Release Details

Farmers & Merchants Bancorp, Inc. Reports Record 2021 First Quarter Financial Results

April 21, 2021

ARCHBOLD, Ohio, April 21, 2021 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2021 first quarter ended March 31, 2021.

2021 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • Net income increased 19.6% to $4.9 million
  • Earnings increased 18.9% to $0.44 per basic and diluted share
  • Net interest income after provision for loan losses increased by 5.7% to $13.3 million, which included a $0.3 million increase in the first quarter provision for loan losses
  • Noninterest income increased 59.9% to $5.0 million
  • First quarter after-tax income benefited from $0.5 million of accelerated fees associated with the Paycheck Protection Program (“PPP”)
  • Strong organic growth supported a 7.1% increase in net total loans and a 24.8% increase in total deposits
  • Originated $43.5 million of new loans under the latest Paycheck Protection Program, helping F&M protect over 18,000 jobs throughout the program
  • Return on average tangible equity increased to 10.10% from 9.13% for the first quarter last year
  • Loans 30 days past due to total loans, excluding COVID related loans, was only 0.18%
  • New full-service office in Fort Wayne, IN opened in 2021 second quarter

“2021 is off to a strong start as our markets emerge from the COVID-19 crisis and we continue to focus on providing local services and leading financial products to our retail, commercial, and agriculture customers. As a result, we are gaining market share and benefitting from robust growth in loans, deposits, and noninterest income, which have helped us successfully offset higher provision for loan losses and operating expenses during the 2021 first quarter,” stated Lars B. Eller, President and Chief Executive Officer. “I am grateful to our team members who continue to work diligently and support the financial needs of our local customers and communities.”

“The acquisition of Ossian Financial Services is expected to close in the coming weeks, and we are well positioned to quickly integrate Ossian into F&M’s platform. Once completed, we expect the acquisition will add approximately $122 million in assets to F&M and will begin contributing to earnings in 2021. In addition, we expect to see the benefit to noninterest expense of our office realignment strategy over the next several quarters, and we will use a portion of the savings to reinvest in expanding our digital and online offerings.”  

Income Statement
Net income for the 2021 first quarter ended March 31, 2021, was $4.9 million, compared to $4.1 million for the same period last year. Earnings per basic and diluted share for the 2021 first quarter was $0.44, compared to $0.37 for the same period last year.

Higher provision for loan losses and operating expenses were successfully offset by increased interest income, successful reductions in cost of funds, interest and fees earned from the Paycheck Protection Program, and a 59.9% or $1.9 million year-over-year increase in noninterest income. Increases in Customer Service Fees and Gain on sales of both 1-4 family mortgage loans and fixed rate agricultural loans were the biggest contributors in noninterest income. F&M’s provision for loan losses increased from $1.4 million for the three months ended March 31, 2020, to $1.7 million for the three months ended March 31, 2021, as the Company prudently increased its allowance of loan losses primarily associated with continued economic uncertainty caused by the COVID-19 crisis. In addition, noninterest expense increased by $1.7 million, due to higher operating expenses supporting a 20% larger Company in asset size and servicing a larger footprint. It also included a one-time expense of $0.3 million related to the Company’s pension.

Deposits
At March 31, 2021, total deposits were $1.684 billion, an increase of 24.8% from March 31, 2020, and an increase of 5.5% from December 31, 2020. The significant organic deposit growth being experienced is a result of continued strength in expanding relationships with new and existing customers, and the benefits of PPP activity. In addition, we continue to see growing customer preferences to more stable and secure saving instruments as deposits have increased since the COVID-19 crisis began.

Loan Portfolio and Asset Quality
Total loans, net at March 31, 2021, increased 7.5% or by $94.0 million to $1.342 billion, compared to $1.248 billion at March 31, 2020, and up from $1.303 billion at December 31, 2020. The year-over-year improvement resulted primarily from the contribution of continued strong organic loan growth. In addition, during the 2021 first quarter, the Company processed $57.5 million of PPP loan forgiveness and principal payments received and originated $43.5 million of new PPP loans, resulting in a total of $12.777 million of PPP loans within F&M’s loan portfolio.

Mr. Eller continued, “Since the start of the crisis, we strengthened our relationships by increasing the amount of financial relief, assistance, and advice we are providing customers. During the first quarter, we processed more than 1,200 new PPP loans, and throughout the PPP process, we have helped our small business customers protect more than 18,000 jobs within our markets.”

“Our local relationships continue to produce strong organic growth, and loans not including PPP loans, increased nearly 2.3% during the 2021 first quarter. We are experiencing organic loan growth across our Ohio, Indiana, and Michigan markets, due to our recently opened LPOs and our strong, experienced, and local lenders. Our agriculture portfolios are also demonstrating compelling growth and strong asset performance as farmers benefit from robust market dynamics.”

