Farmers & Merchants Bank of Long Beach Reports 2022 Third Quarter Results

Rhea-AI Summary

Farmers & Merchants Bank of Long Beach (OTCQX: FMBL) reported its Q3 2022 results, showing resilience despite a challenging interest rate environment. Total assets grew to $11.9 billion, with net loans increasing to $6.4 billion and total deposits rising to $9.4 billion since December 31, 2021. Interest and dividend income reached $88 million, a rise from $79.6 million in Q3 2021. However, net income fell to $26.6 million ($209.64 per diluted share) from $30.5 million ($238.07) last year. The bank's capital ratios remain strong, with a total risk-based capital ratio of 16.61%.

Positive

• Total assets increased to $11.9 billion from $11.4 billion year-over-year.
• Net loans rose to $6.4 billion from $5.4 billion since December 31, 2021.
• Interest and dividend income grew to $88 million from $79.6 million in Q3 2021.
• Capital ratios far exceeded minimum regulatory requirements.

Negative

• Net income decreased to $26.6 million from $30.5 million year-over-year.
• Non-interest income fell to $4.6 million from $5.1 million in Q3 2021.
• Interest expense rose significantly to $6.9 million from $3.0 million a year ago.

LONG BEACH, Calif.--(BUSINESS WIRE)-- Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQX: FMBL) today reported financial results for the third quarter ended September 30, 2022.

“Farmers & Merchants Bank of Long Beach demonstrated its ongoing commitment to client relationships during the 2022 third quarter, as the banking sector faced a challenging external environment, characterized by the nation’s rapid rise in interest rates,” said Henry Walker, president. “We are responsively meeting the demands of our business and consumer clients, both on the lending side, as well as with new product offerings for savers. At the close of the third quarter, total assets, net loans and total deposits all increased from December 31, 2021, and capital ratios again far exceeded minimum requirements.”

Income Statement

For the 2022 third quarter, interest and dividend income increased to $88.0 million from $79.6 million in the 2021 third quarter. Interest and dividend income for the nine-month period ended September 30, 2022 rose to $244.4 million from $231.3 million for the same period in 2021.

Interest expense for the 2022 third quarter amounted to $6.9 million, versus $3.0 million a year ago, reflecting the higher interest rate environment, along with Bank borrowings, which are anticipated to continue in the months ahead to accommodate increased client lending needs. Interest expense for the nine-month period ended September 30, 2022 was $12.6 million, versus $9.5 million reported for the same period last year.

Net interest income before provision for loan losses for the 2022 third quarter advanced to $81.0 million from $76.7 million for the third quarter of 2021 and increased to $231.7 million for the first nine months of 2022 from $221.8 million for the same period in 2021.

Farmers & Merchants’ net interest margin for the 2022 third quarter was 2.83%, versus 2.90% for the 2021 third quarter. Net interest margin was 2.75% for the first nine months of 2022, versus 2.89% for the same period in 2021.

For the 2022 third quarter, the Bank recorded a $4.5 million provision for loan losses, compared with a $1.0 million recapture of loan loss provision in last year’s third quarter. The Bank’s provision for loan losses was $3.5 million for the first nine months of 2022, versus $1.0 million for the first nine months of 2021. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.18% at September 30, 2022, compared with 1.34% at December 31, 2021.

Non-interest income was $4.6 million for the 2022 third quarter, compared with $5.1 million in the third quarter a year ago. For the nine-month period ended September 30, 2022, non-interest income was $14.4 million, compared with $15.6 million for the same period in 2021.

Non-interest expense for the 2022 third quarter was $47.6 million, versus $44.1 million for the same period last year. Non-interest expense for the first nine months of 2022 was $138.2 million, compared with $127.4 million last year.

Net income for the 2022 third quarter was $26.6 million, or $209.64 per diluted share, compared with $30.5 million, or $238.07 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2022 was $83.6 million, or $654.87 per diluted share, compared with $86.2 million, or $672.37 per diluted share, for the same period in 2021.

