over the same quarter last year. The Bank also benefitted from its meticulous, conservative lending policies on quality assets, with no dependence on any one sector.
“While no bank or business is immune to the effects of the rapid interest rate escalation and its continuing impact on our nation’s economic health, F&M has weathered volatile times throughout its 116+ year history, always caring for and serving the needs of our business and consumer clients and supporting the growing number of communities in which we operate,” Walker added.
About Farmers & Merchants Bank
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 Mar. 31, | |||||||
2023 |
2022 |
||||||
| Interest and dividend income: | |||||||
| Loans | $ | 72,475 |
$ | 55,719 |
|
||
| Investment securities | 22,813 |
18,669 |
|
||||
| Investments in FHLB and FRB stock | 400 |
272 |
|
||||
| Interest-bearing deposits in financial institutions | 1,600 |
596 |
|
||||
| Total interest and dividend income | 97,288 |
75,256 |
|
||||
| Interest expense: | |||||||
| Deposits | 13,958 |
1,987 |
|
||||
| Securities sold under repurchase agreements | 6,020 |
678 |
|
||||
| Borrowings | 6,491 |
- |
|
||||
| Total interest expense | 26,469 |
2,665 |
|
||||
| Net interest income | 70,819 |
72,591 |
|
||||
| Provision for credit losses | - |
(1,000 |
) |
||||
| Net interest income after provision for credit losses | 70,819 |
73,591 |
|
||||
| Non-interest income: | |||||||
| Service charges on deposit accounts | 1,544 |
1,535 |
|
||||
| Card income | 230 |
970 |
|
||||
| Other income | 2,061 |
2,568 |
|
||||
| Total non-interest income | 3,835 |
5,073 |
|
||||
| Non-interest expense: | |||||||
| Salaries and employee benefits | 31,793 |
29,110 |
|
||||
| FDIC and other insurance expense | 1,758 |
1,000 |
|
||||
| Occupancy expense | 3,827 |
3,548 |
|
||||
| Software and equipment expense | 3,860 |
3,642 |
|
||||
| Professional and legal services | 1,130 |
1,465 |
|
||||
| Marketing expense | 882 |
1,021 |
|
||||
| Other expense | 5,045 |
3,889 |
|
||||
| Total non-interest expense | 48,295 |
43,675 |
|
||||
| Income before income tax expense | 26,359 |
34,989 |
|
||||
| Income tax expense | 4,736 |
7,154 |
|
||||
| Net income | $ | 21,623 |
$ | 27,835 |
|
||
| Basic earnings per common share | $ | 175.47 |
$ | 221.65 |
|
||
| Diluted earnings per common share | $ | 170.86 |
$ | 217.02 |
|
||
| Basic weighted-average shares outstanding | 123,228 |
125,581 |
|
||||
| Diluted weighted-average shares outstanding | 126,552 |
128,256 |
|
||||
| FARMERS & MERCHANTS BANK OF LONG BEACH | ||||||||
| Balance Sheets (Unaudited) | ||||||||
| (In thousands, except share and per share data) | ||||||||
| Mar. 31, 2023 | Dec. 31, 2022 | |||||||
| Assets | ||||||||
| Cash and due from banks: | ||||||||
| Noninterest-bearing balances | $ | 87,687 |
|
$ | 75,489 |
|
||
| Interest-bearing balances | 99,326 |
|
67,369 |
|
||||
| Total cash and due from banks | 187,013 |
|
142,858 |
|
||||
| Securities available-for-sale, at fair value | 121,014 |
|
123,919 |
|
||||
| Securities held-to-maturity, at amortized cost | 4,673,107 |
|
4,789,522 |
|
||||
| Gross loans | 6,833,148 |
|
6,765,391 |
|
||||
| Allowance for loan losses | (99,046 |
) |
(76,503 |
) |
||||
| Unamortized deferred loan fees, net | (14,916 |
) |
(14,429 |
) |
||||
| Loans, net | 6,719,186 |
|
6,674,459 |
|
||||
| Investments in FHLB and FRB stock, at cost | 22,647 |
|
27,088 |
|
||||
| Bank premises and equipment, net | 120,114 |
|
118,228 |
|
||||
| Deferred tax assets, net | 42,784 |
|
31,538 |
|
||||
| Other assets | 135,750 |
|
147,132 |
|
||||
| Total assets | $ | 12,021,615 |
|
$ | 12,054,744 |
|
||
| Liabilities and Stockholders' Equity | ||||||||
| Liabilities: | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing demand deposits | $ | 3,161,715 |
|
$ | 3,355,298 |
|
||
| Interest-bearing demand deposits | 2,136,502 |
|
2,212,509 |
|
||||
| Savings and money market savings | 2,676,094 |
|
2,668,334 |
|
||||
| Time deposits | 994,836 |
|
906,355 |
|
||||
| Total deposits | 8,969,147 |
|
9,142,496 |
|
||||
| Securities sold under repurchase agreements | 822,379 |
|
785,912 |
|
||||
| Borrowings | 800,000 |
|
700,000 |
|
||||
| Other liabilities | 120,921 |
|
113,254 |
|
||||
| Total liabilities | 10,712,447 |
|
10,741,662 |
|
||||
| Stockholders' Equity: | ||||||||
| Common Stock, par value $20; authorized 250,000 shares; 123,228 shares issued and outstanding at March 31, 2023 and December 31, 2022 | 2,465 |
|
2,465 |
|
||||
| Additional paid-in capital | 179,269 |
|
177,433 |
|
||||
| Retained earnings | 1,133,571 |
|
1,140,897 |
|
||||
| Accumulated other comprehensive income | (6,137 |
) |
(7,713 |
) |
||||
| Total stockholders' equity | 1,309,168 |
|
1,313,082 |
|
||||
| Total liabilities and stockholders' equity | $ | 12,021,615 |
|
$ | 12,054,744 |
|
||
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Contacts
John Hinrichs
Executive Vice President
562-437-0011, ext. 4835
Roger Pondel
PondelWilkinson Inc.
Investor Relations
310-279-5980
investor@pondel.com