Mr. Eller continued: “At March 31, 2021 there were only five loans totaling $10.4 million of COVID-related payment modifications, all of which are interest-only modifications and secured by real estate. This compares to 190 loans representing a balance of $165 million in deferrals at the peak last year.   Given the uncertainty surrounding the COVID-19 crisis, we continue to fund our allowance for loan and lease losses, which increased by 69.0% over the past 12 months. Our allowance for loan and lease losses to total loans, adjusted for our PPP balances, is now over 1.28% and includes the $1.5 million credit mark associated with the 2019 Bank of Geneva acquisition.”

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $8.1 million, or 0.61% of total loans at March 31, 2021, compared to $3.3 million, or 0.27% at March 31, 2020. The year-over-year increase in nonperforming loans is primarily due to the impacts of the COVID-19 crisis.

Mr. Eller concluded: “2021 is expected to be a transformative year for F&M. Throughout the year, we will focus on executing our strategic plan, completing and integrating the Ossian acquisition, integrating last year’s acquisition of Adams County Financial Resources, achieving the benefits from our office realignment program, and driving strong organic growth by supporting our local communities. I am proud of our continued strong performance and excited to update shareholders in the coming quarters on the progress we are making.”

Stockholders’ Equity and Dividends
Total stockholders’ equity increased 4.4% to $246.8 million at March 31, 2021, from $236.5 million at March 31, 2020. At March 31, 2021, the Company had a Tier 1 leverage ratio of 10.39%, compared to 11.56% at March 31, 2020.

Tangible stockholders’ equity increased to $195.9 million at March 31, 2021, compared to $180.9 million at March 31, 2020. On a per share basis, tangible stockholders’ equity at March 31, 2021, was $17.50 per share, compared to $16.26 per share at March 31, 2020.

For the 2021 first quarter, the company declared cash dividends of $0.17 per share, which is a 6.3% increase over the 2020 first quarter declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 26 consecutive years. For the 2021 first quarter, the dividend payout ratio was 38.48% compared to 43.07% for the same period last year.

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. Our locations are in Fulton, Defiance, Hancock, Henry, Lucas, Williams, and Wood counties in Northwest Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, 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 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
   March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
Interest Income           
Loans, including fees  $15,612  $17,061  $16,181  $16,192  $15,883 
Debt securities:           
U.S. Treasury and government agencies   751   695   761   767   1,146 
Municipalities   308   295   279   243   262 
Dividends   50   35   36   26   45 
Federal funds sold   5   5   4   5   6 
Other.   39   48   32   40   122 
Total interest income   16,765   18,139   17,293   17,273   17,464 
Interest Expense           
Deposits   1,340   1,619   1,864   2,254   2,901 
Federal funds purchased and securities sold           
under agreements to repurchase   166   170   174   187   244 
Borrowed funds   222   226   231   257   266 
Total interest expense   1,728   2,015   2,269   2,698   3,411 
Net Interest Income - Before Provision for Loan Losses  15,037   16,124   15,024   14,575   14,053 
Provision for Loan Losses    1,700   1,995   1,987   1,569   1,430 
Net Interest Income After Provision For Loan Losses  13,337   14,129   13,037   13,006   12,623 
Noninterest Income           
Customer service fees   2,814   2,750   2,299   2,258   1,586 
Other service charges and fees   838   980   879   704   1,039 
Net gain on sale of loans   1,046   1,894   1,537   364   227 
Net gain on sale of available-for-sale securities   293   -   -   -   270 
Total noninterest income   4,991   5,624   4,715   3,326   3,122 
Noninterest Expense           
Salaries and wages   4,390   5,068   5,102   4,095   4,223 
Employee benefits   1,994   1,140   1,566   1,218   1,677 
Net occupancy expense   577   585   558   564   564 
Furniture and equipment   791   760   875   750   758 
Data processing   505   428   490   408   442 
Franchise taxes   446   241   368   369   368 
ATM expense   449   456   444   376   414 
Advertising   235   353   411   265   303 
Net (gain) loss on sale of other assets owned   (25)  20   (7)  (7)  1 
FDIC assessment   236   223   194   144   72 
Mortgage servicing rights amortization   505   247   296   356   132 
Consulting fees   223   407   205   217   139 
Other general and administrative   2,033   1,358   1,553   1,612   1,575 
Total noninterest expense   12,359   11,286   12,055   10,367   10,668 
Income Before Income Taxes   5,969   8,467   5,697   5,965   5,077 
Income Taxes   1,060   1,691   1,287   1,161   972 
Net Income   4,909   6,776   4,410   4,804   4,105 
Other Comprehensive Income (Loss) (Net of Tax):           
Net unrealized gain (loss) on available-for-sale securities  (6,737)  (207)  639   661   4,998 
Reclassification adjustment for realized gain on sale of available-for-sale securities  (293)  -   -   -   (270)
Net unrealized gain (loss) on available-for-sale securities  (7,030)  (207)  639   661   4,728 
Tax expense (benefit)   (1,476)  (44)  134   139   993 
Other comprehensive income (loss)   (5,554)  (163)  505   522   3,735 
Comprehensive Income (Loss)  $ (645) $ 6,613  $ 4,915  $ 5,326  $ 7,840 
Basic and Diluted Earnings Per Share  $ 0.44  $ 0.60  $ 0.40  $ 0.43  $ 0.37 
Dividends Declared  $ 0.17  $ 0.17  $ 0.17  $ 0.16  $ 0.16 
            


FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands of dollars, except share data)
 
  March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
  (Unaudited)   (Unaudited) (Unaudited) (Unaudited)
Assets           
Cash and due from banks $118,139  $98,279  $46,395  $54,336  $49,844 
Federal funds sold  57,361   77,427   41,358   31,105   40,993 
Total cash and cash equivalents  175,500   175,706   87,753   85,441   90,837 
           
Interest-bearing time deposits  4,405   4,653   4,657   4,636   4,869 
Securities - available-for-sale  352,974   307,812   259,041   236,292   204,121 
Other securities, at cost  5,939   5,939   5,827   5,810   5,810 
Loans held for sale  7,511   8,391   7,621   11,445   2,153 
Loans, net  1,327,254   1,288,667   1,351,979   1,334,790   1,239,108 
Premises and equipment  26,703   27,063   26,776   26,049   26,120 
Goodwill  47,340   47,340   47,340   47,340   47,340 
Mortgage servicing rights  3,444   3,320   3,027   2,740   2,672 
Other real estate owned  148   71   206   135   185 
Bank owned life insurance  25,347   25,208   15,501   15,399   15,313 
Other assets  16,720   15,374   16,872   14,370   16,597 
           
Total Assets $ 1,993,285  $ 1,909,544  $ 1,826,600  $ 1,784,447  $ 1,655,125 
Liabilities and Stockholders' Equity          
Liabilities          
Deposits          
Noninterest-bearing $384,558  $351,147  $330,845  $336,027  $261,786 
Interest-bearing          
NOW accounts  605,533   542,317   534,792   504,846   463,734 
Savings  451,043   455,145   392,059   374,871   341,256 
Time  242,717   247,553   261,177   261,631   281,931 
Total deposits  1,683,851   1,596,162   1,518,873   1,477,375   1,348,707 
           
Federal Funds Purchased and          
securities sold under agreements to repurchase  30,072   30,239   29,859   30,949   30,585 
Federal Home Loan Bank (FHLB) advances  17,840   17,861   17,724   19,087   24,788 
Dividend payable  1,889   1,889   1,882   1,768   1,768 
Accrued expenses and other liabilities  12,805   14,233   14,841   14,971   12,820 
Total liabilities  1,746,457   1,660,384   1,583,179   1,544,150   1,418,668 
           
Commitments and Contingencies          
           
Stockholders' Equity          
Common stock - No par value 20,000,000 shares authorized; issued          
and outstanding 12,230,000 shares 3/31/21 and 12/31/20  82,030   81,804   81,577   82,134   81,844 
Treasury stock - 1,033,256 shares 3/31/21, 1,032,456 shares 12/31/20 (11,962)  (11,932)  (12,397)  (12,668)  (12,636)
Retained earnings  176,617   173,591   168,381   165,476   162,416 
Accumulated other comprehensive income  143   5,697   5,860   5,355   4,833 
Total stockholders' equity  246,828   249,160   243,421   240,297   236,457 
           
Total Liabilities and Stockholders' Equity $ 1,993,285  $ 1,909,544  $ 1,826,600  $ 1,784,447  $ 1,655,125 
           


FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA
                
   For the Three Months Ended
Selected financial data March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
Return on average assets  1.01%   1.43%   0.98%   1.10%   1.02% 
Return on average equity  7.87%   11.04%   7.28%   8.07%   7.06% 
Yield on earning assets  3.71%   4.09%   4.04%   4.25%   4.66% 
Cost of interest bearing liabilities  0.53%   0.64%   0.74%   0.91%   1.22% 
Net interest spread  3.18%   3.45%   3.30%   3.34%   3.44% 
Net interest margin  3.33%   3.63%   3.51%   3.59%   3.75% 
Efficiency  62.57%   52.20%   62.11%   57.91%   63.09% 
Dividend payout ratio  38.48%   27.77%   42.66%   36.80%   43.07% 
Tangible book value per share (1) $17.50  $17.19  $16.78  $16.33  $16.26 
Tier 1 capital to average assets  10.39%   10.46%   10.65%   10.70%   11.56% 
Average Shares Outstanding  11,197,012   11,177,765   11,142,797   11,129,341   11,134,870 
          
