ARCHBOLD, Ohio, Oct. 18, 2017 (GLOBE NEWSWIRE) — Farmers & Merchants Bancorp, Inc. (Nasdaq:FMAO) today reported financial results for the 2017 third quarter ended September 30, 2017.

2017 Third Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 58 consecutive quarters of profitability
  • Total assets up 4.4% to $1,090,155,000
  • Total gross loans increased 7.9% to $795,205,000
  • Net interest income after provision for loan losses increased 11.2% to $9,103,000
  • Net income increased 6.9% to $3,222,000
  • Earnings per basic and diluted shares increased 6.1% to $0.35
    (share data has been adjusted to reflect the two-for-one stock split on September 20, 2017)
  • Return on average assets increased three basis points to 1.20%
  • Return on average equity increased 18 basis points to 9.76% 

“F&M continues to generate record financial results, as the company implements its growth-oriented business plan,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “We are extremely pleased with the operating and financial milestones we have achieved this year.  For the 2017 third quarter, total loans increased 7.9% to a record $795,205,000, and profitability improved 6.9%, driven by a net interest margin of 3.71% for the 2017 third quarter, which was an increase of 14 basis points over the prior year period.  As a result of F&M’s strong performance, the board of directors during the 2017 third quarter approved a two-for-one stock split, and an 8.3% increase in the company’s declared quarterly dividend.  We believe our growth-oriented focus and improvements to our capital structure, create a strong foundation to support strategic opportunities, while benefitting shareholders with greater liquidity.  Throughout our recent growth phase, we remain committed to proactively managing risk.  While our loan portfolio has increased nearly 8.0% over the past 12 months, our non-performing assets have declined 7.9%.”

Income Statement
Net income for the 2017 third quarter ended September 30, 2017, was $3,222,000, or $0.35 per basic and diluted share compared to $3,015,000, or $0.33 per basic and diluted share for the same period last year. The share data has been adjusted to reflect the two-for-one stock split that became effective on September 20, 2017.  The 6.9% improvement in net income for the 2017 third quarter was primarily due to an 11.2% increase in interest income after provision for loan losses, partially offset by a 9.6% decrease in noninterest income and a 6.3% increase in noninterest expense. Net income for the 2017 nine-month period was $9,284,000, or $1.00 per basic and diluted share compared to $8,470,000, or $0.92 per basic and diluted share for the nine-month period of 2016.

Loan Portfolio and Asset Quality
Total loans, net of allowance and deferred fees and costs, at September 30, 2017, increased 7.7% to a record $788,335,000, compared to $732,070,000 at September 30, 2016, and up 4.9% from $751,310,000 at December 31, 2016.  Year-over-year loan growth was strong across many of the company’s lending areas and included a 17.2% increase in consumer loans, a 17.1% increase in commercial and industrial loans, an 11.3% increase in industrial development bonds, a 10.0% increase in agricultural loans, a 6.9% increase in agricultural real estate loans, and a 6.5% increase in commercial real estate loans, partially offset by a 2.3% reduction in consumer real estate loans.

The company’s provision for loan losses for the 2017 third quarter was $99,000, compared to $308,000 for the 2016 third quarter. Year-to-date, the provision for loan losses was $197,000, compared to $924,000 for the same period last year.

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 397.4% at September 30, 2017, compared to 584.2% at September 30, 2016. Net charge-offs for the third quarter ended September 30, 2017 were $87,000, or 0.01% of average loans, compared to $189,000 or 0.03% of average loans, at September 30, 2016. Year-to-date, net charge-offs were $111,000, or 0.01% of average loans outstanding, compared to $369,000, or 0.05% of average loans outstanding for the same period last year. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $128,278,000 at September 30, 2017, compared to $120,763,000 at December 31, 2016, and $122,048,000 at September 30, 2016.  On a per share basis, tangible stockholders’ equity at September 30, 2017, was $13.84, compared with $13.02 at December 31, 2016, and $13.20 at September 30, 2016. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At September 30, 2017, the company had a Tier 1 leverage ratio of 12.02%, compared to 11.74% at September 30, 2016.

For the 2017 third quarter, the company declared and raised the cash dividend by 8.3% to $0.13 per share, which represented a dividend payout ratio of 37.0% compared to 34.9% for the same period last year.

