LONG BEACH, Calif.--(BUSINESS WIRE)--Farmers & Merchants Bank of Long Beach ("F&M" or the "Bank") (OTCQX: FMBL) today reported financial results for the second quarter ended June 30, 2024.
"F&M's second quarter performance demonstrated the Bank's resilience and strategic management of resources amidst the continued challenging external environment for regional banks," said W. Henry Walker, Chief Executive Officer. "We are staying true to our core values, which include conservative lending policies and maintaining a stable loan portfolio. At the close of the second quarter, our balance sheet remains strong, and we are pleased to report again that F&M's capital ratios far exceeded all regulatory requirements.
"We continue working actively to improve the return on our investments and manage expenses, while meeting increased regulatory demands, since F&M was categorized last year as a regional, versus community, bank. Growth in lower cost deposits will significantly help with the scaling of expenses and paying existing borrowings, and, in turn, enhancing profitability over time. Although the yield on our loan portfolio continues to improve, we find that our HTM (Held-to-Maturity) securities portfolio continues to exert downward pressure on earnings, as is the case with many banks. Fortunately, both categories of F&M investments are of superior quality, posing no risk to capital, and the Bank remains safe and sound."
Daniel Walker, F&M's Executive Chairman of the Board, added, "Our commitment to exceptional service remains a top priority, and combined with F&M's financial strength, is enabling us to attract new clients. Showing confidence in F&M's long-term future, we are pleased that our Board has authorized the repurchase of up to an additional $10 million of the Bank's common stock, following the $10 million repurchase authorization in January of this year."
Operating Results
For the second quarter of 2024, total interest and dividend income rose to $108.7 million from $102.3 million for the second quarter of 2023. Total interest and dividend income for the six months ended June 30, 2024 increased to $217.3 million from $199.6 million reported for the six months ended June 30, 2023.
Total interest expense for the second quarter of 2024 was $51.6 million, compared with $37.3 million in the second quarter of 2023. Interest expense for the six months ended June 30, 2024 was $102.8 million, compared to $63.7 million reported for the same period in 2023.
Net interest income before provision for credit losses for the second quarter of 2024 was $57.1 million versus $65.1 million for the second quarter of 2023. Net interest income for the six months ended June 30, 2024 was $114.5 million, compared with $135.9 million for the six months ended June 30, 2023.
F&M's net interest margin was 1.92% for the second quarter of 2024, versus 2.19% in the second quarter of 2023. Net interest margin was 1.92% for the six months ended June 30, 2024, compared with 2.31% for the same period in 2023.
The Bank recorded a recapture of provision for credit losses of $1.0 million in the second quarter of 2024 due to a reduced level of unfunded loan commitments, compared with no net provision for credit losses for the second quarter of 2023. For the six months ended June 30, 2024, the Bank recorded a $3.5 million recapture of provision for credit losses, compared with no net provision for credit losses for the six months ended June 30, 2023.
Non-interest income was $10.6 million for the second quarter of 2024, compared with $4.4 million in the second quarter of 2023. For the six months ended June 30, 2024, total non-interest income was $18.8 million, compared with $8.2 million for the same period in 2023. The increase in non-interest income was due primarily to Visa Inc. accepting the Bank's tender of its approximately 30 thousand shares of Visa Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock. As a result of the exchange, the Bank marked its Visa Class C common stock to fair value and recorded a gain of $6.3 million based on the conversion and the closing price of Visa Class A common stock on June 30, 2024.
Total non-interest expense for the second quarter of 2024 was $49.8 million, compared with $50.8 million in the second quarter of 2023. Non-interest expense for the six months ended June 30, 2024 was $99.8 million, compared with $99.1 million for the six months ended June 30, 2023.
Net income for the second quarter of 2024 was $13.5 million, or $107.86 per diluted share, compared with $18.1 million, or $143.69 per diluted share, for the second quarter of 2023. Net income for the six months ended June 30, 2024 was $26.5 million, or $210.54 per diluted share, compared with $39.8 million, or $314.54 per diluted share, for the six months ended June 30, 2023.
