FMBL Farmers and Merchants Bank (QX)

-- Net Loans Grew 13% in Year-to-Date Comparison --

Farmers & Merchants Bank of Long Beach (OTCBB: FMBL) today reported financial results for the second quarter and six-months ended June 30, 2014.

“Farmers & Merchants achieved strong loan growth during the first half of the year, as the Bank’s expanded lending team continues to deliver results,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “At the same time, the Bank made steady gains in deposit growth, which is a testament to Farmers & Merchants’ focus on providing superior service with sound and stable fundamentals.”

Income Statement

For the three months ended June 30, 2014, interest income rose to $45.0 million from $39.2 million in the second quarter of 2013. Interest income for the first half of 2014 increased to $88.3 million from $78.8 million reported for the first half of 2013.

Interest expense for the 2014 second quarter was $1.7 million, compared with $1.5 million in the second quarter of 2013. Interest expense for the first half of 2014 was $3.3 million, versus $3.0 million reported for the corresponding period last year.

Net interest income for the 2014 second quarter advanced to $43.3 million from $37.6 million for the second quarter of 2013. Net interest income for the first half of 2014 increased to $85.0 million from $75.7 million for the six months ended June 30, 2013.

Farmers & Merchants’ net interest margin was 3.48% for the 2014 second quarter, up from 3.20% in the 2013 second quarter. Net interest margin was 3.44% for the first half of 2014, versus 3.24% for the same period in 2013.

The Bank did not have a provision for loan losses in the first half of 2014, nor in the same period a year ago, reflecting the continued strength of Farmers & Merchant’s loan portfolio. The Bank’s allowance for loan losses as a percentage of loans outstanding was 1.86% at June 30, 2014, compared with 2.09% at December 31, 2013.

Non-interest income was $9.8 million for the 2014 second quarter, compared with $10.4 million in the same period a year ago. In the first half of 2014, non-interest income was $16.4 million, compared with $21.2 million for the six months ended June 30, 2013.

Non-interest expense for the 2014 second quarter was $29.7 million, compared with $26.4 million for the same period last year. Non-interest expense for the first half of 2014 was $57.9 million, compared with $50.1 million for the first half of 2013.

Net income for the 2014 second quarter increased to $16.1 million, or $123.05 per diluted share, from $14.9 million, or $113.76 per diluted share, for the 2013 second quarter. Net income for the first half of 2014 was $30.2 million, or $230.44 per diluted share, compared with $32.1 million, or $245.44 per diluted share, for the six months ended June 30, 2013.

Balance Sheet

At June 30, 2014, net loans increased to $2.71 billion from $2.40 billion at December 31, 2013. The Bank’s deposits rose to $4.00 billion at the end of the 2014 second quarter from $3.83 billion at December 31, 2013. Non-interest bearing deposits represented 39.3% of total deposits at June 30, 2014, versus 38.5% of total deposits at December 31, 2013. Total assets increased to $5.41 billion at the close of the 2014 second quarter from $5.21 billion at December 31, 2013.

At June 30, 2014, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 24.38%, a Tier 1 risk-based capital ratio of 23.13%, and a Tier 1 leverage ratio of 14.54%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“As a key pillar to the strength and stability of Farmers &Merchants Bank, we continued to maintain a healthy balance sheet in the first half of the year,” said Daniel Walker, chief executive officer and chairman of the board. “As Farmers & Merchants Bank further enhances its presence in Southern California, we remain committed to implementing our growth strategy with the very prudence, integrity and tact that has led to the Bank’s profitability on an annual basis for more than a century.”

About Farmers & Merchants Bank of Long Beach

Founded in Long Beach in 1907 by C.J. Walker, Farmers & Merchants Bank has 23 branches in Los Angeles and Orange Counties. The Bank specializes in commercial and small business banking along with business loan programs. Farmers & Merchants Bank of Long Beach 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 www.fmb.com.

