Farmers & Merchants Bank of Long Beach (OTCQB: FMBL) today reported financial results for the third quarter ended September 30, 2018.
Farmers and Merchants third-quarter results reflect strong loan growth, while at the same time the Bank continues to adjust to a higher interest rate environment, said Henry Walker, president of Farmers & Merchants Bank. The third quarter also marked the opening of our new branch in Santa Barbara, as we further enhance Farmers and Merchants presence in key markets that align with our growth objectives.
For the 2018 third quarter, interest and dividend income rose to $66.6 million from $60.7 million in the 2017 third quarter. Interest and dividend income for the nine-month period ended September 30, 2018 increased to $192.1 million from $176.9 million reported for the same period in 2017.
Interest expense for the 2018 third quarter was $5.8 million, compared with $3.8 million a year ago. Interest expense for the nine-month period ended September 30, 2018 was $15.4 million, versus $10.4 million reported for the same period last year.
Net interest income for the 2018 third quarter rose to $60.9 million from $56.9 million for the third quarter of 2017 and advanced to $176.7 million for the first nine months of 2018 from $166.5 million for the same period in 2017.
Farmers & Merchants net interest margin was 3.47% for the 2018 third quarter, compared with 3.42% for the 2017 third quarter. Net interest margin was 3.41% for the first nine months of 2018, versus 3.43% for the same period in 2017.
The Banks provision for loan losses was $2.0 million for the third quarter of 2018, as lending volumes increased during the period, compared with $1.0 million for the third quarter of 2017. The Banks allowance for loan losses as a percentage of loans outstanding was 1.47% at September 30, 2018. Farmers & Merchants allowance for loan losses as a percentage of loans outstanding was 1.53% at December 31, 2017.
Non-interest income was $7.4 million for the 2018 third quarter, compared with $6.6 million in the third quarter a year ago. Non-interest income was $21.9 million for the nine-month period ended September 30, 2018, compared with $22.5 million for the same period in 2017.
Non-interest expense for the 2018 third quarter was $44.7 million, versus $41.6 million for the same period last year. Non-interest expense for the first nine months of 2018 was $116.2 million, compared with $119.5 million last year.
Net income for the 2018 third quarter rose to $20.7 million, or $157.82 per diluted share, from $16.7 million, or $127.46 per diluted share, in the year-ago period. The Banks net income for the first nine months of 2018 was $63.5 million, or $484.90 per diluted share, up from $53.3 million, or $407.12 per diluted share, for the same period in 2017.
At September 30, 2018, net loans totaled $4.17 billion, compared with $3.83 billion at December 31, 2017. The Banks deposits totaled $5.63 billion at the end of the 2018 third quarter, compared with $5.39 billion at December 31, 2017. Non-interest-bearing deposits represented 38.8% of total deposits at September 30, 2018, versus 37.6% of total deposits at December 31, 2017. Total assets increased to $7.31 billion at the close of the 2018 third quarter, compared with $6.99 billion at the close of the prior year.
At September 30, 2018, Farmers & Merchants Bank remained well-capitalized under all regulatory categories, with a total risk-based capital ratio of 19.56%, a tier 1 risk-based capital ratio of 18.33%, a common equity tier 1 capital ratio of 18.33%, and a tier 1 leverage ratio of 13.87%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.
F&M is entering the final stretch of the year in a position of strength with excellent loan growth that is consistent with the Banks conservative lending standards and culture to protect depositors money while maintaining a strong balance sheet, said Daniel Walker, chief executive officer and chairman of the board. Additionally, we are excited to welcome clients to our new Santa Barbara branch, building relationships with a community that we believe will resonate with F&Ms core values and sound fundamentals, rooted in 111 years of serving Southern California.
Farmers & Merchants Bank also announced today that its board of directors has authorized the Bank to repurchase up to $20 million of its common stock prior to December 31, 2019. The Bank may purchase shares of its common stock from time to time through various means, including open market transactions, privately negotiated transactions, or otherwise in accordance with applicable laws.
