ARCHBOLD, Ohio, Oct. 26, 2023 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2023 third quarter and year-to-date September 30, 2023.
2023 Third Quarter Financial and Operating Highlights (on a year-over-year basis unless noted):
- 82 consecutive quarters of profitability
- Net income was $4.8 million, or $0.35 per basic and diluted share
- Stockholders' equity increased 8.1% to $303.2 million
- Regulatory tangible book value per share increased 2.8% to $18.36 per share
- Total loans were a record of $2.53 billion and increased 7.2% from $2.36 billion at December 31, 2022
- Total assets increased 16.2% to a record $3.23 billion
- Deposits increased 4.3% to a record $2.58 billion
- Asset quality remains strong as nonperforming loans were 0.89% of total loans
- Net charge-offs to average loans were 0.00%
- Allowance for credit losses was 112.61% of nonperforming loans
- Tier 1 leverage ratio decreased to 8.02% from 9.11% last year
- Strategic investments to support long-term growth continue as F&M has opened new offices, unveiled new branding and a new logo, launched new deposit products, and implemented new features across its website and online banking platform
Lars B. Eller, President and Chief Executive Officer, stated, "Throughout 2023, we have been focused on executing against our strategic growth plan, while simultaneously navigating a challenging banking environment. I am pleased with the progress we are making as F&M opened two full-service offices in Oxford and Toledo, Ohio last quarter and since the end of the third quarter, the Bank has opened additional offices in Fort Wayne, Indiana and Birmingham, Michigan. We have also recently launched a new shared services group formation, invested in new internal audit and marketing capabilities, and restructured our HR department."
Mr. Eller continued, "With most of the planned investments behind us, we are focused on scaling our new offices by expanding relationships within these new and existing markets. Early indications are encouraging and reflect F&M's strong team of local bankers. As a result of our efforts across our new and existing offices, third-quarter deposits increased 4.3% from the second quarter to a record $2.58 billion, which included a 3.3% increase in non-interest-bearing deposits. We expect future deposit growth over the next quarters as our growth strategies accelerate and we benefit from new checking accounts that have been opened since the start of the year."
Income Statement
Net income for the 2023 third quarter ended September 30, 2023, was $4.8 million, compared to $9.0 million for the same period last year. Net income per basic and diluted share for the 2023 third quarter was $0.35, compared to $0.68 for the same period last year. Net income for the 2023 nine months ended September 30, 2023, was $17.2 million, compared to $25.3 million for the same period last year. Net income per basic and diluted share for the 2023 nine months was $1.26, compared to $1.94 for the same period last year.
"The rapid rise in the Federal Funds Rate continued to impact our cost of funds and increase the competition for deposits. As a result, our cost of interest-bearing liabilities has increased to 2.82% at September 30, 2023, from 0.68% at September 30, 2022. Our loan portfolio has also lagged in capturing sufficient yield to match the higher cost of funds mainly due to the timing to reprice our commercial real estate adjustable-rate mortgages. 13.3% of the loan portfolio will be subject to repricing next quarter with 22.3% subject to repricing in the next twelve months. These trends during the third quarter caused a 12.9% year-over-year decline in net interest income and impacted overall profitability. As we navigate a challenging rate environment over the near term, we continue to believe we are well positioned for net income growth to re-accelerate in 2024 and beyond, as we benefit from continued strong asset quality, and the contribution of our growth initiatives," continued Mr. Eller.
Deposits
At September 30, 2023, total deposits were $2.58 billion, an increase of 12.8% from September 30, 2022, and an increase of 4.3% from December 31, 2022. The Company's cost of interest-bearing liabilities was 2.82% for the quarter ended September 30, 2023, compared to 0.68% for the quarter ended September 30, 2022, and 1.32% for the quarter ended December 31, 2022.
At September 30, 2023, F&M's average deposit account had an average balance of $25,426. In addition, uninsured deposits to total deposits were approximately 9.1% for the quarter ended September 30, 2023, and the percentage of uninsured by the FDIC was 18.84%.
Loan Portfolio and Asset Quality
Total loans, net at September 30, 2023, increased 18.1%, or by $3.87 million to $2.53 billion, compared to $2.14 billion at September 30, 2022, and up 7.2% from $2.36 billion at December 31, 2022. The year-over-year improvement resulted primarily from the contribution of continued organic loan growth and the completion of the Peoples acquisition. Not including the Peoples acquisition, total net loans increased 13.2% organically, or by $282.8 million from the same period a year ago.
F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $22.4 million, or 0.89% of total loans at September 30, 2023, compared to $5.5 million, or 0.26% at September 30, 2022. At September 30, 2023, nonperforming loans increased by $16.2 million from June 30, 2023, which was primarily due to one agricultural relationship where the Bank is well collateralized and does not foresee a loss.
