Farmers & Merchants Bank of Long Beach Reports 2019 Third-Quarter Results

Company Release - 10/17/2019 8:05 AM ET

LONG BEACH, Calif.--(BUSINESS WIRE)-- Farmers & Merchants Bank of Long Beach (OTCQB: FMBL) today reported financial results for the third quarter ended September 30, 2019.

“The positive performance experienced in the first half of 2019 continued into the third quarter,” said Henry Walker, president of Farmers & Merchants Bank. “We achieved a solid increase in net income over the prior year period, along with further growth in deposits and net loans. At quarter’s end, total assets advanced to a record high $7.60 billion.”

Income Statement

For the 2019 third quarter, interest and dividend income rose to $71.9 million from $66.6 million in the 2018 third quarter. Interest and dividend income for the nine-month period ended September 30, 2019 increased to $210.4 million from $192.1 million reported for the same period in 2018.

Interest expense for the 2019 third quarter was $8.8 million, compared with $5.8 million a year ago. Interest expense for the nine-month period ended September 30, 2019 was $24.6 million, versus $15.4 million reported for the same period last year.

Net interest income for the 2019 third quarter rose to $63.1 million from $60.9 million for the third quarter of 2018 and advanced to $185.8 million for the first nine months of 2019 from $176.7 million for the same period in 2018.

Farmers & Merchants’ net interest margin remained the same at 3.47% for the 2019 and 2018 third quarters. Net interest margin was 3.47% for the first nine months of 2019, versus 3.41% for the same period in 2018.

The Bank did not post a provision for loan losses for the third quarter of 2019, compared with a $2.0 million provision for the third quarter of 2018. The Bank’s provision for loan losses was $250,000 in the first nine months of 2019, versus $2.0 million for the comparable prior year period. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.43% at September 30, 2019, compared with 1.47% at December 31, 2018.

Non-interest income was $5.0 million for the 2019 third quarter, compared with $4.7 million in the third quarter a year ago. Non-interest income was $14.4 million for the nine-month period ended September 30, 2019, compared with $13.6 million for the same period in 2018.

Non-interest expense for the 2019 third quarter was $41.7 million, versus $42.0 million for the same period last year. Non-interest expense for the first nine months of 2019 was $119.2 million, compared with $107.9 million last year.

Net income for the 2019 third quarter advanced to $22.8 million, or $172.51 per diluted share, from $20.7 million, or $157.82 per diluted share, in the year ago period. The Bank’s net income for the first nine months of 2019 was $66.9 million, or $510.80 per diluted share, up from $63.5 million, or $484.90 per diluted share, for the same period in 2018.

Balance Sheet

At September 30, 2019, net loans totaled $4.30 billion, compared with $4.19 billion at December 31, 2018. The Bank’s deposits totaled $5.85 billion at the end of the 2019 third quarter, compared with $5.58 billion at December 31, 2018. Non-interest-bearing deposits represented 37.8% of total deposits at September 30, 2019, versus 37.6% of total deposits at December 31, 2018. Total assets increased to $7.60 billion at September 30, 2019, compared with $7.31 billion at December 31, 2018.

At September 30, 2019, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 20.70%, a tier 1 risk-based capital ratio of 19.46%, a common equity tier 1 capital ratio of 19.46%, and a tier 1 leverage ratio of 14.04%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

“Our positive 2019 third quarter results again demonstrate that the Bank’s focus on achieving strong financial performance, with prudent credit underwriting and conservative operating principles, continues to create value for our stakeholders,” said Daniel Walker, chief executive officer and chairman of the board. “As well, our expansion one year ago into the robust community of Santa Barbara has widened our geographic reach within Southern California, proving the viability of our brand and attractiveness of the Bank’s financial strength and leadership position.”

During the third quarter, Farmers & Merchants Bank repurchased 238 shares of its common stock at a weighted average price of $8,355.31 per share. Year-to-date, the Bank has repurchased 2,400 shares at an average price of $8,194.03 per share. As previously disclosed in October 2018, F&M’s board of directors authorized the Bank to repurchase up to $20 million of its common stock prior to December 31, 2019. The Bank may continue to purchase shares of its common stock from time to time through various means, including open market transactions, privately negotiated transactions, or otherwise in accordance with applicable laws.

To the extent the Bank repurchases shares, the number of shares repurchased and the timing of 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.

About Farmers & Merchants Bank

Founded in Long Beach in 1907 by C.J. Walker, Farmers & Merchants Bank provides white-glove service to clients at 25 branches across Orange County, Long Beach, the South Bay and Santa Barbara, as well as through robust Online and Mobile Banking platforms. The Bank offers commercial and small business banking, business loan programs, home loans, and 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 Bank’s website, www.fmb.com.

Forward-Looking Statements

In addition to the historical information contained herein, this press release may contain forward-looking statements about Farmers & Merchants Bank of Long Beach, including statements about the Bank’s expectations regarding the amount of and timing, methods and funding sources for potential repurchases of its common stock. Readers of this press release should understand that such forward-looking statements are neither promises nor guarantees and are subject to various risks and uncertainties, many of which are beyond the Bank’s control. Such risks and uncertainties could cause actual results and actions to differ materially from those contemplated in such forward-looking statements and the Bank’s reported results should not be considered an indication of the Bank’s future performance. Factors that could cause or contribute to such differences include, but are not limited to, credit, market, operational, liquidity and interest rate risks associated with the Bank’s business and operations, changes in interest rates, changes in general business and economic conditions, changes in banking laws and regulations, loan losses, increases in expenses, changes in rates charged on loans and earned on investments, accounting estimates and judgments, changes in rates on deposits, competition effects, the amount of non-interest income earned, as well as other factors. Given these factors, readers should not place undue reliance on any forward-looking statement.

