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
|
|
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