Farmers & Merchants Bank of Long Beach Reports 2023 Fourth-Quarter and Full-Year Results

LONG BEACH, Calif.--(BUSINESS WIRE)--Farmers & Merchants Bank of Long Beach ("F&M" or the "Bank") (OTCQX: FMBL) today reported financial results for the fourth quarter and the full year ended December 31, 2023. F&M also announced that its Board of Directors has authorized a new $10 million stock repurchase program.

"Now in our 117^th year since F&M was founded, we ended 2023 with profitable operations for the full year and fourth quarter, along with a strong balance sheet and capital ratios that far exceed regulatory requirements," said Henry Walker, Chief Executive Officer. "Despite the challenges that continue to impact the banking industry nationwide, we remain steadfastly focused on our foremost priority goal of safeguarding our clients' deposits and operating the Bank to create long-term value for all stakeholders.

"We enter 2024 with some of the same external pressures that our industry faced last year, including the high cost of funds and increased regulatory expense, which in turn, impact net interest margin and earnings performance. Nevertheless, we will stay true to our core of maintaining stringent underwriting standards and a stellar loan portfolio that is withstanding the test of a volatile real estate market. Finishing the year with net charge-offs of 0.01% and an allocation for credit losses for loans ratio of 1.45% speak to the quality and safety for which F&M is known."

Daniel Walker, F&M's Executive Chairman, said, "We were pleased and proud that our Board of Directors declared a total of $127 per share in dividends by the Bank in 2023, which has paid consecutive dividends every quarter for more than a century. During the year, we strengthened our management infrastructure and grew our regional team with executive promotions and talented new hires. While all banks continue to face some headwinds in the near term, F&M remains a safe and sound island of security for our clients and the markets we serve," Walker added.

Operating Results

For the fourth quarter of 2023, total interest and dividend income rose to $108.0 million from $95.9 million in the fourth quarter of 2022. Total interest and dividend income for the year ended December 31, 2023, increased to $415.5 million compared with $340.3 million reported for the year 2022.

Total interest expense for the fourth quarter of 2023 was $45.7 million, compared with $18.6 million in the fourth quarter of 2022. Interest expense for the year ended 2023 was $152.5 million, versus $31.2 million reported for the same period in 2022.

Net interest income before provision for credit losses for the fourth quarter of 2023 was $62.3 million versus $77.3 million for the fourth quarter of 2022. Net interest income before provision for credit losses for the year 2023 was $263.1 million, compared with $309.0 million for the year 2022.

F&M's net interest margin was 2.08% for the fourth quarter of 2023, versus 2.40% in the fourth quarter of 2022. Net interest margin was 2.21% for the year ended of 2023, compared with 2.73% for the same period in 2022.

For the fourth quarter of 2023 and 2022, the Bank did not record a net provision for credit losses. The Bank recorded a recapture of provision for credit losses of $3.6 million for the year 2023, compared to a $3.5 million provision for credit losses for the same period in 2022.

Non-interest income was $4.2 million for the fourth quarter of 2023, compared with $4.2 million in the fourth quarter of 2022. For year 2023, non-interest income was $16.4 million, compared with $18.5 million for the same period in 2022.

Total noninterest expense for the fourth quarter of 2023 was $49.8 million, compared to $50.6 million for the fourth quarter of 2022. Non-interest expense for the year ended December 31, 2023 was $201.2 million, compared with $188.8 million for the year ended December 31, 2022.

Fourth quarter 2023 net income was $12.8 million, or $101.61 per diluted share, compared with $25.4 million, or $200.86 per diluted share, for the fourth quarter of 2022. The Bank's full year 2023 net income was $70.0 million, or $553.79 per diluted share, compared with $109.0 million, or $855.56 per diluted share, for the same period last year.

Balance Sheet

At December 31, 2023, gross loans amounted to $6.76 billion, approximately equal to that at December 31, 2022, of $6.77 billion. The Bank's allowance for loan losses totaled $97.9 million, or 1.45% of loans held-for-investment at December 31, 2023, compared with $76.5 million, or 1.13% of loans held-for-investment, at December 31, 2022.

The Bank's total deposits were $8.67 billion at December 31, 2023, compared with $9.14 billion at December 31, 2022.

Noninterest-bearing deposits represented 33.2% of total deposits at December 31, 2023, versus 36.7% of total deposits at December 31, 2022.

Total assets were $12.04 billion as of December 31, 2023, compared with $12.05 billion at December 31, 2022.

Capital

Total stockholders' equity was $1.35 billion at December 31, 2023. 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 17.51%; its tier 1 risk-based capital ratio was 16.26%, with a common equity tier 1 capital ratio of 16.26%, and a tier 1 leverage ratio of 11.01%, as of December 31, 2023. 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

Reflecting the Board of Directors' confidence in the Bank's long-term outlook, F&M also announced today that the Board has authorized a new stock repurchase program, authorizing the Bank to repurchase of up to $10 million of the Bank's common stock from time to time through December 31, 2024.