F&M maintains a well-balanced, diverse and high performing CRE portfolio. CRE loans represented 51.6% of the Company's total loan portfolio at September 30, 2023. In addition, F&M's commercial real estate office credit exposure represented 5.1% of the Company's total loan portfolio at September 30, 2023, with a weighted average loan-to-value of approximately 64% and an average loan of $870,000.
F&M's CRE portfolio included the following categories at September 30, 2023:
CRE Category | Dollar Balance | Percent of CRE Portfolio(*) | Percent of Total Loan Portfolio(*) | ||||||
| Multi-family | $ | 241,804 | 18.5 | % | 9.5 | % | |||
| Industrial | $ | 228,644 | 17.5 | % | 9.0 | % | |||
| Retail | $ | 212,383 | 16.3 | % | 8.4 | % | |||
| Hotels | $ | 133,579 | 10.2 | % | 5.3 | % | |||
| Office | $ | 129,619 | 9.9 | % | 5.1 | % | |||
| Gas Stations | $ | 61,484 | 4.7 | % | 2.4 | % | |||
| Food Service | $ | 49,578 | 3.8 | % | 2.0 | % | |||
| Mixed Use | $ | 39,842 | 3.1 | % | 1.6 | % | |||
| Senior Living | $ | 35,788 | 2.7 | % | 1.4 | % | |||
| Other | $ | 171,387 | 13.1 | % | 6.8 | % | |||
| Total CRE | $ | 1,304,118 | 100.0 | % | 51.4 | % | |||
* Numbers have been rounded
At September 30, 2023, the Company's allowance for credit losses to nonperforming loans was 112.61%, compared to 365.44% at September 30, 2022. The allowance to total loans was 1.00% at September 30, 2023, compared to 0.93% at September 30, 2022. As a result of F&M's recent acquisitions, the Company had an accretable yield adjustment of $4.6 million at September 30, 2023, which further enhances F&M's allowance, compared to $6.0 million at September 30, 2022. Including the accretable yield adjustment, F&M's allowance for credit losses to total loans was 1.18% at September 30, 2023, compared to 1.21% at September 30, 2022.
Mr. Eller concluded, "At September 30, 2023, we saw nonperforming loans increase to 0.89% primarily due to one agricultural relationship where the Bank is well collateralized and does not foresee a loss. As we work through this credit, we are closely monitoring our loan portfolio for signs of stress, but overall, we expect our conservative credit culture and pricing will allow us to maintain excellent asset quality throughout various economic cycles. In addition, at September 30, 2023, we had the lowest level of loans over 30 days past due this year. While we continue to believe 2023 will be a transitional year, we believe we are well positioned to emerge from this period with increased market share and higher profitability and I look forward to reporting on our success in the coming quarters. Our financial performance ratios reflect the pressure on the net interest margin and the cost of the strategic investments we have made. We are cognizant of the short-term expense and are confident it will enable long-term gains."
Stockholders' Equity and Dividends
Total stockholders' equity increased 8.1% to $303.2 million at September 30, 2023, from $280.6 million at September 30, 2022. At September 30, 2023, the Company had a Tier 1 leverage ratio of 8.02%, compared to 9.11% at September 30, 2022.
Based on a regulatory basis, tangible stockholders' equity increased to $250.9 million at September 30, 2023, compared to $234.1 million at September 30, 2022. On a per share basis, tangible stockholders' equity at September 30, 2023, was $18.36 per share, compared to $17.86 per share at September 30, 2022.
For the nine months ended September 30, 2023, the Company has declared cash dividends of $0.63 per share, which is a 4.6% increase over the same period last year. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over 28 consecutive years. For the nine months ended September 30, 2023, the dividend payout ratio was 60.07% compared to 30.45% for the same period last year.
About Farmers & Merchants State Bank:
Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) is the holding company of F&M Bank, a local independent community bank that has been serving its communities since 1897. F&M Bank provides commercial banking, retail banking and other financial services. Our locations are in Butler, Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Shelby, Williams, and Wood counties in Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties. The Michigan footprint includes Oakland County, and F&M has Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Bryan, Ohio.
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 Exchange 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, capital market conditions, or the effects of the COVID-19 pandemic, and its impacts on our credit quality and business operations, as well as its impact on general economic and financial 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 or through F&M's website www.fm.bank.
