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

LONG BEACH, Calif.--()--Farmers & Merchants Bank of Long Beach (OTCQB: FMBL) today reported financial results for the second quarter and six-months ended June 30, 2020.

“The second quarter of 2020 demonstrated the Bank’s financial strength and deep commitment to our clients and communities at a most unsettling time in world history,” said Henry Walker, president. “With the pandemic still surging, our top priority remains focused on the health and safety of our staff, clients and their families.

“From a financial perspective, the Bank continues to maintain strong capital ratios and remains ‘well capitalized’ in all financial categories, far exceeding regulatory requirements. This has been our legacy through many crises and economic cycles since F&M’s founding more than a century ago,” Walker added.

Income Statement

For the three months ended June 30, 2020, total interest and dividend income rose to $74.7 million from $70.2 million in the second quarter of 2019. Total interest and dividend income for the first half of 2020 increased to $143.9 million from $138.5 million reported for the first half of 2019.

Total interest expense for the 2020 second quarter was $6.7 million, compared with $8.4 million in the second quarter of 2019. Interest expense for the first half of 2020 was $14.7 million, versus $15.8 million reported for the corresponding period last year.

Net interest income for the 2020 second quarter advanced to $68.0 million from $61.8 million for the second quarter of 2019, with the increase primarily reflecting the recognition of net loan fees and interest income from Paycheck Protection Program (PPP) loans. Net interest income for the first half of 2020 increased to $129.2 million from $122.7 million for the six months ended June 30, 2019.

Net interest margin was 3.13% for the 2020 second quarter, versus 3.45% in the 2019 second quarter. Net interest margin was 3.20% for the first half of 2020, compared with 3.47% for the same period in 2019.

The Bank’s provision for loan losses in the second quarter of 2020 was $4.7 million, with no provision for loan losses in the second quarter of 2019. For the first half of 2020, the provision for loan losses was $5.5 million, compared with $250,000 in the corresponding period last year. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.31% at June 30, 2020, compared with 1.42% at December 31, 2019.

Total non-interest income was $4.3 million for the 2020 second quarter, compared with $4.8 million for the same period a year ago. In the first half of 2020, total non-interest income was $8.9 million, compared with $9.4 million for the six months ended June 30, 2019.

Total non-interest expense for the 2020 second quarter was $42.6 million, compared with $39.6 million for the same period last year. Non-interest expense for the first half of 2020 was $86.2 million, compared with $77.5 million for the first half of 2019.

Net income for the 2020 second quarter was $20.6 million, or $160.52 per diluted share, compared with $21.7 million, or $167.92 per diluted share, for the 2019 second quarter. Net income for the first half of 2020 was $38.6 million, or $300.12 per diluted share, compared with $44.1 million, or $338.82 per diluted share, for the six months ended June 30, 2019.

Balance Sheet

At June 30, 2020, net loans increased to $5.12 billion from $4.34 billion at December 31, 2019. The Bank’s deposits rose to $7.23 billion at the end of the 2020 second quarter from $5.83 billion at December 31, 2019, reflecting a general flight to safety and funds from PPP loans.

Non-interest-bearing deposits represented 40.0% of total deposits at June 30, 2020, versus 36.6% of total deposits at December 31, 2019. Total assets increased to $9.45 billion at the close of the 2020 second quarter from $7.61 billion at December 31, 2019.

At June 30, 2020, Farmers & Merchants Bank’s total risk-based capital ratio was 20.64%; its tier 1 risk-based capital ratio was 19.39%, with a common equity tier 1 capital ratio of 19.39%, and a tier 1 leverage ratio of 13.03%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

“Our entire F&M team has been working tirelessly to serve a growing number of clients during this protracted period of uncertainty,” said Daniel Walker, chief executive officer and chairman of the board. “During the quarter, we processed more than $700 million in PPP loans, with each loan averaging approximately $170,000, for more than 4,000 existing and new clients, including many small businesses.

“Moving forward, we are determined to maintain our conservative policies of financial prudence, as we seek to help our clients and communities navigate through uncharted terrain, doing our part to help preserve financial safety and security for all of our stakeholders,” Walker said.

As announced in April 2020, the board of directors authorized the repurchase up to $20 million of the Bank’s common stock as part of a stock repurchase program that expires on December 31, 2021. As part of this program, the Bank repurchased 145 shares of its common stock during the second quarter at an average price of $6,054.34 per share. To the extent the Bank repurchases additional shares pursuant to this program, 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 robust 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.

