Farmers & Merchants Bank of Long Beach Reports 2024 Second Quarter Results

Rhea-AI Summary

Farmers & Merchants Bank of Long Beach (OTCQX: FMBL) reported its Q2 2024 financial results, demonstrating resilience amid challenges for regional banks. Key highlights include:

- Total interest and dividend income rose to $108.7 million, up from $102.3 million in Q2 2023
- Net interest income before provision for credit losses was $57.1 million, down from $65.1 million in Q2 2023
- Net income for Q2 2024 was $13.5 million, or $107.86 per diluted share, compared to $18.1 million, or $143.69 per diluted share in Q2 2023
- Total assets reached $12.19 billion as of June 30, 2024
- The Board authorized an additional $10 million stock repurchase program

Positive

• Total interest and dividend income increased to $108.7 million in Q2 2024, up from $102.3 million in Q2 2023
• Total deposits grew to $8.81 billion at June 30, 2024, compared with $8.67 billion at December 31, 2023
• The Bank's capital ratios exceeded regulatory requirements for 'well-capitalized' status, with a total risk-based capital ratio of 18.26%
• Board authorized an additional $10 million stock repurchase program, showing confidence in the Bank's long-term future
• Non-interest income increased to $10.6 million in Q2 2024, up from $4.4 million in Q2 2023, primarily due to a $6.3 million gain from Visa stock exchange

Negative

• Net interest income before provision for credit losses decreased to $57.1 million in Q2 2024, down from $65.1 million in Q2 2023
• Net income for Q2 2024 declined to $13.5 million, compared to $18.1 million in Q2 2023
• Net interest margin decreased to 1.92% in Q2 2024, down from 2.19% in Q2 2023
• Gross loans decreased to $6.51 billion as of June 30, 2024, compared with $6.76 billion at December 31, 2023
• Noninterest-bearing deposits decreased to 32.0% of total deposits at June 30, 2024, down from 33.2% at December 31, 2023

--Board Authorizes Repurchase of Up to an Additional $10 million of the Bank’s Common Stock--

LONG BEACH, Calif.--(BUSINESS WIRE)-- Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQX: FMBL) today reported financial results for the second quarter ended June 30, 2024.

"F&M’s second quarter performance demonstrated the Bank’s resilience and strategic management of resources amidst the continued challenging external environment for regional banks,” said W. Henry Walker, Chief Executive Officer. “We are staying true to our core values, which include conservative lending policies and maintaining a stable loan portfolio. At the close of the second quarter, our balance sheet remains strong, and we are pleased to report again that F&M’s capital ratios far exceeded all regulatory requirements.

“We continue working actively to improve the return on our investments and manage expenses, while meeting increased regulatory demands, since F&M was categorized last year as a regional, versus community, bank. Growth in lower cost deposits will significantly help with the scaling of expenses and paying existing borrowings, and, in turn, enhancing profitability over time. Although the yield on our loan portfolio continues to improve, we find that our HTM (Held-to-Maturity) securities portfolio continues to exert downward pressure on earnings, as is the case with many banks. Fortunately, both categories of F&M investments are of superior quality, posing no risk to capital, and the Bank remains safe and sound.”

Daniel Walker, F&M’s Executive Chairman of the Board, added, “Our commitment to exceptional service remains a top priority, and combined with F&M’s financial strength, is enabling us to attract new clients. Showing confidence in F&M’s long-term future, we are pleased that our Board has authorized the repurchase of up to an additional $10 million of the Bank’s common stock, following the $10 million repurchase authorization in January of this year.”

Operating Results

For the second quarter of 2024, total interest and dividend income rose to $108.7 million from $102.3 million for the second quarter of 2023. Total interest and dividend income for the six months ended June 30, 2024 increased to $217.3 million from $199.6 million reported for the six months ended June 30, 2023.

Total interest expense for the second quarter of 2024 was $51.6 million, compared with $37.3 million in the second quarter of 2023. Interest expense for the six months ended June 30, 2024 was $102.8 million, compared to $63.7 million reported for the same period in 2023.

Net interest income before provision for credit losses for the second quarter of 2024 was $57.1 million versus $65.1 million for the second quarter of 2023. Net interest income for the six months ended June 30, 2024 was $114.5 million, compared with $135.9 million for the six months ended June 30, 2023.

F&M’s net interest margin was 1.92% for the second quarter of 2024, versus 2.19% in the second quarter of 2023. Net interest margin was 1.92% for the six months ended June 30, 2024, compared with 2.31% for the same period in 2023.