To the extent the Bank repurchases shares, the number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, stock price, trading volume, regulatory requirements, general business conditions and other factors. The Bank may choose to modify, suspend or discontinue such proposed repurchases at any time and anticipates that any such repurchases will be funded from existing cash and cash equivalents or future cash flow.
About Farmers & Merchants Bank
Founded in Long Beach in 1907 by C.J. Walker, Farmers & Merchants Bank has 25 branches across Orange County, Long Beach, the South Bay and now in Santa Barbara. 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.
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 Banks expectations regarding the amount of and timing, methods and funding sources 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 Banks control. Such risks and uncertainties could cause actual results and actions to differ materially from those contemplated in such forward-looking statements and the Banks reported results should not be considered an indication of the Banks future performance. Factors that could cause or contribute to such differences include, but are not limited to, credit, market, operational, liquidity and interest rate risks associated with the Banks 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 statement.
|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,|
|Interest and dividend income:|
|Investments in FHLB and FRB stock||353||352||1,058||1,147|
|Interest-bearing deposits in financial institutions||713||699||1,777||1,023|
|Total interest and dividend income||66,639||60,708||192,064||176,902|
|Securities sold under repurchase agreements||2,016||1,204||5,418||2,964|
|Total interest expense||5,782||3,841||15,396||10,400|
|Net interest income||60,857||56,867||176,668||166,502|
|Provision for loan losses||2,000||1,000||2,000||1,000|
|Net interest income after provision for loan losses||58,857||55,867||174,668||165,502|
|Service charges on deposit accounts||1,543||1,003||4,116||2,966|
|Other real estate owned income||–||–||–||17|
|Merchant bankcard income||3,014||2,693||8,982||8,057|
|Total non-interest income||7,448||6,561||21,893||22,465|
|Salaries and employee benefits||21,835||21,573||66,189||64,015|
|FDIC and other insurance expense||647||651||1,954||1,922|
|Software and equipment expense||2,675||2,288||7,809||6,537|
|Other real estate owned expense||11||33||49||157|
|Merchant bankcard expense||2,377||2,096||7,083||6,391|
|Professional and legal services||1,597||2,328||4,170||4,188|
|Total non-interest expense||44,736||41,555||116,171||119,517|
|Income before income tax expense||21,569||20,873||80,390||68,450|
|Income tax expense||906||4,185||16,903||15,146|
|Basic and diluted earnings per common share||$||157.82||$||127.46||$||484.90||$||407.12|
|FARMERS & MERCHANTS BANK OF LONG BEACH|
|Balance Sheets (Unaudited)|
|(In thousands except share and per share data)|
|Sep. 30, 2018||Dec. 31, 2017|
|Cash and due from banks:|
|Total cash and due from banks||80,756||100,116|
|Securities available-for-sale, at fair value||145,892||187,102|
|Securities held-to-maturity, at amortized cost||2,667,908||2,657,796|
|Loans held for sale||20,407||15,038|
|Allowance for loan losses||(61,961||)||(59,502||)|
|Unamortized deferred loan fees, net||(6,443||)||(5,611||)|
|Investments in FHLB and FRB stock, at cost||20,690||20,690|
|Bank premises and equipment, net||99,061||95,550|
|Deferred tax assets, net||21,743||20,726|
|Liabilities and Stockholders’ Equity|
|Noninterest-bearing demand deposits||$||2,183,544||$||2,026,237|
|Interest-bearing demand deposits||1,135,258||925,308|
|Savings and money market savings||1,577,801||1,643,859|
|Securities sold under repurchase agreements||584,026||614,410|
|Common Stock, par value $20; authorized 250,000|
|shares; issued and outstanding 130,928 shares||2,619||2,619|
|Additional paid-in capital||112,044||112,044|
|Accumulated other comprehensive income||(1,842||)||87|
|Total stockholders’ equity||1,011,644||959,120|
|Total liabilities and stockholders’ equity||$||7,309,219||$||6,991,578|
Farmers & Merchants Bank of Long Beach
562-437-0011, ext. 4835