Farmers & Merchants Bank of Long Beach Reports 2016 Third-Quarter Results

Company Release - 10/14/2016

LONG BEACH, Calif.--(BUSINESS WIRE)-- Farmers & Merchants Bank of Long Beach (OTCQB: FMBL) today reported financial results for the third quarter ended September 30, 2016.

“As the banking industry continues to navigate a historically low interest rate environment, and confidence in large financial institutions wanes, Farmers & Merchants’ strong deposit growth this year is a testament to the sacred trust we share with our clients in the very community where the Bank was founded in 1907,” said Henry Walker, president of Farmers & Merchants Bank. “The Bank further distinguishes itself by demonstrating consistent financial strength, multi-generational relationships with clients, and a commitment to enhancing the communities we serve through philanthropic contributions.”

Income Statement

For the 2016 third quarter, interest and dividend income rose to $55.7 million from $51.0 million in the 2015 third quarter. Interest and dividend income for the nine-month period ended September 30, 2016 advanced to $166.4 million from $153.0 million reported for the same period in 2015.

Interest expense for the 2016 third quarter was $2.7 million, compared with $2.0 million in last year’s third quarter. Interest expense for the nine-month period ended September 30, 2016 was $7.6 million, versus $5.5 million reported for the same period last year.

Net interest income for the 2016 third quarter rose to $53.1 million from $49.1 million for the third quarter of 2015, and increased to $158.9 million for the first nine months of 2016, versus $147.5 million for the same period in 2015.

Farmers & Merchants’ net interest margin was 3.44% for the 2016 third quarter, compared with 3.53% for the 2015 third quarter. Net interest margin was 3.54% for the first nine months of 2016, compared with 3.66% for the same period in 2015.

The Bank did not have a provision for loan losses in the first nine months of 2016, nor in the same period a year ago, amid continued strength in its loan portfolio. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.66% at September 30, 2016. Farmers & Merchants’ allowance for loan losses as a percentage of loans outstanding was 1.73% at December 31, 2015.

Non-interest income was $6.5 million for the 2016 third quarter, compared with $6.1 million in the third quarter a year ago. Non-interest income was $18.8 million for the nine-month period ended September 30, 2016, compared with $19.6 million for the same period in 2015.

Non-interest expense for the 2016 third quarter was $33.1 million, versus $31.9 million for the same period last year. Non-interest expense for the first nine months of 2016 was $97.7 million, compared with $94.9 million last year.

Net income for the 2016 third quarter was $17.8 million, or $135.90 per diluted share, compared with $16.2 million, or $123.47 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2016 was $53.8 million, or $410.75 per diluted share, compared with $49.5 million, or $377.99 per diluted share, for the same period in 2015.

Balance Sheet

At September 30, 2016, net loans totaled $3.37 billion, compared with $3.22 billion at December 31, 2015. The Bank’s deposits totaled $5.10 billion at the end of the 2016 third quarter, compared with $4.69 billion at December 31, 2015. Non-interest bearing deposits represented 38.5% of total deposits at September 30, 2016, versus 38.9% of total deposits at December 31, 2015. Total assets increased to $6.63 billion at the close of the 2016 third quarter, compared with $6.15 billion at the close of the prior year.

At September 30, 2016, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 21.11%, a tier 1 risk-based capital ratio of 19.86%, a common equity tier 1 capital ratio of 19.86%, and a tier 1 leverage ratio of 13.81%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

“Farmers & Merchants’ solid balance sheet is indicative of characteristics that have embodied the Bank since its inception: liquidity and a conservative lending philosophy,” said Daniel Walker, chief executive officer and chairman of the board. “It is these fundamentals that set the foundation for Farmers & Merchants’ stellar financial health, as well as the Bank’s safety and soundness for every depositor.”

