FMBL Farmers and Merchants Bank (QX)

-- Year-to-Date Net Loans Increase 13% --

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

“We achieved continued growth in the third quarter in key metrics, including loans and deposits, reflecting the strength of our brand and the F&M team in a highly competitive landscape,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “During the quarter, F&M demonstrated its commitment to maintaining its leadership in the region by expanding our executive management team with the appointment of Melissa Lanfre as the Bank’s chief operating officer.”

Income Statement

For the 2013 third quarter, interest income amounted to $40.9 million, compared with $41.5 million earned in the 2012 third quarter, reflecting the protracted low interest rate environment. Interest income for the nine-month period ended September 30, 2013 was $119.7 million, compared with $130.7 million reported for the same period in 2012.

Interest expense for the 2013 third quarter declined to $1.6 million from $1.7 million in last year’s third quarter. Interest expense for the nine-month period ended September 30, 2013 declined to $4.6 million from $5.4 million reported for the same period last year.

Net interest income for the 2013 third quarter was $39.3 million, compared with $39.8 million for the third quarter of 2012, and $115.1 million for the first nine months of 2013, versus $125.3 million for the same period in 2012.

Farmers & Merchants’ net interest margin was 3.28% for the 2013 third quarter, compared with 3.51% for the 2012 third quarter. Net interest margin was 3.25% for the first nine months of 2013, compared with 3.76% for the same period in 2012.

The Bank did not have a provision for loan losses in the first nine months of 2013, nor in the same period a year ago, amid continued strength in the quality of its loan portfolio. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.32% at September 30, 2013, compared with 2.57% at December 31, 2012.

Non-interest income increased to $10.5 million for the 2013 third quarter from $9.5 million in the third quarter a year ago. Non-interest income was $30.6 million for the nine-month period ended September 30, 2013, compared with $20.4 million for the same period in 2012.

Non-interest expense for the 2013 third quarter was $27.9 million, versus $28.1 million for the same period last year. Non-interest expense for the first nine months of 2013 was $77.0 million, compared with $72.2 million last year.

Net income for the 2013 third quarter increased to $15.1 million, or $114.95 per diluted share, from $14.9 million, or $113.68 per diluted share, in the year-ago period. The Bank’s net income for the first nine months of 2013 was $47.2 million, or $360.39 per diluted share, compared with $50.1 million, or $383.02 per diluted share, for the same period in 2012.

Balance Sheet

At September 30, 2013, net loans totaled $2.18 billion, compared with $1.93 billion at December 31, 2012. The Bank’s deposits totaled $3.84 billion at the end of the 2013 third quarter, compared with $3.69 billion at December 31, 2012. Non-interest bearing deposits represented 40.4% of total deposits at September 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 third quarter, compared with $4.99 billion at the close of the prior year.

At September 30, 2013, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 28.72%, a Tier 1 risk-based capital ratio of 27.46%, and a Tier 1 leverage ratio of 14.43%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“Results for the third quarter demonstrate F&M’s sound and stable reputation, which continues to pervade throughout Southern California,” said Daniel Walker, chief executive officer and chairman of the board. “Additionally, the strength of our balance sheet positions us well, as we embark on the next phase of growth and development for the Bank.”

About Farmers & Merchants Bank

Founded in Long Beach in 1907 by C.J. Walker, Farmers & Merchants Bank has 21 branches in L.A. and Orange Counties. The Bank specializes in commercial and small business banking along with business loan programs. Farmers & Merchants Bank of Long Beach is a California state chartered bank with deposits insured by the Federal Deposit Insurance Corporation (Member FDIC) and an Equal Housing Lender. For more information about F&M, please visit www.fmb.com.

