Farmers & Merchants Bank of Long Beach Reports 2024 First Quarter Results

Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQX: FMBL) today reported financial results for the first quarter ended March 31, 2024.

“F&M’s performance for the first three months of 2024 met internal expectations during this transitional year and again demonstrated the Bank’s resiliency to the continued external challenges facing regional banks throughout the nation,” said W. Henry Walker, Chief Executive Officer. “With stringent adherence to our historically conservative lending policies and prudent financial controls to safeguard our clients’ deposits, we achieved profitable operations for the first quarter, along with capital ratios that far exceeded regulatory requirements.

“The repricing of assets for the year is centered in loans and securities and is expected to exceed $1.2 billion in 2024. The high quality of our loan portfolio is reflected in our delinquency rate, which was significantly less than one-tenth of one percent in the first quarter and is a testament to our stringent lending policies.”

Daniel Walker, F&M’s Executive Chairman of the Board, said, “We are pleased to continue our focus on Orange County, with the opening of our 27 ^th location. Our new Laguna Beach branch is strategically situated on a major thoroughfare in Orange County, which is an important and growing marketing region for F&M. Persistently high interest rates will continue to challenge near-term earnings, but we have conviction in our time-tested commitment to stringent credit quality standards in both our loan and securities portfolios, even if some yield must be sacrificed along the way.

“F&M is in a strong competitive position in the markets we serve. Management remains focused on improving net interest margin over the long term, as the key to driving earnings, and, in turn, enhancing long-term stockholder value,” he added.

Operating Results

For the three months ended March 31, 2024, total interest and dividend income rose to $108.6 million from $97.3 million in the first quarter of 2023. Total interest expense for the first quarter of 2024 was $51.2 million, compared with $26.5 million in the first quarter of 2023.

Net interest income before provision for credit losses for the first quarter of 2024 was $57.4 million versus $70.8 million for the first quarter of 2023. F&M’s net interest margin was 1.91% for the first quarter of 2024, versus 2.43% in the first quarter of 2023.

The Bank recorded a recapture of provision for credit losses of $2.5 million in the first quarter of 2024 due to strong recoveries and a reduced level of unfunded loan commitments, compared with no net provision for credit losses for the first quarter of 2023.

Non-interest income was $8.2 million for the first quarter of 2024, compared with $3.8 million in the first quarter of 2023. Total non-interest expense for the first quarter of 2024 was $50.1 million, compared with $48.3 million in the first quarter of 2023, which reflected management’s focus on controlling expenses.

First quarter 2024 net income was $13.0 million, or $102.71 per diluted share, compared with $21.6 million, or $170.86 per diluted share, for the first quarter of 2023.

Balance Sheet

Gross loans were $6.60 billion as of March 31, 2024, compared with $6.76 billion at December 31, 2023. The Bank’s allowance for loan losses totaled $97.5 million, or 1.48% of loans held-for-investment at March 31, 2024, compared with $97.9 million, or 1.45% of loans held-for-investment, at December 31, 2023.

F&M continues to reflect a dependable, stable deposit base. The Bank’s total deposits were $8.60 billion at March 31, 2024, compared with $8.67 billion at December 31, 2023. Noninterest-bearing deposits represented 32.6% of total deposits at March 31, 2024, versus 33.2% of total deposits at December 31, 2023. Securities sold under repurchase agreements grew to $942.5 million at March 31, 2024, from $909.4 million at December 31, 2023.

Borrowings increased to $1.20 billion as of March 31, 2024, from $1.0 billion as of December 31, 2023. Executive management made the strategic decision to secure additional borrowings in the first quarter without incurring additional net interest expense, while providing ample liquidity for the upcoming tax season.

