FMBL Farmers and Merchants Bank (QX)

Farmers & Merchants Bank of Long Beach (OTCBB: FMBL) today reported improved financial results for the second quarter ended June 30, 2011.

“Profitability in the second quarter continued to reflect a disciplined approach to managing our business amid economic and regulatory challenges for the banking industry,” said Henry Walker, chief executive officer of Farmers & Merchants Bank of Long Beach. “This disciplined approach resulted in a 20% increase in net income, compared with the second quarter last year.”

Income Statement

For the 2011 second quarter, interest income increased to $45.5 million from $45.3 million in the prior-year comparable period. Interest income for the first half of 2011 was $90.7 million compared with $90.6 million reported for the first half of 2010.

Interest expense for the 2011 second quarter declined to $2.5 million from $3.2 million in the second quarter of 2010, mostly related to the declining interest rate environment. Interest expense for the first half of 2011 declined to $5.1 million from $6.5 million reported for the first half of 2010.

Net interest income for the 2011 second quarter increased to $42.9 million from $42.1 million for the second quarter of 2010, and increased to $85.6 million for the first half of 2011, compared with $84.1 million in the six months ended June 30, 2010.

The Bank’s provision for loan losses was $6.1 million for the second quarter of 2011, compared with $700,000 for the preceding first quarter, and $8.7 million for the second quarter of 2010. Provision for loan losses totaled $6.8 million for the first half of 2011, versus $15.5 million for the first half of 2010. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.72% at June 30, 2011, compared with 2.75% at March 31, 2011.

Non-interest income was $3.4 million for the 2011 second quarter, versus $3.6 million in the second quarter a year ago. Non-interest income was $6.6 million for the first half of 2010, compared with $7.0 million for the first half of 2010.

Non-interest expense for the 2011 second quarter was $18.5 million, versus $18.4 million for the same period last year. Non-interest expense for the first half of 2011 was $39.8 million, compared with $35.5 million for the first half of 2010.

The Bank's net interest margin remained strong at 4.24% for the 2011 second quarter and at 4.26% for the first half of 2011.

The Bank’s net income for the 2011 second quarter totaled $14.0 million, or $107.21 per diluted share, compared with net income of $11.7 million, or $89.65 per diluted share, in the year-ago period. The Bank’s net income for the first half of 2011 was $29.4 million, or $224.39 per diluted share, compared with $25.0 million, or $191.24 per diluted share for the first half of 2010.

Balance Sheet

At June 30, 2011, net loans increased to $2.09 billion from $2.01 billion at December 31, 2010. The Bank’s deposits totaled $3.06 billion at the end of the 2011 second quarter, compared with $3.00 billion at December 31, 2010. Non-interest bearing deposits represented 34.4% of total deposits at June 30, 2011, versus 33.4% of total deposits at December 31, 2010. Total assets increased to $4.32 billion at the close of the 2011 second quarter, compared with $4.26 billion at December 31, 2010.

At June 30, 2011, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 26.84%, a Tier 1 risk-based capital ratio of 25.58%, and a Tier 1 leverage ratio of 14.69%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“Core deposits continued to grow in the second quarter, as customers sought safety in an otherwise fickle economic environment,” said Daniel Walker, president and chairman of the board. “Maintaining strong capital ratios and unparalleled customer service remain integral to the Bank’s success.”

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach provides personal and business banking services through 22 offices in Los Angeles and Orange Counties. Founded in 1907 by C.J. Walker, the Bank specializes in commercial and small business banking along with business loan programs.

FARMERS & MERCHANTS BANK OF LONG BEACH

Balance Sheets (unaudited)

(in Thousands)

        June 30, 2011       Dec. 31, 2010 Assets Cash and due from banks: Noninterest-bearing balances $ 52,156 $ 49,628 Interest-bearing balances 74,318 48,509 Investment securities 1,926,227 1,977,343 Gross loans 2,152,572 2,070,493 Less allowance for loan losses (58,560 ) (55,627 ) Less unamortized deferred loan fees, net (605 ) (426 ) Net loans 2,093,407   2,014,440   Bank premises and equipment 51,958 51,650 Other real estate owned 45,525 37,300 Accrued interest receivable 17,188 17,134 Deferred tax asset 28,061 27,032 Other assets 32,279   39,370   Total assets $ 4,321,119   $ 4,262,406   Liabilities and stockholders' equity Liabilities: Deposits: Demand, non-interest bearing $ 1,050,500 $ 1,004,272 Demand, interest bearing 270,941 261,961 Savings and money market savings 812,335 754,446 Time deposits 924,411   983,314   Total deposits 3,058,187 3,003,993 Securities sold under agreements to repurchase 604,000 628,192 Accrued interest payable and other liabilities 10,338   7,141   Total liabilities 3,672,525   3,639,326   Stockholders' Equity:

Common Stock, par value $20; authorized 250,000 shares; issued and outstanding 130,928 shares

2,619 2,619 Surplus 12,044 12,044 Retained earnings 625,740 601,861 Other comprehensive income 8,191   6,556   Total stockholders' equity 648,594   623,080   Total liabilities and stockholders' equity $ 4,321,119   $ 4,262,406      

FARMERS & MERCHANTS BANK OF LONG BEACH

Income Statements (Unaudited)

(in Thousands)

      Three Months Ended June 30,     Six Months Ended June 30, 2011     2010 2011     2010 Interest income: Loans $ 28,436 $ 28,980 $ 57,835 $ 57,988 Securities held to maturity 13,014 12,216 25,434 24,087 Securities available for sale 3,961 3,832 7,341 8,035 Deposits with banks 50 267 111 485 Total interest income 45,461 45,295 90,721 90,595 Interest expense: Deposits 2,106 2,629 4,239 5,401 Securities sold under agreement to repurchase 433 538 868 1,074 Total interest expense 2,539 3,167 5,107 6,475 Net interest income 42,922 42,128 85,614 84,120 Provision for loan losses 6,050 8,700 6,750 15,450 Net int. income after provision for loan losses 36,872 33,428 78,864 68,670 Non-interest income: Service charges on deposit accounts 1,182 1,260 2,352 2,569 Gains on sale of securities 1 428 8 870 Merchant bankcard fees 290 341 555 595 Escrow fees 272 178 477 326 Other 1,605 1,405 3,247 2,603 Total non-interest income 3,350 3,612 6,639 6,963 Non-interest expense: Salaries and employee benefits 10,349 10,455 21,038 20,690 FDIC and other insurance expense 703 1,340 1,820 2,389 Occupancy expense 1,405 1,292 2,663 2,619 Equipment expense 1,416 1,237 2,732 2,448 Other real estate owned expense, net 550 695 2,043 1,255 Legal and professional fees 862 516 1,613 1,013 Marketing and promotional expense 1,100 823 1,905 1,528 Printing and supplies 256 205 482 426 Postage and delivery 253 279 521 568 Other 1,615 1,512 4,949 2,570 Total non-interest expense 18,509 18,354 39,766 35,506 Income before income tax expense 21,713 18,686 45,737 40,127 Income tax expense: 7,676 6,948 16,359 15,089 Net income $ 14,037 $ 11,738 $ 29,378 $ 25,038 Basic and diluted earnings per common share $ 107.21 $ 89.65 $ 224.39 $ 191.24