Mr. Siebenmorgen concluded, “Economic trends within our Northwest Ohio and Northeast Indiana markets remain stable, helping F&M produce strong financial results.  We continue to focus on building F&M’s brand throughout our new markets, such as Fort Wayne, Indiana and Bowling Green, Ohio. To this end, I am pleased F&M was once again voted the best bank in the 2017 Readers Choice competition in the Fort Wayne market.  Over the past three years, we have opened three locations, and we are excited about the opportunities to expand our footprint in future periods as F&M’s customer focus, and community banking orientation resonates with customers.  In addition, our strong capitalization and profitability, combined with our successful and proactive risk management, provides F&M with the financial flexibility to support our strategic growth opportunities.  With one quarter remaining, we continue to expect 2017 will be another good year for the bank.”

About Farmers & Merchants State Bank:
The Farmers & Merchants State Bank is a local independent community bank that has been serving Northwest Ohio and Northeast Indiana since 1897. The Farmers & Merchants State Bank provides commercial banking, retail banking and other financial services through its 24 offices. Our locations are in Fulton, Defiance, Henry, Lucas, Williams, and Wood counties in Northwest Ohio. In Northeast Indiana, we have offices located in DeKalb, Allen and Steuben counties. 

Safe Harbor Statement
Farmers & Merchants Bancorp, Inc. (“F&M”) wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. Statements by F&M, including management’s expectations and comments, may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Act of 1934, as amended. Actual results could vary materially depending on risks and uncertainties inherent in general and local banking conditions, competitive factors specific to markets in which F&M and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions. F&M assumes no responsibility to update this information. For more details, please refer to F&M’s SEC filing, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. Such filings can be viewed at the SEC’s website, www.sec.gov.

 
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME (UNAUDITED)
(in thousands, except per share data)
 
      Three  Months Ended   Nine  Months Ended
      September 30, 2017 September 30, 2016   September 30, 2017 September 30, 2016
Interest Income              
Loans, including fees     $ 9,547   $ 8,629     $ 27,367   $ 24,997  
Debt securities:              
U.S. Treasury and government agencies       605     559       1,870     1,734  
Municipalities       290     344       905     1,093  
Dividends       49     36       135     111  
Federal funds sold       7     7       10     9  
Other       37     15       93     37  
Total interest income       10,535     9,590       30,380     27,981  
Interest Expense                              
Deposits       1,161     947       3,289     2,686  
Federal funds purchased and securities sold                              
under agreements to repurchase       135     115       366     346  
Borrowed funds       37     37       110     110  
Total interest expense       1,333     1,099       3,765     3,142  
Net Interest Income – Before Provision for Loan Losses       9,202     8,491       26,615     24,839  
Provision for Loan Losses        99     308       197     924  
Net Interest Income After Provision                              
For Loan Losses       9,103     8,183       26,418     23,915  
Noninterest Income                              
Customer service fees       1,320     1,711       4,131     4,497  
Other service charges and fees       1,134     941       3,214     2,850  
Net gain on sale of loans       181     216       600     619  
Net gain on sale of available for sale securities           47       47     503  
Total noninterest income       2,635     2,915       7,992     8,469  
Noninterest Expense                              
Salaries and Wages       3,236     2,981       9,374     8,661  
Employee benefits       943     849       2,648     2,426  
Net occupancy expense       434     359       1,221     1,083  
Furniture and equipment       493     438       1,456     1,293  
Data processing       300     360       919     1,132  
Franchise taxes       226     219       676     658  
Net (gain) loss on sale of other assets owned       13     (6 )     27     39  
FDIC Assessment       82     126       247     368  
Mortgage servicing rights amortization       85     123       266     311  
Other general and administrative       1,545     1,473       4,692     4,594  
Total other operating expenses       7,357     6,922       21,526     20,565  
Income Before Income Taxes       4,381     4,176       12,884     11,819  
Income Taxes       1,159     1,161       3,600     3,349  
Net Income       3,222     3,015       9,284     8,470  
Other Comprehensive Income (Loss) (Net of Tax):                              
Net unrealized gain (loss) on available for sale securities       (472 )   58       1,984     2,652  
Reclassification adjustment for gain on sale of available for
  sale securities
          (47 )     (47 )   (503 )
Net unrealized gain (loss) on available for sale securities       (472 )   11       1,937     2,149  
Tax expense (benefit)       (160 )   4       659     731  
Other comprehensive income (loss)       (312 )   7       1,278     1,418  
Comprehensive Income     $ 2,910   $ 3,022     $ 10,562   $ 9,888  
Earnings Per Share – Basic and Diluted (1)     $ 0.35   $ 0.33     $ 1.00   $ 0.92  
Dividends Declared (1)     $ 0.13   $ 0.12     $ 0.37   $ 0.34  
                               
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
      (in thousands of dollars)
      September 30, 2017 December 31, 2016
      (Unaudited)  
Assets        
Cash and due from banks   $ 48,313   $ 27,348  
Federal funds sold     791     974  
  Total cash and cash equivalents     49,104     28,322  
                 
