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Farmers & Merchants Bancorp, Inc. Reports 2018 First Quarter Financial Results

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ARCHBOLD, Ohio, April 19, 2018 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) today reported financial results for the 2018 first quarter ended March 31, 2018.

2018 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 60 consecutive quarters of profitability
  • Total loans increased 8.2% to $834,737,000, and were up 1.4% from the fourth quarter
  • Net interest income after provision for loan losses increased 13.7% to $9,633,000
  • Net income increased 32.7% to $3,767,000
  • Earnings per basic and diluted share increased 32.3% to $0.41
  • Return on average assets was 1.35%, up from 1.07%
  • Return on average equity was 11.20%, up from 8.97%

Paul S. Siebenmorgen, President and Chief Executive Officer, stated, "I am pleased with the strong start to the new year as we continue to execute our growth-oriented business plan.  From 2007 to March 31, 2018, F&M has expanded its footprint by opening 11 new locations.  Total loans at these branches have grown from 7% of our loan portfolio to nearly 49% of our loan portfolio at March 31, 2018.  The success of F&M's de novo growth strategy provides us with growing confidence in our real estate strategy and belief that there are many compelling markets around our core geographies that need the community oriented financial services F&M provides.  Most recently we opened our 25th full-service office in Findlay, Ohio. This full-service office will offer the latest banking technology to serve customers, enabling F&M to offer the benefits of both self-service video banking and the branch experience in one solution. I am pleased with the continued strength of our business, and expect 2018 to be another good year for F&M." 

Income Statement
Net income for the first quarter ended March 31, 2018, was $3,767,000, or $0.41 per basic and diluted share, compared to the same period last year's net income of $2,839,000, or $0.31 per basic and diluted share, which was adjusted for a two-for-one stock split paid in September 2017. The 32.7% improvement in net income for the 2018 first quarter was primarily due to a 13.7% increase in net interest income after provision for loan losses, partially offset by an 8.0% increase in noninterest expense.  As a result of the Tax Cuts and Job Act, the Bank's tax rate was lowered which benefitted earnings.

Loan Portfolio and Asset Quality
Total loans at March 31, 2018, increased 8.2% to a record $834,737,000, compared to $771,206,000 at March 31, 2017, and up 1.4% from $823,024,000 at December 31, 2017.  The year-over-year improvement resulted primarily from an 8.5% increase in commercial real estate loans, a 7.0% increase in commercial and industrial loans, a 14.8% increase in agricultural loans, a 14.0% increase in consumer loans, and a 7.6% increase in agricultural real estate loans. 

The company's provision for loan losses for the 2018 first quarter was $40,000, compared to $73,000 for the 2017 first quarter.

F&M's loan quality remains strong as the allowance for loan losses to nonperforming loans was 755.2% at March 31, 2018, compared to 479.0% at March 31, 2017.  Net charge-offs for the quarter ended March 31, 2018, were $108,000, or 0.01% of average loans, compared to $7,000 or 0.00% of average loans for the quarter ended March 31, 2017.

Stockholders' Equity and Dividends
Tangible stockholders' equity increased to $130,668,000 at March 31, 2018, compared to $129,667,000 at December 31, 2017, and $122,984,000 at March 31, 2017.  On a per share basis, tangible stockholders' equity at March 31, 2018, was $14.06, compared to $13.99 at December 31, 2017, and $13.31, at March 31, 2017. The increase in tangible stockholders' equity is the result of growth in retained earnings due to increased profitability. At March 31, 2018, the company had a Tier 1 leverage ratio of 12.11%, compared to 11.81% at March 31, 2017. 

For the 2018 first quarter, the company declared cash dividends of $0.13 per share, which represents a dividend payout ratio of 31.7% compared to 37.1% for the same period last year.

Mr. Siebenmorgen concluded, "Economic trends remain stable within our local communities.  Loan demand was strong for the 2018 first quarter, compared to the same period last year, as total loans increased 8.2%, while non-performing assets declined 29.6%.  The year-over-year growth in loans was a result of strong demand across all our loan segments.  Net charge-offs for the quarter were very low at 0.01%, compared to last year when they were 0.00%.  Total interest income was up 14.6% during the 2018 first quarter, driven by loan growth and higher yield on earnings assets.  Overall, we are pleased with the direction we are headed, and optimistic favorable financial and business trends will continue in 2018, as we focus on proactively managing risk with asset growth, expanding market share in our Fort Wayne and Toledo markets, and executing our de-novo and acquisition growth strategies."

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 25 offices. Our locations are in Fulton, Defiance, Hancock, 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
        March 31, 2018
  March 31, 2017
Interest Income                  
Loans, including fees   $ 10,102     $ 8,700  
Debt securities:                  
U.S. Treasury and government agencies   623       642  
Municipalities       281       315  
Dividends       55       42  
Federal funds sold       15       -  
Other           60         22  
Total interest income     11,136       9,721  
Interest Expense                  
Deposits       1,319       1,030  
Federal funds purchased and securities sold              
under agreements to repurchase   124       113  
Borrowed funds         20         36  
Total interest expense       1,463         1,179  
Net Interest Income - Before Provision for Loan Losses   9,673       8,542  
Provision for Loan Losses        40         73  
Net Interest Income After Provision              
For Loan Losses       9,633       8,469  
Noninterest Income                  
Customer service fees     1,466       1,481  
Other service charges and fees     1,012       871  
Net gain on sale of loans     132       201  
Net gain on sale of available-for-sale securities     -         31  
Total noninterest income     2,610       2,584  
Noninterest Expense                  
Salaries and wages       3,310       3,001  
Employee benefits       1,136       922  
Net occupancy expense     387       413  
Furniture and equipment     507  
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