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Farmers & Merchants Bank of Long Beach Reports 2021 Third Quarter Results
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LONG BEACH, Calif.--(BUSINESS WIRE)--
Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQB: FMBL) today reported financial results for the third quarter ended September 30, 2021.
“The Bank reported a sharp increase in net income, and further enhanced its financial strength for the third quarter of 2021, with total assets attaining a record high, and capital ratios far exceeding regulatory requirements,” said Henry Walker, president. “As the transition from a COVID-19 impacted economy continues, we are beginning to experience an increased pace of in-person meetings with new and existing clients who are looking to expand their operations and develop new projects, as evidenced, in part, by core loan growth of $150 million during the quarter.”
Income Statement
For the 2021 third quarter, interest and dividend income increased to $79.6 million from $70.8 million in the 2020 third quarter. Interest and dividend income for the nine-month period ended September 30, 2021 rose to $231.3 million from $214.6 million for the same period in 2020.
Interest expense for the 2021 third quarter declined to $3.0 million from $5.8 million a year ago. Interest expense for the nine-month period ended September 30, 2021 was $9.5 million, versus $20.5 million reported for the same period last year.
Net interest income before provision for loan losses for the 2021 third quarter advanced to $76.7 million from $65.0 million for the third quarter of 2020 and increased to $221.8 million for the first nine months of 2021 from $194.2 million for the same period in 2020.
Farmers & Merchants’ net interest margin for the 2021 third quarter was 2.90%, versus 2.80% for the 2020 third quarter. Net interest margin was 2.89% for the first nine months of 2021, versus 3.05% for the same period in 2020.
For the 2021 third quarter, the Bank recorded a $1.0 million recapture of loan loss provision, compared with a provision for loan losses of $3.0 million in last year’s third quarter. The Bank’s provision for loan losses was $1.0 million for the first nine months of 2021, versus $8.5 million for the first nine months of 2020. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.38% at September 30, 2021, compared with 1.34% at December 31, 2020.
Non-interest income was $5.1 million for the 2021 third quarter, compared with $5.5 million in the third quarter a year ago. For the nine-month period ended September 30, 2021, non-interest income was $15.6 million, compared with $14.5 million for the same period in 2020.
Non-interest expense for the 2021 third quarter was $44.1 million, versus $43.8 million for the same period last year. Non-interest expense for the first nine months of 2021 was $127.4 million, compared with $130.0 million last year.
Net income for the 2021 third quarter rose to $30.5 million, or $238.07 per diluted share, from $19.9 million, or $155.18 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2021 increased to $86.2 million, or $672.37 per diluted share, from $58.4 million, or $455.18 per diluted share, for the same period in 2020.
Balance Sheet
At September 30, 2021, net loans totaled $5.3 billion, equal to that at December 31, 2020. The Bank’s deposits rose to $8.9 billion at the end of the 2021 third quarter, from $7.6 billion at December 31, 2020. Noninterest-bearing deposits represented 39.3% of total deposits at September 30, 2021, versus 37.9% of total deposits at December 31, 2020. Total assets increased to $11.3 billion at September 30, 2021, compared with $9.9 billion at December 31, 2020.
At September 30, 2021, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 18.86%, a tier 1 risk-based capital ratio of 17.71%, a common equity tier 1 capital ratio of 17.71%, and a tier 1 leverage ratio of 11.25%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.
“As restrictions related to the pandemic are lifting in California and the vaccine rollout continues, we are working together throughout our communities toward a COVID-19 solution and are optimistic about business conditions over the long-term in the markets we serve,” said Daniel Walker, chief executive officer and chairman of the board. “During the third quarter, we assisted clients with their applications for more than $250 million of PPP loan forgiveness and ended the quarter with approximately $140 million of remaining PPP loans. F&M’s long history of financial and operational strength is allowing us to successfully navigate the current transitional and low interest rate business environment, as we have met numerous challenges serving our clients since the Bank’s inception in 1907.”
