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Farmers & Merchants Bancorp, Inc. Reports 2016 Second-Quarter and Year-to-Date Financial Results

ARCHBOLD, Ohio, July 20, 2016 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (OTCQX:FMAO) today reported financial results for the 2016 second quarter and year-to-date ended June 30, 2016.

2016 Second Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 53 consecutive quarters of profitability
  • Total assets up 8.4% to $1,021,275,000
  • Total loans increased 17.9% to $731,691,000
  • Net interest income after provision for loan losses increased 10.6% to $8,001,000
  • Net income increased 14.5% to $2,974,000
  • Earnings per basic and diluted shares increased 16.1% to $0.65
  • Declared quarterly dividend increased 4.5% to $0.23 per share
  • Noninterest income improved 6.9% to $2,884,000

“Favorable business and financial momentum continued in the 2016 second quarter as we ended the period with record total assets and loans outstanding, while earnings increased 16.1% to $0.65 per share,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “Our growing financial results demonstrate the success our strong community banking franchise is having throughout our Northwestern Ohio and Northeastern Indiana markets. In addition, our customer centric approach is helping us grow share within our markets, while our local economies are benefitting from low unemployment rates, and stable manufacturing and agricultural demand.”

Income Statement
Net income for the 2016 second quarter ended June 30, 2016 was $2,974,000, or $0.65 per basic and diluted share compared to $2,597,000, or $0.56 per basic and diluted share for the same period last year. The 14.5% improvement in net income for the 2016 second quarter was primarily due to a 10.6% increase in net interest income after provision for loan losses, and a 6.9% increase in noninterest income, partially offset by a 4.3% increase in noninterest expense.

Net income for the 2016 first half was $5,455,000, or $1.18 per basic and diluted share compared to $4,948,000, or $1.07 per basic and diluted share for the period ended June 30, 2015. The 10.2% improvement in net income for the 2016 six-month period was primarily due to an 8.9% increase in net interest income after provision for loan losses, and a 5.7% increase in noninterest income, partially offset by a 5.4% increase in noninterest expense.

Loan Portfolio and Asset Quality
Total loans at June 30, 2016 increased 17.9% to a record $731,691,000, compared to $620,591,000 at June 30, 2015, and up 6.7% from $685,878,000 at December 31, 2015. Year-over-year loan growth was strong across the company’s lending areas and included a 28.0% increase in commercial real estate loans, a 21.2% increase in consumer loans, a 16.6% increase in agricultural real estate loans, a 12.2% increase in agricultural, a 9.5% increase in commercial and industrial loans, and a 2.6% increase in consumer real estate loans, offset by a 20.1% reduction in industrial development bonds.

The company’s provision for loan losses for the 2016 second quarter was $339,000, compared to $183,000 for the 2015 second quarter. Year-to-date, the provision for loan losses was $616,000, compared to $297,000 for the same period last year. The second quarter and year-to-date increase in provision expense was a result of the significant growth the company has experienced in its loan portfolio.

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 424.9% at June 30, 2016, compared to 193.5% at June 30, 2015. Net charge-offs for the second quarter ended June 30, 2016 were $131,000, or 0.02% of average loans, compared to $233,000 or 0.04% of average loans, at June 30, 2015. Year-to-date, net charge-offs were $180,000, or 0.01% of average loans outstanding, compared to $275,000, or 0.04% of average loans outstanding for the same period last year.

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $119,913,000 at June 30, 2016, compared to $114,960,000 at December 31, 2015, and $111,594,000 at June 30, 2015. On a per share basis, tangible stockholders’ equity at June 30, 2016 was $26.04, compared with $24.92 at December 31, 2015, and $24.23 at June 30, 2015. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At June 30, 2016, the company had a Tier 1 leverage ratio of 11.74%, compared to 11.90% at June 30, 2015.

For the 2016 second quarter, the company declared cash dividends of $0.23 per share, which represented a dividend payout ratio of 35.3% compared to 38.8% for the same period last year.