Non-GAAP Financial Measures
This press release includes disclosure of financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers & Merchants Bancorp, Inc. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers & Merchants Bancorp, Inc.'s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial measures is included within this press release.
| Company Contact: | Investor and Media Contact: |
| Lars B. Eller President and Chief Executive Officer Farmers & Merchants Bancorp, Inc. (419) 446-2501 leller@fm.bank | Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com |
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME | ||||||||||||||||||||||||||||||
| (Unaudited) (in thousands of dollars, except per share data) | ||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||
| Interest Income | ||||||||||||||||||||||||||||||
| Loans, including fees | $ | 33,783 | $ | 31,365 | $ | 29,703 | $ | 27,302 | $ | 24,119 | $ | 94,851 | $ | 66,962 | ||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | 1,005 | 1,030 | 1,068 | 1,118 | 1,049 | 3,103 | 3,107 | |||||||||||||||||||||||
| Municipalities | 392 | 401 | 408 | 420 | 373 | 1,201 | 995 | |||||||||||||||||||||||
| Dividends | 246 | 148 | 123 | 126 | 93 | 517 | 192 | |||||||||||||||||||||||
| Federal funds sold | 6 | 9 | 21 | 2 | - | 36 | 19 | |||||||||||||||||||||||
| Other | 927 | 424 | 479 | 524 | 213 | 1,830 | 382 | |||||||||||||||||||||||
| Total interest income | 36,359 | 33,377 | 31,802 | 29,492 | 25,847 | 101,538 | 71,657 | |||||||||||||||||||||||
| Interest Expense | ||||||||||||||||||||||||||||||
| Deposits | 13,323 | 10,434 | 8,151 | 4,978 | 2,166 | 31,908 | 4,905 | |||||||||||||||||||||||
| Federal funds purchased and securities sold | ||||||||||||||||||||||||||||||
| under agreements to repurchase | 349 | 427 | 405 | 463 | 416 | 1,181 | 734 | |||||||||||||||||||||||
| Borrowed funds | 2,741 | 2,113 | 1,280 | 1,209 | 398 | 6,134 | 951 | |||||||||||||||||||||||
| Subordinated notes | 284 | 285 | 284 | 285 | 284 | 853 | 837 | |||||||||||||||||||||||
| Total interest expense | 16,697 | 13,259 | 10,120 | 6,935 | 3,264 | 40,076 | 7,427 | |||||||||||||||||||||||
| Net Interest Income - Before Provision for Credit Losses* | 19,662 | 20,118 | 21,682 | 22,557 | 22,583 | 61,462 | 64,230 | |||||||||||||||||||||||
| Provision for Credit Losses - Loans* | 460 | 143 | 817 | 755 | 1,637 | 1,420 | 3,845 | |||||||||||||||||||||||
| Provision for Credit Losses - Off Balance Sheet Credit Exposures* | (76 | ) | (129 | ) | 62 | - | - | (143 | ) | - | ||||||||||||||||||||
| Net Interest Income After Provision for Credit Losses* | 19,278 | 20,104 | 20,803 | 21,802 | 20,946 | 60,185 | 60,385 | |||||||||||||||||||||||
| Noninterest Income | ||||||||||||||||||||||||||||||
| Customer service fees | 2,208 | 2,361 | 2,447 | 2,862 | 2,300 | 7,016 | 7,096 | |||||||||||||||||||||||
| Other service charges and fees | 1,162 | 1,803 | 2,554 | 1,115 | 1,105 | 5,519 | 3,111 | |||||||||||||||||||||||
| Net gain on sale of loans | 294 | 108 | 67 | 165 | 327 | 469 | 1,188 | |||||||||||||||||||||||
| Net loss on sale of available-for-sale securities | - | - | (891 | ) | - | - | (891 | ) | - | |||||||||||||||||||||
| Total noninterest income | 3,664 | 4,272 | 4,177 | 4,142 | 3,732 | 12,113 | 11,395 | |||||||||||||||||||||||
| Noninterest Expense | ||||||||||||||||||||||||||||||
| Salaries and wages | 6,777 | 6,500 | 6,657 | 6,353 | 5,479 | 19,934 | 16,347 | |||||||||||||||||||||||
| Employee benefits | 2,066 | 2,071 | 2,165 | 1,911 | 1,392 | 6,302 | 4,992 | |||||||||||||||||||||||
| Net occupancy expense | 950 | 840 | 856 | 753 | 693 | 2,646 | 1,813 | |||||||||||||||||||||||
