FMBL Farmers and Merchants Bank (QX)

Farmers & Merchants Bank of Long Beach (OTCBB: FMBL) today announced financial results for the fourth quarter and full year ended December 31, 2012.

“We achieved solid financial results for 2012, including another year of record earnings, despite an increasingly challenging regulatory and interest rate environment,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “We also made several key hires during the year, including a new chief credit officer, chief auditor, chief information officer and supporting staff, which will further enhance our position of strength as we enter 2013.”

Income Statement

For the 2012 fourth quarter, total interest income was $40.4 million, compared with $43.3 million in the fourth quarter of 2011. Total interest income for the year ended December 31, 2012 was $171.1 million, compared with $178.6 million reported for 2011.

Interest expense for the 2012 fourth quarter fell to $1.6 million from $2.0 million in the same quarter of 2011. Interest expense for the full 2012 year declined to $7.0 million from $9.5 million in 2011. The Bank’s overall cost of funds continued to reflect the low interest rate environment and the impact of non-interest bearing deposits.

The Bank’s net interest income for the 2012 fourth quarter was $38.8 million, compared with net interest income of $41.3 million for the same quarter of 2011. Net interest income for 2012 was $164.1 million, versus $169.2 million in 2011. Farmers & Merchant’s net interest margin was 3.65% for the year ended December 31, 2012, compared with 4.08% in the previous year.

The Bank did not have a provision for loan losses in the fourth quarter of 2012 or for the year ended December 31, 2012, reflecting stabilization of the asset quality of the Bank’s loan portfolio. Provision for loan losses in the fourth quarter of 2011 totaled $5.5 million and was $14.2 for the full 2011 year. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.85% at December 31, 2012, compared with 2.80% at December 31, 2011.

Non-interest income was $3.9 million for the 2012 fourth quarter, compared with $4.0 million in the 2011 fourth quarter. Non-interest income for the full 2012 year totaled $15.9 million, versus $13.9 million for 2011.

Non-interest expense for the 2012 fourth quarter was $24.1 million, compared with $19.9 million for the same period last year. Non-interest expense for the year ended December 31, 2012 was $87.8 million, compared with $78.4 million last year.

The Bank’s net income for the 2012 fourth quarter was $13.2 million, or $101.12 per diluted share, compared with $13.8 million, or $105.30 per diluted share, in the 2011 fourth quarter. The Bank’s net income for 2012 rose to $63.4 million, or $484.14 per diluted share, from $59.1 million, or $451.53 per diluted share, for 2011.

Balance Sheet

At December 31, 2012, net loans totaled $1.93 billion, compared with $2.03 billion at December 31, 2011. The Bank’s deposits grew to $3.69 billion at the end of 2012, from $3.39 billion at December 31, 2011. Non-interest bearing deposits represented 40.0% of total deposits at December 31, 2012, versus 37.2% of total deposits at December 31, 2011. Total assets increased to $4.99 billion at the close of 2012 from $4.66 billion at December 31, 2011.

At December 31, 2012, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 29.61%, a Tier 1 risk-based capital ratio of 28.35%, and a Tier 1 leverage ratio of 14.24%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“We continued to build on the asset quality of our loan portfolio and experienced solid deposit growth in 2012 – two characteristics that reflect Farmers & Merchants’ commitment to the long-term success of the Bank,” said Daniel Walker, chief executive officer and chairman of the board. “Additionally, we believe the strategic investments we made in 2012, in both personnel and technology enhancements, will help continue to distinguish Farmers & Merchants Bank as one of the strongest banks in the region.”

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, Twelve Months Ended Dec. 31,   2012   2011     2012   2011   Interest income:   Loans $ 26,060 $ 28,667 $ 112,157 $ 115,395 Securities held-to-maturity 11,678 11,303 47,112 48,734 Securities available-for-sale 2,406 3,118 10,794 13,980 Deposits with banks   287   224     1,051   497   Total interest income   40,431   43,312     171,114   178,606   Interest expense:   Deposits 1,328 1,709 5,840 7,920 Securities sold under agreement to repurchase   293   294     1,147   1,535   Total interest expense   1,621   2,003     6,987   9,455   Net interest income 38,810 41,309 164,127 169,151   Provision for loan losses   -   5,450     -   14,200   Net interest income after provision for loan losses   38,810   35,859     164,127   154,951   Non-interest income:   Service charges on deposit accounts 1,136 1,481 4,598 5,114 Gains on sale of securities 303 71 345 174 Merchant bankcard fees 376 354 1,710 1,257 Escrow fees 227 220 858 924 Other income   1,867   1,888     8,366   6,436   Total non-interest income   3,909   4,014     15,877   13,905   Non-interest expense:   Salaries and employee benefits 13,012 9,850 48,271 41,814 FDIC and other insurance expense 1,667 1,643 6,479 4,671 Occupancy expense 1,368 1,374 5,487 5,501 Equipment expense 1,718 1,322 5,800 5,435 Other real estate owned expense,net 740 1,081 1,679 3,441 Amortization of investments in LIC 1,866 2,541 7,762 3,894 Legal and professional fees 953 1,321 2,882 3,896 Marketing and promotional expense 1,067 1,096 3,674 3,934 Other expense   1,669   (364 )   5,727   5,842   Total non-interest expense   24,060   19,864     87,761   78,428   Income before income tax expense 18,659 20,009 92,243 90,428   Income tax expense   5,420   6,223     28,856   31,310   Net income $ 13,239 $ 13,786   $ 63,387 $ 59,118   Basic and diluted earnings per common share $ 101.12 $ 105.30   $ 484.14 $ 451.53   FARMERS & MERCHANTS BANK OF LONG BEACH Balance Sheets (Unaudited) (In Thousands)           Dec. 31, 2012 Dec. 31, 2011 Assets   Cash and due from banks: Noninterest-bearing balances $ 60,914 $ 57,394 Interest-bearing balances 253,087 278,525 Securities held-to-maturity 1,942,085 1,564,841 Securities available for sale 630,055 548,289 Gross loans 1,990,146 2,087,388 Less allowance for loan losses (56,700 ) (58,463 ) Less unamortized deferred loan fees, net   (364 )   (418 ) Net loans   1,933,082     2,028,507   Other real estate owned, net 17,696 23,036 Investments in low-income communities (LIC) 35,804 43,566 Bank premises and equipment, net 60,504 55,155 Accrued interest receivable 18,542 16,464 Net deferred tax assets 28,302 28,583 Other assets   8,890     14,985     Total assets $ 4,988,961   $ 4,659,345     Liabilities and stockholders' equity   Liabilities:   Deposits: Demand, non-interest bearing $ 1,474,215 $ 1,263,162 Demand, interest bearing 346,991 300,984 Savings and money market savings 1,011,029 909,794 Time deposits   853,631     919,538     Total deposits 3,685,866 3,393,478   Securities sold under agreements to repurchase 551,293 555,992 Other liabilities   34,543     39,659     Total liabilities   4,271,702     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 695,169 646,708 Accumulated other comprehensive income 7,427     8,845   Total stockholders' equity   717,259     670,216     Total liabilities and stockholders' equity $ 4,988,961   $ 4,659,345