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Farmers & Merchants Bank of Long Beach Reports 2023 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, 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

 

 

Contacts

John Hinrichs

Executive Vice President

562-437-0011, ext. 4835

Roger Pondel

PondelWilkinson Inc.

Investor Relations

310-279-5980

investor@pondel.com

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