Mr. Siebenmorgen concluded, “We remain committed to conservatively managing risk and I am encouraged by the exceptionally low charge-off rate in the second quarter. In addition, I am pleased with the sequential increase in profitability we achieved during the 2016 second quarter as our return on average assets increased 19 basis points to 1.18% and return on average equity increased 153 basis points to 9.71%. As a result of the second quarter’s improvement in profitability, F&M’s board of directors approved a 4.5% increase in our quarterly dividend, representing the 17th consecutive year we have increased our dividend payment. Finally, we are investing in growing our branches and in May 2016 announced construction of our 24th branch office in Bowling Green, Ohio, which we anticipate opening in the third quarter. Once completed, this office will represent the second new branch opened this year. While it will take several quarters for each branch to get to scale, we are excited about the long-term potential of our new Ft. Wayne, Indiana, and Bowling Green, Ohio markets.”

About Farmer & 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 23 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 of dollars, except per share data)
Three Months Ended Six Months Ended
June 30, 2016June 30, 2015 June 30, 2016June 30, 2015
Interest Income
Loans, including fees $ 8,362 $ 7,163 $ 16,368 $ 14,257
Debt securities:
U.S. Treasury and government agencies 595 620 1,175 1,216
Municipalities 380 458 749 905
Dividends 37 37 75 74
Federal funds sold 2 3 2 5
Other 11 8 22 16
Total interest income 9,387 8,289 18,391 16,473
Interest Expense
Deposits 885 808 1,739 1,605
Federal funds purchased and securities sold
under agreements to repurchase 126 63 231 124
Borrowed funds 36 - 73 -
Total interest expense 1,047 871 2,043 1,729
Net Interest Income - Before Provision for Loan Losses 8,340 7,418 16,348 14,744
Provision for Loan Losses 339 183 616 297
Net Interest Income After Provision
For Loan Losses 8,001 7,235 15,732 14,447
Noninterest Income
Customer service fees 1,308 1,424 2,786 2,783
Other service charges and fees 999 965 1,909 1,879
Net gain on sale of loans 234 173 403 348
Net gain on sale of available for sale securities 343 137 456 246
Total noninterest income 2,884 2,699 5,554 5,256
Noninterest Expense
Salaries and Wages 2,840 2,714 5,680 5,369
Employee benefits 715 687 1,577 1,751
Net occupancy expense 346 368 724 723
Furniture and equipment 443 427 855 849
Data processing 361 320 772 649
Franchise taxes 225 187 439 374
Net loss on sale of other assets owned - 5 45 11
FDIC Assessment 121 119 242 238
Mortgage servicing rights amortization 99 103 188 183
Other general and administrative 1,507 1,451 3,121 2,799
Total other operating expenses 6,657 6,381 13,643 12,946
Income Before Income Taxes 4,228 3,553 7,643 6,757
Income Taxes 1,254 956 2,188 1,809
Net Income 2,974 2,597 5,455 4,948
Other Comprehensive Income (Net of Tax):
Net unrealized gain on available for sale securities 649 (1,824) 2,594 (94)
Reclassification adjustment for gain on sale of available for
sale securities
(343) (137) (456) (246)
Net unrealized gain on available for sale securities 306 (1,961) 2,138 (340)
Tax expense 104 (667) 727 (116)
Other comprehensive income 202 (1,294) 1,411 (224)
Comprehensive Income $ 3,176 $1,303 $ 6,866 $ 4,724
Earnings Per Share - Basic and Diluted$ 0.65 $ 0.56 $ 1.18 $ 1.07
Dividends Declared $ 0.23 $ 0.22 $ 0.45 $ 0.43
See Notes to Condensed Consolidated Unaudited Financial Statements