Total assets were $12.19 billion as of March 31, 2024, compared with $12.04 billion at December 31, 2023. Total stockholders’ equity was $1.36 billion at March 31, 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 18.02%; its tier 1 risk-based capital ratio was 16.77%, with a common equity tier 1 capital ratio of 16.77%, and a tier 1 leverage ratio of 11.09%, as of March 31, 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 quarter of 2024, the Bank repurchased 1,165 shares of its common stock on the open market at an average repurchase price of $4,978.26 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. To the extent the Bank repurchases additional shares under this program, which expires December 31, 2024, 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 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 March 31,
		2024			2023

Interest and dividend income:
Loans	$	75,485		$	72,475
Investment securities		20,371			22,813
Investments in FHLB and FRB stock		539			400
Interest-bearing deposits in financial institutions		12,241			1,600
Total interest and dividend income		108,636			97,288

Interest expense:
Deposits		27,459			13,958
Securities sold under repurchase agreements		9,610			6,020
Borrowings		14,123			6,491
Total interest expense		51,192			26,469

Net interest income before provision for credit losses		57,444			70,819

Provision for credit losses
Loans		(1,500	)		-
Investment securities		-			100
Reserve for unfunded loan commitments		(1,000	)		(100	)
Total provision for credit losses		(2,500	)		-

Net interest income after provision for credit losses		59,944			70,819

Non-interest income:
Service charges on deposit accounts		1,809			1,544
Card income		225			230
Other income		6,209			2,061
Total non-interest income		8,243			3,835

Non-interest expense:
Salaries and employee benefits		30,777			31,793
FDIC and other insurance expense		2,874			1,758
Occupancy expense		3,890			3,827
Software and equipment expense		4,263			3,860
Other real estate owned expense		37			-
Professional and legal services		2,495			1,130
Marketing expense		1,038			882
Other expense		4,707			5,045
Total non-interest expense		50,081			48,295

Income before income tax expense		18,106			26,359

Income tax expense		5,104			4,736

Net income	$	13,002		$	21,623

Basic earnings per common share	$	105.90		$	175.47
Diluted earnings per common share	$	102.71		$	170.86
Basic weighted-average shares outstanding		122,772			123,228
Diluted weighted-average shares outstanding		126,592			126,552

FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands, except share and per share data)

	Mar. 31, 2024			Dec. 31, 2023

Assets
Cash and due from banks:
Noninterest-bearing balances	$	58,340		$	74,595
Interest-bearing balances		1,014,066			548,874
Total cash and due from banks		1,072,406			623,469
Securities available-for-sale, at fair value		110,592			115,883
Securities held-to-maturity, at amortized cost		4,175,781			4,301,060
Gross loans		6,602,292			6,756,207
Allowance for loan losses		(97,501	)		(97,900	)
Unamortized deferred loan fees, net		(9,986	)		(11,469	)
Loans, net		6,494,805			6,646,838
Other real estate owned, net		2,929			-
Investments in FHLB and FRB stock, at cost		22,858			22,798
Bank premises and equipment, net		125,281			125,929
Deferred tax assets, net		47,574			45,723
Other assets		138,857			154,154
Total assets	$	12,191,083		$	12,035,854

Liabilities and Stockholders' Equity

Liabilities:
Deposits:
Noninterest-bearing demand deposits	$	2,800,304		$	2,880,315
Interest-bearing demand deposits		2,080,451			2,069,275
Savings and money market savings		2,661,382			2,661,312
Time deposits		1,055,492			1,059,166
Total deposits		8,597,629			8,670,068
Securities sold under repurchase agreements		942,472			909,376
Borrowings		1,200,000			1,000,000
Other liabilities		94,266			104,965
Total liabilities		10,834,367			10,684,409

Stockholders' Equity:
Common Stock, par value $20; authorized 250,000 shares; 121,970 and 123,135 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		2,440			2,463
Additional paid-in capital		180,552			184,483
Retained earnings		1,179,491			1,169,759
Accumulated other comprehensive loss		(5,767	)		(5,260	)
Total stockholders' equity		1,356,716			1,351,445
Total liabilities and stockholders' equity	$	12,191,083		$	12,035,854