Farmers & Merchants Bank of Long Beach Reports 2017 Third-Quarter Results

Company Release - 10/19/2017

--Net Loans Grow 12 Percent in Year-to-Date Comparison--

LONG BEACH, Calif.--(BUSINESS WIRE)-- Farmers & Merchants Bank of Long Beach (OTCQB: FMBL) today reported financial results for the third quarter ended September 30, 2017.

“The Bank’s lending team has achieved excellent results this year, as it focuses on cultivating relationships with clients who seek a financial institution with strong values and a solid foundation,” said Henry Walker, president of Farmers & Merchants Bank. “At the same time, we continue to maintain a conservative lending philosophy that has been fundamental to the Bank’s financial health.”

Income Statement

For the 2017 third quarter, interest and dividend income rose to $60.7 million from $55.7 million in the 2016 third quarter. Interest and dividend income for the nine-month period ended September 30, 2017 advanced to $176.9 million from $166.5 million reported for the same period in 2016.

Interest expense for the 2017 third quarter was $3.8 million, compared with $2.7 million in last year’s third quarter. Interest expense for the nine-month period ended September 30, 2017 was $10.4 million, versus $7.6 million reported for the same period last year.

Net interest income for the 2017 third quarter rose to $56.9 million from $53.1 million for the third quarter of 2016, and increased to $166.5 million for the first nine months of 2017, versus $158.9 million for the same period in 2016.

Farmers & Merchants’ net interest margin was 3.42% for the 2017 third quarter, compared with 3.44% for the 2016 third quarter. Net interest margin was 3.43% for the first nine months of 2017, compared with 3.54% for the same period in 2016.

The Bank’s provision for loan losses was $1.0 million for the third quarter and first nine months of 2017 amid increased lending volume. The Bank did not record a provision for loan losses in 2016. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.49% at September 30, 2017. Farmers & Merchants’ allowance for loan losses as a percentage of loans outstanding was 1.64% at December 31, 2016.

Non-interest income was $6.6 million for the 2017 third quarter, compared with $6.5 million in the third quarter a year ago. Non-interest income was $22.5 million for the nine-month period ended September 30, 2017, compared with $18.8 million for the same period in 2016.

Non-interest expense for the 2017 third quarter was $41.6 million, versus $33.1 million for the same period last year. Non-interest expense for the first nine months of 2017 was $119.5 million, compared with $97.7 million last year.

Net income for the 2017 third quarter was $16.7 million, or $127.46 per diluted share, compared with $17.8 million, or $135.90 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2017 was $53.3 million, or $407.12 per diluted share, compared with $53.8 million, or $410.75 per diluted share, for the same period in 2016.

Balance Sheet

At September 30, 2017, net loans totaled $3.81 billion, compared with $3.40 billion at December 31, 2016. The Bank’s deposits totaled $5.89 billion at the end of the 2017 third quarter, compared with $5.12 billion at December 31, 2016. Non-interest-bearing deposits represented 40.9% of total deposits at September 30, 2017, versus 37.7% of total deposits at December 31, 2016. Total assets increased to $7.48 billion at the close of the 2017 third quarter, compared with $6.73 billion at the close of the prior year.

At September 30, 2017, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 20.22%, a tier 1 risk-based capital ratio of 18.99%, a common equity tier 1 capital ratio of 18.99%, and a tier 1 leverage ratio of 13.56%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

“Farmers & Merchants’ strong liquidity continues to demonstrate our commitment to ensuring the safety and soundness of the Bank,” said Daniel Walker, chief executive officer and chairman of the board. “In our 110th year of serving Southern California, it is noteworthy that the fundamentals that keep F&M and its depositors healthy are as essential as the personalized service that fuels the Bank’s growth.”

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,

2017201620172016
 
Interest and dividend income:
 
Loans $ 44,235 $ 40,827 $ 127,503 $ 121,686
Investment securities 15,422 14,103 47,229 42,827
Investments in FHLB and FRB stock 352 445 1,147 1,277
Interest-bearing deposits in financial institutions 699 370 1,023 697  
 
Total interest and dividend income 60,708 55,745 176,902 166,487  
 
Interest expense:
 
Deposits 2,635 2,178 7,372 6,162
Securities sold under repurchase agreements 1,204 492 2,964 1,400
Other borrowings 2 - 64 -  
 
Total interest expense 3,841 2,670 10,400 7,562  
 
Net interest income 56,867 53,075 166,502 158,925
 
Provision for loan losses 1,000 - 1,000 -  
 
Net interest income after provision for loan losses 55,867 53,075 165,502 158,925  
 
Non-interest income:
 
Service charges on deposit accounts 1,003 1,004 2,966 2,977
Other real estate owned income - 1 17 17
Merchant bankcard income 2,693 2,726 8,057 7,665
Other income 2,865 2,741 11,425 8,110  
 
Total non-interest income 6,561 6,472 22,465 18,769  
 
Non-interest expense:
 
Salaries and employee benefits 21,573 18,348 64,015 56,639
FDIC and other insurance expense 651 618 1,922 2,343
Occupancy expense 2,305 2,352 6,792 6,772
Software and equipment expense 2,288 1,811 6,537 5,409
Other real estate owned expense 33 69 157 (58 )
Merchant bankcard expense 2,096 2,139 6,391 5,953
Professional and legal services 2,328 1,418 4,188 3,640
Marketing expense 1,497 1,816 4,067 4,595
Other expense 8,784 4,542 25,448 12,433  
 
Total non-interest expense 41,555 33,113 119,517 97,726  
 
Income before income tax expense 20,873 26,434 68,450 79,968
 
Income tax expense 4,185 8,641 15,146 26,190  
 
Net income$16,688$17,793$53,304$53,778  
 
Basic and diluted earnings per common share $ 127.46 $ 135.90 $ 407.12 $ 410.75  
 
FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands except share and per share data)
   
Sept. 30, 2017Dec. 31, 2016
 
Assets
 
Cash and due from banks:
Noninterest-bearing balances $ 58,014 $ 63,797
Interest-bearing balances 572,631   84,918  
 
Total cash and due from banks 630,645 148,715
Securities available-for-sale, at fair value 182,268 182,320
Securities held-to-maturity, at amortized cost 2,648,780 2,762,877
Loans held for sale 5,792 6,080
Gross loans 3,875,392 3,466,382
Allowance for loan losses (57,795 ) (56,867 )
Unamortized deferred loan fees, net (5,716 ) (5,314 )
 
Loans, net 3,811,881   3,404,201  
 
Other real estate owned, net - 791
Investments in FHLB and FRB stock, at cost 20,690 20,690
Bank premises and equipment, net 92,490 87,775
Deferred tax assets, net 31,343 30,281
Other assets 58,772   85,328  
 
Total assets$

7,482,661

   $

6,729,058

  
 
 
Liabilities and Stockholders' Equity
 
Liabilities:
 
Deposits:
Noninterest-bearing demand deposits $ 2,410,255 $ 1,931,931
Interest-bearing demand deposits 882,306 868,380
Savings and money market savings 1,784,765 1,460,669
Time deposits 811,048   861,977  
 
Total deposits 5,888,374 5,122,957
Securities sold under repurchase agreements 603,097 540,035
Other borrowings - 100,000
Other liabilities 36,223   55,753  
 
Total liabilities 6,527,694   5,818,745  
 
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 839,457 795,187
Accumulated other comprehensive income 847   463  
 
Total stockholders' equity 954,967   910,313  
 
Total liabilities and stockholders' equity$7,482,661   $6,729,058  

Farmers & Merchants Bank of Long Beach
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 of Long Beach
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