FARMERS & MERCHANTS BANK OF LONG BEACH Income Statements (Unaudited) (In thousands except per share data)         Three Months Ended Sept. 30,       Nine Months Ended Sept. 30, 2013       2012 2013       2012   Interest income:   Loans $ 26,002 $ 26,741 $ 76,813 $ 86,097 Securities available-for-sale 1,980 2,639 6,289 8,430 Securities held-to-maturity 12,800 11,848 36,117 35,392 Deposits with banks 105 294 457 764 Total interest income 40,887 41,522 119,676 130,683   Interest expense:   Deposits 1,268 1,433 3,753 4,512 Securities sold under repurchase agreements 283 305 839 854 Total interest expense 1,551 1,738 4,592 5,366   Net interest income 39,336 39,784 115,084 125,317   Provision for loan losses - - - -   Net interest income after provision for loan losses 39,336 39,784 115,084 125,317   Non-interest income:   Service charges on deposit accounts 1,135 1,110 3,403 3,462 Gains on sale of securities - - 1,048 42 Other real estate owned income 3,275 2,504 3,275 2,504 Merchant bankcard income 2,448 3,418 7,010 6,644 Other income 3,623 2,477 15,894 7,780 Total non-interest income 10,481 9,509 30,630 20,432   Non-interest expense:   Salaries and employee benefits 13,536 11,695 40,260 35,259 FDIC and other insurance expense 1,303 1,634 4,702 4,813 Occupancy expense 2,340 2,032 5,044 4,768 Equipment expense 1,619 1,366 4,592 4,082 Other real estate owned expense 712 2,905 243 3,443 Amortization of public welfare investments 2,020 1,866 6,061 5,897 Merchant bankcard expense 1,904 2,902 5,564 5,072 Legal and professional services 970 883 2,719 1,929 Marketing expense 1,573 1,313 2,980 2,425 Other expense 1,939 1,455 4,860 4,477 Total non-interest expense 27,916 28,051 77,025 72,165   Income before income tax expense 21,901 21,242 68,689 73,584   Income tax expense 6,851 6,359 21,504 23,436   Net income $ 15,050 $ 14,883 $ 47,185 $ 50,148   Basic and diluted earnings per common share $ 114.95 $ 113.68 $ 360.39 $ 383.02     FARMERS & MERCHANTS BANK OF LONG BEACH Balance Sheets (Unaudited) (In thousands except share and per share data)                 Sept. 30, 2013 Dec. 31, 2012   Assets   Cash and due from banks: Noninterest-bearing balances $ 65,017 $ 60,914 Interest-bearing balances 34,059 253,087 Securities available-for-sale 492,346 630,055 Securities held-to-maturity 2,219,970 1,942,085 Loan held for sale 1,663 2,365 Gross loans 2,228,103 1,982,075 Less allowance for loan losses (51,621 ) (50,994 ) Less unamortized deferred loan fees, net (708 ) (364 ) Net loans 2,175,774   1,930,718   Other real estate owned, net 14,298 17,696 Public welfare investments 29,743 35,804 Bank premises and equipment, net 65,911 60,504 Net deferred tax assets 24,452 26,060 Other assets 22,154   29,674     Total assets $ 5,145,387   $ 4,988,961       Liabilities and Stockholders' Equity   Liabilities:   Deposits: Demand, non-interest bearing $ 1,549,200 $ 1,474,215 Demand, interest bearing 379,142 346,991 Savings and money market savings 1,070,754 1,011,029 Time deposits 837,239   853,631   Total deposits 3,836,335 3,685,866   Securities sold under repurchase agreements 527,728 551,293 Other liabilities 30,135   34,543     Total liabilities 4,394,198   4,271,702     Stockholders' Equity:  

Common Stock, par value $20; authorized 250,000shares; issued and outstanding 130,928 shares

2,619 2,619 Additional paid-in capital 12,044 12,044 Retained earnings 733,713 695,169 Other comprehensive income 2,813   7,427     Total stockholders' equity 751,189   717,259     Total liabilities and stockholders' equity $ 5,145,387   $ 4,988,961  

Farmers & Merchants BankJohn HinrichsExecutive Vice President562-437-0011, ext. 5035orPondelWilkinson Inc.Evan PondelInvestor Relations310-279-5980investor@pondel.com