  FARMERS & MERCHANTS BANK OF LONG BEACH Income Statements (Unaudited) (In thousands except per share data)         Three Months Ended June 30, Six Months Ended June 30,   2014   2013   2014   2013   Interest income:   Loans $ 31,122 $ 25,252 $ 59,992 $ 50,811 Securities available-for-sale 1,328 2,069 2,858 4,309 Securities held-to-maturity 12,446 11,688 25,299 23,317 Deposits with banks 88 146 141 353   Total interest income 44,984 39,155 88,290 78,790   Interest expense:   Deposits 1,424 1,224 2,772 2,485 Federal funds purchased - - 4 - Securities sold under repurchase agreements 280 284 554 557   Total interest expense 1,704 1,508 3,330 3,042   Net interest income 43,280 37,647 84,960 75,748   Provision for loan losses - - - -   Net interest income after provision for loan losses 43,280 37,647 84,960 75,748   Non-interest income:   Service charges on deposit accounts 1,154 1,115 2,287 2,268 Gains on sale of securities - - 425 1,048 Other real estate owned income 338 153 503 463 Merchant bankcard income 2,429 2,388 4,703 4,562 Other income 5,853 6,771 8,445 12,838   Total non-interest income 9,774 10,427 16,363 21,179   Non-interest expense:   Salaries and employee benefits 16,247 13,383 31,926 26,724 FDIC and other insurance expense 769 1,707 1,521 3,399 Occupancy expense 1,982 1,673 3,753 3,271 Equipment expense 1,589 1,538 3,070 2,972 Other real estate owned expense 1,162 811 1,783 (6) Amortization of public welfare investments 2,117 2,020 4,234 4,041 Merchant bankcard expense 1,938 1,939 3,725 3,660 Legal and professional services 782 1,001 1,726 1,749 Marketing expense 1,279 786 2,768 1,375 Other expense 1,807 1,507 3,360 2,954 2,922 2,922 Total non-interest expense 29,672 26,365 57,866 50,139   Income before income tax expense 23,382 21,709 43,457 46,788   Income tax expense 7,271 6,815 13,286 14,653   Net income $ 16,111 $ 14,894 $ 30,171 $ 32,135   Basic and diluted earnings per common share $ 123.05 $ 113.76 $ 230.44 $ 245.44   FARMERS & MERCHANTS BANK OF LONG BEACH Balance Sheets (Unaudited) (In thousands except share and per share data)   June 30, 2014 Dec. 31, 2013   Assets   Cash and due from banks: Noninterest-bearing balances $ 67,663 $ 65,261 Interest-bearing balances 130,141 20,755 Securities available-for-sale 303,262 427,942 Securities held-to-maturity 1,985,486 2,145,289 Loans held for sale 1,254 465 Gross loans 2,759,914 2,454,302 Less allowance for loan losses (51,275) (51,251) Less unamortized deferred loan fees, net (1,852) (1,704) Net loans 2,706,787 2,401,347 Other real estate owned, net 12,075 14,502 Public welfare investments 50,519 27,722 Bank premises and equipment, net 87,004 66,212 Net deferred tax assets 23,089 23,512 Federal Home Loan Bank stock 25,000 - Other assets 22,584 21,579   Total assets $

5,414,864

$

5,214,586

    Liabilities and Stockholders' Equity   Liabilities:   Deposits: Demand, non-interest bearing $ 1,572,185 $ 1,475,888 Demand, interest bearing 408,256 413,291 Savings and money market savings 1,168,541 1,080,774 Time deposits 848,716 861,489   Total deposits 3,997,698 3,831,442   Securities sold under repurchase agreements 594,043 595,991 Other liabilities 38,806 27,986   Total liabilities

4,630,547

4,455,419

  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 12,044 Retained earnings 666,818 742,408 Accumulated other comprehensive income 2,836 2,096   Total stockholders' equity 784,317 759,167   Total liabilities and stockholders' equity $

5,414,864

$

5,214,586

Farmers & Merchants Bank of Long BeachJohn HinrichsExecutive Vice President562-437-0011, ext. 5035orPondelWilkinson Inc.Evan PondelCorporate and Investor Relations310-279-5980investor@pondel.com