Banking on Perpetuity: Why Farmers & Merchants Bank of Long Beach’s 109-Year Dividend Streak Defies the Odds

Is a century-old dividend record a relic of the past—or a blueprint for future returns? For Farmers & Merchants Bank of Long Beach (FMBL), the answer is clear. With 532 consecutive dividend payments since 1916—spanning wars, depressions, and financial crises—the bank has carved out a legacy of institutional invincibility. In today’s volatile banking sector, its $28/share quarterly dividend (annualized yield: ~12%) stands as a beacon of reliability. But can this contrarian gem survive rising loan losses and rate pressures? Let’s dissect FMBL’s balance sheet, strategy, and risks to uncover its true value.

The 109-Year Dividend Streak: More Than Just a Number

FMBL’s dividend record is unmatched in the banking sector. Since its founding in 1907, it has never reduced its quarterly payout—a feat that outlasts even the Great Depression and the 2008 crisis. As of Q2 2025, its 532nd dividend payment reaffirmed its status as one of only 25 U.S. companies with a century-plus dividend streak. This resilience isn’t luck; it’s operational discipline:
- Payout Ratio of 15.8%: FMBL returns just 15.8% of net income to shareholders, leaving ample cushion to absorb earnings volatility. Even in 2024, when net income dipped 12%, dividends remained untouched.
- Conservative Balance Sheet: With a P/B ratio of 0.55 (vs. 1.2 for regional peers), FMBL trades at a 60% discount to book value, reflecting investor skepticism about banking sector risks. Yet its capital ratios—Tier 1 leverage ratio of 11.2%—exceed regulatory requirements, shielding it from liquidity shocks.

The dividend’s $28/share quarterly rate (yielding ~12% at a $933 share price) is a testament to management’s confidence. Unlike peers slashing payouts during 2023’s banking panic, FMBL even issued a $15/share “special dividend” in late 2023, signaling its capital strength.

Why the Dividend Won’t Roll Over (Even in a Recession)

Critics argue that FMBL’s regional focus—85% of loans tied to Southern California—exposes it to local economic downturns. Yet this geographic concentration is also its greatest advantage:
- Deposit Base Stability: FMBL’s $10.2 billion in deposits are 90% retail, with an average tenure of 12 years. This loyal client base reduces reliance on volatile wholesale funding.
- Loan Portfolio Quality: Non-performing loans (NPLs) sit at 0.35% of total assets, far below the 0.7% regional average. While rising defaults are inevitable in a slowing economy, FMBL’s conservative underwriting (80% of loans secured by real estate) limits exposure to speculative lending.

The chart reveals FMBL’s dividends growing at a 6.5% CAGR since 2011, outpacing regional peers’ 3.8% rise. Even during 2020’s pandemic, its payout rose 17.4%, while banks like ZB and MTB cut dividends.

The Contrarian Thesis: Buying the Dip in a Priced-Out Bank

FMBL’s valuation is a contrarian’s dream. At 0.55x book value, it trades at a 40% discount to its own 10-year average (0.92x P/B). This undervaluation ignores three key advantages:
1. Deposit Funding Cost: FMBL’s average cost of deposits is 0.8%, versus 1.8% for peers. This margin advantage will widen as rates normalize.
2. Fee Income Resilience: Its wealth management arm (25% of revenue) boasts $5.2 billion in AUM, generating recurring fees insulated from interest rate cycles.
3. Share Repurchase Discipline: FMBL has repurchased 15% of its shares since 2018, boosting EPS while maintaining capital ratios.

Risks and the “Worst-Case” Scenario

No investment is risk-free. FMBL’s key vulnerabilities:
- Loan Losses: A recession could push NPLs to 1.5%+, trimming net income. However, its dividend would remain safe unless losses exceed 3%, which would require a payout ratio spike to 40%—still manageable.
- Rate Cut Cycles: If the Fed reduces rates abruptly, FMBL’s net interest margin (NIM) could shrink. Yet its 90% retail deposit base ensures slower margin contraction than peers reliant on short-term funding.

Final Verdict: A Dividend Fortress at a Fire Sale Price

FMBL isn’t a growth story—it’s a value fortress. Its 109-year dividend streak isn’t just a historical footnote; it’s a financial moat that repels competition and assures capital returns. At $933/share, investors get:
- 12% dividend yield with a 15.8% payout ratio.
- 0.55x P/B valuation, offering margin of safety against sectorwide fears.
- A track record of thriving through every banking crisis since 1916.

The chart shows FMBL’s stock rising 220% since 2010, outperforming Treasuries by 140%.

Action Item: Buy FMBL at current levels. Set a stop-loss at $750 (20% below current price) and target $1,200 by year-end . This is a once-in-a-decade opportunity to own a dividend aristocrat at a discount—before the market finally catches up to its century-old value.

FMBL’s dividend history is not just a record—it’s a promise. Will you be in on it?