During the third quarter, the Bank repurchased 480 shares of its common stock on the open market at an average price of $8,257.63 share. For the first nine months of 2021, the Bank purchased a total of 989 shares of its common stock at an average price of $8,152.22. 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 anticipates that any such repurchases will be funded from existing cash and cash equivalents or future cash flow. 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 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, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2021
2020
2021
2020
Interest and dividend income:
Loans
$
62,964
$
57,538
$
185,528
$
167,883
Investment securities
15,876
12,746
43,875
44,836
Investments in FHLB and FRB stock
299
260
859
779
Interest-bearing deposits in financial institutions
499
207
1,012
1,146
Total interest and dividend income
79,638
70,751
231,274
214,644
Interest expense:
Deposits
2,137
3,767
6,884
13,909
Securities sold under repurchase agreements
848
2,012
2,583
6,565
Total interest expense
2,985
5,779
9,467
20,474
Net interest income
76,653
64,972
221,807
194,170
Provision for loan losses
(1,000)
3,000
1,000
8,500
Net interest income after provision for loan losses
77,653
61,972
220,807
185,670
Non-interest income:
Service charges on deposit accounts
1,427
1,203
4,113
3,922
Card income
955
865
2,363
2,313
Other income
2,726
3,458
9,091
8,229
Total non-interest income
5,108
5,526
15,567
14,464
Non-interest expense:
Salaries and employee benefits
27,702
27,235
82,432
82,651
FDIC and other insurance expense
931
672
2,645
1,855
Occupancy expense
3,667
3,822
10,365
10,716
Software and equipment expense
3,447
3,560
10,431
10,511
Other real estate owned expense
7
17
27
17
Professional and legal services
1,598
1,596
4,350
4,420
Marketing expense
1,729
1,237
3,519
4,160
Other expense
5,001
5,675
13,633
15,678
Total non-interest expense
44,082
43,814
127,402
130,008
Income before income tax expense
38,679
23,684
108,972
70,126
Income tax expense
8,158
3,821
22,745
11,689
Net income
$
30,521
$
19,863
$
86,227
$
58,437
Basic earnings per common share
$
242.49
$
155.28
$
682.94
$
455.41
Diluted earnings per common share
$
238.07
$
155.18
$
672.37
$
455.18
Basic weighted-average shares outstanding
125,871
127,918
126,260
128,316
Diluted weighted-average shares outstanding
128,204
127,995
128,244
128,384
FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
September 30, 2021
December 31, 2020
Assets
Cash and due from banks:
Noninterest-bearing balances
$
67,379
$
72,109
Interest-bearing balances
1,424,159
939,566
Total cash and due from banks
1,491,538
1,011,675
Securities available-for-sale, at fair value
147,409
137,373
Securities held-to-maturity, at amortized cost
4,117,419
3,131,213
Loans held for sale
15,534
22,893
Gross loans
5,351,629
5,414,814
Allowance for loan losses
(73,882)
(72,267)
Unamortized deferred loan fees, net
(10,581)
(15,747)
Loans, net
5,267,166
5,326,800
Other real estate owned, net
966
966
Investments in FHLB and FRB stock, at cost
20,031
20,257
Bank premises and equipment, net
115,725
103,615
Deferred tax assets, net
29,450
26,489
Other assets
81,042
90,497
Total assets
$
11,286,280
$
9,871,778
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits
$
3,516,980
$
2,889,012
Interest-bearing demand deposits
2,059,824
1,788,133
Savings and money market savings
2,595,061
2,129,755
Time deposits
775,376
810,726
Total deposits
8,947,241
7,617,626
Securities sold under repurchase agreements
1,081,673
1,062,348
Other liabilities
41,356
47,962
Total liabilities
10,070,270
8,727,936
Stockholders' Equity:
Common Stock, par value $20; authorized 250,000
125,628 and 126,617 shares issued and outstanding
at September 30, 2021 and December 31, 2020, respectively
