Farmers & Merchants Bancorp, Inc. Reports Record 2016 Fourth-Quarter and Full-Year Financial Results

ARCHBOLD, Ohio, Feb. 08, 2017 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (OTCQX:FMAO) today reported financial results for the 2016 fourth quarter and twelve months ended December 31, 2016.

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

  • 55 consecutive quarters of profitability
  • Total loans increased 2.9% from 2016 third quarter
  • Net interest income after provision for loan losses increased 9.6% to $8,468,000
  • Net income increased 15.2% to $3,194,000
  • Basic and diluted earnings per share increased 15.0% to $0.69
  • Noninterest income improved 7.2% to $2,899,000
  • Return on average assets of 1.22%, up from 1.14%
  • Return on average equity of 10.12%, up from 9.26%

2016 Full-Year Financial Highlights Include:

  • Total loans increased 10.8% to a record $760,149,000
  • Net interest income after provision for loan losses increased 10.0% to $32,383,000
  • Net income increased 12.8% to a record $11,664,000
  • Basic and diluted earnings per share increased 12.9% to a record $2.53
  • Noninterest income improved 5.4% to $11,368,000
  • Return on average assets of 1.14%, up from 1.08%
  • Return on average equity of 9.38%, up from 8.80%
  • Tangible book value per share increased 4.8% to $26.13

Paul S. Siebenmorgen, President and Chief Executive Officer, stated, “We ended 2016 with record earnings, assets, and total loans, as well as declared a record $4,162,000 of dividends to our shareholders, an increase of 4.4% from the previous year. 2016’s record results reflect the successful execution of our growth-oriented business plan, the dedication of our associates, and the valuable financial products and solutions we offer our customers. During 2016, we opened new F&M locations in Huntertown, Indiana and Bowling Green, Ohio, and have assembled strong teams of associates and managers to drive our growth potential in these exciting markets. In addition, we continued to invest in expanding our online, digital, and mobile platforms, and recently announced an agreement with Intuit that makes integrating F&M business and personal accounts with QuickBooks an easy and seamless process. We also announced a partnership with Bowling Green State University Athletics and Falcon Sports Properties to provide customers a cobranded F&M/BGSU Athletics Affinity Credit Card. F&M will also receive sponsorships and various advertising opportunities at BG Athletic events. As you can see, we are working hard to expand our organization and increase our market share. We were successful achieving our growth goals in 2016 and we are optimistic 2017 will be another good year for the bank.”

Income Statement
Net income for the 2016 fourth quarter ended December 31, 2016 was $3,194,000, or $0.69 per basic and diluted share, compared to $2,772,000, or $0.60 per basic and diluted share for the same period last year. The 15.2% improvement in net income for the 2016 fourth quarter was primarily due to a 9.6% increase in net interest income after provision for loan losses, and a 7.2% increase in noninterest income, partially offset by a 3.9% increase in noninterest expense.

Net income for the 2016 twelve months was $11,664,000, or $2.53 per basic and diluted share compared to $10,340,000, or $2.24 per basic and diluted share for the twelve months ended December 31, 2015. The 12.8% improvement in net income for 2016 was primarily due to a 10.0% increase in net interest income after provision for loan losses, and a 5.4% increase in noninterest income, which was partially offset by a 5.2% increase in noninterest expense.

Loan Portfolio and Asset Quality
Total loans at December 31, 2016 were $760,149,000, compared to $685,878,000 at December 31, 2015, and $738,682,000 at September 30, 2016. Total loans for 2016, compared to 2015, increased 10.8%, and were up 2.9% from the 2016 third quarter. The year-over-year improvement resulted primarily from a 17.0% increase in commercial real estate loans, a 9.1% increase in commercial and industrial loans, a 19.5% increase in consumer loans, an 8.3% increase in agricultural real estate loans, and a 2.3% increase in agricultural loans.

