Farmers & Merchants Bank of Long Beach (OTCQB: FMBL) today reported financial results for the fourth quarter and full year ended December 31, 2017.

“Farmers and Merchants Bank continued to invest in technology, generate solid loan growth, and maintain financial strength in our 110th year of serving Southern California,” said Henry Walker, president of Farmers & Merchants Bank. “As the Bank enters 2018, we remain focused on further cultivating relationships with new and existing clients to enhance our presence in the communities we serve.”

Income Statement

For the 2017 fourth quarter, total interest and dividend income was $62.0 million, compared with $56.4 million in the fourth quarter of 2016. Total interest and dividend income for the year ended December 31, 2017 was $238.9 million, compared with $222.9 million reported for 2016.

Interest expense for the 2017 fourth quarter was $4.0 million, compared with $2.8 million in the same period a year ago. Interest expense for the full 2017 year was $14.4 million versus $10.3 million in 2016.

Farmers & Merchants’ net interest income for the 2017 fourth quarter was $58.1 million, compared with net interest income of $53.6 million for the fourth quarter in 2016. Net interest income for 2017 was $224.6 million, versus $212.6 million in 2016.

Net interest margin for the fourth quarter 2017 was 3.44%, compared with net interest margin of 3.41% for the same period in 2016. Farmers & Merchants’ net interest margin was 3.43% for the year ended December 31, 2017, compared with 3.51% in the previous year.

Farmers & Merchants did not record a loan loss provision in the fourth quarters of 2017 or 2016. The Bank’s provision for loan losses was $1.0 million for the year ended December 31, 2017, while the Bank did not record a provision for loan losses for the year ended December 31, 2016. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.53% at December 31, 2017, compared with 1.64% at December 31, 2016.

Non-interest income was $6.5 million for the 2017 fourth quarter, essentially in line with non-interest income in the 2016 fourth quarter. Non-interest income for the full 2017 year totaled $28.9 million, compared with $25.2 million for the full 2016 year.

Non-interest expense for the 2017 fourth quarter was $42.3 million, compared with $45.8 million for the same period last year. Non-interest expense for the year ended December 31, 2017 was $161.8 million, compared with $143.5 million last year.

The Bank’s net income for the 2017 fourth quarter was $11.5 million, or $87.53 per diluted share, which includes $6.8 million of additional income tax expense, or $51.94 per diluted share, related to the Tax Cuts and Jobs Act (the Tax Act). In the fourth quarter of 2016, the Bank’s net income was $17.7 million, or $135.42 per diluted share. The Bank’s net income for 2017 was $64.8 million, or $494.65 per diluted share, compared with $71.5 million, or $546.16 per diluted share, for 2016.

Balance Sheet

At December 31, 2017, net loans totaled $3.83 billion, compared with $3.40 billion at December 31, 2016. The Bank’s deposits grew to $5.39 billion at the end of 2017, from $5.12 billion at December 31, 2016. Non-interest bearing deposits represented 37.6% of total deposits at December 31, 2017, versus 37.7% of total deposits at December 31, 2016. Total assets increased to $6.99 billion at the close of 2017 from $6.73 billion at December 31, 2016.

At December 31, 2017, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 19.72%, a tier 1 risk-based capital ratio of 18.47%, a common equity tier 1 capital ratio of 18.47%, and a tier 1 leverage ratio of 13.45%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 8.00%, 6.50% and 5.00%, respectively.

“Despite another year of navigating a low interest rate environment, Farmers and Merchants maintained strong liquidity levels and its commitment to putting clients first and safeguarding their deposits,” said Daniel Walker, chief executive officer and chairman of the board of Farmers & Merchants Bank. “I am proud of the hard work and dedication of our employees in 2017, who have all contributed to the Bank’s position of strength now that our 111th year of serving Southern California is well underway.”

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 Dec. 31, Twelve Months Ended Dec. 31,
2017 2016 2017 2016
 

Interest and dividend income:

 
Loans $ 45,269 $ 40,113 $ 172,772 $ 161,799
Investment securities 15,926 14,996 63,155 57,823
Investments in FHLB and FRB stock 313 1,028 1,460 2,305
Interest-bearing deposits in financial institutions 527   266   1,550   963  
 
Total interest and dividend income 62,035   56,403   238,937   222,890  
 
Interest expense:
 
Deposits 2,665 2,290 10,037 8,452
Securities sold under repurchase agreements 1,288 477 4,252 1,877
Other borrowings 2   5   66   5  
 
Total interest expense 3,955   2,772   14,355   10,334  
 
Net interest income 58,080 53,631 224,582 212,556
 
Provision for loan losses -   -   1,000   -  
 
Net interest income after provision for loan losses 58,080   53,631   223,582   212,556  
 
Non-interest income:
 
Service charges on deposit accounts 1,005 953 3,971 3,930
Other real estate owned income - 10 17 27
Merchant bankcard income 2,716 2,633 10,773 10,298
Other income 2,737   2,866   14,162   10,976  
 
Total non-interest income 6,458   6,462   28,923   25,231  
 
Non-interest expense:
 
Salaries and employee benefits 21,071 20,551 85,086 77,190
FDIC and other insurance expense 652 620 2,574 2,963
Occupancy expense 2,460 3,661 9,252 10,433
Software and equipment expense 2,843 1,928 9,380 7,337
Other real estate owned expense (762 ) (04 ) (605 ) (62 )
Merchant bankcard expense 2,095 2,087 8,486 8,040
Professional and legal services 1,836 2,009 6,024 5,649
Marketing expense 1,240 1,801 5,307 6,396
Other expense 10,893   13,154   36,341   25,587  
 
Total non-interest expense 42,328   45,807   161,845   143,533  
 
Income before income tax expense 22,210 14,286 90,660 94,254
 
Income tax expense 10,750   (3,444 ) 25,896   22,746  
 
Net income $ 11,460   $ 17,730   $ 64,764   $ 71,508  
 
Basic and diluted earnings per common share $ 87.53   $ 135.42   $ 494.65   $ 546.16  
 
FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In thousands except share and per share data)
 
Dec. 31, 2017 Dec. 31, 2016
 
Assets
 
Cash and due from banks:
Noninterest-bearing balances $ 56,604 $ 63,797
Interest-bearing balances 43,512   84,918  
 
Total cash and due from banks 100,116 148,715
Securities available-for-sale, at fair value 187,102 182,320
Securities held-to-maturity, at amortized cost 2,657,796 2,762,877
Loans held for sale 15,038 6,080
Gross loans 3,899,110 3,466,382
Allowance for loan losses (59,502 ) (56,867 )
Unamortized deferred loan fees, net (5,611 ) (5,314 )
 
Loans, net 3,833,997   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 95,550 87,775
Deferred tax assets, net 19,343 30,281
Other assets 61,946   85,328  
 
Total assets $ 6,991,578   $ 6,729,058  
 
 
Liabilities and Stockholders' Equity
 
Liabilities:
 
Deposits:
Noninterest-bearing demand deposits $ 2,026,237 $ 1,931,931
Interest-bearing demand deposits 925,308 868,380
Savings and money market savings 1,643,859 1,460,669
Time deposits 795,707   861,977  
 
Total deposits 5,391,111 5,122,957
Securities sold under repurchase agreements 614,410 540,035
Other borrowings - 100,000
Other liabilities 26,937   55,753  
 
Total liabilities 6,032,458   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 844,370 795,187
Accumulated other comprehensive income 87   463  
 
Total stockholders' equity 959,120   910,313  
 
Total liabilities and stockholders' equity $ 6,991,578   $ 6,729,058