An August decision changes the meaning of June earnings
Farmers & Merchants Bank of Long Beach announced on August 31, 2026 that it had sold about $1 billion of low-yielding municipal bonds. The completed repositioning was expected to produce an approximately $85 million pre-tax loss and a third-quarter net loss. The bank still expected full-year profitability. The sale was an event; those earnings outcomes remained forecasts in the announcement. [6]
The choice brings an ordinary banking trade-off into view. Keeping an old bond can preserve its accounting treatment and its small income stream. Selling it may expose a loss immediately while releasing money for investments with different yields and maturities.
A family-led institution with public shareholders
C.J. Walker founded the Long Beach bank in 1907. Its historical account emphasizes reassuring depositors during a period of financial uncertainty and the continuity of the Walker family’s involvement. That is the bank’s own history, rather than an independent rating of its present safety. [4]
The July 2026 release described fourth-generation Walker leadership, 27 Southern California branches from San Clemente to Santa Barbara, and commercial and consumer services offered through branches and digital channels. The bank itself has publicly traded shares under FMBL. Its family leadership should not be mistaken for ownership of every share. [5]
The legal bank and the regulatory ownership field
FDIC certificate 1225 identifies Farmers and Merchants Bank of Long Beach, established November 20, 1907. It is a California state-chartered commercial bank and Federal Reserve member; the Federal Reserve is its primary federal regulator. [1]
The FDIC’s June 2026 regulatory top-holder field names Palomar Enterprises LLC. That field identifies regulatory control and is not a statement that Palomar owns all the bank’s shares. The financial table below measures the insured bank, not Palomar’s separate accounts. [7]
The bank in two dated snapshots
Bank-only FDIC figures: June 30 balances, January–June income and annualized first-half net interest margin. Dollars are in millions. These are pre-repositioning balances; the August sale is not embedded in the June figures. [2]
Scroll horizontally to see all columns.
| Bank-only measure; $ millions | June 2025 | June 2026 |
|---|---|---|
| Assets | $11,395.5 | $11,770.1 |
| Deposits | $8,688.0 | $8,762.6 |
| Gross loans and leases | $6,459.0 | $6,635.4 |
| Net loans and leases | $6,361.5 | $6,551.4 |
| Equity | $1,388.4 | $1,636.1 |
| First-half net income | $30.7 | $57.4 |
| First-half net interest margin | 2.35% | 2.76% |
| / gross loans | 0.72% | 0.01% |
Property lending and investments share the balance sheet
June 2026 securities totaled $4.41 billion. Real-estate-secured loans represented $5.80 billion, including $4.43 billion secured by nonfarm nonresidential property. [2]
These assets expose the bank to different kinds of timing. A property borrower’s rent or business cash flow supports repayment. A fixed-rate security continues paying its contractual coupon even when newly issued securities offer more. Accounting gains and losses, current cash income and ultimate repayment are related, but separate, measures.
The June funding base included deposits and secured borrowing
June noninterest-bearing deposits were $2.94 billion, approximately 33.5% of the $8.76 billion deposit total. The bank reported no brokered deposits, but had $1.02 billion of federal funds purchased and repurchase-agreement funding and $300.0 million of other borrowed money. Estimated uninsured deposits were $4.77 billion. [3]
Customer deposits are not the whole liability side of a bank. A repurchase agreement raises cash against securities and carries repayment and collateral obligations. Its economics differ from a checking account, even when both help finance the same pool of earning assets.
Why selling lower-yielding bonds can help later income
The August release said the sold bonds had yielded 1.43%; some proceeds were reinvested at an average 5.13%. It also described repayment of $300 million of borrowings and money reserved for future lending. Management presented the transaction as an improvement in flexibility and earnings capacity. It did not establish a guaranteed future profit stream. [6]
The arithmetic is not simply the difference between two yields multiplied by the original bond balance. Sale proceeds, the realized loss, the amount actually reinvested, debt repayment, taxes and subsequent loan demand all affect the outcome. Retaining cash instead of lending it changes that calculation again.
Credit and capital before the repositioning
The bank’s noncurrent-loan ratio declined from 0.72% to approximately 0.01% between the two June dates. First-half net recoveries were $1.0 million in 2026, compared with $1.2 million of net in 2025. Recoveries concern previously recognized losses and are not equivalent to a promise about every remaining loan. [2]
The June bank common-equity Tier 1 capital ratio was 18.25%, and the leverage ratio was 13.95%. Both predate the August securities sale. June capital therefore supplies context for the decision but cannot establish the exact capital position afterward. [3]
The first-half improvement had several contributors
F&M’s July release reported a first-half net interest margin of 2.76%, versus 2.35% in 2025, and a $2.7 million credit-provision recapture. A recapture reverses part of an earlier allowance expense and can support reported earnings without being interest received from a new loan. These bank disclosures are separate from the later expected securities loss. [5]
Repositioning can change future interest income, financing costs and the timing of gains and losses. Comparing periods without identifying intervening transactions can hide their economic effects.
What remains unresolved in an October account
Final third-quarter results, post-sale capital, the precise use of remaining proceeds and subsequent loan performance are not established by the June reports. The source review is not a comprehensive supervisory or litigation history.
A strong relationship business still has to decide when holding an old asset costs more in foregone income than selling it costs today.
Sources
- FDIC institution identity, certificate 1225; October 2, 2026 index checked October 6Official sourceBack to text: ↑
- FDIC bank financials, certificate 1225: June 30, 2025 and June 30, 2026; dollar amounts reported in thousandsOfficial sourceBack to text: ↑1↑2↑3
- FDIC funding, credit-loss and capital data, certificate 1225: June 30, 2025 and 2026Official sourceBack to text: ↑1↑2
- F&M Bank: historical account of the Walker-founded institution; checked October 6, 2026SourceBack to text: ↑
- Farmers & Merchants Bank of Long Beach: second-quarter and first-half results, July 14, 2026SourceBack to text: ↑1↑2
- F&M Bank: completed securities repositioning and expected earnings impact, August 31, 2026SourceBack to text: ↑1↑2
- FDIC June 30, 2026 regulatory top-holder fields; checked October 6, 2026Official sourceBack to text: ↑