Balance Sheet
Gross loans were $6.51 billion as of June 30, 2024, compared with $6.76 billion at December 31, 2023. The Bank's allowance for loan losses totaled $97.5 million, or 1.50% of loans held-for-investment at June 30, 2024, compared with $97.9 million, or 1.45% of loans held-for-investment at December 31, 2023.
The Bank's total deposits were $8.81 billion at June 30, 2024, compared with $8.67 billion at December 31, 2023. Noninterest-bearing deposits represented 32.0% of total deposits at June 30, 2024, versus 33.2% of total deposits at December 31, 2023. Securities sold under repurchase agreements grew to $926.2 million at June 30, 2024, from $909.4 million at December 31, 2023. Borrowings were $1.0 billion as of June 30, 2024 and December 31, 2023.
Total assets were $12.19 billion as of June 30, 2024 compared with $12.04 billion at December 31, 2023. Total stockholders' equity was $1.36 billion at June 30, 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 18.26%; its tier 1 risk-based capital ratio was 17.00%, with a common equity tier 1 capital ratio of 17.00%, and a tier 1 leverage ratio of 11.21%, as of June 30, 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 half of 2024, the Bank repurchased 1,824 shares of its common stock on the open market at an average repurchase price of $4,796.46 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, which expires December 31, 2024.
As noted above, the Board authorized the repurchase of up to an additional $10 million of the Bank's common stock from time to time through May 31, 2025. Under the stock repurchase program, the Bank may purchase shares of its common stock 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.
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
| Interest and dividend income: | ||||||||||||||||
| Loans | $ | 74,025 | $ | 74,632 | $ | 149,510 | $ | 147,107 | ||||||||
| Investment securities | 19,703 | 22,345 | 40,074 | 45,158 | ||||||||||||
| Investments in FHLB and FRB stock | 460 | 414 | 999 | 814 | ||||||||||||
| Interest-bearing deposits in financial institutions | 14,475 | 4,957 | 26,716 | 6,557 | ||||||||||||
| Total interest and dividend income | 108,663 | 102,348 | 217,299 | 199,636 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Deposits | 29,319 | 19,611 | 56,778 | 33,569 | ||||||||||||
| Securities sold under repurchase agreements | 9,483 | 7,274 | 19,093 | 13,294 | ||||||||||||
| Borrowings | 12,767 | 10,390 | 26,890 | 16,881 | ||||||||||||
| Total interest expense | 51,569 | 37,275 | 102,761 | 63,744 | ||||||||||||
| Net interest income before provision for credit losses | 57,094 | 65,073 | 114,538 | 135,892 | ||||||||||||
| Provision for credit losses | ||||||||||||||||
| Loans | - | - | (1,500 | ) | - | |||||||||||
| Investment securities | - | - | - | 100 | ||||||||||||
| Reserve for unfunded loan commitments | (1,000 | ) | - | (2,000 | ) | (100 | ) | |||||||||
| Total provision for credit losses | (1,000 | ) | - | (3,500 | ) | - | ||||||||||
| Net interest income after provision for credit losses | 58,094 | 65,073 | 118,038 | 135,892 | ||||||||||||
| Non-interest income: | ||||||||||||||||
| Service charges on deposit accounts | 1,877 | 1,810 | 3,686 | 3,354 | ||||||||||||
| Card income | 214 | 370 | 439 | 600 | ||||||||||||
| Other income | 8,473 | 2,206 | 14,682 | 4,267 | ||||||||||||
| Total non-interest income | 10,564 | 4,386 | 18,807 | 8,221 | ||||||||||||
| Non-interest expense: | ||||||||||||||||
| Salaries and employee benefits | 30,974 | 30,915 | 61,751 | 62,708 | ||||||||||||
