Farmers & Merchants Bank of Long Beach Reports 2010 Second-Quarter Results

Farmers & Merchants Bank of Long Beach (OTCBB:FMBL) today reported financial results for the second quarter ended June 30, 2010.

"Farmers & Merchants Bank’s solid second-quarter performance is a testament to the disciplined lending practices and sound fundamentals that have guided the Bank for more than a century,” said Henry Walker, chief executive officer of Farmers & Merchants Bank of Long Beach. "Deposit growth stems from a customer base that resonates with our core values.”

Income Statement

For the 2010 second quarter, interest income decreased 6.0% to $45.3 million from $48.2 million in the prior-year comparable period. Interest income for the first half of 2010 was $90.6 million compared with $94.7 million reported for the first half of 2009.

Interest expense for the 2010 second quarter declined to $3.2 million from $4.7 million in the second quarter of 2009, mostly related to the declining interest rate environment. Interest expense for the first half of 2010 declined to $6.5 million from $10.3 million reported for the first half of 2009.

Net interest income for the 2010 second quarter decreased 3.2% to $42.1 million from $43.5 million for the second quarter of 2009, and declined slightly to $84.1 million for the first half of 2010 compared with $84.5 million in the six months ended June 30, 2009.

The Bank’s provision for loan losses equaled $8.7 million for the second quarter of 2010, compared with $6.8 million for the preceding first quarter, and $10.0 million for the second quarter of 2009. Provision for loan losses totaled $15.5 million for the first half of 2010 versus $18.0 million for the first half of 2009. The Bank’s allowance for loan losses as a percentage of loans outstanding was 3.0% at June 30, 2010, compared with 2.7% at March 31, 2010.

Non-interest income was $3.6 million for the 2010 second quarter versus $3.3 million in the second quarter a year ago. Non-interest income was $7.0 million for the first half of 2010 compared with $6.1 million for the first half of 2009.

Non-interest expense for the 2010 second quarter was $18.4 million, versus $20.9 million for the same period last year. Non-interest expense for the first half of 2010 was $35.5 million compared with $40.5 million for the first half of 2009. The decrease in non-interest expense was primarily attributable to decreased FDIC and other insurance expenses, as well as a decrease in net other real estate owned (OREO) expense resulting from a reduction in the provision for OREO.

The Bank's net interest margin remained strong at 4.34% for the 2010 second quarter and at 4.39% for the first half of 2010.

The Bank’s net income for the 2010 second quarter totaled $11.7 million, or $89.65 per diluted share, compared with net income of $9.1 million, or $69.52 per diluted share, in the year-ago period. The Bank’s net income for the first half of 2010 was $25.0 million, or $191.24 per diluted share, compared with $19.1 million, or $146.16 per diluted share for the first half of 2009.

Balance Sheet

At June 30, 2010, net loans increased to $1.99 billion from $1.97 billion at December 31, 2009. The Bank’s deposits totaled $2.94 billion at the end of the 2010 second quarter, compared with $2.84 billion at December 31, 2009. Non-interest bearing deposits represented 32.3% of total deposits at June 30, 2010, versus 31.6% of total deposits at December 31, 2009. Total assets increased to $4.19 billion at the close of the 2010 second quarter, compared with $3.98 billion at December 31, 2009.

At June 30, 2010, Farmers & Merchants Bank remained "well-capitalized” under all regulatory categories, with a total risk-based capital ratio of 26.9%, a Tier 1 risk-based capital ratio of 25.6%, and a Tier 1 leverage ratio of 14.4%. The minimum ratios for capital adequacy for a well-capitalized bank are 10.00%, 6.00% and 5.00%, respectively.

"A strong and stable balance sheet is necessary for building long-term relationships with our customers,” said Daniel Walker, president and chairman of the board. "Our priority is to uphold our commitment to the community we serve with integrity, dedication and superior service.”

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach provides personal and business banking services through 22 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.