Farmers & Merchants Bank of Long Beach (“F&M” or the “Bank”) (OTCQX: FMBL) today announced it has completed a strategic repositioning of its investment securities portfolio designed to enhance long-term earnings power, improve balance sheet flexibility, and support continued growth in customer borrowing demand.

“The balance sheet repositioning reflects the disciplined approach that has defined F&M for more than a century,” said W. Henry Walker, F&M’s Chief Executive Officer. “We executed this transaction from a position of strength to enhance earning asset yields, expand net interest margin, and further strengthen our balance sheet. The result is a more efficient balance sheet with greater capacity to support customer borrowing needs and future growth. This action strengthens our long-term earnings profile while preserving the consistent profitability that has distinguished F&M across economic cycles.”

As part of the repositioning, F&M sold approximately $1 billion of low-yielding municipal bonds that were previously classified as held-to-maturity. The bonds carried a weighted average yield of 1.43%, reflecting the historically low-interest rate environment when they were originally purchased. A portion of the sale proceeds has been redeployed into securities with an average yield of 5.13%, without increasing the Bank’s risk profile. In addition, proceeds were used to pay down higher-rate debt to improve funding costs. The remaining proceeds will provide funding capacity for loans at meaningfully higher yields, while meeting ongoing customer demand across the communities F&M serves and maintaining F&M’s disciplined credit approach. While the non-recurring loss on sale of securities is expected to result in a pre-tax loss of approximately $85 million and a net loss for the 2026 third quarter, the Bank expects to report net income for the full 2026 year.

Benefits of the repositioning include:

  • Substantially improving yield. Replacing legacy securities yielding 1.43% with securities and loans at current market yields will increase net interest margin and improve the Bank’s future profitability.

  • Fulfilling F&M’s commitment to customer loan demand. Converting low-yielding municipal securities into deployable liquidity further expands F&M’s capacity to accommodate an anticipated increase in loan demand from the families, businesses and communities it has served since 1907.

  • Enhancing balance sheet flexibility. The repositioning reduces overall average life and concentration in the securities portfolio, positioning F&M to respond more nimbly to future changes in the interest rate environment and to respond to future growth opportunities.

  • Paying off $300 million of borrowings. The payoff of borrowings with higher interest rates will reduce future funding costs.

  • Offsetting one-time gains. The loss recognized on the sale will offset one-time gains realized in 2026, including $14 million of one-time gains already recognized in Q2 2026, improving the after-tax economics of the restructuring and enhancing the overall tax efficiency of the Bank’s balance sheet.

Daniel K. Walker, F&M’s Executive Chairman, added, “Financial strength has never been just a slogan at F&M—it is the foundation of everything we do. Because we entered this period with exceptional capital, we had the luxury of choosing when and how to act. Our common equity tier 1 ratio remains outstanding, and our balance sheet emerges from this repositioning even stronger than before. That strength is what allows us to keep saying ‘yes’ to our customers and to continue building long-term value for all of our constituents.”

The Bank also announced that shareholders approved all proposals presented at its 2026 annual meeting.

Key proposals at the annual meeting included election of directors; ratification of KPMG LLP as the Bank’s independent public accounting firm; approval of additional future share repurchases by the Bank; and approval of a proposed amendment to the Bank’s Restated Articles of Incorporation updating the supermajority shareholder vote requirement for certain significant corporate actions to 60% from a legacy 80%.

“We wish to thank our shareholders for their continued support and for their strong participation at this year’s annual meeting. Passing all proposals reflects confidence in our path forward and in our team’s ongoing commitment to growing our organization,” stated Mr. Daniel K. Walker.

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach (F&M) provides a distinctive white-glove banking experience through 27 Southern California branches, from San Clemente to Santa Barbara, and through its secure online and mobile banking platforms. Founded in 1907 by C.J. Walker, and today proudly led by the fourth generation of the Walker family, the Bank has devoted more than a century to building trusted relationships, rooted in personal service, integrity, safety and community commitment. Combining the strength and sophistication of a regional institution with the warmth and responsiveness of a community bank, F&M provides a wide range of commercial and consumer banking services designed to help businesses, individuals and families thrive at every stage of growth. With assets exceeding $11 billion, F&M is a California state-chartered bank, with deposits insured by the Federal Deposit Insurance Corporation (FDIC), and is an Equal Housing Lender. Please visit www.fmb.com for more information.

Forward-Looking Statements

In addition to the historical information contained herein, this press release may contain forward-looking statements about Farmers & Merchants Bank of Long Beach, including, but not limited to, expectations regarding third quarter 2026 financial results and reporting net income for the full 2026 year, and anticipated tax impacts and funding costs. Readers should understand that such forward-looking statements are neither promises nor guarantees and are subject to various risks and uncertainties, many of which are beyond the Bank’s control. Such risks and uncertainties could cause actual results and actions to differ materially from those contemplated. Factors that could cause or contribute to such differences include, but are not limited to, credit, market, operational, liquidity and interest rate risks associated with the Bank’s business and operations, changes in interest rates, changes in general business and economic conditions, changes in banking laws and regulations, loan losses, increases in expenses, changes in rates charged on loans and earned on investments, accounting estimates and judgments, changes in rates on deposits, competition effects, the amount of non-interest income earned, as well as other factors. Given these factors, readers should not place undue reliance on any forward-looking statement.

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