Business Wire | Oct 16, 2020 08:05AM EDT

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

Oct. 16, 2020

LONG BEACH, Calif.--(BUSINESS WIRE)--Oct. 16, 2020--Farmers & Merchants Bank of Long Beach ("F&M" or the "Bank") (OTCQB: FMBL) today reported financial results for the third quarter ended September 30, 2020.

"The Bank reported profitable operations and maintained its financial strength for the third quarter of 2020, despite the continuing effect of the pandemic and its impact on the economy," said Henry Walker, president. "At quarter's end, our capital ratios far exceeded regulatory requirements and remained strong in all categories. F&M is prepared to endure the protracted impact of COVID-19 and manage through these challenging times for the benefit of all stakeholders, as it has managed through other challenges for more than a century."

Income Statement

For the 2020 third quarter, interest and dividend income amounted to $70.8 million, compared with $71.9 million in the 2019 third quarter. Interest and dividend income for the nine-month period ended September 30, 2020 increased to $214.6 million from $210.4 million reported for the same period in 2019.

Interest expense for the 2020 third quarter declined to $5.8 million from $8.8 million a year ago. Interest expense for the nine-month period ended September 30, 2020 was $20.5 million, versus $24.6 million reported for the same period last year.

Net interest income before provision for loan losses for the 2020 third quarter rose to $65.0 million from $63.1 million for the third quarter of 2019 and advanced to $194.2 million for the first nine months of 2020 from $185.8 million for the same period in 2019.

Farmers & Merchants' net interest margin for the 2020 third quarter was 2.80%, versus 3.47% for the 2019 third quarter. Net interest margin was 3.05% for the first nine months of 2020, versus 3.47% for the same period in 2019.

For the 2020 third quarter, the Bank recorded a provision for loan losses of $3.0 million and did not record a provision for loan losses in last year's third quarter. The Bank's provision for loan losses was $8.5 million for the first nine months of 2020, versus $250,000 for the first nine months of 2019. The Bank's allowance for loan losses as a percentage of loans outstanding was 1.33% at September 30, 2020, compared with 1.42% at December 31, 2019.

Non-interest income was $5.5 million for the 2020 third quarter, compared with $5.0 million in the third quarter a year ago. Non-interest income was $14.5 million for the nine-month period ended September 30, 2020, compared with $14.4 million for the same period in 2019.

Non-interest expense for the 2020 third quarter was $43.8 million, versus $41.7 million for the same period last year. Non-interest expense for the first nine months of 2020 was $130.0 million, compared with $119.2 million last year.

Net income for the 2020 third quarter amounted to $19.9 million, or $155.18 per diluted share, compared with $22.8 million, or $172.51 per diluted share, in the year-ago period. The Bank's net income for the first nine months of 2020 was $58.4 million, or $455.18 per diluted share, versus $66.9 million, or $510.80 per diluted share, for the same period in 2019.

Balance Sheet

At September 30, 2020, net loans totaled $5.3 billion, compared with $4.3 billion at December 31, 2019. The Bank's deposits totaled $7.4 billion at the end of the 2020 third quarter, compared with $5.8 billion at December 31, 2019. Non-interest-bearing deposits represented 38.9% of total deposits at September 30, 2020, versus 36.6% of total deposits at December 31, 2019. Total assets increased to $9.7 billion at September 30, 2020, compared with $7.6 billion at December 31, 2019.

At September 30, 2020, Farmers & Merchants Bank remained "well-capitalized" under all regulatory categories, with a total risk-based capital ratio of 20.38%, a tier 1 risk-based capital ratio of 19.13%, a common equity tier 1 capital ratio of 19.13%, and a tier 1 leverage ratio of 12.69%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

"Since the start of the pandemic, our top priority has been the health and welfare of our employees, clients, shareholders and the communities we serve," said Daniel Walker, chief executive officer and chairman of the board. "Our entire team continues to support all of our stakeholders in a thoughtful, disciplined and compassionate manner. While a high degree of uncertainty still surrounds the magnitude, duration and economic impact of the pandemic, we are confident that F&M's financial position, including high levels of capital and liquidity, will allow us to successfully navigate these challenging times."

During the third quarter, the Bank repurchased 661 shares of its common stock at an average price of $6,045.58 per share. For the first nine months of 2020, the Bank purchased a total of 806 shares of its common stock at an average price of $6,047.15. 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 the share repurchase program does not obligate the Bank to acquire any specific number of shares in any period.

