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

Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQX: FMBL) today reported financial results for the first quarter ended March 31, 2024.

“F&M’s performance for the first three months of 2024 met internal expectations during this transitional year and again demonstrated the Bank’s resiliency to the continued external challenges facing regional banks throughout the nation,” said W. Henry Walker, Chief Executive Officer. “With stringent adherence to our historically conservative lending policies and prudent financial controls to safeguard our clients’ deposits, we achieved profitable operations for the first quarter, along with capital ratios that far exceeded regulatory requirements.

“The repricing of assets for the year is centered in loans and securities and is expected to exceed $1.2 billion in 2024. The high quality of our loan portfolio is reflected in our delinquency rate, which was significantly less than one-tenth of one percent in the first quarter and is a testament to our stringent lending policies.”

Daniel Walker, F&M’s Executive Chairman of the Board, said, “We are pleased to continue our focus on Orange County, with the opening of our 27th location. Our new Laguna Beach branch is strategically situated on a major thoroughfare in Orange County, which is an important and growing marketing region for F&M. Persistently high interest rates will continue to challenge near-term earnings, but we have conviction in our time-tested commitment to stringent credit quality standards in both our loan and securities portfolios, even if some yield must be sacrificed along the way.

“F&M is in a strong competitive position in the markets we serve. Management remains focused on improving net interest margin over the long term, as the key to driving earnings, and, in turn, enhancing long-term stockholder value,” he added.

Operating Results

For the three months ended March 31, 2024, total interest and dividend income rose to $108.6 million from $97.3 million in the first quarter of 2023. Total interest expense for the first quarter of 2024 was $51.2 million, compared with $26.5 million in the first quarter of 2023.

Net interest income before provision for credit losses for the first quarter of 2024 was $57.4 million versus $70.8 million for the first quarter of 2023. F&M’s net interest margin was 1.91% for the first quarter of 2024, versus 2.43% in the first quarter of 2023.

The Bank recorded a recapture of provision for credit losses of $2.5 million in the first quarter of 2024 due to strong recoveries and a reduced level of unfunded loan commitments, compared with no net provision for credit losses for the first quarter of 2023.

Non-interest income was $8.2 million for the first quarter of 2024, compared with $3.8 million in the first quarter of 2023. Total non-interest expense for the first quarter of 2024 was $50.1 million, compared with $48.3 million in the first quarter of 2023, which reflected management’s focus on controlling expenses.

First quarter 2024 net income was $13.0 million, or $102.71 per diluted share, compared with $21.6 million, or $170.86 per diluted share, for the first quarter of 2023.

Balance Sheet

Gross loans were $6.60 billion as of March 31, 2024, compared with $6.76 billion at December 31, 2023. The Bank’s allowance for loan losses totaled $97.5 million, or 1.48% of loans held-for-investment at March 31, 2024, compared with $97.9 million, or 1.45% of loans held-for-investment, at December 31, 2023.

F&M continues to reflect a dependable, stable deposit base. The Bank’s total deposits were $8.60 billion at March 31, 2024, compared with $8.67 billion at December 31, 2023. Noninterest-bearing deposits represented 32.6% of total deposits at March 31, 2024, versus 33.2% of total deposits at December 31, 2023. Securities sold under repurchase agreements grew to $942.5 million at March 31, 2024, from $909.4 million at December 31, 2023.

Borrowings increased to $1.20 billion as of March 31, 2024, from $1.0 billion as of December 31, 2023. Executive management made the strategic decision to secure additional borrowings in the first quarter without incurring additional net interest expense, while providing ample liquidity for the upcoming tax season.

Total assets were $12.19 billion as of March 31, 2024, compared with $12.04 billion at December 31, 2023. Total stockholders’ equity was $1.36 billion at March 31, 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 18.02%; its tier 1 risk-based capital ratio was 16.77%, with a common equity tier 1 capital ratio of 16.77%, and a tier 1 leverage ratio of 11.09%, as of March 31, 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 quarter of 2024, the Bank repurchased 1,165 shares of its common stock on the open market at an average repurchase price of $4,978.26 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. To the extent the Bank repurchases additional shares under this program, which expires December 31, 2024, 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.