Asset quality remains strong as the company’s provision for loan losses for the 2016 fourth quarter was $197,000, compared to $85,000 for the 2015 fourth quarter. The provision for loan losses for 2016 was $1,121,000, compared to $625,000 in 2015. The 2016 full year and fourth quarter higher provision was primarily due to the increase in total loans outstanding for both periods. The allowance for loan losses to nonperforming loans was 490.4% at December 31, 2016, compared to 293.8% at December 31, 2015. Net charge-offs for the year ended December 31, 2016 were $394,000, or 0.05% of average loans, compared to $473,000 or 0.08% of average loans, at December 31, 2015.

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $120,763,000 as of December 31, 2016, compared to $114,960,000 at December 31, 2015. On a per share basis, tangible stockholders’ equity at December 31, 2016 was $26.13 compared with $24.93 at December 31, 2015. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At December 31, 2016, the company had a Tier 1 leverage ratio of 11.74%, compared to 11.98% at December 31, 2015.

For 2016, the company declared cash dividends of $0.91 per share, which is a 4.6% increase over 2015’s dividend payment. For 2016, the dividend payout ratio was 32.97% compared to 36.33% for the same period last year.

Mr. Siebenmorgen concluded, “F&M remains well positioned in its local markets, which continue to demonstrate favorable economic trends. Positive economic trends combined with market share growth helped our loan portfolio improve 10.8% in 2016, which was driven primarily by strong demand for commercial real estate, commercial and industrial, and consumer loans. The growth in our loan portfolio during 2016 drove a 12.1% increase in total interest income, while total loans to total assets increased 260 basis points to 72.0% for the year. While we are extremely pleased with our growth, we remain focused on managing risk, and I am encouraged with the year-over-year declines in nonperforming loans and charge-offs. I would like to use this opportunity to thank all of our stakeholders for their support during this record year, and look forward to sharing our continued success with you in the future.”

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 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 (LOSS)
(Unaudited; 000's Omitted, Except Per Share Data)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2016 2015 2016 2015
Interest Income
Loans, including fees$8,706 $7,695 $33,703 $29,293
Debt securities:
U.S. Treasury and government agencies 639 615 2,373 2,434
Municipalities 344 378 1,437 1,739
Dividends 38 37 149 148
Federal funds sold 13 1 22 8
Other 6 7 43 28
Total interest income 9,746 8,733 37,727 33,650
Interest Expense - -
Deposits 931 823 3,617 3,269
Federal funds purchased and securities sold
under agreements to repurchase 112 99 458 317
Borrowed funds 38 1 148 1
Total interest expense 1,081 923 4,223 3,587
Net Interest Income - Before provision for loan losses 8,665 7,810 33,504 30,063
Provision for Loan Losses 197 85 1,121 625
Net Interest Income After Provision
For Loan Losses 8,468 7,725 32,383 29,438
Noninterest Income
Customer service fees 1,621 1,676 6,118 5,847
Other service charges and fees 924 827 3,774 3,790
Net gain on sale of loans 269 169 888 700
Net gain on sale of available for sale securities 85 33 588 451
Total noninterest income 2,899 2,705 11,368 10,788
Noninterest Expense
Salaries and Wages 2,959 2,824 11,620 10,907
Employee benefits 897 1,000 3,323 3,555
Net occupancy expense 376 340 1,459 1,352
Furniture and equipment 431 305 1,724 1,629
Data processing 277 333 1,409 1,300
Franchise taxes 220 186 878 746
Net loss on sale of other assets owned 42 4 81 47
FDIC Assessment 39 121 407 485
Mortgage servicing rights amortization 108 98 419 374
Other general and administrative 1,517 1,398 6,111 5,672
Total other operating expenses 6,866 6,609 27,431 26,067
Income Before Income Taxes 4,501 3,821 16,320 14,159
Income Taxes 1,307 1,049 4,656 3,819
Net Income$3,194 $2,772 $11,664 $10,340
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available for sale securities$(5,373) $(1,016) $(2,721) $100
Reclassification adjustment for gain on sale of (85) (33) (588) (451)
available for sale securities
Net unrealized gain (loss) on available for sale securities (5,458) (1,049) (3,309) (351)
Tax expense (benefit) (1,856) (356) (1,125) (119)
Other comprehensive income (loss) (3,602) (693) (2,184) (232)
Comprehensive Income (Loss)$(408) $2,079 $9,480 $10,108
Earnings Per Share - Basic and Diluted$0.69 $0.60 $2.53 $2.24


FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2016 AND 2015
(000'S OMITTED EXCEPT PER SHARE DATA)
2016 2015
Assets
Assets
Cash and due from banks $27,348 $21,333
Federal Funds Sold 974 685
Total cash and cash equivalents 28,322 22,018
Interest-bearing time deposits 1,915 -
Securities - available for sale 218,527 235,115
Other Securities, at cost 3,717 3,717
Loans, net
753,365 679,821
Premises and equipment 21,457 20,587
Goodwill
4,074 4,074
Mortgage Servicing Rights 2,192 2,056
Other Real Estate Owned 774 1,175
Other assets 21,552 20,505
Total Assets $1,055,895 $989,068
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing $186,390 $171,112
Interest-bearing
NOW accounts 230,446 190,890
Savings 226,537 225,052
Time 198,830 184,285
Total deposits 842,203 771,339
Federal Funds Purchases and
Securities sold under agreement to repurchase 70,324 78,815
Federal Home Loan Bank (FHLB) Advances 10,000 10,000
Dividend payable 1,053 1,007
Accrued expenses and other liabilities 6,738 7,810
Total liabilities $930,318 $868,971
Commitments and Contingencies
Stockholders' Equity
Common Shares 6,500,000 shares 12/31/15
Common Shares 10,000,000 shares 12/31/16
shares; issued & outstanding 5,200,000 shares 11,947 12,086
Treasury Stock - 579,125 shares 2016, 587,466 shares 2015 (12,267) (12,389)
Retained earnings 127,869 120,188
Accumulated other comprehensive income (1,972) 212
Total stockholders' equity 125,577 120,097
Total Liabilities and Stockholders' Equity $1,055,895 $989,068

For the Three Months Ended
For the Twelve Months Ended
December 31 December 31
Selected financial data 2016 2015 2016 2015
Return on average assets 1.22% 1.14% 1.14% 1.08%
Return on average equity 10.12% 9.26% 9.38% 8.80%
Yield on earning assets 4.05% 3.90% 4.00% 3.90%
Cost of interest bearing liabilities 0.55% 0.49% 0.59% 0.54%
Net interest spread 3.49% 3.41% 3.41% 3.35%
Net interest margin 3.61% 3.49% 3.56% 3.49%
Efficiency 58.98% 62.00% 61.00% 63.25%
Dividend payout ratio 32.97% 36.33% 35.68% 38.55%
Tangible book value per share$26.13 $24.93
Tier 1 capital to average assets 11.74% 11.98%
December 31
Loans 2016 2015
(Dollar amounts in thousands)
Commercial real estate$377,481 $322,762
Agricultural real estate 63,391 58,525
Consumer real estate 87,273 88,189
Commercial and industrial 109,256 100,125
Agricultural 84,563 82,654
Consumer 33,179 27,770
Industrial development bonds 5,732 6,491
Less: Net deferred loan fees and costs (726) (638)
Total loans$760,149 $685,878
December 31
Asset quality data 2016 2015
(Dollar amounts in thousands)
Nonaccrual loans$1,384 $2,041
Troubled debt restructuring$697 $1,239
90 day past due and accruing$- $-
Nonperforming loans$1,384 $2,041
Other real estate owned$774 $1,175
Non-performing assets$2,158 $3,216
(Dollar amounts in thousands)
Allowance for loan and lease losses$6,784 $6,057
Allowance for loan and lease losses/total loans 0.89% 0.88%
Net charge-offs:
Quarter-to-date$25 $193
Year-to-date$394 $473
Net charge-offs to average loans
Quarter-to-date 0.00% 0.03%
Year-to-date 0.05% 0.08%
Non-performing loans/total loans 0.18% 0.30%
Allowance for loan and lease losses/nonperforming loans 490.39% 293.75%

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.