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, 2012.

“We continued to achieve profitability in the third quarter and nine-month period, while focusing on the long-term strength of the Bank by maintaining the asset quality of our loan portfolio,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “In an increasingly competitive lending environment, we remain committed to forming relationships that are in the best interest of the Bank, shareholders and community we’ve been serving for more than a century.”

Income Statement

For the 2012 third quarter, interest income decreased to $41.5 million from $44.6 million earned in the 2011 third quarter. Interest income for the nine-month period ended September 30, 2012 was $130.7 million, compared with $135.3 million reported for the same period in 2011. These results were impacted by the mix of securities and loans with lower yields available for securities.

Interest expense for the 2012 third quarter declined to $1.7 million from $2.3 million in last year’s third quarter. Interest expense for the nine-month period ended September 30, 2012 declined to $5.4 million from $7.5 million reported for the same period last year. The Bank’s overall cost of funds continues to reflect the low interest rate environment and the impact of non-interest bearing deposits.

Net interest income for the 2012 third quarter decreased to $39.8 million from $42.2 million for the third quarter of 2011, and to $125.3 million for the first nine months of 2012 from $127.8 million for the same period in 2011.

The Bank did not have a provision for loan losses in the third quarter of 2012 or during the first nine months of the year amid improving economic conditions. Provision for loan losses in the third quarter of 2011 totaled $2.0 million and $8.8 million for the first nine months of 2011. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.91% at September 30, 2012, compared with 2.80% at December 31, 2011.

Non-interest income increased to $3.4 million for the 2012 third quarter from $3.3 million in the third quarter a year ago. Non-interest income was $12.0 million for the nine-month period ended September 30, 2012, compared with $9.9 million for the same period in 2011.

Non-interest expense for the 2012 third quarter was $22.0 million, versus $18.8 million for the same period last year. Non-interest expense for the first nine months of 2012 was $63.7 million, compared with $58.6 million last year.

The Bank's net interest margin was 3.51% for the third quarter ended September 30, 2012 and 3.76% for the first nine months of 2012.

Net income for the 2012 third quarter decreased to $14.9 million, or $113.67 per diluted share, from $16.0 million, or $121.85 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2012 rose to $50.1 million, or $383.02 per diluted share, from $45.3 million, or $346.23 per diluted share, for the same period in 2011.

Balance Sheet

At September 30, 2012, net loans totaled $1.92 billion, compared with $2.03 billion at December 31, 2011. The Bank’s deposits totaled $3.53 billion at the end of the 2012 third quarter, compared with $3.39 billion at December 31, 2011. Non-interest bearing deposits represented 38.0% of total deposits at September 30, 2012, versus 37.2% of total deposits at December 31, 2011. Total assets increased to $4.87 billion at the close of the 2012 third quarter, compared with $4.66 billion at the close of the prior year.

At September 30, 2012, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 29.89%, a Tier 1 risk-based capital ratio of 28.62%, and a Tier 1 leverage ratio of 14.46%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“We reported solid year-to-date deposit growth in the third quarter, as the strength and reputation of the Bank continued to resonate with customers amid economic uncertainty,” said Daniel Walker, chief executive officer and chairman of the board. “Additionally, as the Bank moves forward in its 105th year of serving Southern California, we believe the investments we have made in our infrastructure in 2012 position us well for the future.”

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 Sept 30,       Nine Months Ended Sept 30,   2012         2011   2012         2011   Interest income:   Loans $ 26,741 $ 28,892 $ 86,097 $ 86,728 Securities held-to-maturity 11,848 11,997 35,392 37,431 Securities available-for-sale 2,639 3,521 8,430 10,862 Deposits with banks 294 162 764 273   Total interest income 41,522 44,572 130,683 135,294   Interest expense:   Deposits 1,433 1,971 4,512 6,211 Securities sold under agreement to repurchase 305 373 854 1,241   Total interest expense 1,738 2,344 5,366 7,452   Net interest income 39,784 42,228 125,317 127,842   Provision for loan losses - 2,000 - 8,750   Net interest income after provision for loan losses 39,784 40,228 125,317 119,092   Non-interest income:   Service charges on deposit accounts 1,110 1,281 3,462 3,633 Gains on sale of securities 41 103 42 103 Merchant bankcard fees 433 348 1,334 903 Escrow fees 201 227 631 704 Other income 1,585 1,293 6,500 4,548   Total non-interest income 3,370 3,252 11,969 9,891   Non-interest expense: Salaries and employee benefits 11,695 10,925 35,259 31,963 FDIC and other insurance expense 1,634 1,208 4,813 3,029 Occupancy expense 1,383 1,464 4,119 4,127 Equipment expense 1,366 1,381 4,082 4,112 Other real estate owned expense, net 401 318 939 2,360 Amortization of investments in low-income communities 1,866 450 5,897 1,353 Legal and professional fees 883 962 1,929 2,575 Marketing and promotional expense 1,374 933 2,607 2,838 Other expense 1,310 1,156 4,057 6,206   Total non-interest expense 21,912 18,797 63,702 58,563   Income before income tax expense 21,242 24,683 73,584 70,420   Income tax expense 6,359 8,729 23,436 25,088   Net income $ 14,883 $ 15,954 $ 50,148 $ 45,332   Basic and diluted earnings per common share $ 113.67 $ 121.85 $ 383.02 $ 346.23    

FARMERS & MERCHANTS BANK OF LONG BEACH

Balance Sheets (Unaudited)

(In Thousands)

            Sept. 30, 2012           Dec. 31, 2011 Assets   Cash and due from banks: Non-interest-bearing balances $ 55,474 $ 57,394 Interest-bearing balances 306,778 278,525 Securities held-to-maturity 1,786,848 1,564,841 Securities available-for-sale 629,253 548,289 Gross loans 1,975,505 2,087,388 Less allowance for loan losses (57,530 ) (58,463 ) Less unamortized deferred loan fees, net (330 ) (418 ) Net loans 1,917,645   2,028,507   Other real estate owned, net 22,586 23,036 Investments in low-income communities 37,669 43,566 Bank premises and equipment, net 60,077 55,155 Accrued interest receivable 18,161 16,464 Net deferred tax assets 28,210 28,583 Other assets 8,901   14,985     Total assets $ 4,871,602   $ 4,659,345     Liabilities and stockholders' equity   Liabilities:   Deposits: Demand, non-interest bearing $ 1,341,647 $ 1,263,162 Demand, interest bearing 314,979 300,984 Savings and money market savings 993,621 909,794 Time deposits 878,100   919,538     Total deposits 3,528,347 3,393,478   Securities sold under agreements to repurchase 595,173 555,992 Other liabilities 36,182   39,659     Total liabilities 4,159,702   3,989,129     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 688,607 646,708 Accumulated other comprehensive income 8,630   8,845     Total stockholders' equity 711,900   670,216     Total liabilities and stockholders' equity $ 4,871,602   $ 4,659,345