Release Details

Farmers & Merchants Bancorp, Inc. Reports 2016 Second-Quarter and Year-to-Date Financial Results

July 20, 2016

ARCHBOLD, Ohio, July 20, 2016 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (OTCQX:FMAO) today reported financial results for the 2016 second quarter and year-to-date ended June 30, 2016.

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

  • 53 consecutive quarters of profitability
  • Total assets up 8.4% to $1,021,275,000
  • Total loans increased 17.9% to $731,691,000
  • Net interest income after provision for loan losses increased 10.6% to $8,001,000
  • Net income increased 14.5% to $2,974,000
  • Earnings per basic and diluted shares increased 16.1% to $0.65
  • Declared quarterly dividend increased 4.5% to $0.23 per share
  • Noninterest income improved 6.9% to $2,884,000

“Favorable business and financial momentum continued in the 2016 second quarter as we ended the period with record total assets and loans outstanding, while earnings increased 16.1% to $0.65 per share,” stated Paul S. Siebenmorgen, President and Chief Executive Officer.  “Our growing financial results demonstrate the success our strong community banking franchise is having throughout our Northwestern Ohio and Northeastern Indiana markets.  In addition, our customer centric approach is helping us grow share within our markets, while our local economies are benefitting from low unemployment rates, and stable manufacturing and agricultural demand.”

Income Statement
Net income for the 2016 second quarter ended June 30, 2016 was $2,974,000, or $0.65 per basic and diluted share compared to $2,597,000, or $0.56 per basic and diluted share for the same period last year. The 14.5% improvement in net income for the 2016 second quarter was primarily due to a 10.6% increase in net interest income after provision for loan losses, and a 6.9% increase in noninterest income, partially offset by a 4.3% increase in noninterest expense. 

Net income for the 2016 first half was $5,455,000, or $1.18 per basic and diluted share compared to $4,948,000, or $1.07 per basic and diluted share for the period ended June 30, 2015.  The 10.2% improvement in net income for the 2016 six-month period was primarily due to an 8.9% increase in net interest income after provision for loan losses, and a 5.7% increase in noninterest income, partially offset by a 5.4% increase in noninterest expense. 

Loan Portfolio and Asset Quality
Total loans at June 30, 2016 increased 17.9% to a record $731,691,000, compared to $620,591,000 at June 30, 2015, and up 6.7% from $685,878,000 at December 31, 2015.  Year-over-year loan growth was strong across the company’s lending areas and included a 28.0% increase in commercial real estate loans, a 21.2% increase in consumer loans, a 16.6% increase in agricultural real estate loans, a 12.2% increase in agricultural, a 9.5% increase in commercial and industrial loans, and a 2.6% increase in consumer real estate loans, offset by a 20.1% reduction in industrial development bonds. 

The company’s provision for loan losses for the 2016 second quarter was $339,000, compared to $183,000 for the 2015 second quarter.  Year-to-date, the provision for loan losses was $616,000, compared to $297,000 for the same period last year.  The second quarter and year-to-date increase in provision expense was a result of the significant growth the company has experienced in its loan portfolio. 

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 424.9% at June 30, 2016, compared to 193.5% at June 30, 2015.  Net charge-offs for the second quarter ended June 30, 2016 were $131,000, or 0.02% of average loans, compared to $233,000 or 0.04% of average loans, at June 30, 2015.  Year-to-date, net charge-offs were $180,000, or 0.01% of average loans outstanding, compared to $275,000, or 0.04% of average loans outstanding for the same period last year. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $119,913,000 at June 30, 2016, compared to $114,960,000 at December 31, 2015, and $111,594,000 at June 30, 2015.  On a per share basis, tangible stockholders’ equity at June 30, 2016 was $26.04, compared with $24.92 at December 31, 2015, and $24.23 at June 30, 2015. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability.  At June 30, 2016, the company had a Tier 1 leverage ratio of 11.74%, compared to 11.90% at June 30, 2015. 

For the 2016 second quarter, the company declared cash dividends of $0.23 per share, which represented a dividend payout ratio of 35.3% compared to 38.8% for the same period last year.

