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Farmers & Merchants Bancorp, Inc. Reports Strong 2016 Third-Quarter Financial Results

ARCHBOLD, Ohio, Oct. 19, 2016 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (OTCQX:FMAO) today reported financial results for the 2016 third quarter ended September 30, 2016.

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

  • 54 consecutive quarters of profitability
  • Total assets up 9.1% to $1,044,447,000
  • Total loans increased 16.3% to $738,682,000
  • Net interest income after provision for loan losses increased 12.6% to $8,183,000
  • Net income increased 15.1% to $3,015,000
  • Earnings per basic and diluted shares increased 14.0% to $0.65
  • Return on average assets increased 7 basis points to 1.17%
  • Return on average equity increased 71 basis points to 9.58%
  • July quarterly dividend increased 4.5% to $0.23 per share

“Our financial results continued to demonstrate strong improvements in the 2016 third quarter as a result of strong loan growth, higher net interest margin, controlled operating expenses, and increased fee based income,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “The double-digit loan growth we achieved in the third quarter, was a result of higher commercial real estate and commercial and industrial loans, which increased 22.7% and 25.6%, respectively from the prior year period. Our loan to deposit ratio at the end of the 2016 third quarter was 88.1%, which has increased 540 basis points from 82.7% at September 30, 2015. I am encouraged by these strong growth trends, which reflect the team of experienced commercial lenders we have assembled over the past several years, and F&M’s focus on managing risk with quick underwriting decisions and superior customer service. Our local markets continue to show stable economic trends and we are cautiously optimistic 2016 will be another good year for the bank.”

Income Statement
Net income for the 2016 third quarter ended September 30, 2016 was $3,015,000, or $0.65 per basic and diluted share compared to $2,620,000, or $0.57 per basic and diluted share for the same period last year. The 15.1% improvement in net income for the 2016 third quarter was primarily due to a 12.6% increase in interest income after provision for loan losses and a 3.1% increase in noninterest income, partially offset by a 6.3% increase in noninterest expense.

Loan Portfolio and Asset Quality
Total loans at September 30, 2016 increased 16.3% to a record $738,682,000, compared to $635,239,000 at September 30, 2015, and up 7.7% from $685,878,000 at December 31, 2015. Year-over-year loan growth was strong across the company’s lending areas and included a 22.7% increase in commercial real estate loans, a 15.7% increase in consumer loans, a 9.3% increase in agricultural real estate loans, an 8.2% increase in agricultural, and a 25.6% increase in commercial and industrial loans, offset by a 1.1% reduction in consumer real estate loans, and an 11.4% decrease in industrial development bonds.

The company’s provision for loan losses for the 2016 third quarter was $308,000, compared to $234,000 for the 2015 third quarter. Year-to-date, the provision for loan losses was $924,000, compared to $540,000 for the same period last year. The third quarter 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 584.2% at September 30, 2016, compared to 266.7% at September 30, 2015. Net charge-offs for the third quarter ended September 30, 2016 were $189,000, or 0.03% of average loans, compared to $5,000 or 0.00% of average loans, at September 30, 2015. Year-to-date, net charge-offs were $369,000, or 0.05% of average loans outstanding, compared to $280,000, or 0.05% of average loans outstanding for the same period last year.

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $122,048,000 at September 30, 2016, compared to $114,960,000 at December 31, 2015, and $114,276,000 at September 30, 2015. On a per share basis, tangible stockholders’ equity at September 30, 2016 was $26.41, compared with $24.92 at December 31, 2015, and $24.71 at September 30, 2015. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At September 30, 2016, the company had a Tier 1 leverage ratio of 11.74%, compared to 11.98% at September 30, 2015. The 24 basis point year-over-year decline was a result of the company’s average assets increasing at a faster pace than the company’s Tier 1 capital.

For the 2016 third quarter, the company declared and raised the cash dividend by 4.5% to $0.23 per share, which represented a dividend payout ratio of 34.9% compared to 38.5% for the same period last year.

Mr. Siebenmorgen concluded, “We continue to work hard on extending our leadership position in our existing core-markets, while developing new markets, such as Ft. Wayne, Indiana and Bowling Green, Ohio. We look forward to opening our Bowling Green location this month, after several construction-related delays. Home to Bowling Green State University and its nearly 17,000 students and more than 2,000 faculty members, Bowling Green is an exciting market supported by compelling demographics and a strong economic anchor. In addition, the majority of deposits in this market are located at large, super-regional financial institutions. We are optimistic, F&M’s customer focus, and community banking orientation will be a welcomed addition to the Bowling Green market, and we have assembled an experienced team to roll out F&M’s full suite of financial products and services. I am encouraged by the direction we are headed as we execute our growth strategies, and focus on creating value for our customers, employees, and shareholders.”

