Business Wire | Oct 18, 2021 08:05AM EDT

Farmers & Merchants Bank of Long Beach Reports 2021 Third Quarter Results

Oct. 18, 2021

LONG BEACH, Calif.--(BUSINESS WIRE)--Oct. 18, 2021--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 Nine Months Ended September 30, 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 299 260 859 779stockInterest-bearing deposits in 499 207 1,012 1,146financial institutionsTotal interest and dividend 79,638 70,751 231,274 214,644incomeInterest expense:Deposits 2,137 3,767 6,884 13,909

Securities sold under 848 2,012 2,583 6,565repurchase agreementsTotal 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 77,653 61,972 220,807 185,670provision for loan lossesNon-interest income:Service charges on deposit 1,427 1,203 4,113 3,922accountsCard 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 931 672 2,645 1,855expenseOccupancy 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 38,679 23,684 108,972 70,126expenseIncome 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 $ 238.07 $ 155.18 $ 672.37 $ 455.18shareBasic weighted-average shares 125,871 127,918 126,260 128,316outstandingDiluted weighted-average shares 128,204 127,995 128,244 128,384outstandingFARMERS & MERCHANTS BANK OF LONG BEACHBalance Sheets (Unaudited)(In thousands, except share and per share data)September 30, 2021December 31, 2020AssetsCash and due from banks:Noninterest-bearing balances$67,379

$72,109

Interest-bearing balances1,424,159

939,566

Total cash and due from banks1,491,538

1,011,675

Securities available-for-sale, at fair value147,409

137,373

Securities held-to-maturity, at amortized cost4,117,419

3,131,213

Loans held for sale15,534

22,893

Gross loans5,351,629

5,414,814

Allowance for loan losses(73,882)

(72,267)

Unamortized deferred loan fees, net(10,581)

(15,747)

Loans, net5,267,166

5,326,800

Other real estate owned, net966

966

Investments in FHLB and FRB stock, at cost20,031

20,257

Bank premises and equipment, net115,725

103,615

Deferred tax assets, net29,450

26,489

Other assets81,042

90,497

Total assets$11,286,280

$9,871,778

Liabilities and Stockholders' EquityLiabilities:Deposits:Noninterest-bearing demand deposits$3,516,980

$2,889,012

Interest-bearing demand deposits2,059,824

1,788,133

Savings and money market savings2,595,061

2,129,755

Time deposits775,376

810,726

Total deposits8,947,241

7,617,626

Securities sold under repurchase agreements1,081,673

1,062,348

Other liabilities41,356

47,962

Total liabilities10,070,270

8,727,936

Stockholders' Equity:Common Stock, par value $20; authorized 250,000125,628 and 126,617 shares issued and outstandingat September 30, 2021 and December 31, 2020, respectively2,513

2,532

Additional paid-in capital88,097

90,516

Retained earnings1,123,959

1,047,949

Accumulated other comprehensive income1,441

2,845

Total stockholders' equity1,216,010

1,143,842

Total liabilities and stockholders' equity$11,286,280

$9,871,778

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