The Bank recorded a recapture of provision for credit losses of $1.0 million in the second quarter of 2024 due to a reduced level of unfunded loan commitments, compared with no net provision for credit losses for the second quarter of 2023. For the six months ended June 30, 2024, the Bank recorded a $3.5 million recapture of provision for credit losses, compared with no net provision for credit losses for the six months ended June 30, 2023.

Non-interest income was $10.6 million for the second quarter of 2024, compared with $4.4 million in the second quarter of 2023. For the six months ended June 30, 2024, total non-interest income was $18.8 million, compared with $8.2 million for the same period in 2023. The increase in non-interest income was due primarily to Visa Inc. accepting the Bank’s tender of its approximately 30 thousand shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock. As a result of the exchange, the Bank marked its Visa Class C common stock to fair value and recorded a gain of $6.3 million based on the conversion and the closing price of Visa Class A common stock on June 30, 2024.

Total non-interest expense for the second quarter of 2024 was $49.8 million, compared with $50.8 million in the second quarter of 2023. Non-interest expense for the six months ended June 30, 2024 was $99.8 million, compared with $99.1 million for the six months ended June 30, 2023.

Net income for the second quarter of 2024 was $13.5 million, or $107.86 per diluted share, compared with $18.1 million, or $143.69 per diluted share, for the second quarter of 2023. Net income for the six months ended June 30, 2024 was $26.5 million, or $210.54 per diluted share, compared with $39.8 million, or $314.54 per diluted share, for the six months ended June 30, 2023.

Balance Sheet

Gross loans were $6.51 billion as of June 30, 2024, compared with $6.76 billion at December 31, 2023. The Bank’s allowance for loan losses totaled $97.5 million, or 1.50% of loans held-for-investment at June 30, 2024, compared with $97.9 million, or 1.45% of loans held-for-investment at December 31, 2023.

The Bank’s total deposits were $8.81 billion at June 30, 2024, compared with $8.67 billion at December 31, 2023. Noninterest-bearing deposits represented 32.0% of total deposits at June 30, 2024, versus 33.2% of total deposits at December 31, 2023. Securities sold under repurchase agreements grew to $926.2 million at June 30, 2024, from $909.4 million at December 31, 2023. Borrowings were $1.0 billion as of June 30, 2024 and December 31, 2023.

Total assets were $12.19 billion as of June 30, 2024 compared with $12.04 billion at December 31, 2023. Total stockholders’ equity was $1.36 billion at June 30, 2024.

Capital

Capital ratios are the foundation of safety in all banks, and F&M continues to exceed national banks and peer banks in this area. 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 18.26%; its tier 1 risk-based capital ratio was 17.00%, with a common equity tier 1 capital ratio of 17.00%, and a tier 1 leverage ratio of 11.21%, as of June 30, 2024. The minimum ratios for capital adequacy for a “well-capitalized” bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

Stock Repurchase Program

During the first half of 2024, the Bank repurchased 1,824 shares of its common stock on the open market at an average repurchase price of $4,796.46 per share, pursuant to the stock repurchase program announced in January 2024, under which the board of directors authorized the repurchase of up to $10 million of the Bank’s common stock, which expires December 31, 2024.

As noted above, the Board authorized the repurchase of up to an additional $10 million of the Bank’s common stock from time to time through May 31, 2025. Under the stock repurchase program, the Bank may purchase shares of its common stock through various means, including open market transactions and privately negotiated transactions, in each case, subject to applicable requirements and laws. To the extent the Bank repurchases shares, the number of shares repurchased and the timing of any repurchases will depend on a number of factors, including, but not limited to, stock price, trading volume, regulatory requirements, general business conditions and other factors. The Bank may choose to modify, suspend or discontinue such proposed repurchases at any time and anticipates that any such repurchases will be funded from existing cash and cash equivalents or future cash flow. The new stock repurchase program does not obligate the Bank to repurchase any specific number of shares in any particular period.