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, 2016December 31, 2015
(Unaudited)
Assets
Cash and due from banks $ 22,895 $ 21,333
Federal funds sold 484 685
Total cash and cash equivalents 23,379 22,018
Interest-bearing time deposits 1,960 -
Securities - available-for-sale 217,063 235,115
Other securities, at cost 3,717 3,717
Loans, net 725,198 679,821
Premises and equipment 21,295 20,587
Goodwill 4,074 4,074
Mortgage servicing rights 2,143 2,056
Other real estate owned 1,252 1,175
Other assets 21,194 20,505
Total Assets $ 1,021,275 $ 989,068
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing $ 170,126 $ 171,112
Interest-bearing
NOW accounts 204,924 190,890
Savings 236,546 225,052
Time 191,250 184,285
Total deposits 802,846 771,339
Federal Funds purchased and
securities sold under agreements to repurchase 75,942 78,815
Federal Home Loan Bank (FHLB) advances 10,000 10,000
Dividend payable 1,051 1,007
Accrued expenses and other liabilities 6,548 7,810
Total liabilities 896,387 868,971
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value - 10,000,000 shares
authorized 5,200,000 shares issued and outstanding 12,260 12,086
Treasury Stock - 594,466 shares 2016, 587,466 shares 2015 (12,583) (12,389)
Retained earnings 123,587 120,188
Accumulated other comprehensive income 1,624 212
Total stockholders' equity 124,888 120,097
Total Liabilities and Stockholders' Equity$ 1,021,275 $ 989,068

For the Three Months Ended For the Six Months Ended
June 30
June 30
Selected financial data 2016 2015 2016 2015
Return on average assets 1.17% 1.10% 1.08% 1.05%
Return on average equity 9.61% 8.90% 8.90% 8.52%
Yield on earning assets 3.99% 3.85% 3.98% 3.85%
Cost of interest bearing liabilities 0.58% 0.53% 0.58% 0.53%
Net interest spread 3.41% 3.32% 3.40% 3.32%
Net interest margin 3.56% 3.45% 3.55% 3.45%
Efficiency 60.15% 62.59% 62.56% 64.18%
Dividend payout ratio 35.34% 38.78% 37.69% 39.81%
Tangible book value per share$ 26.04 $ 24.23
Tier 1 capital to average assets 11.74% 11.90%
June 30
Loans 2016 2015
(Dollar amounts in thousands)
Commerical real estate$ 357,838 $ 279,489
Agricultural real estate 61,403 52,682
Consumer real estate 89,090 86,796
Commercial and industrial 104,336 95,275
Agricultural 83,287 74,229
Consumer 30,458 25,140
Industrial development bonds 5,952 7,452
Less: Net deferred loan fees and costs (673) (472)
Total loans$ 731,691 $ 620,591
June 30
Asset quality data 2016 2015
(Dollar amounts in thousands)
Nonaccrual loans$ 1,528 $ 3,063
Troubled debt restructuring$ 815 $ 1,255
90 day past due and accruing$ - $ -
Nonperforming loans$ 1,528 $ 3,063
Other real estate owned$ 1,252 $ 1,098
Non-performing assets$ 2,780 $ 4,161
(Dollar amounts in thousands)
Allowance for loan and lease losses$ 6,493 $ 5,927
Allowance for loan and lease losses/total loans 0.89% 0.96%
Net charge-offs:
Quarter-to-date$ 131 $ 233
Year-to-date$ 180 $ 275
Net charge-offs to average loans
Quarter-to-date 0.02% 0.04%
Year-to-date 0.01% 0.04%
Non-performing loans/total loans 0.21% 0.49%
Allowance for loan and lease losses/nonperforming loans 424.86% 193.50%

Company Contact: Marty Filogamo Senior Vice President – Marketing Manager Farmers & Merchants Bancorp, Inc. (419) 445-3501 ext. 15435 mfilogamo@fm-bank.com. Investor and Media Contact: Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com

Source:Farmers & Merchants Bancorp Inc.