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

Rhea-AI Summary

Farmers & Merchants Bank of Long Beach reports financial results for Q3 2023, with strong balance sheet and stable deposit base. Cost of funds may impact performance in the near-term. Total interest and dividend income rose to $107.9 million. Net interest income before provision for credit losses decreased to $64.9 million. Net interest margin was 2.14% for Q3 2023. Non-interest income was $4.1 million. Net income was $17.4 million. Gross loans amounted to $6.81 billion. Deposits were $9.06 billion. Total assets increased to $12.5 billion. Capital ratios exceed regulatory requirements. Bank repurchased 93 shares of common stock.

Positive

• Farmers & Merchants Bank of Long Beach reports strong balance sheet and stable deposit base. Total interest and dividend income rose to $107.9 million. Gross loans amounted to $6.81 billion. Deposits were $9.06 billion. Total assets increased to $12.5 billion. Capital ratios exceed regulatory requirements.

Negative

• Cost of funds may impact performance in the near-term. Net interest income before provision for credit losses decreased to $64.9 million. Net interest margin was 2.14% for Q3 2023. Non-interest income was $4.1 million. Net income was $17.4 million.

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 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/

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 the financial results for Farmers & Merchants Bank of Long Beach in Q3 2023?

Farmers & Merchants Bank of Long Beach reported strong financial results for Q3 2023, with a strong balance sheet and stable deposit base. Total interest and dividend income rose to $107.9 million. Net interest income before provision for credit losses decreased to $64.9 million. Non-interest income was $4.1 million. Net income was $17.4 million.

What is the status of the bank's loans and deposits?

Gross loans amounted to $6.81 billion, and deposits were $9.06 billion at the end of Q3 2023.

How did the bank's capital ratios perform?

The bank's capital ratios exceeded regulatory requirements. The total risk-based capital ratio was 17.30%, the tier 1 risk-based capital ratio was 16.05%, the common equity tier 1 capital ratio was 16.05%, and the tier 1 leverage ratio was 10.80%.

Did the bank repurchase any shares of its common stock?

Yes, during Q3 2023, the bank repurchased 93 shares of its common stock on the open market at an average price of $5,125.78 per share, effectively closing out the remaining balance of the stock repurchase program.