false 0000792966 0000792966 2021-10-20 2021-10-20

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 20, 2021

 

Farmers & Merchants Bancorp, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Ohio	001-38084	34-1469491
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)

 

307 North Defiance Street, Archbold, Ohio	43502
(Address of Principal Executive Offices)	(Zip Code)

Registrant's Telephone Number, including Area Code (419) 446-2501

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of Each Exchange
Common Stock, No Par Value	FMAO	NASDAQ Capital Market

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17-CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

---

 

ITEM 2.02.Results of Operation and Financial Condition

On October 20, 2021, Farmers & Merchants Bancorp, Inc. issued a press release announcing its earnings for the three and nine months ended September 30, 2021.  A copy of the press release is attached hereto as Exhibit 99 and is incorporated by reference herein.

ITEM 9.01.Financial Statements and Exhibits

(d)

Exhibits.

 

Exhibit Number	Exhibit
99	Company Press Release dated October 20, 2021

 

104	The Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

---

 

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto authorized.

 

	FARMERS & MERCHANTS BANCORP, INC.
		(Registrant)
Dated: October 20, 2021		/s/ Lars B. Eller
		Lars B. Eller
		President and Chief Executive Officer
		/s/ Barbara J. Britenriker
		Barbara J. Britenriker
		Executive Vice President and Chief Financial Officer

 

Exhibit 99

 

 

 

Farmers & Merchants Bancorp, Inc. Reports

2021 Third-Quarter and Year-to-Date Financial Results

 

ARCHBOLD, OHIO, October 20, 2021, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2021 third quarter and year-to-date September 30, 2021.

 

2021 Third Quarter Financial Highlights Include

(compared to the 2020 third quarter period unless noted):

 

“2021 is shaping up to be a transformative year as we focus on bringing our individualized, local, and comprehensive financial products and services to more customers across Ohio, Indiana, and Michigan,” stated Lars B. Eller, President and Chief Executive Officer.  “We are well on our way to becoming a $3.0 billion asset bank, and when including Perpetual’s assets, we will have almost $2.6 billion in total assets.  Our success is a testament to our strategic growth plan, the value we provide our local communities, and the commitment of F&M’s team members.”

 

On October 1, 2021, F&M successfully closed the acquisition of Perpetual Federal Savings Bank, Inc. (“PFSB”).  PFSB is F&M’s third acquisition within the last twelve months and immediately enhances the Company’s growing franchise within compelling Ohio markets including Urbana, Columbus, Dayton, Springfield, Piqua, Tipp City, Troy, and Sidney.  The integration and system conversions were completed on October 18, 2021, and PFSB’s financial metrics will be included in F&M’s fourth-quarter results.  

Mr. Eller continued, “These three acquisitions, combined with our Michigan LPO and expansion plans have increased our presence in Indiana, Michigan, and Ohio, while diversifying our revenue streams and immediately contributing to earnings.  I am proud of our team’s ability to quickly complete and successfully integrate these acquisitions.  In

---

addition, we have simultaneously been growing organically and I am encouraged by the 8.3%  organic loan growth F&M produced during the quarter which is evidence of our talented local lenders, and the success of our recently opened offices and LPOs.”  

 

Income Statement

Net income for the 2021 third quarter ended September 30, 2021, was $5.9 million, compared to $4.4 million for the same period last year.  Net income per basic and diluted share for the 2021 third quarter was $0.53, compared to $0.40 for the same period last year.  Net income for the 2021 nine months ended September 30, 2021, was $15.8 million, compared to $13.3 million for the same period last year.  Net income per basic and diluted share for the 2021 nine months was $1.41, compared to $1.20 for the same period last year.  

 

Adjusted net income, excluding one-time tax adjusted acquisition expenses, was $7.1 million, or $0.63 per share for the 2021 third quarter, compared to $4.4 million, or $0.40 per share for the 2020 third quarter.  Adjusted net income was $18.2 million, or $1.62 per share for the 2021 nine months, compared to $13.3 million, or $1.20 per share for the 2020 nine months.  Included in the financial table section of this press release is a non-GAAP reconciliation.  