Interest-bearing time deposits     2,541     1,915  
Securities – available-for-sale     192,811     218,527  
Other securities, at cost     3,717     3,717  
Loans held for sale     2,147     2,055  
Loans, net     788,335     751,310  
Premises and equipment     21,473     21,457  
Goodwill     4,074     4,074  
Mortgage servicing rights     2,264     2,192  
Other real estate owned     615     774  
Bank owned life insurance     14,446     14,376  
Other assets     8,628     7,176  
                 
Total Assets   $ 1,090,155   $ 1,055,895  
  Liabilities and Stockholders’ Equity              
Liabilities              
Deposits              
  Noninterest-bearing   $ 189,963   $ 186,390  
  Interest-bearing              
  NOW accounts     294,911     230,446  
  Savings     224,911     226,537  
  Time     193,581     198,830  
  Total deposits     903,366     842,203  
                 
Federal Funds purchased and              
securities sold under agreements to repurchase     35,550     70,324  
Federal Home Loan Bank (FHLB) advances     10,000     10,000  
Dividend payable     1,193     1,053  
Accrued expenses and other liabilities     7,157     6,738  
  Total liabilities     957,266     930,318  
                 
Commitments and Contingencies              
                 
Stockholders’ Equity              
Common stock – No par value 20,000,000 shares authorized;     11,388     11,947  
issued and outstanding 10,400,000 shares 9/30/17 and 12/31/16 (1)            
Treasury Stock – 1,133,324 shares 9/30/17, 1,158,250 shares 12/31/16 (1)   (12,126 )   (12,267 )
Retained earnings     134,320     127,869  
Accumulated other comprehensive loss     (693 )   (1,972 )
  Total stockholders’ equity     132,889     125,577  
                 
Total Liabilities and Stockholders’ Equity   $ 1,090,155   $ 1,055,895  
                 
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017            
                 

    For the Three Months Ended   For the Nine Months Ended
    September 30   September 30
Selected financial data   2017       2016     2017       2016  
Return on average assets   1.20%       1.17%     1.16%       1.11%  
Return on average equity   9.76%       9.58%     9.57%       9.13%  
Yield on earning assets   4.24%       4.03%     4.12%       4.00%  
Cost of interest bearing liabilities   0.72%       0.60%     0.68%       0.59%  
Net interest spread   3.52%       3.42%     3.44%       3.41%  
Net interest margin   3.71%       3.57%     3.61%       3.56%  
Efficiency   61.41%       60.09%     61.49%       61.70%  
Dividend payout ratio   37.03%       34.93%     36.51%       36.71%  
Tangible book value per share (1) $ 13.84     $ 13.20            
Tier 1 capital to average assets   12.02%       11.74%            
                     
    September 30          
Loans   2017       2016            
(Dollar amounts in thousands)                    
Commercial real estate $ 394,481     $ 370,315            
Agricultural real estate   63,603       59,502            
Consumer real estate   84,283       86,301            
Commercial and industrial   124,078       105,961            
Agricultural   87,095       79,191            
Consumer   35,843       30,585            
Industrial development bonds   6,555       5,892            
Less: Net deferred loan fees and costs   (733 )     (690 )          
Total loans $ 795,205     $ 737,057            
                     
    September 30          
Asset quality data   2017       2016            
(Dollar amounts in thousands)                    
Nonaccrual loans $ 1,729     $ 1,132            
Troubled debt restructuring $ 679     $ 704            
90 day past due and accruing $     $            
Nonperforming loans $ 1,729     $ 1,132            
Other real estate owned $ 615     $ 1,412            
Non-performing assets $ 2,344     $ 2,544            
                     
(Dollar amounts in thousands)                    
Allowance for loan and lease losses $ 6,870     $ 6,612            
Allowance for loan and lease losses/total loans   0.86%       0.90%            
Net charge-offs:                      
Quarter-to-date $ 87     $ 189            
Year-to-date $ 111     $ 369            
Net charge-offs to average loans                    
Quarter-to-date   0.01%       0.03%            
Year-to-date   0.01%       0.05%            
Non-performing loans/total loans   0.22%       0.15%            
Allowance for loan and lease losses/nonperforming loans   397.35%       584.18%            
                     
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017
                     

 

CONTACT: Company Contact:
Marty Filogamo
Senior Vice President – Marketing Manager
Farmers & Merchants Bancorp, Inc.
(419) 445-3501 ext. 15435
[email protected] 

Investor and Media Contact:
Andrew M. Berger
Managing Director
SM Berger & Company, Inc. 
(216) 464-6400
[email protected]