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

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

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

 

 

 

Contacts

Kevin Tiber

President

562 499-4829

Roger Pondel

PondelWilkinson Inc.

Investor Relations

310-279-5980

investor@pondel.com

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