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 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
(Unaudited; in thousands of dollars, except per share data)
Three Months Ended Nine Months Ended
September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
Interest Income
Loans, including fees $8,629 $7,341 $24,997 $21,598
Debt securities:
U.S. Treasury and government agencies 559 603 1,734 1,819
Municipalities 344 456 1,093 1,361
Dividends 36 37 111 111
Federal funds sold 7 2 9 7
Other 15 5 37 21
Total interest income 9,590 8,444 27,981 24,917
Interest Expense
Deposits 947 841 2,686 2,446
Federal funds purchased and securities sold
under agreements to repurchase 115 94 346 218
Borrowed funds 37 - 110 -
Total interest expense 1,099 935 3,142 2,664
Net Interest Income - Before Provision for Loan Losses 8,491 7,509 24,839 22,253
Provision for Loan Losses 308 243 924 540
Net Interest Income After Provision
For Loan Losses 8,183 7,266 23,915 21,713
Noninterest Income
Customer service fees 1,711 1,388 4,497 4,171
Other service charges and fees 941 1,084 2,850 2,963
Net gain on sale of loans 216 183 619 531
Net gain on sale of available for sale securities 47 172 503 418
Total noninterest income 2,915 2,827 8,469 8,083
Noninterest Expense
Salaries and Wages 2,981 2,714 8,661 8,083
Employee benefits 849 804 2,426 2,555
Net occupancy expense 359 289 1,083 1,012
Furniture and equipment 438 475 1,293 1,324
Data processing 360 318 1,132 967
Franchise taxes 219 186 658 560
Net (gain) loss on sale of other assets owned (6) 32 39 43
FDIC Assessment 126 126 368 364
Mortgage servicing rights amortization 123 93 311 276
Other general and administrative 1,473 1,475 4,594 4,274
Total noninterest expenses 6,922 6,512 20,565 19,458
Income Before Income Taxes 4,176 3,581 11,819 10,338
Income Taxes 1,161 961 3,349 2,770
Net Income 3,015 2,620 8,470 7,568
Other Comprehensive Income (Net of Tax):
Net unrealized gain on available for sale securities 58 1,210 2,652 1,116
Reclassification adjustment for gain on sale of available for sale securities (47) (172) (503) (418)
Net unrealized gain on available for sale securities 11 1,038 2,149 698
Tax expense 4 353 731 237
Other comprehensive income 7 685 1,418 461
Comprehensive Income $3,022 $3,305 $9,888 $8,029
Earnings Per Share - Basic and Diluted$0.65 $0.57 $1.84 $1.64
Dividends Declared $0.23 $0.22 $0.68 $0.65


FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
September 30, 2016 December 31, 2015
(Unaudited)
Assets
Cash and due from banks $30,896 $21,333
Federal funds sold 602 685
Total cash and cash equivalents 31,498 22,018
Interest-bearing time deposits 1,915 -
Securities - available-for-sale 224,473 235,115
Other securities, at cost 3,717 3,717
Loans, net 732,070 679,821
Premises and equipment 21,356 20,587
Goodwill 4,074 4,074
Mortgage servicing rights 2,143 2,056
Other real estate owned 1,412 1,175
Other assets 21,789 20,505
Total Assets $ 1,044,447 $ 989,068
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing $176,180 $171,112
Interest-bearing
NOW accounts 209,264 190,890
Savings 240,615 225,052
Time 212,042 184,285
Total deposits 838,101 771,339
Federal Funds purchased and
securities sold under agreements to repurchase 59,487 78,815
Federal Home Loan Bank (FHLB) advances 10,000 10,000
Dividend payable 1,053 1,007
Accrued expenses and other liabilities 8,863 7,810
Total liabilities 917,504 868,971
Commitments and Contingencies
Stockholders' Equity
Common shares - no par value - 6,500,000 shares 12/31/15
Common shares - no par value - 10,000,000 shares 9/30/16
authorized, 5,200,000 shares issued and outstanding 11,841 12,086
Treasury Stock - 578,705 shares 2016, 587,466 shares 2015 (12,251) (12,389)
Retained earnings 125,723 120,188
Accumulated other comprehensive income 1,630 212
Total stockholders' equity 126,943 120,097
Total Liabilities and Stockholders' Equity$ 1,044,447 $ 989,068


For the Three Months Ended For the Nine Months Ended
September 30 September 30
Selected financial data 2016
2015
2016
2015
Return on average assets 1.17% 1.10% 1.11% 1.06%
Return on average equity 9.58% 8.87% 9.13% 8.64%
Yield on earning assets 4.03% 3.96% 4.00% 3.92%
Cost of interest bearing liabilities 0.60% 0.57% 0.59% 0.54%
Net interest spread 3.42% 3.39% 3.41% 3.38%
Net interest margin 3.57% 3.53% 3.56% 3.52%
Efficiency 60.09% 62.73% 61.70% 63.69%
Dividend payout ratio 34.93% 38.51% 36.71% 39.36%
Tangible book value per share$ 26.41 $ 24.71
Tier 1 capital to average assets 11.74% 11.98%
September 30
Loans 2016
2015
(Dollar amounts in thousands)
Commercial real estate$ 370,315 $ 301,841
Agricultural real estate 60,206 55,059
Consumer real estate 87,222 88,222
Commercial and industrial 105,961 84,371
Agricultural 79,191 73,193
Consumer 30,585 26,440
Industrial development bonds 5,892 6,649
Less: Net deferred loan fees and costs (690) (536)
Total loans$ 738,682 $ 635,239
September 30
Asset quality data 2016
2015
(Dollar amounts in thousands)
Nonaccrual loans$ 1,132 $ 2,294
Troubled debt restructuring$ 704 $ 1,239
90 day past due and accruing$ - $ -
Nonperforming loans$ 1,132 $ 2,294
Other real estate owned$ 1,412 $ 1,133
Non-performing assets$ 2,544 $ 3,427
(Dollar amounts in thousands)
Allowance for loan and lease losses$ 6,612 $ 6,165
Allowance for loan and lease losses/total loans 0.90% 0.97%
Net charge-offs:
Quarter-to-date$ 189 $ 5
Year-to-date$ 369 $ 280
Net charge-offs to average loans
Quarter-to-date 0.03% 0.00%
Year-to-date 0.05% 0.05%
Non-performing loans/total loans 0.15% 0.36%
Allowance for loan and lease losses/nonperforming loans 584.18% 266.69%

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.