 

Mr. Eller continued, “We ended the quarter with record quarterly net income and earnings per share, when adjusted for one-time acquisition expenses.  Adjusted ROACE was 9.78%, compared to 7.28% for the same period last year, while adjusted ROA was 1.17% during the 2021 third quarter, and 1.11% year-to-date.  In addition, the Bank has had 16 consecutive months with an operating efficiency ratio in the 50% range when removing affiliate and acquisition expenses.  Our strong third-quarter financial results and profitability reflect the benefits of our larger scale, diverse revenue streams, strong asset quality, and prudent expense management, and we believe earnings growth will accelerate in the coming quarters.”  

 

Deposits

At September 30, 2021, total deposits were $1.87 billion, an increase of 22.9% from September 30, 2020, and an increase of 16.9% 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 completion of the Ossian Financial Services, Inc. acquisition.  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 net loans, at September 30, 2021, increased 48.2%, or by $656.8 million to $2.02 billion, compared to $1.36 billion at September 30, 2020, and up 55.1% from $1.30 billion at December 31, 2020.  The year-over-year improvement resulted primarily from the contribution of continued organic loan growth and the completion of the Ossian Financial Services, Inc. acquisition.  Not including the Ossian acquisition and PPP, loans increased 12.6% organically from the same period a year ago.  In addition, during the 2021 third quarter, the Company processed $37.3 million of PPP loan forgiveness and principal payments received, resulting in a total of $9.8 million of PPP loans within F&M’s loan portfolio at September 30, 2021.  

 

Mr. Eller continued, “At September 30, 2021, there were only two loans totaling $3.4 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.  Overall asset quality continues to improve.  We ended the third quarter with no charge-offs, and the lowest level of nonperforming assets in five quarters.  As economic activity stabilizes, and F&M’s loan performance improves better than pre-pandemic levels, we expect contributions to our allowance for loan losses will also stabilize and align with loan growth in future periods.”    

 

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors.  Nonperforming loans were $6.2 million, or 0.42% of total loans at September 30, 2021, compared to $7.9 million, or 0.58% at September 30, 2020.  

 

“We remain focused on operational excellence, investments in technology, supporting our communities, and ensuring a best-in-class experience for our customers.  I am pleased with the Board’s decision to increase our quarterly dividend because of our strong year-to-date financial results and positive outlook.  Across F&M, we are working hard to execute our strategic growth plan, and create lasting value for our customers, employees, and shareholders,” concluded Mr. Eller.

 

---

 

Stockholders’ Equity and Dividends

Total stockholders’ equity increased 4.7% to $254.7 million at September 30, 2021, from $243.4 million at September 30, 2020. At September 30, 2021, the Company had a Tier 1 leverage ratio of 9.45%, compared to 10.65% at September 30, 2020.  

 

In August 2021, F&M completed a $35.0 million private placement of 3.25% fixed-to-floating rate subordinated notes due July 30, 2031 (the “Notes”) to various accredited investors (the “Offering”). The Notes are intended to qualify as Tier 2 capital for regulatory purposes. The Company intends to use the net proceeds from the Offering for general corporate purposes, including financing acquisitions and organic growth.

 

Tangible stockholders’ equity increased to $194.6 million at September 30, 2021, compared to $187.2 million at September 30, 2020. On a per share basis, tangible stockholders’ equity at September 30, 2021, was $17.33 per share, compared to $16.78 per share at September 30, 2020.

 

For the nine months ended September 30, 2021, the Company has declared cash dividends of $0.52 per share, which is a 6.1% increase over the 2020 nine-month declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over 27 consecutive years. For the three months ended September 30, 2021, the dividend payout ratio was 33.81% compared to 42.66% 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 Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Williams, and Wood counties in Western Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties, and we have a Loan Production Office in West Bloomfield, Michigan.  

 

Safe harbor statement

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.

 

---

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME

(Unaudited) (in thousands of dollars, except per share data)

 

---

---

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (in thousands of dollars, except share data)

 

 

---

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

SELECT FINANCIAL DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

---

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

---

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES

(in thousands of dollars, except percentages)

 

 

 

 

---

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES

(in thousands of dollars, except percentages)

 

 

---

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

 

 

 

 

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATION OF NET INCOME