Business Wire | Jul 20, 2020 08:05AM EDT

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

Jul. 20, 2020

LONG BEACH, Calif.--(BUSINESS WIRE)--Jul. 20, 2020--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 BEACHIncome Statements (Unaudited)(In thousands, except per share data) Three Months Ended Six Months Ended June June 30, 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 211 879 939 1,197financial institutions Total interest and dividend 74,747 70,179 143,893 138,519income Interest expense: Deposits 4,452 5,560 10,142 10,495

Securities sold under repurchase 2,253 2,831 4,553 5,275agreementsOther 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 63,342 61,787 123,698 122,458provision for loan losses Non-interest income: Service charges on deposit 1,192 1,780 2,719 3,425accountsCard 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 128,508 129,464 128,518 130,069outstandingDiluted weighted-average shares 128,521 129,492 128,531 130,097outstanding

FARMERS & MERCHANTS BANK OF LONG BEACHBalance Sheets (Unaudited)(In thousands, except share and per share data) June 30, Dec. 31, 2020 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 outstandingat June 30, 2020 and December 31, 2019. 2,568 2,571respectivelyAdditional 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



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