 
FARMERS & MERCHANTS BANK OF LONG BEACH
Income Statements (Unaudited)
(In thousands, except share and per share data)

Three Months Ended Sep. 30,

Nine Months Ended Sep. 30,

 

2019

 

 

2018

 

2019

 

2018

 
Interest and dividend income:
 
Loans

$

 

53,334

 

$

 

48,714

$

 

155,845

$

 

139,521

Investment securities

17,446

 

16,859

51,552

49,708

Investments in FHLB and FRB stock

351

 

353

1,056

1,058

Interest-bearing deposits in financial institutions

736

 

713

1,933

1,777

 
Total interest and dividend income

71,867

 

66,639

210,386

192,064

 
Interest expense:
 
Deposits

6,000

 

3,762

16,495

9,971

Securities sold under repurchase agreements

2,752

 

2,016

8,027

5,418

Other borrowings

11

 

4

52

7

 
Total interest expense

8,763

 

5,782

24,574

15,396

 
Net interest income

63,104

 

60,857

185,812

176,668

 
Provision for loan losses

-

 

2,000

250

2,000

 
Net interest income after provision for loan losses

63,104

 

58,857

185,562

174,668

 
Non-interest income:
 
Service charges on deposit accounts

1,652

 

1,543

5,077

4,116

Card income

765

 

961

2,571

2,849

Other real estate owned income

194

 

-

227

-

Other income

2,410

 

2,193

6,508

6,636

 
Total non-interest income

5,021

 

4,697

14,383

13,601

 
Non-interest expense:
 
Salaries and employee benefits

25,986

 

21,835

72,620

66,189

FDIC and other insurance expense

(343

)

647

911

1,954

Occupancy expense

2,914

 

2,529

8,583

7,283

Software and equipment expense

3,219

 

2,675

9,428

7,809

Other real estate owned expense

5

 

11

84

49

Professional and legal services

1,747

 

1,597

5,311

4,170

Marketing expense

2,613

 

1,962

6,549

4,183

Other expense

5,567

 

10,729

15,685

16,242

 
Total non-interest expense

41,708

 

41,985

119,171

107,879

 
Income before income tax expense

26,417

 

21,569

80,774

80,390

 
Income tax expense

3,582

 

906

13,860

16,903

 
Net income

$

 

22,835

 

$

 

20,663

$

 

66,914

$

 

63,487

 
Basic earnings per common share

$

 

177.61

 

$

 

157.82

$

 

516.46

$

 

484.90

Diluted earnings per common share

$

 

172.51

 

$

 

157.82

$

 

510.80

$

 

484.90

Basic weighted-average shares outstanding

128,570

 

130,928

129,564

130,928

Diluted weighted-average shares outstanding

132,370

 

130,928

130,999

130,928

 
FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
 

Sep. 30, 2019

Dec. 31, 2018

 
Assets
 
Cash and due from banks:
Noninterest-bearing balances

$

 

81,903

 

$

 

69,486

 

Interest-bearing balances

77,448

 

17,661

 

 
Total cash and due from banks

159,351

 

87,147

 

Securities available-for-sale, at fair value

531,545

 

134,008

 

Securities held-to-maturity, at amortized cost

2,334,939

 

2,649,460

 

Loans held for sale

23,133

 

20,718

 

Gross loans

4,369,224

 

4,260,093

 

Allowance for loan losses

(62,515

)

(62,450

)

Unamortized deferred loan fees, net

(5,417

)

(5,973

)

 
Loans, net

4,301,292

 

4,191,670

 

 
Other real estate owned, net

-

 

1,724

 

Investments in FHLB and FRB stock, at cost

20,160

 

20,690

 

Bank premises and equipment, net

109,259

 

100,478

 

Deferred tax assets, net

20,946

 

19,680

 

Other assets

96,455

 

82,661

 

 
Total assets

$

 

7,597,080

 

$

 

7,308,236

 

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

$

 

2,208,627

 

$

 

2,098,097

 

Interest-bearing demand deposits

1,253,483

 

1,178,886

 

Savings and money market savings

1,647,666

 

1,566,446

 

Time deposits

739,507

 

741,037

 

 
Total deposits

5,849,283

 

5,584,466

 

Securities sold under repurchase agreements

603,188

 

609,791

 

FHLB advances

-

 

30,000

 

Other liabilities

76,383

 

56,106

 

 
Total liabilities

6,528,854

 

6,280,363

 

 
Stockholders' Equity:
 
Common Stock, par value $20; authorized 250,000
shares; 128,528 and 130,928 shares issued

2,571

 

2,619

 

and outstanding at September 30, 2019 and
December 31, 2018, respectively
Additional paid-in capital

93,936

 

112,044

 

Retained earnings

970,608

 

914,164

 

Accumulated other comprehensive income

1,111

 

(954

)

 
Total stockholders' equity

1,068,226

 

1,027,873

 

 
Total liabilities and stockholders' equity

$

 

7,597,080

 

$

 

7,308,236

 

 

 

John Hinrichs
Executive Vice President
562-437-0011, ext. 4835

Roger Pondel
PondelWilkinson Inc.
Investor Relations
310-279-5980
[email protected]

Source: Farmers & Merchants Bank