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 March 31,

 

2024

 

 

2023

 

 
Interest and dividend income:
Loans

$

75,485

 

$

72,475

 

Investment securities

 

20,371

 

 

22,813

 

Investments in FHLB and FRB stock

 

539

 

 

400

 

Interest-bearing deposits in financial institutions

 

12,241

 

 

1,600

 

Total interest and dividend income

 

108,636

 

 

97,288

 

 
Interest expense:
Deposits

 

27,459

 

 

13,958

 

Securities sold under repurchase agreements

 

9,610

 

 

6,020

 

Borrowings

 

14,123

 

 

6,491

 

Total interest expense

 

51,192

 

 

26,469

 

 
Net interest income before provision for credit losses

 

57,444

 

 

70,819

 

 
Provision for credit losses
Loans

 

(1,500

)

 

-

 

Investment securities

 

-

 

 

100

 

Reserve for unfunded loan commitments

 

(1,000

)

 

(100

)

Total provision for credit losses

 

(2,500

)

 

-

 

 
Net interest income after provision for credit losses

 

59,944

 

 

70,819

 

 
Non-interest income:
Service charges on deposit accounts

 

1,809

 

 

1,544

 

Card income

 

225

 

 

230

 

Other income

 

6,209

 

 

2,061

 

Total non-interest income

 

8,243

 

 

3,835

 

 
Non-interest expense:
Salaries and employee benefits

 

30,777

 

 

31,793

 

FDIC and other insurance expense

 

2,874

 

 

1,758

 

Occupancy expense

 

3,890

 

 

3,827

 

Software and equipment expense

 

4,263

 

 

3,860

 

Other real estate owned expense

 

37

 

 

-

 

Professional and legal services

 

2,495

 

 

1,130

 

Marketing expense

 

1,038

 

 

882

 

Other expense

 

4,707

 

 

5,045

 

Total non-interest expense

 

50,081

 

 

48,295

 

 
Income before income tax expense

 

18,106

 

 

26,359

 

 
Income tax expense

 

5,104

 

 

4,736

 

 
Net income

$

13,002

 

$

21,623

 

 
Basic earnings per common share

$

105.90

 

$

175.47

 

Diluted earnings per common share

$

102.71

 

$

170.86

 

Basic weighted-average shares outstanding

 

122,772

 

 

123,228

 

Diluted weighted-average shares outstanding

 

126,592

 

 

126,552

 

FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
 
Mar. 31, 2024 Dec. 31, 2023
 
Assets
Cash and due from banks:
Noninterest-bearing balances

$

58,340

 

$

74,595

 

Interest-bearing balances

 

1,014,066

 

 

548,874

 

Total cash and due from banks

 

1,072,406

 

 

623,469

 

Securities available-for-sale, at fair value

 

110,592

 

 

115,883

 

Securities held-to-maturity, at amortized cost

 

4,175,781

 

 

4,301,060

 

Gross loans

 

6,602,292

 

 

6,756,207

 

Allowance for loan losses

 

(97,501

)

 

(97,900

)

Unamortized deferred loan fees, net

 

(9,986

)

 

(11,469

)

Loans, net

 

6,494,805

 

 

6,646,838

 

Other real estate owned, net

 

2,929

 

 

-

 

Investments in FHLB and FRB stock, at cost

 

22,858

 

 

22,798

 

Bank premises and equipment, net

 

125,281

 

 

125,929

 

Deferred tax assets, net

 

47,574

 

 

45,723

 

Other assets

 

138,857

 

 

154,154

 

Total assets

$

12,191,083

 

$

12,035,854

 

 
Liabilities and Stockholders' Equity
 
Liabilities:
Deposits:
Noninterest-bearing demand deposits

$

2,800,304

 

$

2,880,315

 

Interest-bearing demand deposits

 

2,080,451

 

 

2,069,275

 

Savings and money market savings

 

2,661,382

 

 

2,661,312

 

Time deposits

 

1,055,492

 

 

1,059,166

 

Total deposits

 

8,597,629

 

 

8,670,068

 

Securities sold under repurchase agreements

 

942,472

 

 

909,376

 

Borrowings

 

1,200,000

 

 

1,000,000

 

Other liabilities

 

94,266

 

 

104,965

 

Total liabilities

 

10,834,367

 

 

10,684,409

 

 
Stockholders' Equity:
Common Stock, par value $20; authorized 250,000 shares; 121,970 and 123,135 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

2,440

 

 

2,463

 

Additional paid-in capital

 

180,552

 

 

184,483

 

Retained earnings

 

1,179,491

 

 

1,169,759

 

Accumulated other comprehensive loss

 

(5,767

)

 

(5,260

)

Total stockholders' equity

 

1,356,716

 

 

1,351,445

 

Total liabilities and stockholders' equity

$

12,191,083

 

$

12,035,854

 

 

Contacts

Kevin Tiber

President

562 499-4829

Roger Pondel

PondelWilkinson Inc.

Investor Relations

310-279-5980

investor@pondel.com

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