| Furniture and equipment | 1,189 | 1,211 | 1,252 | 1,096 | 1,047 | 3,652 | 3,111 | |||||||||||||||||||||||
| Data processing | 840 | 796 | 726 | 1,917 | 781 | 2,362 | 2,039 | |||||||||||||||||||||||
| Franchise taxes | 434 | 379 | 366 | (45 | ) | 254 | 1,179 | 1,429 | ||||||||||||||||||||||
| ATM expense | 640 | 683 | 623 | 561 | 580 | 1,946 | 1,656 | |||||||||||||||||||||||
| Advertising | 865 | 830 | 514 | 531 | 578 | 2,209 | 1,115 | |||||||||||||||||||||||
| Net (gain) loss on sale of other assets owned | 49 | - | - | 12 | - | 49 | (271 | ) | ||||||||||||||||||||||
| FDIC assessment | 586 | 496 | 306 | 250 | 271 | 1,388 | 655 | |||||||||||||||||||||||
| Mortgage servicing rights amortization - net | 106 | 164 | 159 | 110 | (50 | ) | 429 | 35 | ||||||||||||||||||||||
| Consulting fees | 179 | 231 | 230 | 637 | 254 | 640 | 665 | |||||||||||||||||||||||
| Other general and administrative | 2,363 | 2,643 | 3,077 | 2,964 | 2,192 | 8,083 | 6,613 | |||||||||||||||||||||||
| Total noninterest expense | 17,044 | 16,844 | 16,931 | 17,050 | 13,471 | 50,819 | 40,199 | |||||||||||||||||||||||
| Income Before Income Taxes | 5,898 | 7,532 | 8,049 | 8,894 | 11,207 | 21,479 | 31,581 | |||||||||||||||||||||||
| Income Taxes | 1,121 | 1,531 | 1,583 | 1,706 | 2,253 | 4,235 | 6,254 | |||||||||||||||||||||||
| Net Income | 4,777 | 6,001 | 6,466 | 7,188 | 8,954 | 17,244 | 25,327 | |||||||||||||||||||||||
| Other Comprehensive Income (Loss) (Net of Tax): | ||||||||||||||||||||||||||||||
| Net unrealized gain (loss) on available-for-sale securities | (4,514 | ) | (5,996 | ) | 8,030 | (628 | ) | (8,197 | ) | (2,480 | ) | (43,738 | ) | |||||||||||||||||
| Reclassification adjustment for realized loss on sale of available-for-sale securities | - | - | 891 | - | - | 891 | - | |||||||||||||||||||||||
| Net unrealized gain (loss) on available-for-sale securities | (4,514 | ) | (5,996 | ) | 8,921 | (628 | ) | (8,197 | ) | (1,589 | ) | (43,738 | ) | |||||||||||||||||
| Tax expense (benefit) | (947 | ) | (1,260 | ) | 1,874 | (132 | ) | (1,721 | ) | (333 | ) | (9,185 | ) | |||||||||||||||||
| Other comprehensive income (loss) | (3,567 | ) | (4,736 | ) | 7,047 | (496 | ) | (6,476 | ) | (1,256 | ) | (34,553 | ) | |||||||||||||||||
| Comprehensive Income (Loss) | $ | 1,210 | $ | 1,265 | $ | 13,513 | $ | 6,692 | $ | 2,478 | $ | 15,988 | $ | (9,226 | ) | |||||||||||||||
| Basic Earnings Per Share | $ | 0.35 | $ | 0.44 | $ | 0.47 | $ | 0.53 | $ | 0.68 | $ | 1.26 | $ | 1.94 | ||||||||||||||||
| Diluted Earnings Per Share | $ | 0.35 | $ | 0.44 | $ | 0.47 | $ | 0.53 | $ | 0.68 | $ | 1.26 | $ | 1.94 | ||||||||||||||||
| Dividends Declared | $ | 0.2100 | $ | 0.2100 | $ | 0.2100 | $ | 0.2100 | $ | 0.2100 | $ | 0.6300 | $ | 0.6025 | ||||||||||||||||
| *ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method. | ||||||||||||||||||||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||||
| (Unaudited) (in thousands of dollars, except share data) | |||||||||||||||||||||
| September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | |||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
| Assets | |||||||||||||||||||||
| Cash and due from banks | $ | 151,711 | $ | 69,760 | $ | 62,780 | $ | 83,085 | $ | 69,680 | |||||||||||
| Federal funds sold | 1,471 | 1,433 | 1,545 | 1,324 | 990 | ||||||||||||||||
| Total cash and cash equivalents | 153,182 | 71,193 | 64,325 | 84,409 | 70,670 | ||||||||||||||||
| Interest-bearing time deposits | 2,989 | 3,485 | 4,435 | 4,442 | 5,187 | ||||||||||||||||
| Securities - available-for-sale | 348,255 | 363,225 | 372,975 | 390,789 | 395,485 | ||||||||||||||||
| Other securities, at cost | 16,995 | 17,535 | 11,543 | 9,799 | 8,227 | ||||||||||||||||
| Loans held for sale | 1,039 | 1,459 | 951 | 827 | 2,182 | ||||||||||||||||
