FMBL Farmers and Merchants Bank (QX)

Farmers & Merchants Bank of Long Beach (OTCBB: FMBL) today reported financial results for the second quarter ended June 30, 2012.

“Farmers & Merchants reported solid financial results for the second quarter, maintaining strong operational performance and continuing to grow the Bank’s deposit base,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “The Bank’s strength reflects our conservative lending practices and disciplined approach to managing investments.”

Income Statement

For the 2012 second quarter, interest income decreased to $42.9 million from $45.5 million in the prior-year comparable period. Interest income for the first half of 2012 was $89.2 million, compared with $90.7 million reported for the first half of 2011.

Interest expense for the 2012 second quarter declined to $1.8 million from $2.5 million in the second quarter of 2011, primarily related to the prolonged low interest rate environment. Interest expense for the first half of 2012 declined to $3.6 million from $5.1 million reported for the first half of 2011.

Net interest income for the 2012 second quarter declined to $41.1 million from $42.9 million for the second quarter of 2011, and was virtually unchanged at $85.5 million for the first half of 2012, compared with the six months ended June 30, 2011.

The Bank did not have a provision for loan losses in the second quarter or first half of 2012, primarily because of generally more stable economic conditions. The provision for loan losses was $6.1 million for the second quarter of 2011 and $6.8 million for the first half of 2011. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.80% at June 30, 2012, in line with 2.80% at December 31, 2011.

Non-interest income was $3.4 million for the 2012 second quarter, the same as that for the second quarter a year ago. Non-interest income was $8.6 million for the first half of 2012, compared with $6.6 million for the first half of 2011.

Non-interest expense for the 2012 second quarter was $19.9 million, compared with $18.5 million for the same period last year. Non-interest expense for the first half of 2012 was $41.8 million, compared with $39.8 million for the first half of 2011.

Farmers & Merchants’ net interest margin was 3.73% for the 2012 second quarter, compared with 4.24% last year.

The Bank’s net income for the 2012 second quarter rose 19.0% to $16.7 million, or $127.87 per diluted share, from $14.0 million, or $107.21 per diluted share, for the 2011 second quarter. Net income for the first half of 2012 advanced to $35.3 million, or $269.35 per diluted share, from $29.4 million, or $224.39 per diluted share for the first six months of 2011.

Balance Sheet

At June 30, 2012, net loans decreased to $1.99 billion from $2.03 billion at December 31, 2011. The Bank’s deposits grew to $3.48 billion at the end of the 2012 second quarter, from $3.39 billion at December 31, 2011. Non-interest bearing deposits represented 37.7% of total deposits at June 30, 2012, versus 37.2% of total deposits at December 31, 2011. Total assets increased to $4.78 billion at the close of the 2012 second quarter from $4.66 billion at December 31, 2011.

At June 30, 2012, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 28.90%, a Tier 1 risk-based capital ratio of 27.64%, and a Tier 1 leverage ratio of 14.47%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“Deposits grew at a steady clip during the first half of 2012, as we continued to maintain a strong balance sheet,” said Daniel Walker, chief executive officer and chairman of the board. “With capital ratios well above regulatory minimums, the Bank enters the second half of the year in a position of strength and stability.”

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach provides personal and business banking services through 21 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 Income Statements (Unaudited) (In Thousands)             Three Months Ended June 30, Six Months Ended June 30, 2012 2011 2012 2011   Interest income:   Loans $ 27,945 $ 28,436 $ 59,355 $ 57,835 Securities held to maturity 11,911 13,014 23,544 25,434 Securities available for sale 2,776 3,961 5,791 7,341 Deposits with banks   252     50   471   111   Total interest income   42,884     45,461   89,161   90,721   Interest expense:   Deposits 1,513 2,106 3,079 4,239 Securities sold under agreement to repurchase   280     433   549   868   Total interest expense   1,793     2,539   3,628   5,107   Net interest income 41,091 42,922 85,533 85,614   Provision for loan losses   -     6,050   -   6,750   Net int. income after provision for loan losses   41,091     36,872   85,533   78,864   Non-interest income:   Service charges on deposit accounts 1,153 1,182 2,352 2,352 Merchant bankcard fees 481 290 902 555 Escrow fees 264 272 429 477 Other   1,530     1,605   4,915   3,255   Total non-interest income   3,427     3,350   8,598   6,639   Non-interest expense:   Salaries and employee benefits 11,803 10,349 23,564 21,038 FDIC and other insurance expense 1,609 703 3,179 1,820 Occupancy expense 1,358 1,405 2,736 2,663 Equipment expense 1,379 1,416 2,716 2,732 Other real estate owned expense,net (758 ) 550 538 2,043 Amortization of investments in low-income communities 1,830 451 4,031 902 Legal and professional fees 581 862 1,045 1,613 Marketing and promotional expense 547 1,100 1,233 1,905 Other   1,509     1,673   2,747   5,050   Total non-interest expense   19,858     18,509   41,789   39,766   Income before income tax expense 24,660 21,713 52,342 45,737   Income tax expense   7,918     7,676   17,077   16,359   Net income $ 16,742   $ 14,037 $ 35,265 $ 29,378   Basic and diluted earnings per common share $ 127.87   $ 107.21 $ 269.35 $ 224.39             FARMERS & MERCHANTS BANK OF LONG BEACH Balance Sheets (Unaudited) (In Thousands)   June 30, 2012 Dec. 31, 2011 Assets   Cash and due from banks: Noninterest-bearing balances $ 55,720 $ 57,394 Interest-bearing balances 245,722 278,525 Investment securities 2,308,810 2,113,130 Gross loans 2,044,716 2,087,388 Less allowance for loan losses (57,155 ) (58,463 ) Less unamortized deferred loan fees, net (450 ) (418 ) Net loans 1,987,111   2,028,507   Other real estate owned 21,248 23,036 Investments in low-income communities 39,535 43,566 Bank premises and equipment 59,751 55,155 Accrued interest receivable 16,940 16,464 Deferred tax asset 29,117 28,583 Other assets 15,909   14,985     Total assets $ 4,779,863   $ 4,659,345     Liabilities and stockholders' equity   Liabilities:   Deposits: Demand, non-interest bearing $ 1,314,325 $ 1,263,162 Demand, interest bearing 307,950 300,984 Savings and money market savings 964,329 909,794 Time deposits 897,608   919,538     Total deposits 3,484,212 3,393,478   Securities sold under agreements to repurchase 559,007 555,992 Other liabilities 37,289   39,659     Total liabilities 4,080,508   3,989,129     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 676,474 646,708 Other comprehensive income 8,218   8,845     Total stockholders' equity 699,355   670,216     Total liabilities and stockholders' equity $ 4,779,863   $ 4,659,345