Farmers & Merchants Bank of Long Beach Reports 2012 Third-Quarter Results

-- Bank Maintains Strong Balance Sheet, with Assets Growing to $4.8 Billion --

LONG BEACH, Calif.--(BUSINESS WIRE)--Farmers & Merchants Bank of Long Beach (OTCBB:FMBL) today reported financial results for the third quarter ended September 30, 2012.

“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”

“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; authorized 250,000 shares; issued and outstanding 130,928 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