| Loans, net | 2,504,329 | 2,490,883 | 2,422,018 | 2,336,074 | 2,122,626 | ||||||||||||||||
| Premises and equipment | 31,723 | 30,398 | 28,679 | 28,381 | 26,484 | ||||||||||||||||
| Construction in progress | 3,044 | 2,290 | 1,565 | 278 | - | ||||||||||||||||
| Goodwill | 86,358 | 86,358 | 86,358 | 86,358 | 80,434 | ||||||||||||||||
| Loan servicing rights | 5,687 | 5,635 | 4,985 | 3,549 | 3,583 | ||||||||||||||||
| Bank owned life insurance | 33,691 | 33,470 | 33,269 | 33,073 | 28,051 | ||||||||||||||||
| Other assets | 47,388 | 41,512 | 38,972 | 37,372 | 40,831 | ||||||||||||||||
| Total Assets | $ | 3,234,680 | $ | 3,147,443 | $ | 3,070,075 | $ | 3,015,351 | $ | 2,783,760 | |||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||
| Liabilities | |||||||||||||||||||||
| Deposits | |||||||||||||||||||||
| Noninterest-bearing | $ | 505,358 | $ | 488,678 | $ | 520,145 | $ | 532,794 | $ | 506,928 | |||||||||||
| Interest-bearing | |||||||||||||||||||||
| NOW accounts | 778,133 | 770,113 | 800,230 | 750,887 | 705,888 | ||||||||||||||||
| Savings | 591,344 | 581,192 | 590,854 | 627,203 | 607,375 | ||||||||||||||||
| Time | 700,445 | 628,757 | 601,939 | 557,980 | 462,845 | ||||||||||||||||
| Total deposits | 2,575,280 | 2,468,740 | 2,513,168 | 2,468,864 | 2,283,036 | ||||||||||||||||
| Federal funds purchased and securities | |||||||||||||||||||||
| sold under agreements to repurchase | 30,527 | 51,567 | 30,496 | 54,206 | 55,802 | ||||||||||||||||
| Federal Home Loan Bank (FHLB) advances | 266,286 | 266,818 | 164,327 | 127,485 | 102,147 | ||||||||||||||||
| Other borrowings | - | - | - | 10,000 | 10,000 | ||||||||||||||||
| Subordinated notes, net of unamortized issuance costs | 34,673 | 34,644 | 34,615 | 34,586 | 34,557 | ||||||||||||||||
| Dividend payable | 2,838 | 2,834 | 2,831 | 2,832 | 2,727 | ||||||||||||||||
| Accrued expenses and other liabilities | 21,892 | 18,177 | 18,881 | 19,238 | 14,913 | ||||||||||||||||
| Total liabilities | 2,931,496 | 2,842,780 | 2,764,318 | 2,717,211 | 2,503,182 | ||||||||||||||||
| Commitments and Contingencies | |||||||||||||||||||||
| Stockholders' Equity | |||||||||||||||||||||
| Common stock - No par value 20,000,000 shares authorized; issued and | |||||||||||||||||||||
| outstanding 14,564,425 shares 9/30/23 and 12/31/22 | 135,171 | 135,647 | 135,241 | 135,497 | 121,811 | ||||||||||||||||
| Treasury stock - 898,843 shares 9/30/23 and 956,003 shares 12/31/22 | (11,008 | ) | (11,298 | ) | (11,310 | ) | (11,573 | ) | (11,547 | ) | |||||||||||
| Retained earnings | 218,510 | 216,236 | 213,012 | 212,449 | 208,051 | ||||||||||||||||
| Accumulated other comprehensive loss | (39,489 | ) | (35,922 | ) | (31,186 | ) | (38,233 | ) | (37,737 | ) | |||||||||||
| Total stockholders' equity | 303,184 | 304,663 | 305,757 | 298,140 | 280,578 | ||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 3,234,680 | $ | 3,147,443 | $ | 3,070,075 | $ | 3,015,351 | $ | 2,783,760 | |||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||
| SELECT FINANCIAL DATA | |||||||||||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||
| Selected financial data | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| Return on average assets | 0.59 | % | 0.77 | % | 0.84 | % | 0.96 | % | 1.31 | % | 0.73 | % | 1.25 | % | |||||||||||||
| Return on average equity | 6.26 | % | 7.84 | % | 8.59 | % | 10.00 | % | 12.53 | % | 7.52 | % | 11.72 | % | |||||||||||||
| Yield on earning assets | 4.79 | % | 4.53 | % | 4.41 | % | 4.18 | % | 4.00 | % | 4.57 | % | 3.76 | % | |||||||||||||
| Cost of interest bearing liabilities | 2.82 | % | 2.35 | % | 1.85 | % | 1.32 | % | 0.68 | % | 2.35 | % | 0.53 | % | |||||||||||||