Mr. Siebenmorgen concluded, “We remain committed to conservatively managing risk and I am encouraged by the exceptionally low charge-off rate in the second quarter.  In addition, I am pleased with the sequential increase in profitability we achieved during the 2016 second quarter as our return on average assets increased 19 basis points to 1.18% and return on average equity increased 153 basis points to 9.71%.  As a result of the second quarter’s improvement in profitability, F&M’s board of directors approved a 4.5% increase in our quarterly dividend, representing the 17th consecutive year we have increased our dividend payment.  Finally, we are investing in growing our branches and in May 2016 announced construction of our 24th branch office in Bowling Green, Ohio, which we anticipate opening in the third quarter.  Once completed, this office will represent the second new branch opened this year.  While it will take several quarters for each branch to get to scale, we are excited about the long-term potential of our new Ft. Wayne, Indiana, and Bowling Green, Ohio markets.” 

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 23 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 of dollars, except per share data)

 
      Three  Months Ended    Six  Months Ended 
      June 30, 2016 June 30, 2015   June 30, 2016 June 30, 2015
Interest Income            
Loans, including fees   $   8,362     $   7,163     $   16,368     $   14,257  
Debt securities:            
U.S. Treasury and government agencies     595         620         1,175         1,216  
Municipalities          380         458         749         905  
Dividends       37         37         75         74  
Federal funds sold       2         3         2         5  
Other       11         8         22         16  
Total interest income       9,387         8,289         18,391         16,473  
Interest Expense            
Deposits       885         808         1,739         1,605  
Federal funds purchased and securities sold           
under agreements to repurchase     126         63         231         124  
Borrowed funds       36         -         73         -  
Total interest expense       1,047       871         2,043         1,729  
Net Interest Income - Before Provision for Loan Losses     8,340         7,418         16,348         14,744  
Provision for Loan Losses        339         183         616         297  
Net Interest Income After Provision                        
For Loan Losses       8,001         7,235         15,732         14,447  
Noninterest Income            
Customer service fees       1,308         1,424         2,786         2,783  
Other service charges and fees       999         965         1,909         1,879  
Net gain on sale of loans        234         173         403         348  
Net gain on sale of available for sale securities     343         137         456         246  
Total noninterest income        2,884         2,699         5,554         5,256  
Noninterest Expense            
Salaries and Wages       2,840         2,714         5,680         5,369  
Employee benefits       715         687         1,577         1,751  
Net occupancy expense       346         368         724         723  
Furniture and equipment       443         427         855         849  
Data processing       361         320         772         649  
Franchise taxes       225         187         439         374  
Net loss on sale of other assets owned     -         5         45         11  
FDIC Assessment       121         119         242         238  
Mortgage servicing rights amortization      99         103         188         183  
Other general and administrative       1,507         1,451       3,121         2,799  
Total other operating expenses      6,657         6,381         13,643         12,946  
Income Before Income Taxes       4,228         3,553         7,643         6,757  
Income Taxes       1,254         956         2,188         1,809  
Net Income       2,974         2,597         5,455         4,948  
Other Comprehensive Income (Net of Tax):                              
Net unrealized gain on available for sale securities     649         (1,824 )       2,594         (94 )
Reclassification adjustment for gain on sale of available for
  sale securities
    (343 )       (137 )       (456 )       (246 )
Net unrealized gain on available for sale securities     306         (1,961 )       2,138         (340 )
Tax expense       104         (667 )       727         (116 )
Other comprehensive income      202         (1,294 )       1,411         (224 )
             
Comprehensive Income   $   3,176     $ 1,303     $   6,866     $   4,724  
Earnings Per Share - Basic and Diluted $   0.65     $   0.56     $   1.18     $   1.07  
Dividends Declared    $   0.23     $   0.22     $   0.45     $   0.43  
See Notes to Condensed Consolidated Unaudited Financial Statements               

 

 FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS

      (in thousands of dollars)   
      June 30, 2016 December 31, 2015  
      (Unaudited)    
Assets          
Cash and due from banks   $   22,895     $   21,333    
Federal funds sold       484         685    
  Total cash and cash equivalents     23,379         22,018    
           