About Farmers & Merchants Bank

Founded in Long Beach in 1907 by C.J. Walker, Farmers & Merchants Bank has 24 branches across Orange County, Long Beach and the South Bay. The Bank specializes in 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 Sept 30,Nine Months Ended Sept 30,
2016201520162015
Interest and dividend income:
 
Loans $ 40,804 $ 37,048 $ 121,648 $ 111,331
Investment securities 14,103 13,294 42,827 38,895
Investments in FHLB and FRB stock 445 537 1,277 2,416
Interest-bearing deposits in financial institutions 370 163 697   317
Total interest and dividend income 55,722 51,042 166,449   152,959
 
Interest expense:
 
Deposits 2,178 1,681 6,162 4,636
Securities sold under repurchase agreements 492 305 1,400 849
Other borrowings - - -   6
Total interest expense 2,670 1,986 7,562   5,491
Net interest income 53,052 49,056 158,887 147,468
 
Provision for loan losses - - -   -
 
Net interest income after provision for loan losses 53,052 49,056 158,887   147,468
 
Non-interest income:
 
Service charges on deposit accounts 1,004 1,029 2,977 3,037
Other real estate owned income 1 42 17 1,414
Merchant bankcard income 2,726 2,608 7,665 7,391
Other income 2,764 2,425 8,148   7,774
Total non-interest income 6,495 6,104 18,807   19,616
 
Non-interest expense:
 
Salaries and employee benefits 18,348 18,095 56,639 54,614
FDIC and other insurance expense 618 826 2,343 2,398
Occupancy expense 2,352 2,286 6,772 6,361
Software and equipment expense 1,811 1,790 5,409 5,255
Other real estate owned expense 69 2 (58 ) 112
Amortization of public welfare investments 2,117 2,117 6,351 6,351
Merchant bankcard expense 2,087 2,080 5,801 6,014
Professional and legal services 1,418 1,079 3,640 2,969
Marketing expense 1,816 1,864 4,596 4,484
Other expense 2,477 1,756 6,233   6,339
Total non-interest expense 33,113 31,895 97,726   94,897
Income before income tax expense 26,434 23,265 79,968 72,187
 
Income tax expense 8,641 7,100 26,190   22,698
Net income$17,793$16,165$53,778   $49,489
 
Basic and diluted earnings per common share $ 135.90 $ 123.47 $ 410.75   $ 377.99
 
 
                   
FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands except share and per share data)
 
Sept. 30, 2016Dec. 31, 2015
Assets
 
Cash and due from banks:
Noninterest-bearing balances $ 58,008 $ 64,742
Interest-bearing balances 255,364   103,278  
Total cash and due from banks 313,372 168,020
Securities available-for-sale, at fair value 187,810 206,649
Securities held-to-maturity, at amortized cost 2,559,270 2,363,383
Loans held for sale 8,788 3,168
Gross loans 3,432,617 3,278,852
Allowance for loan losses (56,844 ) (56,670 )
Unamortized deferred loan fees, net (4,774 ) (4,139 )
Loans, net 3,370,999   3,218,043  
Other real estate owned, net 791 1,351
Investments in FHLB and FRB stock, at cost 20,690 20,690
Public welfare investments 26,149 34,499
Bank premises and equipment, net 87,581 86,781
Deferred tax assets, net 28,377 27,892
Other assets 24,096   23,124  
Total assets$6,627,923   $6,153,600  
 
 
Liabilities and Stockholders' Equity
 
Liabilities:
 
Deposits:
Noninterest-bearing demand deposits $ 1,964,744 $ 1,824,516
Interest-bearing demand deposits 821,243 645,125
Savings and money market savings 1,459,556 1,376,920
Time deposits 858,323   843,405  
Total deposits 5,103,866 4,689,966
Securities sold under repurchase agreements 594,253 572,915
Other liabilities 29,664   35,388  
Total liabilities 5,727,783   5,298,269  
 
Stockholders' Equity:
 

Common Stock, par value $20; authorized 250,000 shares; issued and outstanding 130,928 shares

2,619 2,619
Additional paid-in capital 112,044 112,044
Retained earnings 784,003 739,259
Accumulated other comprehensive income 1,474   1,409  
Total stockholders' equity 900,140   855,331  
Total liabilities and stockholders' equity$6,627,923   $6,153,600  
 

Farmers & Merchants Bank
John Hinrichs
Executive Vice President
562-437-0011, ext. 4835
or
PondelWilkinson Inc.
Evan Pondel
Investor Relations
310-279-5980
investor@pondel.com

Source: Farmers & Merchants Bank
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