FMBL Farmers and Merchants Bank (QX)

Farmers & Merchants Bank of Long Beach (OTCBB: FMBL) today reported financial results for the second quarter ended June 30, 2013.

“Despite prevailing headwinds from the low interest rate environment, our second quarter results were in line with expectations, as F&M maintained its strong financial position for the first half of 2013,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “As favorable economic signs appear to be surfacing, the Bank is well poised to serve its personal and business banking customers, while we also benefit from the talents and prowess of new members of our team.”

Income Statement

For the three months ended June 30, 2013, interest income was $39.2 million, compared with $42.9 million in the second quarter of 2012; the decline reflects the continuing low interest rate and competitive loan pricing environment. Interest income for the first half of 2013 was $78.8 million, compared with $89.2 million reported for the first half of 2012.

Interest expense for the 2013 second quarter declined to $1.5 million from $1.8 million in the second quarter of 2012. Interest expense for the first half of 2013 declined to $3.0 million from $3.6 million reported for the first half of 2012. Interest expense continues to reflect the impact of historically low rates and strong levels of non-interest bearing demand accounts.

Net interest income for the 2013 second quarter was $37.6 million, compared with $41.1 million for the second quarter of 2012. Net interest income for the first half of 2013 was $75.7 million, compared with $85.5 million for the six months ended June 30, 2012.

Farmers & Merchants’ net interest margin was 3.20% for the 2013 second quarter, compared with 3.73% in the 2012 second quarter. Net interest margin was 3.24% for the first half of 2013, compared with 3.87% for the same period in 2012.

The Bank did not have a provision for loan losses in the first half of 2013, nor in the same period a year ago, reflecting the continued improvement in the quality of the Bank’s loan portfolio. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.40% at June 30, 2013, compared with 2.57% at December 31, 2012.

Non-interest income was $10.0 million for the 2013 second quarter, which included one-time income of $3.5 million, compared with non-interest income of $4.5 million in the second quarter of 2012. In the first half of 2013, non-interest income was $20.1 million, compared with $10.9 million for the six months ended June 30, 2012.

Non-interest expense for the 2013 second quarter was $25.9 million, compared with $21.0 million for the same period last year. Non-interest expense for the first half of 2013 was $49.1 million, compared with $44.1 million for the first half of 2012.

Net income for the 2013 second quarter totaled $14.9 million, or $113.76 per diluted share, compared with net income of $16.7 million, or $127.88 per diluted share, for the 2012 second quarter. Net income for the first half of 2013 was $32.1 million, or $245.44 per diluted share, compared with $35.3 million, or $269.35 per diluted share, for the six months ended June 30, 2012.

Balance Sheet

At June 30, 2013, net loans increased to $2.06 billion from $1.93 billion at December 31, 2012. The Bank’s deposits rose to $3.77 billion at the end of the 2013 second quarter from $3.69 billion at December 31, 2012. Non-interest bearing deposits represented 40.5% of total deposits at June 30, 2013, versus 40.0% of total deposits at December 31, 2012. Total assets increased to $5.15 billion at the close of the 2013 second quarter from $4.99 billion at December 31, 2012.

At March 31, 2013, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 29.09%, a Tier 1 risk-based capital ratio of 27.84%, and a Tier 1 leverage ratio of 14.48%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“We continued to report steady loan and deposit growth and maintained strong capital ratios during the first half of the year,” said Daniel Walker, chief executive officer and chairman of the board. “As Farmers & Merchants Bank continues to grow, the financial health of our balance sheet is indicative of the Bank’s competitive advantage in the communities we serve.”

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 Except Per Share Data)           Three Months Ended June 30, Six Months Ended June 30, 2013 2012 2013 2012   Interest income:   Loans $ 25,252 $ 27,945 $ 50,811 $ 59,355 Securities available-for-sale 2,069 2,776 4,309 5,791 Securities held-to-maturity 11,688 11,911 23,317 23,544 Deposits with banks 146 252   353   471   Total interest income 39,155 42,884   78,790   89,161   Interest expense:   Deposits 1,224 1,513 2,485 3,079 Securities sold under repurchase agreements 284 280   557   549   Total interest expense 1,508 1,793   3,042   3,628   Net interest income 37,647 41,091 75,748 85,533   Provision for loan losses - -   -   -   Net interest income after provision for loan losses 37,647 41,091   75,748   85,533   Non-interest income:   Service charges on deposit accounts 1,115 1,153 2,268 2,352 Gain on sale of securities - - 1,048 42 Merchant bankcard income 2,388 1,598 4,562 3,226 Other income 6,483 1,794   12,271   5,303   Total non-interest income 9,986 4,545   20,149   10,923   Non-interest expense:   Salaries and employee benefits 13,383 11,803 26,724 23,564 FDIC and other insurance expense 1,707 1,609 3,399 3,179 Occupancy expense 1,384 1,358 2,704 2,736 Equipment expense 1,538 1,379 2,972 2,716 Other real estate owned expense, net 658 (757 ) (469 ) 538 Amortization of public welfare investments 2,020 1,830 4,041 4,031 Merchant bankcard expense 1,939 1,063 3,660 2,170 Legal and professional services 1,001 580 1,749 1,045 Marketing expense 801 483 1,407 1,113 Other expense 1,493 1,627   2,922   3,022 2,922 Total non-interest expense 25,924 20,975   49,109   44,114   Income before income tax expense 21,709 24,661 46,788 52,342   Income tax expense 6,815 7,918   14,653   17,077   Net income $ 14,894 $ 16,743   $ 32,135   $ 35,265   Basic and diluted earnings per common share $ 113.76 $ 127.88   $ 245.44   $ 269.35     FARMERS & MERCHANTS BANK OF LONG BEACH Balance Sheets (Unaudited) (In Thousands Except Share and Per Share Data)         June 30, 2013 Dec. 31, 2012   Assets   Cash and due from banks: Noninterest-bearing balances $ 76,231 $ 60,914 Interest-bearing balances 193,267 253,087 Securities available-for-sale 566,239 630,055 Securities held-to-maturity 2,083,998 1,942,085 Gross loans 2,112,854 1,984,440 Less allowance for loan losses (50,762 ) (50,994 ) Less unamortized deferred loan fees, net (360 ) (364 ) Net loans 2,061,732   1,933,082  

Other real estate owned, net

17,953 17,696 Public welfare investments 31,763 35,804 Bank premises and equipment, net 64,530 60,504 Net deferred tax assets 26,784 26,060 Other assets 23,646   29,674     Total assets $ 5,146,143   $ 4,988,961       Liabilities and Stockholders' Equity   Liabilities:   Deposits: Demand, non-interest bearing $ 1,527,624 $ 1,474,215 Demand, interest bearing 359,149 346,991 Savings and money market savings 1,048,565 1,011,029 Time deposits 836,735   853,631     Total deposits 3,772,073 3,685,866   Securities sold under repurchase agreements 605,373 551,293 Other liabilities 29,643   34,543     Total liabilities 4,407,089   4,271,702     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 12,044 12,044 Retained earnings 721,543 695,169 Other comprehensive income 2,848   7,427     Total stockholders' equity 739,054   717,259     Total liabilities and stockholders' equity $ 5,146,143   $ 4,988,961