Under the new stock repurchase program, the Bank may purchase shares of its common stock from time to time 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.

During 2023, the Bank repurchased 93 shares of its common stock on the open market at an average repurchase price of $5,125.78 per share, pursuant to the stock repurchase program announced in January 2022, which expired December 31, 2023.

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)
		Twelve Months Ended December 31,								Twelve Months Ended December 31,
			2023				2022				2023				2022
Interest and dividend income:
Loans		$	76,432			$	70,869			$	299,723			$	246,818
Investment securities			20,895				23,236				87,511				87,601
Investments in FHLB and FRB stock			443				389				1,672				1,226
Interest-bearing deposits in financial institutions			10,199				1,406				26,615				4,628
Total interest and dividend income			107,969				95,900				415,521				340,273
Interest expense:
Deposits			24,978				8,448				81,556				15,732
Securities sold under repurchase agreements			9,287				4,739				31,499				8,762
Borrowings			11,414				5,423				39,398				6,740
Total interest expense			45,679				18,610				152,453				31,234
Net interest income before provision for credit losses			62,290				77,290				263,068				309,039
Provision for credit losses
Loans			1,100				-				(700	)			3,500
Investment securities			-				-				100				-
Reserve for unfunded loan commitments			(1,100	)			-				(3,000	)			-
Total provision for credit losses			-				-				(3,600	)			3,500
Net interest income after provision for credit losses			62,290				77,290				266,668				305,539
Non-interest income:
Service charges on deposit accounts			1,818				1,719				6,971				6,451
Card income			315				242				1,272				2,543
Other income			2,018				2,194				8,204				9,536
Total non-interest income			4,151				4,155				16,447				18,530
Non-interest expense:
Salaries and employee benefits			26,881				31,841				120,419				119,978
FDIC and other insurance expense			3,249				1,237				9,172				4,306
Occupancy expense			4,071				3,923				15,712				15,354
Software and equipment expense			4,471				3,738				16,025				15,060
Professional and legal services			2,524				2,064				8,121				7,612
Marketing expense			1,485				1,672				7,730				6,886
Other expense			7,080				6,136				24,004				19,602
Total non-interest expense			49,761				50,611				201,183				188,798
Income before income tax expense			16,680				30,834				81,932				135,271
Income tax expense			3,832				5,390				11,925				26,269
Net income		$	12,848			$	25,444			$	70,007			$	109,002
Basic earnings per common share		$	104.34			$	206.12			$	568.23			$	876.17
Diluted earnings per common share		$	101.61			$	200.86			$	553.79			$	855.56
Basic weighted-average shares outstanding			123,135				123,442				123,202				124,407
Diluted weighted-average shares outstanding			126,446				126,672				126,413				127,404

FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
	Dec. 31, 2023				Dec. 31, 2022
Assets
Cash and due from banks:
Noninterest-bearing balances	$	74,595			$	75,489
Interest-bearing balances		548,874				67,369
Total cash and due from banks		623,469				142,858
Securities available-for-sale, at fair value		115,883				123,919
Securities held-to-maturity, at amortized cost		4,301,060				4,789,522
Gross loans		6,756,207				6,765,391
Allowance for loan losses		(97,900	)			(76,503	)
Unamortized deferred loan fees, net		(11,469	)			(14,429	)
Loans, net		6,646,838				6,674,459
Investments in FHLB and FRB stock, at cost		22,798				27,088
Bank premises and equipment, net		125,929				118,228
Deferred tax assets, net		45,723				31,538
Other assets		154,154				147,132
Total assets	$	12,035,854			$	12,054,744
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	2,880,315			$	3,355,298
Interest-bearing demand deposits		2,069,275				2,212,509
Savings and money market savings		2,661,312				2,668,334
Time deposits		1,059,166				906,355
Total deposits		8,670,068				9,142,496
Securities sold under repurchase agreements		909,376				785,912
Borrowings		1,000,000				700,000
Other liabilities		104,965				113,254
Total liabilities		10,684,409				10,741,662
Stockholders' Equity:
Common Stock, par value $20; authorized 250,000 shares; 123,135 and 123,228 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively		2,463				2,465
Additional paid-in capital		184,483				177,433
Retained earnings		1,169,759				1,140,897
Accumulated other comprehensive loss		(5,260	)			(7,713	)
Total stockholders' equity		1,351,445				1,313,082
Total liabilities and stockholders' equity	$	12,035,854			$	12,054,744

Contacts

Kevin Tiber
President
562-499-4829

Roger Pondel
PondelWilkinson Inc.
Investor Relations
310-279-5980
[e-mail]