Interest-bearing time deposits       1,960         -    
Securities - available-for-sale        217,063         235,115    
Other securities, at cost       3,717         3,717    
Loans, net       725,198         679,821    
Premises and equipment       21,295         20,587    
Goodwill       4,074         4,074    
Mortgage servicing rights       2,143         2,056    
Other real estate owned        1,252         1,175    
Other assets        21,194         20,505    
Total Assets   $   1,021,275     $   989,068    
  Liabilities and Stockholders' Equity            
Liabilities        
Deposits         
  Noninterest-bearing   $   170,126     $   171,112    
  Interest-bearing        
  NOW accounts        204,924         190,890    
  Savings       236,546         225,052    
  Time       191,250         184,285    
  Total deposits       802,846         771,339    
           
Federal Funds purchased and        
securities sold under agreements to repurchase     75,942         78,815    
Federal Home Loan Bank (FHLB) advances      10,000         10,000    
Dividend payable       1,051         1,007    
Accrued expenses and other liabilities     6,548         7,810    
  Total liabilities       896,387         868,971    
                 
Commitments and Contingencies        
           
Stockholders' Equity        
Common stock - No par value - 10,000,000 shares      
  authorized 5,200,000 shares issued and outstanding     12,260         12,086    
Treasury Stock - 594,466 shares 2016, 587,466 shares 2015     (12,583 )       (12,389 )  
Retained earnings       123,587         120,188    
Accumulated other comprehensive income     1,624         212    
                       Total stockholders' equity        124,888         120,097    
Total Liabilities and Stockholders' Equity $   1,021,275     $   989,068    
                 

 

 

    For the Three Months Ended   For the Six Months Ended
    June 30   June 30
Selected financial data     2016         2015       2016         2015  
Return on average assets     1.17 %       1.10 %     1.08 %       1.05 %
Return on average equity     9.61 %       8.90 %     8.90 %       8.52 %
Yield on earning assets     3.99 %       3.85 %     3.98 %       3.85 %
Cost of interest bearing liabilities     0.58 %       0.53 %     0.58 %       0.53 %
Net interest spread     3.41 %       3.32 %     3.40 %       3.32 %
Net interest margin     3.56 %       3.45 %     3.55 %       3.45 %
Efficiency     60.15 %       62.59 %     62.56 %       64.18 %
Dividend payout ratio     35.34 %       38.78 %     37.69 %       39.81 %
Tangible book value per share $     26.04     $     24.23            
Tier 1 capital to average assets     11.74 %       11.90 %          
                     
    June 30          
Loans     2016         2015            
(Dollar amounts in thousands)                    
Commerical real estate $     357,838      $      279,489            
Agricultural real estate       61,403           52,682            
Consumer real estate       89,090           86,796            
Commercial and industrial       104,336           95,275            
Agricultural       83,287           74,229            
Consumer       30,458           25,140            
Industrial development bonds       5,952           7,452            
  Less: Net deferred loan fees and costs       (673 )         (472 )          
Total loans $     731,691      $      620,591            
                     
    June 30          
Asset quality data     2016         2015            
(Dollar amounts in thousands)                    
Nonaccrual loans $     1,528      $      3,063            
Troubled debt restructuring $     815      $      1,255            
90 day past due and accruing $     -      $      -            
Nonperforming loans $   1,528      $    3,063            
Other real estate owned $     1,252      $      1,098            
Non-performing assets $     2,780      $      4,161            
                     
(Dollar amounts in thousands)                    
Allowance for loan and lease losses $   6,493     $     5,927            
Allowance for loan and lease losses/total loans     0.89 %       0.96 %          
Net charge-offs:                    
  Quarter-to-date $   131     $     233            
  Year-to-date $   180     $     275            
Net charge-offs to average loans                    
  Quarter-to-date     0.02 %       0.04 %          
  Year-to-date     0.01 %       0.04 %          
Non-performing loans/total loans     0.21 %       0.49 %          
Allowance for loan and lease losses/nonperforming loans     424.86 %       193.50 %          
                     

 

 

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