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,

2020

 

2019

 

2020

 

2019

 
Interest and dividend income:
 
Loans $

59,020

$

51,771

$

110,345

$

102,511

Investment securities

15,345

17,180

32,090

34,106

Investments in FHLB and FRB stock

171

349

519

705

Interest-bearing deposits in financial institutions

211

879

939

1,197

 
Total interest and dividend income

74,747

70,179

143,893

138,519

 
Interest expense:
 
Deposits

4,452

5,560

10,142

10,495

Securities sold under repurchase agreements

2,253

2,831

4,553

5,275

Other borrowings

-

1

-

41

 
Total interest expense

6,705

8,392

14,695

15,811

 
Net interest income

68,042

61,787

129,198

122,708

 
Provision for loan losses

4,700

-

5,500

250

 
Net interest income after provision for loan losses

63,342

61,787

123,698

122,458

 
Non-interest income:
 
Service charges on deposit accounts

1,192

1,780

2,719

3,425

Card income

578

878

1,448

1,806

Other real estate owned income

-

15

-

33

Other income

2,531

2,142

4,771

4,098

 
Total non-interest income

4,301

4,815

8,938

9,362

 
Non-interest expense:
 
Salaries and employee benefits

27,715

23,340

55,416

46,634

FDIC and other insurance expense

738

632

1,183

1,254

Occupancy expense

3,561

3,021

6,894

5,669

Software and equipment expense

3,101

3,169

6,167

6,209

Other real estate owned expense

-

29

-

79

Professional and legal services

1,663

1,893

2,824

3,564

Marketing expense

1,155

2,221

2,923

3,936

Other expense

4,621

5,343

10,787

10,118

 
Total non-interest expense

42,554

39,648

86,194

77,463

 
Income before income tax expense

25,089

26,954

46,442

54,357

 
Income tax expense

4,459

5,209

7,868

10,278

 
Net income $

20,630

$

21,745

$

38,574

$

44,079

 
Basic earnings per common share $

160.53

$

167.98

$

300.15

$

338.89

Diluted earnings per common share $

160.52

$

167.92

$

300.12

$

338.82

Basic weighted-average shares outstanding

128,508

129,464

128,518

130,069

Diluted weighted-average shares outstanding

128,521

129,492

128,531

130,097

 
FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)
   
June 30, 2020   Dec. 31, 2019
   
Assets  
   
Cash and due from banks:  
Noninterest-bearing balances $

68,518

  $

64,556

Interest-bearing balances

734,678

 

54,309

   
Total cash and due from banks

803,196

 

118,865

Securities available-for-sale, at fair value

115,181

 

150,623

Securities held-to-maturity, at amortized cost

3,149,908

 

2,728,583

Loans held for sale

23,246

 

23,301

Gross loans

5,204,660

 

4,403,876

Allowance for loan losses

(67,907)

 

(62,489)

Unamortized deferred loan fees, net

(21,143)

 

(5,127)

   
Loans, net

5,115,610

 

4,336,260

   
Investments in FHLB and FRB stock, at cost

20,236

 

20,160

Bank premises and equipment, net

105,877

 

108,133

Deferred tax assets, net

25,492

 

22,213

Other assets

89,443

 

97,431

   
Total assets $

9,448,189

  $

7,605,569

   
   
Liabilities and Stockholders' Equity  
   
Liabilities:  
   
Deposits:  
Noninterest-bearing demand deposits $

2,893,639

  $

2,135,056

Interest-bearing demand deposits

1,607,940

 

1,302,726

Savings and money market savings

1,907,562

 

1,669,525

Time deposits

819,589

 

720,958

   
Total deposits

7,228,730

 

5,828,265

Securities sold under repurchase agreements

1,042,698

 

632,428

Other liabilities

58,007

 

61,996

   
Total liabilities

8,329,435

 

6,522,689

   
Stockholders' Equity:  
   
Common Stock, par value $20; authorized 250,000  
128,383 and 128,528 shares issued and outstanding  
at June 30, 2020 and December 31, 2019. respectively

2,568

 

2,571

Additional paid-in capital

97,651

 

95,446

Retained earnings

1,015,502

 

983,867

Accumulated other comprehensive income

3,033

 

996

   
Total stockholders' equity

1,118,754

 

1,082,880

   
Total liabilities and stockholders' equity $

9,448,189

  $

7,605,569

   

 

Contacts

John Hinrichs
Executive Vice President
562-437-0011, ext. 4835

Roger Pondel
PondelWilkinson Inc.
Investor Relations
310-279-5980
investor@pondel.com

Contacts

John Hinrichs
Executive Vice President
562-437-0011, ext. 4835

Roger Pondel
PondelWilkinson Inc.
Investor Relations
310-279-5980
investor@pondel.com