| Net interest spread | 1.97 | % | 2.18 | % | 2.56 | % | 2.86 | % | 3.32 | % | 2.22 | % | 3.23 | % | |||||||||||||
| Net interest margin | 2.59 | % | 2.73 | % | 3.01 | % | 3.20 | % | 3.49 | % | 2.77 | % | 3.37 | % | |||||||||||||
| Efficiency | 73.07 | % | 69.06 | % | 63.53 | % | 50.46 | % | 51.19 | % | 68.24 | % | 53.16 | % | |||||||||||||
| Dividend payout ratio | 60.07 | % | 47.22 | % | 43.79 | % | 39.39 | % | 30.45 | % | 49.50 | % | 40.58 | % | |||||||||||||
| Tangible book value per share (1) | $ | 18.36 | $ | 18.21 | $ | 17.92 | $ | 17.69 | $ | 17.86 | |||||||||||||||||
| Tier 1 leverage ratio | 8.02 | % | 9.85 | % | 8.36 | % | 8.39 | % | 9.11 | % | |||||||||||||||||
| Average shares outstanding | 13,650,823 | 13,632,440 | 13,615,655 | 13,606,876 | 13,083,145 | 13,633,101 | 13,071,859 | ||||||||||||||||||||
| Loans | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | ||||||||||||||||||||||
| (Dollar amounts in thousands) | |||||||||||||||||||||||||||
| Commercial real estate | $ | 1,304,118 | $ | 1,280,902 | $ | 1,225,315 | $ | 1,152,603 | $ | 1,063,661 | |||||||||||||||||
| Agricultural real estate | 225,672 | 230,837 | 227,897 | 220,819 | 205,089 | ||||||||||||||||||||||
| Consumer real estate | 512,973 | 506,866 | 502,974 | 494,423 | 416,001 | ||||||||||||||||||||||
| Commercial and industrial | 250,891 | 253,444 | 241,598 | 242,360 | 229,388 | ||||||||||||||||||||||
| Agricultural | 123,735 | 128,344 | 131,467 | 128,733 | 128,615 | ||||||||||||||||||||||
| Consumer | 83,024 | 88,312 | 89,588 | 89,147 | 70,602 | ||||||||||||||||||||||
| Other | 31,083 | 28,996 | 29,316 | 29,818 | 30,662 | ||||||||||||||||||||||
| Less: Net deferred loan fees and costs | (1,890 | ) | (1,908 | ) | (1,503 | ) | (1,516 | ) | (1,402 | ) | |||||||||||||||||
| Total loans,net | $ | 2,529,606 | $ | 2,515,793 | $ | 2,446,652 | $ | 2,356,387 | $ | 2,142,616 | |||||||||||||||||
| Asset quality data | September 30, 2023 | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | ||||||||||||||||||||||
| (Dollar amounts in thousands) | |||||||||||||||||||||||||||
| Nonaccrual loans | $ | 22,447 | $ | 6,295 | $ | 7,717 | $ | 4,689 | $ | 5,470 | |||||||||||||||||
| 90 day past due and accruing | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||
| Nonperforming loans | $ | 22,447 | $ | 6,295 | $ | 7,717 | $ | 4,689 | $ | 5,470 | |||||||||||||||||
| Other real estate owned | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||
| Nonperforming assets | $ | 22,447 | $ | 6,295 | $ | 7,717 | $ | 4,689 | $ | 5,470 | |||||||||||||||||
| Allowance for credit losses (2) | $ | 25,277 | $ | 24,910 | $ | 24,507 | $ | 20,313 | $ | 19,990 | |||||||||||||||||
| Accretable yield adjustment | 4,565 | 5,209 | 5,754 | 6,427 | 5,959 | ||||||||||||||||||||||
| Adjusted credit losses with accretable yield included (2) | $ | 29,842 | $ | 30,119 | $ | 30,261 | $ | 26,740 | $ | 25,949 | |||||||||||||||||
| Allowance for credit losses/total loans (2) | 1.00 | % | 0.99 | % | 1.00 | % | 0.86 | % | 0.93 | % | |||||||||||||||||
| Adjusted credit losses with accretable yield/total loans (2) | 1.18 | % | 1.20 | % | 1.24 | % | 1.13 | % | 1.21 | % | |||||||||||||||||
| Net charge-offs: | |||||||||||||||||||||||||||
| Quarter-to-date | $ | 93 | $ | (133 | ) | $ | 60 | $ | 431 | $ | 71 | ||||||||||||||||
| Year-to-date | $ | 97 | $ | (73 | ) | $ | 60 | $ | 529 | $ | 97 | ||||||||||||||||
| Net charge-offs to average loans | |||||||||||||||||||||||||||
| Quarter-to-date | 0.00 | % | -0.01 | % | 0.00 | % | 0.02 | % | 0.00 | % | |||||||||||||||||
| Year-to-date | 0.00 | % | -0.00 | % | 0.00 | % | 0.03 | % | 0.00 | % | |||||||||||||||||
| Nonperforming loans/total loans | 0.89 | % | 0.25 | % | 0.32 | % | 0.20 | % | 0.26 | % | |||||||||||||||||
