Market Overview

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

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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                
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