Balance Sheet

At September 30, 2022, net loans increased to $6.4 billion, from $5.4 billion at December 31, 2021. The Bank’s deposits rose to $9.4 billion at the end of the 2022 third quarter, from $9.2 billion at December 31, 2021. Noninterest-bearing deposits represented 38.5% of total deposits at September 30, 2022, versus 38.4% of total deposits at December 31, 2021. Total assets increased to $11.9 billion at September 30, 2022, from $11.4 billion at December 31, 2021.

At September 30, 2022, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 16.61%, a tier 1 risk-based capital ratio of 15.66%, a common equity tier 1 capital ratio of 15.66%, and a tier 1 leverage ratio of 11.11%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

During the 2022 third quarter, demonstrating its confidence in F&M’s long-term outlook, the Bank repurchased 444 shares of its common stock on the open market at an average price of $8,085.00 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. For the first nine months of 2022, the Bank purchased a total of 1,796 shares of its common stock at an average price of $8,159.98 per share. To the extent the Bank repurchases additional shares under this program, which expires December 31, 2023, the timing and number of shares repurchased will depend on a variety of factors, including, but not limited to, stock price, trading volume, regulatory requirements, general business conditions and others. The Bank may choose to modify, suspend, or discontinue such proposed repurchases at any time without prior notice, and the share repurchase program does not obligate the Bank to acquire any specific number of shares in any period.

“The Bank’s long history of generating profits for our stockholders, while prudently managing risk, combined with our unwavering commitment to serving our clients during periods of economic stress, continue to serve F&M and all of its stakeholders well,” said Daniel Walker, chief executive officer and chairman of the board. “Our talented team and F&M’s sound fundamentals remain central to our performance, as we navigate the volatile rate environment and uncertainties that lay ahead.”

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 25 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.

Forward-Looking Statements

In addition to the historical information contained herein, this press release may contain forward-looking statements about Farmers & Merchants Bank of Long Beach, including, but not limited to, statements about the Bank’s ability to navigate through the challenges of a volatile rate environment and economic uncertainties, anticipated Bank borrowings to accommodate increased client lending needs, as well as expectations regarding the amount of, timing, and methods for potential repurchases of its common stock. Readers of this press release should understand that such forward-looking statements are neither promises nor guarantees and are subject to various risks and uncertainties, many of which are beyond the Bank’s control. Such risks and uncertainties could cause actual results and actions to differ materially from those contemplated in such forward-looking statements and the Bank’s reported results should not be considered an indication of the Bank’s future performance. Factors that could cause or contribute to such differences include, but are not limited to, the adverse effects and negative impacts related to, or caused by the COVID-19 pandemic, credit, market, operational, liquidity and interest rate risks associated with the Bank’s business and operations, changes in interest rates, changes in general business and economic conditions, changes in banking laws and regulations, loan losses, increases in expenses, changes in rates charged on loans and earned on investments, accounting estimates and judgments, changes in rates on deposits, competition effects, the amount of non-interest income earned, as well as other factors. Given these factors, readers should not place undue reliance on any forward-looking statements, which reflect management’s opinions only as of the date hereof. Except as otherwise required by law, the Bank assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

