July 18, 2012 at 16:05 PM EDT
Farmers & Merchants Bank of Long Beach Reports 2012 Second-Quarter Results

Farmers & Merchants Bank of Long Beach (OTCBB: FMBL) today reported financial results for the second quarter ended June 30, 2012.

“Farmers & Merchants reported solid financial results for the second quarter, maintaining strong operational performance and continuing to grow the Bank’s deposit base,” said Henry Walker, president of Farmers & Merchants Bank of Long Beach. “The Bank’s strength reflects our conservative lending practices and disciplined approach to managing investments.”

Income Statement

For the 2012 second quarter, interest income decreased to $42.9 million from $45.5 million in the prior-year comparable period. Interest income for the first half of 2012 was $89.2 million, compared with $90.7 million reported for the first half of 2011.

Interest expense for the 2012 second quarter declined to $1.8 million from $2.5 million in the second quarter of 2011, primarily related to the prolonged low interest rate environment. Interest expense for the first half of 2012 declined to $3.6 million from $5.1 million reported for the first half of 2011.

Net interest income for the 2012 second quarter declined to $41.1 million from $42.9 million for the second quarter of 2011, and was virtually unchanged at $85.5 million for the first half of 2012, compared with the six months ended June 30, 2011.

The Bank did not have a provision for loan losses in the second quarter or first half of 2012, primarily because of generally more stable economic conditions. The provision for loan losses was $6.1 million for the second quarter of 2011 and $6.8 million for the first half of 2011. The Bank’s allowance for loan losses as a percentage of loans outstanding was 2.80% at June 30, 2012, in line with 2.80% at December 31, 2011.

Non-interest income was $3.4 million for the 2012 second quarter, the same as that for the second quarter a year ago. Non-interest income was $8.6 million for the first half of 2012, compared with $6.6 million for the first half of 2011.

Non-interest expense for the 2012 second quarter was $19.9 million, compared with $18.5 million for the same period last year. Non-interest expense for the first half of 2012 was $41.8 million, compared with $39.8 million for the first half of 2011.

Farmers & Merchants’ net interest margin was 3.73% for the 2012 second quarter, compared with 4.24% last year.

The Bank’s net income for the 2012 second quarter rose 19.0% to $16.7 million, or $127.87 per diluted share, from $14.0 million, or $107.21 per diluted share, for the 2011 second quarter. Net income for the first half of 2012 advanced to $35.3 million, or $269.35 per diluted share, from $29.4 million, or $224.39 per diluted share for the first six months of 2011.

Balance Sheet

At June 30, 2012, net loans decreased to $1.99 billion from $2.03 billion at December 31, 2011. The Bank’s deposits grew to $3.48 billion at the end of the 2012 second quarter, from $3.39 billion at December 31, 2011. Non-interest bearing deposits represented 37.7% of total deposits at June 30, 2012, versus 37.2% of total deposits at December 31, 2011. Total assets increased to $4.78 billion at the close of the 2012 second quarter from $4.66 billion at December 31, 2011.

At June 30, 2012, Farmers & Merchants Bank remained “well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 28.90%, a Tier 1 risk-based capital ratio of 27.64%, and a Tier 1 leverage ratio of 14.47%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

“Deposits grew at a steady clip during the first half of 2012, as we continued to maintain a strong balance sheet,” said Daniel Walker, chief executive officer and chairman of the board. “With capital ratios well above regulatory minimums, the Bank enters the second half of the year in a position of strength and stability.”

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 June 30,Six Months Ended June 30,
2012201120122011
Interest income:
Loans $ 27,945 $ 28,436 $ 59,355 $ 57,835
Securities held to maturity 11,911 13,014 23,544 25,434
Securities available for sale 2,776 3,961 5,791 7,341
Deposits with banks 252 50 471 111
Total interest income 42,884 45,461 89,161 90,721
Interest expense:
Deposits 1,513 2,106 3,079 4,239
Securities sold under agreement to repurchase 280 433 549 868
Total interest expense 1,793 2,539 3,628 5,107
Net interest income 41,091 42,922 85,533 85,614
Provision for loan losses - 6,050 - 6,750
Net int. income after provision for loan losses 41,091 36,872 85,533 78,864
Non-interest income:
Service charges on deposit accounts 1,153 1,182 2,352 2,352
Merchant bankcard fees 481 290 902 555
Escrow fees 264 272 429 477
Other 1,530 1,605 4,915 3,255
Total non-interest income 3,427 3,350 8,598 6,639
Non-interest expense:
Salaries and employee benefits 11,803 10,349 23,564 21,038
FDIC and other insurance expense 1,609 703 3,179 1,820
Occupancy expense 1,358 1,405 2,736 2,663
Equipment expense 1,379 1,416 2,716 2,732
Other real estate owned expense,net (758 ) 550 538 2,043
Amortization of investments in low-income communities 1,830 451 4,031 902
Legal and professional fees 581 862 1,045 1,613
Marketing and promotional expense 547 1,100 1,233 1,905
Other 1,509 1,673 2,747 5,050
Total non-interest expense 19,858 18,509 41,789 39,766
Income before income tax expense 24,660 21,713 52,342 45,737
Income tax expense 7,918 7,676 17,077 16,359
Net income$16,742$14,037$35,265$29,378
Basic and diluted earnings per common share $ 127.87 $ 107.21 $ 269.35 $ 224.39
FARMERS & MERCHANTS BANK OF LONG BEACH
Balance Sheets (Unaudited)
(In Thousands)
June 30, 2012Dec. 31, 2011
Assets
Cash and due from banks:
Noninterest-bearing balances $ 55,720 $ 57,394
Interest-bearing balances 245,722 278,525
Investment securities 2,308,810 2,113,130
Gross loans 2,044,716 2,087,388
Less allowance for loan losses (57,155 ) (58,463 )
Less unamortized deferred loan fees, net (450 ) (418 )
Net loans 1,987,111 2,028,507
Other real estate owned 21,248 23,036
Investments in low-income communities 39,535 43,566
Bank premises and equipment 59,751 55,155
Accrued interest receivable 16,940 16,464
Deferred tax asset 29,117 28,583
Other assets 15,909 14,985
Total assets$4,779,863$4,659,345
Liabilities and stockholders' equity
Liabilities:
Deposits:
Demand, non-interest bearing $ 1,314,325 $ 1,263,162
Demand, interest bearing 307,950 300,984
Savings and money market savings 964,329 909,794
Time deposits 897,608 919,538
Total deposits 3,484,212 3,393,478
Securities sold under agreements to repurchase 559,007 555,992
Other liabilities 37,289 39,659
Total liabilities4,080,5083,989,129
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 676,474 646,708
Other comprehensive income 8,218 8,845
Total stockholders' equity699,355670,216
Total liabilities and stockholders' equity$4,779,863$4,659,345

Contacts:

Farmers & Merchants Bank of Long Beach
John Hinrichs
Executive Vice President
562-437-0011
or
PondelWilkinson Inc.
Evan Pondel
Investor Relations
310-279-5980
investor@pondel.com
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