| Allowance for credit losses/nonperforming loans (2) | 112.61 | % | 395.71 | % | 319.22 | % | 273.67 | % | 365.44 | % | |||||||||||||||||
| (1) Tangible Equity = Stockholder Equity less goodwill, other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities) plus CECL adjustment | |||||||||||||||||||||||||||
| (2) ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method. | |||||||||||||||||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||
| AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES | ||||||||||||||||||
| (in thousands of dollars, except percentages) | ||||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||||||||
| Interest Earning Assets: | Average Balance | Interest/Dividends | Annualized Yield/Rate | Average Balance | Interest/Dividends | Annualized Yield/Rate | ||||||||||||
| Loans | $ | 2,536,885 | $ | 33,783 | 5.33 | % | $ | 2,082,486 | $ | 24,119 | 4.63 | % | ||||||
| Taxable investment securities | 393,910 | 1,559 | 1.58 | % | 422,250 | 1,426 | 1.35 | % | ||||||||||
| Tax-exempt investment securities | 23,986 | 84 | 1.77 | % | 25,169 | 89 | 1.79 | % | ||||||||||
| Fed funds sold & other | 85,515 | 933 | 4.36 | % | 58,266 | 213 | 1.46 | % | ||||||||||
| Total Interest Earning Assets | 3,040,296 | $ | 36,359 | 4.79 | % | 2,588,171 | $ | 25,847 | 4.00 | % | ||||||||
| Nonearning Assets | 180,193 | 150,044 | ||||||||||||||||
| Total Assets | $ | 3,220,489 | $ | 2,738,215 | ||||||||||||||
| Interest Bearing Liabilities: | ||||||||||||||||||
| Savings deposits | $ | 1,367,168 | $ | 7,673 | 2.24 | % | $ | 1,328,344 | $ | 1,586 | 0.48 | % | ||||||
| Other time deposits | 667,880 | 5,650 | 3.38 | % | 423,668 | 580 | 0.55 | % | ||||||||||
| Other borrowed money | 266,467 | 2,741 | 4.11 | % | 60,455 | 398 | 2.63 | % | ||||||||||
| Fed funds purchased & securities | ||||||||||||||||||
| sold under agreement to repurch. | 34,128 | 349 | 4.09 | % | 63,388 | 416 | 2.63 | % | ||||||||||
| Subordinated notes | 34,654 | 284 | 3.28 | % | 34,538 | 284 | 3.29 | % | ||||||||||
| Total Interest Bearing Liabilities | $ | 2,370,297 | $ | 16,697 | 2.82 | % | $ | 1,910,393 | $ | 3,264 | 0.68 | % | ||||||
| Noninterest Bearing Liabilities | 544,801 | 542,077 | ||||||||||||||||
| Stockholders' Equity | $ | 305,391 | $ | 285,745 | ||||||||||||||
| Net Interest Income and Interest Rate Spread | $ | 19,662 | 1.97 | % | $ | 22,583 | 3.32 | % | ||||||||||
| Net Interest Margin | 2.59 | % | 3.49 | % | ||||||||||||||
| Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts | ||||||||||||||||||
| For the Nine Months Ended | For the Nine Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||||||||
| Interest Earning Assets: | Average Balance | Interest/Dividends | Annualized Yield/Rate | Average Balance | Interest/Dividends | Annualized Yield/Rate | ||||||||||||
| Loans | $ | 2,470,770 | $ | 94,851 | 5.12 | % | $ | 1,997,081 | $ | 66,962 | 4.47 | % | ||||||
| Taxable investment securities | 396,917 | 4,544 | 1.53 | % | 424,882 | 4,065 | 1.28 | % | ||||||||||
| Tax-exempt investment securities | 24,865 | 277 | 1.88 | % | 21,794 | 229 | 1.77 | % | ||||||||||
| Fed funds sold & other | 67,869 | 1,866 | 3.67 | % | 101,922 | 401 | 0.52 | % | ||||||||||
| Total Interest Earning Assets | 2,960,421 | $ | 101,538 | 4.57 | % | 2,545,679 | $ | 71,657 | 3.76 | % | ||||||||
| Nonearning Assets | 176,568 | 158,378 | ||||||||||||||||
| Total Assets | $ | 3,136,989 | $ | 2,704,057 | ||||||||||||||
| Interest Bearing Liabilities: | ||||||||||||||||||
| Savings deposits | $ | 1,373,110 | $ | 18,854 | 1.83 | % | $ | 1,315,793 | $ | 2,951 | 0.30 | % | ||||||
| Other time deposits | 620,071 | 13,054 | 2.81 | % | 439,534 | 1,954 | 0.59 | % | ||||||||||