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,
		2022				2021				2022				2021
Interest and dividend income:
Loans		$	63,182			$	62,964			$	175,949			$	185,528
Investment securities			23,477				15,876				64,365				43,875
Investments in FHLB and FRB stock			279				299				837				859
Interest-bearing deposits in financial institutions			1,013				499				3,222				1,012
Total interest and dividend income			87,951				79,638				244,373				231,274
Interest expense:
Deposits			3,255				2,137				7,284				6,884
Securities sold under repurchase agreements			2,348				848				4,023				2,583
Borrowings			1,317				-				1,317				-
Total interest expense			6,920				2,985				12,624				9,467
Net interest income			81,031				76,653				231,749				221,807
Provision for loan losses			4,500				(1,000	)			3,500				1,000
Net interest income after provision for loan losses			76,531				77,653				228,249				220,807
Non-interest income:
Service charges on deposit accounts			1,632				1,427				4,732				4,113
Card income			257				955				2,301				2,363
Other income			2,677				2,726				7,342				9,091
Total non-interest income			4,566				5,108				14,375				15,567
Non-interest expense:
Salaries and employee benefits			29,590				27,702				88,137				82,432
FDIC and other insurance expense			1,055				931				3,069				2,645
Occupancy expense			4,030				3,667				11,431				10,365
Software and equipment expense			3,909				3,447				11,322				10,431
Professional and legal services			2,121				1,598				5,548				4,350
Marketing expense			1,997				1,729				5,214				3,519
Other expense			4,889				5,008				13,466				13,660
Total non-interest expense			47,591				44,082				138,187				127,402
Income before income tax expense			33,506				38,679				104,437				108,972
Income tax expense			6,872				8,158				20,879				22,745
Net income		$	26,634			$	30,521			$	83,558			$	86,227
Basic earnings per common share		$	214.68			$	242.49			$	669.90			$	682.94
Diluted earnings per common share		$	209.64			$	238.07			$	654.87			$	672.37
Basic weighted-average shares outstanding			124,067				125,871				124,732				126,260
Diluted weighted-average shares outstanding			127,047				128,204				127,595				128,244

FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
		Sept. 30, 2022				Dec. 31, 2021
Assets
Cash and due from banks:
Noninterest-bearing balances		$	80,653			$	49,025
Interest-bearing balances			170,558				1,252,646
Total cash and due from banks			251,211				1,301,671
Securities available-for-sale, at fair value			122,916				139,947
Securities held-to-maturity, at amortized cost			4,880,124				4,366,821
Loans held for sale			-				9,430
Gross loans			6,481,640				5,453,279
Allowance for loan losses			(76,485	)			(72,880	)
Unamortized deferred loan fees, net			(12,837	)			(8,650	)
Loans, net			6,392,318				5,371,749
Other real estate owned, net			-				966
Investments in FHLB and FRB stock, at cost			19,790				20,031
Bank premises and equipment, net			116,024				115,827
Deferred tax assets, net			30,285				27,939
Other assets			124,860				83,879
Total assets		$	11,937,528			$	11,438,260
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits		$	3,603,835			$	3,552,248
Interest-bearing demand deposits			2,331,221				2,187,998
Savings and money market savings			2,711,594				2,755,862
Time deposits			703,611				745,382
Total deposits			9,350,261				9,241,490
Securities sold under repurchase agreements			704,220				916,672
Borrowings			500,000				-
Other liabilities			89,837				38,536
Total liabilities			10,644,318				10,196,698
Stockholders' Equity:
Common Stock, par value $20; authorized 250,000 123,832 and 125,628 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively			2,477				2,513
Additional paid-in capital			180,450				89,972
Retained earnings			1,120,752				1,147,661
Accumulated other comprehensive (loss) income			(10,469	)			1,416
Total stockholders' equity			1,293,210				1,241,562
Total liabilities and stockholders' equity		$	11,937,528			$	11,438,260

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221017005117/en/

John Hinrichs

Executive Vice President

562-437-0011, ext. 4835

Roger Pondel

PondelWilkinson Inc.

Investor Relations

310-279-5980

investor@pondel.com

Source: Farmers & Merchants Bank of Long Beach

FAQ

What were Farmers & Merchants Bank's Q3 2022 earnings results?

Farmers & Merchants Bank reported a net income of $26.6 million for Q3 2022, down from $30.5 million in Q3 2021.

How did total assets change for Farmers & Merchants Bank by September 30, 2022?

Total assets increased to $11.9 billion as of September 30, 2022, up from $11.4 billion at the end of 2021.

What is the capital ratio of Farmers & Merchants Bank as of September 30, 2022?

The bank reported a total risk-based capital ratio of 16.61%, significantly above regulatory requirements.

How did the interest expense for Farmers & Merchants Bank change in Q3 2022?

Interest expense rose to $6.9 million in Q3 2022, compared to $3.0 million in Q3 2021.

What impact did the interest rate environment have on Farmers & Merchants Bank's performance?

The rising interest rates contributed to increased interest and dividend income but also raised interest expenses.