Farmers & Merchants Bank of Long Beach Reports 2020 Third-Quarter Results

Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQB: FMBL) today reported financial results for the third quarter ended September 30, 2020.

“The Bank reported profitable operations and maintained its financial strength for the third quarter of 2020, despite the continuing effect of the pandemic and its impact on the economy,” said Henry Walker, president. “At quarter’s end, our capital ratios far exceeded regulatory requirements and remained strong in all categories. F&M is prepared to endure the protracted impact of COVID-19 and manage through these challenging times for the benefit of all stakeholders, as it has managed through other challenges for more than a century.”

Income Statement

For the 2020 third quarter, interest and dividend income amounted to $70.8 million, compared with $71.9 million in the 2019 third quarter. Interest and dividend income for the nine-month period ended September 30, 2020 increased to $214.6 million from $210.4 million reported for the same period in 2019.

Interest expense for the 2020 third quarter declined to $5.8 million from $8.8 million a year ago. Interest expense for the nine-month period ended September 30, 2020 was $20.5 million, versus $24.6 million reported for the same period last year.

Net interest income before provision for loan losses for the 2020 third quarter rose to $65.0 million from $63.1 million for the third quarter of 2019 and advanced to $194.2 million for the first nine months of 2020 from $185.8 million for the same period in 2019.

Farmers & Merchants’ net interest margin for the 2020 third quarter was 2.80%, versus 3.47% for the 2019 third quarter. Net interest margin was 3.05% for the first nine months of 2020, versus 3.47% for the same period in 2019.

For the 2020 third quarter, the Bank recorded a provision for loan losses of $3.0 million and did not record a provision for loan losses in last year’s third quarter. The Bank’s provision for loan losses was $8.5 million for the first nine months of 2020, versus $250,000 for the first nine months of 2019. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.33% at September 30, 2020, compared with 1.42% at December 31, 2019.

Non-interest income was $5.5 million for the 2020 third quarter, compared with $5.0 million in the third quarter a year ago. Non-interest income was $14.5 million for the nine-month period ended September 30, 2020, compared with $14.4 million for the same period in 2019.

Non-interest expense for the 2020 third quarter was $43.8 million, versus $41.7 million for the same period last year. Non-interest expense for the first nine months of 2020 was $130.0 million, compared with $119.2 million last year.

Net income for the 2020 third quarter amounted to $19.9 million, or $155.18 per diluted share, compared with $22.8 million, or $172.51 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2020 was $58.4 million, or $455.18 per diluted share, versus $66.9 million, or $510.80 per diluted share, for the same period in 2019.

Balance Sheet

At September 30, 2020, net loans totaled $5.3 billion, compared with $4.3 billion at December 31, 2019. The Bank’s deposits totaled $7.4 billion at the end of the 2020 third quarter, compared with $5.8 billion at December 31, 2019. Non-interest-bearing deposits represented 38.9% of total deposits at September 30, 2020, versus 36.6% of total deposits at December 31, 2019. Total assets increased to $9.7 billion at September 30, 2020, compared with $7.6 billion at December 31, 2019.

At September 30, 2020, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 20.38%, a tier 1 risk-based capital ratio of 19.13%, a common equity tier 1 capital ratio of 19.13%, and a tier 1 leverage ratio of 12.69%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

“Since the start of the pandemic, our top priority has been the health and welfare of our employees, clients, shareholders and the communities we serve,” said Daniel Walker, chief executive officer and chairman of the board. “Our entire team continues to support all of our stakeholders in a thoughtful, disciplined and compassionate manner. While a high degree of uncertainty still surrounds the magnitude, duration and economic impact of the pandemic, we are confident that F&M’s financial position, including high levels of capital and liquidity, will allow us to successfully navigate these challenging times.”

