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Farmers & Merchants Bancorp, Inc. Reports 2017 Third-Quarter and Year-to-Date Financial Results

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, 2017September 30, 2016 September 30, 2017September 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, 2017December 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


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

Source:Farmers & Merchants Bancorp, Inc.