| FDIC and other insurance expense | 2,637 | 1,846 | 5,511 | 3,604 | ||||||||||||
| Occupancy expense | 3,909 | 3,711 | 7,799 | 7,538 | ||||||||||||
| Software and equipment expense | 4,468 | 3,803 | 8,731 | 7,663 | ||||||||||||
| Other real estate owned expense | 212 | - | 249 | - | ||||||||||||
| Professional and legal services | 3,102 | 2,353 | 5,597 | 3,483 | ||||||||||||
| Marketing expense | 919 | 2,669 | 1,957 | 3,551 | ||||||||||||
| Other expense | 3,533 | 5,522 | 8,240 | 10,567 | ||||||||||||
| Total non-interest expense | 49,754 | 50,819 | 99,835 | 99,114 | ||||||||||||
| Income before income tax expense | 18,904 | 18,640 | 37,010 | 44,999 | ||||||||||||
| Income tax expense | 5,370 | 491 | 10,474 | 5,227 | ||||||||||||
| Net income | $ | 13,534 | $ | 18,149 | $ | 26,536 | $ | 39,772 | ||||||||
| Basic earnings per common share | $ | 111.12 | $ | 147.28 | $ | 217.01 | $ | 322.75 | ||||||||
| Diluted earnings per common share | $ | 107.86 | $ | 143.69 | $ | 210.54 | $ | 314.54 | ||||||||
| Basic weighted-average shares outstanding | 121,792 | 123,228 | 122,282 | 123,228 | ||||||||||||
| Diluted weighted-average shares outstanding | 125,481 | 126,301 | 126,038 | 126,444 | ||||||||||||
FARMERS & MERCHANTS BANK OF LONG BEACH Balance Sheets (Unaudited) (In thousands, except share and per share data) | |||||||
| Jun. 30, 2024 | Dec. 31, 2023 | ||||||
| Assets | |||||||
| Cash and due from banks: | |||||||
| Noninterest-bearing balances | $ | 66,258 | $ | 74,595 | |||
| Interest-bearing balances | 1,246,277 | 548,874 | |||||
| Total cash and due from banks | 1,312,535 | 623,469 | |||||
| Securities available-for-sale, at fair value | 98,181 | 115,883 | |||||
| Securities held-to-maturity, at amortized cost | 4,029,122 | 4,301,060 | |||||
| Loans held for sale | 460 | - | |||||
| Gross loans | 6,506,539 | 6,756,207 | |||||
| Allowance for loan losses | (97,510 | ) | (97,900 | ) | |||
| Unamortized deferred loan fees, net | (9,156 | ) | (11,469 | ) | |||
| Loans, net | 6,399,873 | 6,646,838 | |||||
| Other real estate owned, net | 2,929 | - | |||||
| Investments in FHLB and FRB stock, at cost | 22,740 | 22,798 | |||||
| Bank premises and equipment, net | 124,634 | 125,929 | |||||
| Deferred tax assets, net | 44,456 | 45,723 | |||||
| Other assets | 158,152 | 154,154 | |||||
| Total assets | $ | 12,193,082 | $ | 12,035,854 | |||
| Liabilities and Stockholders' Equity | |||||||
| Liabilities: | |||||||
| Deposits: | |||||||
| Noninterest-bearing demand deposits | $ | 2,820,940 | $ | 2,880,315 | |||
| Interest-bearing demand deposits | 2,267,720 | 2,069,275 | |||||
| Savings and money market savings | 2,675,284 | 2,661,312 | |||||
| Time deposits | 1,049,341 | 1,059,166 | |||||
| Total deposits | 8,813,285 | 8,670,068 | |||||
| Securities sold under repurchase agreements | 926,151 | 909,376 | |||||
| Borrowings | 1,000,000 | 1,000,000 | |||||
| Other liabilities | 92,926 | 104,965 | |||||
| Total liabilities | 10,832,362 | 10,684,409 | |||||
| Stockholders' Equity: | |||||||
| Common Stock, par value $20; authorized 250,000 shares; 123,969 and 123,135 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | 2,479 | 2,463 | |||||
| Additional paid-in capital | 174,863 | 184,483 | |||||
| Retained earnings | 1,189,629 | 1,169,759 | |||||
| Accumulated other comprehensive loss | (6,251 | ) | (5,260 | ) | |||
| Total stockholders' equity | 1,360,720 | 1,351,445 | |||||
| Total liabilities and stockholders' equity | $ | 12,193,082 | $ | 12,035,854 | |||
Contacts
Kevin Tiber
President
562 499-4829
Roger Pondel
PondelWilkinson Inc.
Investor Relations
310-279-5980
investor@pondel.com
