FMBL Farmers and Merchants Bank (QX)

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

“The economic climate continues to pose challenges for businesses and consumers alike, but Farmers & Merchants’ sound approach to lending practices in the third quarter helped the Bank maintain strength and profitability,” said Henry Walker, chief executive officer of Farmers & Merchants Bank of Long Beach. “While many of our peers may believe that introducing products with fancy bells and whistles will drive performance, our priority remains delivering no-nonsense banking that customers can depend on in good times and bad.”

Income Statement

For the 2011 third quarter, interest income increased to $44.6 million from $44.4 million earned in the 2010 third quarter. Interest income for the nine-month period ended September 30, 2011 was $135.3 million, compared with $135.0 million reported for the same period in 2010.

Interest expense for the 2011 third quarter declined slightly to $2.3 million from $2.9 million in last year’s third quarter, mostly related to the low interest rate environment. Interest expense for the nine-month period ended September 30, 2011 declined to $7.5 million from $9.4 million reported for the same period last year.

Net interest income for the 2011 third quarter increased to $42.2 million from $41.5 million for the third quarter of 2010, and improved to $127.8 million for the first nine months of 2011 from $125.6 million for the same period in 2010.

The Bank’s provision for loan losses equaled $2.0 million for the third quarter of 2011, compared with $6.0 million for the preceding second quarter, and $4.0 million for the third quarter of 2010. Provision for loan losses totaled $8.8 million for the first nine months of 2011 versus $19.5 million for the same period in 2010. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.83% at September 30, 2011, compared with 2.72% at June 30, 2011.

Non-interest income decreased to $3.3 million for the 2011 third quarter from $4.3 million in the third quarter a year ago. Non-interest income was $9.9 million for the nine-month period ended September 30, 2011, compared with $11.2 million for the same period in 2010.

Non-interest expense for the 2011 third quarter was $18.8 million, versus $22.2 million for the same period last year. Non-interest expense for the first nine months of 2011 was $58.6 million, compared with $57.7 million last year.

The Bank's net interest margin was 4.05% for the quarter ended September 30, 2011 and 4.19% for the first nine months of 2011.

Net income for the 2011 third quarter increased to $16.0 million, or $121.86 per diluted share, from $12.7 million, or $96.66 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2011 rose to $45.3 million, or $346.24 per diluted share, from $37.7 million, or $287.90 per diluted share, for the same period in 2010.

Balance Sheet

At September 30, 2011, net loans totaled $2.00 billion, approximately the same when compared with the end of 2010. The Bank’s deposits totaled $3.24 billion at the end of the 2011 third quarter, compared with $3.00 billion at December 31, 2010. Non-interest bearing deposits represented 35.0% of total deposits at September 30, 2011, versus 33.4% of total deposits at December 31, 2010. Total assets increased to $4.51 billion at the close of the 2011 third quarter, compared with $4.26 billion at the close of the prior year.

At September 30, 2011, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 28.57%, a Tier 1 risk-based capital ratio of 27.31%, 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.

“Farmers & Merchants has cultivated a reputation of strength and stability for more than a century, and upholding that reputation with a strong balance sheet, as reflected in our third quarter, is absolutely imperative,” said Daniel Walker, president and chairman of the board. “Our ‘well-capitalized’ status is a testament to the solid fundamentals that have been core to the bank’s philosophy since its inception in 1907.”

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)

            Sept. 30, 2011           Dec. 31, 2010   Assets   Cash and due from banks: Noninterest-bearing balances $ 66,432 $ 49,628 Interest-bearing balances 350,731 48,509 Investment securities 1,932,172 1,977,343 Gross loans 2,062,960 2,070,493 Less allowance for loan losses (58,315 ) (55,627 ) Less unamortized deferred loan fees, net (489 ) (426 ) Net loans 2,004,156   2,014,440   Bank premises and equipment 52,380 51,650 Other real estate owned 32,106 37,300 Accrued interest receivable 16,037 17,134 Deferred tax asset 28,067 27,032 Other assets 27,460   39,370   Total assets $ 4,509,541   $ 4,262,406       Liabilities and stockholders' equity   Liabilities:   Deposits: Demand, non-interest bearing $ 1,131,461 $ 1,004,272 Demand, interest bearing 274,612 261,961 Savings and money market savings 894,163 754,446 Time deposits 936,484   983,314   Total deposits 3,236,720 3,003,993 Securities sold under agreements to repurchase 596,705 628,192 Accrued interest payable and other liabilities 13,369   7,141   Total liabilities 3,846,794   3,639,326     Stockholders' Equity:   Common Stock, par value $20; authorized250,000 shares; issued and outstanding130,928 shares 2,619 2,619 Surplus 12,044 12,044 Retained earnings 638,945 601,861 Other comprehensive income 9,139   6,556   Total stockholders' equity 662,747   623,080   Total liabilities and stockholders' equity $ 4,509,541   $ 4,262,406      

FARMERS & MERCHANTS BANK OF LONG BEACH

Income Statements (unaudited)

(in thousands)

            Three Months Ended Sept. 30,           Nine Months Ended Sept. 30, 2011           2010 2011           2010   Interest income:   Loans $ 28,892 $ 29,144 $ 86,728 $ 87,132 Securities held to maturity 11,997 11,709 37,431 35,796 Securities available for sale 3,521 3,320 10,862 11,355 Deposits with banks 162 204 273 689 Total interest income 44,572 44,377 135,294 134,972   Interest expense: Deposits 1,971 2,379 6,211 7,780 Securities sold under agreement to repurchase 373 520 1,241 1,595 Total interest expense 2,344 2,899 7,452 9,375 Net interest income 42,228 41,478 127,842 125,597   Provision for loan losses 2,000 4,000 8,750 19,450 Net int. income after provision for loan losses 40,228 37,478 119,092 106,147   Non-interest income: Service charges on deposit accounts 1,281 1,264 3,633 3,833 Gains on sale of securities 95 - 103 870 Merchant bankcard fees 348 328 903 923 Escrow fees 227 276 704 602 Other 1,301 2,382 4,548 4,985 Total non-interest income 3,252 4,250 9,891 11,213   Non-interest expense: Salaries and employee benefits 10,925 9,845 31,963 30,535 FDIC and other insurance expense 1,208 1,227 3,029 3,616 Occupancy expense 1,464 1,611 4,127 4,230 Equipment expense 1,381 1,309 4,112 3,757 Other real estate owned expense, net 318 5,564 2,360 6,819 Legal and professional fees 962 734 2,575 1,747 Marketing and promotional expense 933 784 2,838 2,312 Printing and supplies 171 187 653 613 Postage and delivery 256 288 778 856 Other 1,179 641 6,128 3,210 Total non-interest expense 18,797 22,190 58,563 57,695   Income before income tax expense 24,683 19,538 70,420 59,665   Income tax expense 8,729 6,882 25,088 21,971   Net income $ 15,954 $ 12,656 $ 45,332 $ 37,694   Basic and diluted earnings per common share $ 121.86 $ 96.66 $ 346.24 $ 287.90