Farmers & Merchants Bank of Long Beach Reports 2013 Third-Quarter Results

Company Release - 10/17/2013

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

LONG BEACH, Calif.--(BUSINESS WIRE)-- 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       20122013       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, 2013Dec. 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 liabilities4,394,198   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 733,713 695,169
Other comprehensive income 2,813   7,427  
 
Total stockholders' equity751,189   717,259  
 
Total liabilities and stockholders' equity$5,145,387   $4,988,961  

Farmers & Merchants Bank
John Hinrichs
Executive Vice President
562-437-0011, ext. 5035
or
PondelWilkinson Inc.
Evan Pondel
Investor Relations
310-279-5980
investor@pondel.com

Source: Farmers & Merchants Bank
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