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 27 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 June 30,								Six Months Ended June 30,
			2024				2023				2024				2023
Interest and dividend income:
Loans		$	74,025			$	74,632			$	149,510			$	147,107
Investment securities			19,703				22,345				40,074				45,158
Investments in FHLB and FRB stock			460				414				999				814
Interest-bearing deposits in financial institutions			14,475				4,957				26,716				6,557
Total interest and dividend income			108,663				102,348				217,299				199,636
Interest expense:
Deposits			29,319				19,611				56,778				33,569
Securities sold under repurchase agreements			9,483				7,274				19,093				13,294
Borrowings			12,767				10,390				26,890				16,881
Total interest expense			51,569				37,275				102,761				63,744
Net interest income before provision for credit losses			57,094				65,073				114,538				135,892
Provision for credit losses
Loans			-				-				(1,500	)			-
Investment securities			-				-				-				100
Reserve for unfunded loan commitments			(1,000	)			-				(2,000	)			(100	)
Total provision for credit losses			(1,000	)			-				(3,500	)			-
Net interest income after provision for credit losses			58,094				65,073				118,038				135,892
Non-interest income:
Service charges on deposit accounts			1,877				1,810				3,686				3,354
Card income			214				370				439				600
Other income			8,473				2,206				14,682				4,267
Total non-interest income			10,564				4,386				18,807				8,221
Non-interest expense:
Salaries and employee benefits			30,974				30,915				61,751				62,708
FDIC and other insurance expense			2,637				1,846				5,511				3,604
Occupancy expense			3,909				3,711				7,799				7,538
Software and equipment expense			4,468				3,803				8,731				7,663
Other real estate owned expense			212				-				249				-
Professional and legal services			3,102				2,353				5,597				3,483
Marketing expense			919				2,669				1,957				3,551
Other expense			3,533				5,522				8,240				10,567
Total non-interest expense			49,754				50,819				99,835				99,114
Income before income tax expense			18,904				18,640				37,010				44,999
Income tax expense			5,370				491				10,474				5,227
Net income		$	13,534			$	18,149			$	26,536			$	39,772
Basic earnings per common share		$	111.12			$	147.28			$	217.01			$	322.75
Diluted earnings per common share		$	107.86			$	143.69			$	210.54			$	314.54
Basic weighted-average shares outstanding			121,792				123,228				122,282				123,228
Diluted weighted-average shares outstanding			125,481				126,301				126,038				126,444

FARMERS & MERCHANTS BANK OF LONG BEACH Balance Sheets (Unaudited) (In thousands, except share and per share data)
	Jun. 30, 2024				Dec. 31, 2023
Assets
Cash and due from banks:
Noninterest-bearing balances	$	66,258			$	74,595
Interest-bearing balances		1,246,277				548,874
Total cash and due from banks		1,312,535				623,469
Securities available-for-sale, at fair value		98,181				115,883
Securities held-to-maturity, at amortized cost		4,029,122				4,301,060
Loans held for sale		460				-
Gross loans		6,506,539				6,756,207
Allowance for loan losses		(97,510	)			(97,900	)
Unamortized deferred loan fees, net		(9,156	)			(11,469	)
Loans, net		6,399,873				6,646,838
Other real estate owned, net		2,929				-
Investments in FHLB and FRB stock, at cost		22,740				22,798
Bank premises and equipment, net		124,634				125,929
Deferred tax assets, net		44,456				45,723
Other assets		158,152				154,154
Total assets	$	12,193,082			$	12,035,854
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	2,820,940			$	2,880,315
Interest-bearing demand deposits		2,267,720				2,069,275
Savings and money market savings		2,675,284				2,661,312
Time deposits		1,049,341				1,059,166
Total deposits		8,813,285				8,670,068
Securities sold under repurchase agreements		926,151				909,376
Borrowings		1,000,000				1,000,000
Other liabilities		92,926				104,965
Total liabilities		10,832,362				10,684,409
Stockholders' Equity:
Common Stock, par value $20; authorized 250,000 shares; 123,969 and 123,135 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		2,479				2,463
Additional paid-in capital		174,863				184,483
Retained earnings		1,189,629				1,169,759
Accumulated other comprehensive loss		(6,251	)			(5,260	)
Total stockholders' equity		1,360,720				1,351,445
Total liabilities and stockholders' equity	$	12,193,082			$	12,035,854

 

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Kevin Tiber

President

562 499-4829

Roger Pondel

PondelWilkinson Inc.

Investor Relations

310-279-5980

investor@pondel.com

Source: Farmers & Merchants Bank of Long Beach

FAQ

What was Farmers & Merchants Bank's (FMBL) net income for Q2 2024?

Farmers & Merchants Bank (FMBL) reported a net income of $13.5 million, or $107.86 per diluted share, for the second quarter of 2024.

How did FMBL's total interest and dividend income change in Q2 2024 compared to Q2 2023?

FMBL's total interest and dividend income increased to $108.7 million in Q2 2024, up from $102.3 million in Q2 2023.

What was FMBL's net interest margin for Q2 2024?

FMBL's net interest margin was 1.92% for the second quarter of 2024, compared to 2.19% in the second quarter of 2023.

How much did FMBL authorize for its new stock repurchase program in 2024?

FMBL's Board authorized the repurchase of up to an additional $10 million of the Bank's common stock through May 31, 2025.

What was FMBL's total risk-based capital ratio as of June 30, 2024?

FMBL's total risk-based capital ratio was 18.26% as of June 30, 2024, exceeding regulatory requirements for a 'well-capitalized' financial institution.