About Farmers & Merchants Bank

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, expect per share data)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019



Interest and dividend income:



Loans $ 57,538 $ 53,334 $ 167,883 $ 155,845

Investment securities 12,746 17,446 44,836 51,552

Investments in FHLB and FRB 260 351 779 1,056stock

Interest-bearing deposits in 207 736 1,146 1,933financial institutions



Total interest and dividend 70,751 71,867 214,644 210,386income



Interest expense:



Deposits 3,767 6,000 13,909 16,495

Securities sold under repurchase 2,012 2,752 6,565 8,027agreements

Other borrowings - 11 - 52



Total interest expense 5,779 8,763 20,474 24,574



Net interest income 64,972 63,104 194,170 185,812



Provision for loan losses 3,000 - 8,500 250



Net interest income after 61,972 63,104 185,670 185,562provision for loan losses



Non-interest income:



Service charges on deposit 1,203 1,652 3,922 5,077accounts

Card income 865 765 2,313 2,571

Other real estate owned income - 194 - 227

Other income 3,458 2,410 8,229 6,508



Total non-interest income 5,526 5,021 14,464 14,383



Non-interest expense:



Salaries and employee benefits 27,235 25,986 82,651 72,620

FDIC and other insurance expense 672 (343) 1,855 911

Occupancy expense 3,822 2,914 10,716 8,583

Software and equipment expense 3,138 3,219 9,305 9,428

Other real estate owned expense 17 5 17 84

Professional and legal services 1,596 1,747 4,420 5,311

Marketing expense 1,237 2,613 4,160 6,549

Other expense 6,097 5,567 16,884 15,685



Total non-interest expense 43,814 41,708 130,008 119,171



Income before income tax expense 23,684 26,417 70,126 80,774



Income tax expense 3,821 3,582 11,689 13,860



Net income $ 19,863 $ 22,835 $ 58,437 $ 66,914



Basic earnings per common share $ 155.28 $ 177.61 $ 455.41 $ 516.46

Diluted earnings per common 155.18 172.51 455.18 510.80share $ $ $ $

Basic weighted-average shares 127,918 128,570 128,316 129,564outstanding

Diluted weighted-average shares 127,995 132,370 128,384 130,999outstanding

FARMERS & MERCHANTS BANK OF LONG BEACH

Balance Sheets (Unaudited)

(In thousands, except share and per share data)

September 30, 2020

Dec. 31, 2019

AssetsCash and due from banks:Noninterest-bearing balances$73,111

$64,556

Interest-bearing balances846,951

54,309

Total cash and due from banks920,062

118,865

Securities available-for-sale, at fair value125,131

150,623

Securities held-to-maturity, at amortized cost3,107,320

2,728,583

Loans held for sale28,678

23,301

Gross loans5,348,558

4,403,876

Allowance for loan losses(71,005)

(62,489)

Unamortized deferred loan fees, net(18,502)

(5,127)

Loans, net5,259,051

4,336,260

Other real estate owned, net966

-

Investments in FHLB and FRB stock, at cost20,236

20,160

Bank premises and equipment, net104,162

108,133

Deferred tax assets, net26,417

22,213

Other assets90,882

97,431

Total assets$9,682,905

$7,605,569

Liabilities and Stockholders' EquityLiabilities:Deposits:Noninterest-bearing demand deposits$2,884,373

$2,135,056

Interest-bearing demand deposits1,646,943

1,302,726

Savings and money market savings2,055,848

1,669,525

Time deposits834,165

720,958

Total deposits7,421,329

5,828,265

Securities sold under repurchase agreements1,077,207

632,428

Other liabilities51,500

61,996

Total liabilities8,550,036

6,522,689

Stockholders' Equity:Common Stock, par value $20; authorized 250,000127,722 and 128,528 shares issued and outstandingat September 30, 2020 and December 31, 2019, respectively2,554

2,571

Additional paid-in capital95,543

95,446

Retained earnings1,031,916

983,867

Accumulated other comprehensive income2,856

996

Total stockholders' equity1,132,869

1,082,880

Total liabilities and stockholders' equity$9,682,905

$7,605,569

View source version on businesswire.com: https://www.businesswire.com/news/home/20201016005068/en/

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

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