FMBL Farmers and Merchants Bank (QX)

Farmers & Merchants Bank of Long Beach (OTCBB: FMBL) today reported financial results for the fourth quarter and full year ended December 31, 2011.

“Farmers & Merchants Bank has reported double-digit percent increases in year-over-year net income for the past three years, coupled with a strong balance sheet,” said Henry Walker, chief executive officer of Farmers & Merchants Bank of Long Beach. “As the global and domestic economies continue to challenge the banking industry as a whole, we believe Farmers & Merchants is well positioned to attract customers who seek a community bank with financial strength and personalized service.”

Income Statement

For the 2011 fourth quarter, total interest income was $43.3 million, compared with $44.0 million in the fourth quarter of 2010. Total interest income for the year ended December 31, 2011 was $178.6 million, compared with $178.9 million reported for the same period in 2010.

Interest expense for the 2011 fourth quarter declined to $2.0 million from $2.7 million in the same quarter of 2010, attributed primarily to the roll over of long-term time deposits. Interest expense for the year totaled $9.5 million, compared with $12.0 million for the same period in 2010.

The Bank’s net interest income for the 2011 fourth quarter was $41.3 million, in line with the $41.3 million of net interest income for the same quarter of 2010. Net interest income for 2011 was $169.2 million, versus $166.9 million in 2010. Farmers & Merchant’s net interest margin was 4.08% for the year ended December 31, 2011, compared with 4.23% in the previous year.

The Bank’s provision for loan losses decreased to $5.5 million in the fourth quarter of 2011 from $6.5 million in the 2010 fourth quarter amid stabilizing economic conditions. Provision for loan losses declined to $14.2 million in 2011 from $26.0 million for 2010. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.80% at December 31, 2011, compared with 2.69% at December 31, 2010.

Non-interest income was $4.0 million for the 2011 fourth quarter, compared with $4.2 million in the 2010 fourth quarter. Non-interest income for the full 2011 year totaled $13.9 million, compared with $15.4 million for 2010.

Non-interest expense for the 2011 fourth quarter was $19.9 million, compared with $16.7 million for the same period last year. Non-interest expense for the year ended December 31, 2011 was $78.4 million, compared with $74.4 million last year.

The Bank’s net income for the 2011 fourth quarter was $13.8 million, or $105.29 per diluted share, compared with $15.3 million, or $117.16 per diluted share, in the 2010 fourth quarter. The Bank’s net income for 2011 rose to $59.1 million, or $451.53 per diluted share, from $53.0 million, or $405.06 per diluted share, for 2010.

Balance Sheet

At December 31, 2011, net loans increased to $2.03 billion from $2.01 billion at December 31, 2010. The Bank’s deposits grew 13.0% to $3.39 billion at the end of 2011, from $3.00 billion at December 31, 2010. Non-interest bearing deposits represented 37.2% of total deposits at December 31, 2011, versus 33.4% of total deposits at December 31, 2010. Total assets increased to $4.66 billion at the close of 2011 from $4.26 billion at December 31, 2010.

At December 31, 2011, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 27.94%, a Tier 1 risk-based capital ratio of 26.67%, and a Tier 1 leverage ratio of 14.26%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“Farmers & Merchants Bank finished 2011 with an 11 percent increase in full-year net income and a 13 percent increase in total deposits, a testament to our strength and stability in a tough economic environment,” said Daniel Walker, president and chairman of the board. “We remain focused on the fundamentals that have contributed to the Bank’s success for 105 years.”

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 Dec 31, Year ended December 31, 2011 2010 2011 2010 Interest income: Loans $ 28,667 $ 28,796 $ 115,395 $ 115,928 Securities held to maturity 11,303 11,768 48,734 47,563 Securities available for sale 3,118 3,311 13,980 14,666 Deposits with banks 224 85   497 774 Total interest income 43,312 43,960   178,606 178,931   Interest expense: Deposits 1,709 2,219 7,920 9,999 Securities sold under agreement to repurchase 294 449   1,535 2,043 Total interest expense 2,003 2,668   9,455 12,042 Net interest income 41,309 41,292 169,151 166,889   Provision for loan losses 5,450 6,500   14,200 25,950 Net int. income after provision for loan losses 35,859 34,792   154,951 140,939   Non-interest income: Service charges on deposit accounts 1,481 1,240 5,114 5,073 Gains on sale of securities 71 - 174 870 Merchant bankcard fees 354 286 1,257 1,209 Escrow fees 220 188 924 790 Other 1,888 2,504   6,436 7,489 Total non-interest income 4,014 4,218   13,905 15,431   Non-interest expense: Salaries and employee benefits 9,850 9,631 41,814 40,165 FDIC and other insurance expense 1,643 1,265 4,671 4,881 Occupancy expense 1,374 1,465 5,501 5,696 Equipment expense 1,322 1,345 5,435 5,102 Other real estate owned expense, net 1,081 (520 ) 3,441 6,298 Legal and professional fees 1,321 689 3,896 2,436 Marketing and promotional expense 1,096 692 3,934 3,004 Other 2,177 2,166   9,736 6,846 Total non-interest expense 19,864 16,733   78,428 74,428 Income before income tax expense 20,009 22,277 90,428 81,942 Income tax expense 6,223 6,938   31,310 28,909 Net income $ 13,786 $ 15,339   $ 59,118 $ 53,033 Basic and diluted earnings per common share $ 105.29 $ 117.16   $ 451.53 $ 405.06        

FARMERS & MERCHANTS BANK OF LONG BEACH

Balance Sheets (Unaudited) (In Thousands)         Dec. 31, 2011 Dec. 31, 2010 Assets Cash and due from banks: Noninterest-bearing balances $ 57,394 $ 49,628 Interest-bearing balances 278,525 48,509 Investment securities 2,113,130 1,977,343 Gross loans 2,087,388 2,070,493 Less allowance for loan losses (58,463 ) (55,627 ) Less unamortized deferred loan fees, net (418 ) (426 ) Net loans 2,028,507   2,014,440   Bank premises and equipment 55,155 51,650 Other real estate owned 23,036 37,300 Accrued interest receivable 16,464 17,134 Deferred tax asset 28,583 27,032 Other assets 58,551   39,370   Total assets $ 4,659,345   $ 4,262,406     Liabilities and stockholders' equity Liabilities: Deposits: Demand, non-interest bearing $ 1,263,162 $ 1,004,272 Demand, interest bearing 300,984 261,961 Savings and money market savings 909,794 754,446 Time deposits 919,538   983,314   Total deposits 3,393,478 3,003,993 Securities sold under agreements to repurchase 555,992 628,192 Accrued interest payable and other liabilities 39,659   7,141     Total liabilities 3,989,129   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 646,708 601,861 Other comprehensive income 8,845   6,556   Total stockholders' equity 670,216   623,080     Total liabilities and stockholders' equity $ 4,659,345   $ 4,262,406