Organic Loan and Deposit Growth Drive Strong Third Quarter Results

ARCHBOLD, Ohio, Oct. 21, 2019 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2019 third quarter and year-to-date September 30, 2019.

2019 Third Quarter Financial Highlights Include (on a year-over-year basis unless noted):

• Total loans increased 38.2% to $1.159 billion as a result of the contribution from the Limberlost acquisition and strong organic consumer lending, residential mortgage and commercial and industrial growth
• Total assets increased 42.1% to a record $1.575 billion
• Organic deposit growth continued and increased 2.9% in the past three months to a record $1.278 billion
• Net interest income after provision for loan losses increased 27.3% to $12.7 million
• Net income increased 10.3% to $4.3 million
• Earnings per basic and diluted share decreased 9.5% to $0.38 as a result of a 20.3% increase in the weighted average common shares outstanding due to the additional shares from the Limberlost acquisition
• Tangible book value per share increased 7.9% to $15.68 per share

“Organic loan and deposit growth accelerated during the 2019 third quarter and increased 6.2% and 2.9%, respectively over the past three months,” stated Lars B. Eller, President and Chief Executive Officer. “The strong growth trends we experienced in the third quarter are a direct result of the positive execution of our new strategic plan, the contribution of our talented and community-oriented bankers and improving production from our more recently opened offices.  In addition, I am encouraged that the expansion in loans over the past three months was driven by commercial and agricultural loans.  Competition for loans and deposits remains strong, which combined with lower benchmark rates, has impacted our net income margin, however, we believe strong loan growth, controlled cost of funds, and stable asset quality will continue to contribute to higher net interest income and overall profitability.” 

Income Statement
Net income for the 2019 third quarter ended September 30, 2019, was $4.3 million, compared to $3.9 million for the same period last year.  Earnings per basic and diluted share for the 2019 third quarter was $0.38, compared to $0.42 for the same period last year, as a result of a 20.3% increase in the weighted average common shares outstanding due to the additional shares from the Limberlost acquisition. 

Net income for the 2019 nine months ended September 30, 2019, was $13.7 million, compared to $11.8 million for the same period last year.  Net income for the 2019 nine months included $1.2 million of one-time acquisition related expenses and a $1.6 million benefit from recoveries.  Net income per basic and diluted share for the 2019 nine months was $1.23, compared to $1.27 for the same period last year.  2019 nine months earnings included $0.09 per basic and diluted share of one-time acquisition related expenses and a $0.14 per basic and diluted share benefit from recoveries.

Loan Portfolio and Asset Quality
Total loans, net at September 30, 2019, increased 38.2% or by $320.0 million to $1.159 billion, compared to $838.7 million at September 30, 2018, and up 36.9% from $846.4 million at December 31, 2018. The year-over-year improvement resulted primarily from the contribution of the Limberlost acquisition and organic loan growth. 

Mr. Eller continued, “Economic trends within our markets remain stable, supporting F&M’s growth and excellent asset quality.  While we have experienced a temporary increase in nonaccrual loans, our nonaccrual loans as a percent of total loans of 0.28% at September 30, 2019, remains significantly better than our peer group average and demonstrates F&M’s prudent underwriting standards and high-quality loan portfolio. In addition, our allowance for loan and lease does not include a $2.2 million credit mark associated with the Limberlost acquisition, which further supports the future performance of our loan portfolio.”

Deposits
Over the past three months, deposits have increased organically 2.9% or by $35.7 million to $1.278 billion at September 30, 2019.  The significant organic deposit growth we have been experiencing continues to be due primarily to new product development that has allowed F&M to attract new customers and expand existing customer holdings. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $174.6 million at September 30, 2019, compared to $138.9 million at December 31, 2018, and $133.1 million at September 30, 2018.  On a per share basis, tangible stockholders’ equity at September 30, 2019, was $15.68 per share, compared to $14.96 per share at December 31, 2018, and $14.53 at September 30, 2018. 

Total stockholders’ equity increased 63.2% to $227.4 million at September 30, 2019, from $139.3 million at September 30, 2018, and increased 1.5% from $224.0 million at June 30, 2019.  At September 30, 2019, the company had a Tier 1 leverage ratio of 11.45%, compared to 12.63% at September 30, 2018.  The decline in the Tier 1 leverage ratio was primarily due to the added goodwill associated with the Limberlost acquisition. 

For the 2019 third quarter, the company declared cash dividends of $0.15 per share, which is a 7.1% increase over the 2018 third quarter declared dividend payment.  F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over nine consecutive years. 

“Our recently created three-year strategic plan is focused on growing earnings and creating value for our shareholders, and we are well positioned to achieve these goals.  2019 is shaping up to be a transformative year and we are benefitting from strong organic loan and deposit growth, the Limberlost acquisition, and the enhancements we are making to our operating platform, while we successfully navigate changes with benchmark rates.  As a result, 2019 will be another record year of strong profitability and asset growth.  As we look to 2020 and beyond, I am extremely confident in the direction we are headed,” concluded Mr. Eller. 

About Farmers & Merchants State Bank:
Farmers & Merchants Bancorp, Inc. (“F&M”) (Nasdaq: FMAO), is the holding company for the Farmers & Merchants State Bank, a local independent community bank with $1.6 billion in assets 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 30 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 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 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 or through F&M’s website www.fm.bank.

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The results of operations of Bank of Geneva have been included in the Company’s consolidated financial statements since the acquisition date of January 1, 2019.  The following schedule includes pro-forma results for the three and nine months ended September 30, 2019 and 2018 as if the Bank of Geneva acquisitions had occurred as of the beginning of the comparable prior reporting period.

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