| Other borrowed money | 204,927 | 6,134 | 3.99 | % | 54,184 | 951 | 2.34 | % | ||||||||||
| Fed funds purchased & securities | ||||||||||||||||||
| sold under agreement to repurch. | 37,649 | 1,181 | 4.18 | % | 42,584 | 734 | 2.30 | % | ||||||||||
| Subordinated notes | 34,625 | 853 | 3.28 | % | 34,509 | 837 | 3.23 | % | ||||||||||
| Total Interest Bearing Liabilities | $ | 2,270,382 | $ | 40,076 | 2.35 | % | $ | 1,886,604 | $ | 7,427 | 0.53 | % | ||||||
| Noninterest Bearing Liabilities | 561,001 | 529,439 | ||||||||||||||||
| Stockholders' Equity | $ | 305,606 | $ | 288,014 | ||||||||||||||
| Net Interest Income and Interest Rate Spread | $ | 61,462 | 2.22 | % | $ | 64,230 | 3.23 | % | ||||||||||
| Net Interest Margin | 2.77 | % | 3.37 | % | ||||||||||||||
| Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts | ||||||||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||
| NON-GAAP RECONCILIATION OF TANGIBLE BOOK VALUE | ||||||||||||||||
| Actual End of Period | Regulatory End of Period | |||||||||||||||
| Non-GAAP Reconciliation of Tangible Book Value | Year to Date | Year to Date | ||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Shares Outstanding | 13,665,582 | 13,107,500 | 13,665,582 | 13,107,500 | ||||||||||||
| Tangible Equity | ||||||||||||||||
| Equity | $ | 303,184 | $ | 280,578 | $ | 303,184 | $ | 280,578 | ||||||||
| Goodwill | 86,358 | 80,434 | 86,358 | 80,434 | ||||||||||||
| Other Intangible | 7,992 | 3,744 | 7,992 | 3,744 | ||||||||||||
| Comprehensive Loss Adjustment* | - | - | 39,489 | 37,737 | ||||||||||||
| CECL Adjustment** | - | - | 2,528 | - | ||||||||||||
| Tangible Equity | $ | 208,834 | $ | 196,400 | $ | 250,851 | $ | 234,137 | ||||||||
| Shares Outstanding | 13,666 | 13,108 | 13,666 | 13,108 | ||||||||||||
| Tangible Book Equity per Share | $ | 15.28 | $ | 14.98 | $ | 18.36 | $ | 17.86 | ||||||||
| Actual Average | Regulatory Average | |||||||||||||||
| Year to Date | Year to Date | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Net Income | $ | 17,244 | $ | 25,327 | $ | 17,244 | $ | 25,327 | ||||||||
| Acquisition Costs - Tax Adjusted | 147 | 463 | 147 | 463 | ||||||||||||
| Average Shares Outstanding | 13,633,101 | 13,071,859 | 13,633,101 | 13,071,859 | ||||||||||||
| Average Tangible Equity | ||||||||||||||||
| Average Equity | $ | 305,606 | $ | 288,014 | $ | 305,606 | $ | 288,014 | ||||||||
| Average Goodwill | 86,358 | 80,434 | 86,358 | 80,434 | ||||||||||||
| Average Other Intangible | 8,717 | 4,119 | 8,717 | 4,119 | ||||||||||||
| Average Comprehensive Loss Adjustment* | - | - | 35,497 | 21,181 | ||||||||||||
| Average CECL Adjustment** | - | - | 2,528 | - | ||||||||||||
| Average Tangible Equity | $ | 210,531 | $ | 203,461 | $ | 248,556 | $ | 224,642 | ||||||||
| Average Shares Outstanding | 13,633 | 13,072 | 13,633 | 13,072 | ||||||||||||
| Average Tangible Book Equity per Share | $ | 15.44 | $ | 15.56 | $ | 18.23 | $ | 17.19 | ||||||||
| Return on Average Tangible Equity | 10.92 | % | 16.60 | % | 9.25 | % | 15.03 | % | ||||||||
| Return on Average Tangible Equity w/o Acquisition | 11.01 | % | 16.90 | % | 9.33 | % | 15.31 | % | ||||||||
| *The Bank has adopted the Accumulated Other Comprehensive Income (AOCI) opt out election which removed AOCI | ||||||||||||||||
| from the calculation of tangible equity for regulatory purposes. | ||||||||||||||||
| **ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method and | ||||||||||||||||
| the Bank has elected to spread the Capital adjustment over three years. The first year permits 75% of the capital adjustment to be removed | ||||||||||||||||
| from the calculation of tangible equity for regulatory purposes. | ||||||||||||||||