During the third quarter, the Bank repurchased 661 shares of its common stock at an average price of $6,045.58 per share. For the first nine months of 2020, the Bank purchased a total of 806 shares of its common stock at an average price of $6,047.15. The purchases were made as part of a stock repurchase program announced in April 2020, under which the board of directors authorized the repurchase of up to $20 million of the Bank’s common stock. To the extent the Bank repurchases additional shares pursuant to this program, which expires December 31, 2021, 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

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 its Online and Mobile Banking platforms. The Bank offers commercial and small business banking, business loan programs, home loans, and consumer 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 ability to endure and navigate through the challenges caused by the COVID-19 pandemic and expectations regarding the amount of, timing, and methods 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, the adverse effects and negative impacts related to, or caused by the COVID-19 pandemic, 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 statements, which reflect management’s opinions only as of the date hereof. Except as otherwise required by law, the Bank assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

FARMERS & MERCHANTS BANK OF LONG BEACH
Income Statements (Unaudited)
(In thousands, expect per share data)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Interest and dividend income:
Loans	$	57,538		$	53,334		$	167,883		$	155,845
Investment securities		12,746			17,446			44,836			51,552
Investments in FHLB and FRB stock		260			351			779			1,056
Interest-bearing deposits in financial institutions		207			736			1,146			1,933
Total interest and dividend income		70,751			71,867			214,644			210,386
Interest expense:
Deposits		3,767			6,000			13,909			16,495
Securities sold under repurchase agreements		2,012			2,752			6,565			8,027
Other borrowings		-			11			-			52
Total interest expense		5,779			8,763			20,474			24,574
Net interest income		64,972			63,104			194,170			185,812
Provision for loan losses		3,000			-			8,500			250
Net interest income after provision for loan losses		61,972			63,104			185,670			185,562
Non-interest income:
Service charges on deposit accounts		1,203			1,652			3,922			5,077
Card income		865			765			2,313			2,571
Other real estate owned income		-			194			-			227
Other income		3,458			2,410			8,229			6,508
Total non-interest income		5,526			5,021			14,464			14,383
Non-interest expense:
Salaries and employee benefits		27,235			25,986			82,651			72,620
FDIC and other insurance expense		672			(343)			1,855			911
Occupancy expense		3,822			2,914			10,716			8,583
Software and equipment expense		3,138			3,219			9,305			9,428
Other real estate owned expense		17			5			17			84
Professional and legal services		1,596			1,747			4,420			5,311
Marketing expense		1,237			2,613			4,160			6,549
Other expense		6,097			5,567			16,884			15,685
Total non-interest expense		43,814			41,708			130,008			119,171
Income before income tax expense		23,684			26,417			70,126			80,774
Income tax expense		3,821			3,582			11,689			13,860
Net income	$	19,863		$	22,835		$	58,437		$	66,914
Basic earnings per common share	$	155.28		$	177.61		$	455.41		$	516.46
Diluted earnings per common share	$	155.18		$	172.51		$	455.18		$	510.80
Basic weighted-average shares outstanding		127,918			128,570			128,316			129,564
Diluted weighted-average shares outstanding		127,995			132,370			128,384			130,999

FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
		September 30, 2020			Dec. 31, 2019
Assets
Cash and due from banks:
Noninterest-bearing balances	$	73,111		$	64,556
Interest-bearing balances		846,951			54,309
Total cash and due from banks		920,062			118,865
Securities available-for-sale, at fair value		125,131			150,623
Securities held-to-maturity, at amortized cost		3,107,320			2,728,583
Loans held for sale		28,678			23,301
Gross loans		5,348,558			4,403,876
Allowance for loan losses		(71,005)			(62,489)
Unamortized deferred loan fees, net		(18,502)			(5,127)
Loans, net		5,259,051			4,336,260
Other real estate owned, net		966			-
Investments in FHLB and FRB stock, at cost		20,236			20,160
Bank premises and equipment, net		104,162			108,133
Deferred tax assets, net		26,417			22,213
Other assets		90,882			97,431
Total assets	$	9,682,905		$	7,605,569
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	2,884,373		$	2,135,056
Interest-bearing demand deposits		1,646,943			1,302,726
Savings and money market savings		2,055,848			1,669,525
Time deposits		834,165			720,958
Total deposits		7,421,329			5,828,265
Securities sold under repurchase agreements		1,077,207			632,428
Other liabilities		51,500			61,996
Total liabilities		8,550,036			6,522,689
Stockholders' Equity:
Common Stock, par value $20; authorized 250,000
127,722 and 128,528 shares issued and outstanding
at September 30, 2020 and December 31, 2019, respectively		2,554			2,571
Additional paid-in capital		95,543			95,446
Retained earnings		1,031,916			983,867
Accumulated other comprehensive income		2,856			996
Total stockholders' equity		1,132,869			1,082,880
Total liabilities and stockholders' equity	$	9,682,905		$	7,605,569

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201016005068/en/