Loans March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
(Dollar amounts in thousands)               
Commercial real estate $618,754  $588,825  $595,146  $589,382  $570,217 
Agricultural real estate  179,945   189,159   192,883   194,606   194,383 
Consumer real estate  175,675   175,588   175,963   174,069   174,731 
Commercial and industrial  202,958   189,246   238,175   223,842   143,261 
Agricultural  100,022   94,358   103,330   107,458   109,584 
Consumer  54,445   52,540   53,320   50,108   49,022 
Other  14,088   15,757   9,030   9,714   8,336 
  Less: Net deferred loan fees and costs  (4,208)  (2,483)  (3,985)  (4,456)  (1,893)
Total loans,net $1,341,679  $1,302,990  $1,363,862  $1,344,723  $1,247,641 
                
          
Asset quality data March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
(Dollar amounts in thousands)               
Nonaccrual loans $8,139  $9,404  $7,870  $8,473  $3,344 
Troubled debt restructuring $5,774  $6,514  $7,028  $7,034  $1,934 
90 day past due and accruing $-  $-  $-  $-  $- 
Nonperforming loans $8,139  $9,404  $7,870  $8,473  $3,344 
Other real estate owned $148  $71  $206  $135  $185 
Nonperforming assets $8,287  $9,475  $8,076  $8,608  $3,529 
                
(Dollar amounts in thousands)               
Allowance for loan and lease losses $14,425  $13,672  $11,883  $10,538  $8,533 
Allowance for loan and lease losses/total loans  1.08%   1.05%   0.87%   0.78%   0.68% 
Net charge-offs:               
   Quarter-to-date $947  $205  $37  $169  $125 
   Year-to-date $947  $537  $331  $294  $125 
Net charge-offs to average loans               
   Quarter-to-date  0.07%   0.02%   0.00%   0.01%   0.01% 
   Year-to-date  0.07%   0.04%   0.03%   0.02%   0.01% 
Nonperforming loans/total loans  0.61%   0.72%   0.58%   0.63%   0.27% 
Allowance for loan and lease losses/nonperforming loans  177.24%   177.96%   151.01%   117.24%   256.66% 
                
(1) Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities)
                


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 
  March 31, 2021 March 31, 2020 
Interest Earning Assets: Average Balance Interest/Dividends Annualized Yield/Rate Average Balance Interest/Dividends Annualized Yield/Rate 
Loans $1,328,571 $15,612 4.70%  $1,236,848 $15,883 5.14%  
Taxable Investment Securities  324,536  1,009 1.24%   190,158  1,321 2.78%  
Tax-exempt Investment Securities  20,375  100 2.49%   28,832  132 2.32%  
Fed Funds Sold & Other  136,663  44 0.13%   46,393  128 1.10%  
Total Interest Earning Assets  1,810,145 $ 16,765 3.71%   1,502,231 $ 17,464 4.66%  
              
Nonearning Assets  126,579      114,326     
              
Total Assets $ 1,936,724     $ 1,616,557     
              
Interest Bearing Liabilities:             
Savings Deposits $1,014,392 $574 0.23%   773,130  1,485 0.77%  
Other Time Deposits  242,033  766 1.27%   277,579  1,416 2.04%  
Other Borrowed Money  17,848  222 4.98%   24,787  266 4.29%  
Fed Funds Purchased & Securities             
  Sold under Agreement to Repurch.  30,210  166 2.20%   38,954  244 2.51%  
Total Interest Bearing Liabilities $1,304,483 $ 1,728 0.53%  $1,114,450 $ 3,411 1.22%  
              
Noninterest bearing Liabilities  382,640      269,550     
              
Stockholders Equity $ 249,601     $232,557     
              
Net Interest Income and interest rate spread   $15,037 3.18%    $14,053 3.44%  
              
Net Interest Margin     3.33%      3.75%  
              
    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.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
 
 
Non-GAAP Allowance for Loan Losses, excluding PPP Loans  
(in thousands of dollars, except percentages)  
   For the Three Months Ended
  March 31, 2021
   
Allowance for Loan Losses $14,425 
Credit Mark  1,500 
Total Credit Mark & Allowance for Loan Losses  15,925 
   
Loans $1,341,679 
Adjustments  
PPP Loans  (12,777)
Loans excluding PPP Loans $1,328,902 
   
Allowance for Loan Losses  1.08%
Effect of Credit Mark  0.19%
Effect of PPP Loans  0.01%
Allowance for Loan Losses, excluding PPP Loans  1.28%