Release Details

Farmers & Merchants Bancorp, Inc. Reports Record 2017 Fourth-Quarter and Full-Year Financial Results

February 8, 2018

ARCHBOLD, Ohio, Feb. 08, 2018 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq:FMAO) today reported financial results for the 2017 fourth quarter and twelve months ended December 31, 2017.

2017 Fourth Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 59 consecutive quarters of profitability
  • Total gross loans increased 3.5% from 2017 third quarter
  • Net interest income after provision for loan losses increased 12.0% to $9,481,000
  • Net income increased 7.6% to a record $3,436,000
  • Basic and diluted earnings per share increased 5.7% to $0.37
    (share data has been adjusted to reflect the two-for-one stock split on September 20, 2017)
  • Return on average assets of 1.25%, up from 1.22%
  • Return on average equity of 10.29%, up from 10.12%

2017 Full-Year Financial Highlights Include:

  • Total gross loans increased 8.6% to a record $823,024,000
  • Net interest income after provision for loan losses increased 10.9% to $35,899,000
  • Net income increased 9.1% to a record $12,720,000
  • Basic and diluted earnings per share increased 8.7% to a record $1.38
    (share data has been adjusted to reflect the two-for-one stock split on September 20, 2017) 
  • Return on average assets of 1.18%, up from 1.14%
  • Return on average equity of 9.75%, up from 9.38%
  • Tangible book value per share increased 7.0% to $13.99

“Across the board, 2017 was an historic year of achievements for Farmers & Merchants as our bank attained record financial and operating results,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “During 2017, total loans increased 8.6% to a record $823,024,000, and profitability improved 9.1% to a record $12,720,000, driven by a net interest margin of 3.61%, which was an increase of five basis points over the prior year.  The growth we achieved during 2017 was a direct result of the company’s focus on loan growth, the contribution of the three new branches we have opened in the past three years, and stable economic trends across our markets.  I am pleased that we were able to share 2017’s success with our shareholders by increasing the company’s quarterly cash stock dividend twice during the year, as well as declaring a two-for-one stock split in August.  The annual cash dividend, adjusted for the two-for-one stock split, increased 8.7% year-over-year to $0.50 per share, representing the 18th consecutive year F&M raised its annual cash dividend.  Finally, I am encouraged by F&M’s improving investor awareness, as a result of the company’s strong 2017 operating and financial results, the uplisting to Nasdaq, the inclusion into the Russell 3000, and the two-for-one stock split.”

Income Statement
Net income for the 2017 fourth quarter ended December 31, 2017 was $3,436,000, or $0.37 per basic and diluted share, compared to $3,194,000, or $0.35 per basic and diluted share for the same period last year. The 7.6% improvement in net income for the 2017 fourth quarter was primarily due to a 12.0% increase in net interest income after provision for loan losses, partially offset by a 4.9% increase in noninterest expense. 

Net income for the 2017 twelve months was $12,720,000, or $1.38 per basic and diluted share compared to $11,664,000, or $1.27 per basic and diluted share for the twelve months ended December 31, 2016.  The 9.1% improvement in net income for 2017 was primarily due to a 10.9% increase in net interest income after provision for loan losses, partially offset by a 4.7% increase in noninterest expense. 

The Tax Cuts and Jobs Act of 2017 did not have a material impact on F&M’s 2017 fourth quarter or full year financial results, and the company expects to benefit from a lower effective tax rate in 2018.  

Loan Portfolio and Asset Quality
Total loans were $823,024,000, compared to $758,094,000 at December 31, 2016, and $795,205,000 at September 30, 2017.  Total loans for 2017, compared to 2016, increased 8.6%, and were up 3.5% from the 2017 third quarter.  Year-over-year loan growth was strong across many of the company’s lending areas and included an 8.8% increase in commercial real estate loans, a 15.6% increase in commercial and industrial loans, a 13.8% increase in consumer loans, an 2.7% increase in agricultural real estate loans, and a 12.5% increase in agricultural loans, partially offset by a 3.0% reduction in consumer real estate loans. 

The company’s provision for loan losses for the 2017 fourth quarter was $25,000, compared to $197,000 for the 2016 fourth quarter.  The provision for loan losses for 2017 was $222,000, compared to $1,121,000 in 2016.  

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 684.8% at December 31, 2017, compared to 490.4% at December 31, 2016.  Net charge-offs for the year ended December 31, 2017 were $138,000, or 0.02% of average loans, compared to $394,000 or 0.05% of average loans, at December 31, 2016.  

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $129,667,000 as of December 31, 2017, compared to $120,763,000 at December 31, 2016.  On a per share basis, tangible stockholders’ equity at December 31, 2017 was $13.99 compared to $13.07 at December 31, 2016. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability.  At December 31, 2017, the company had a Tier 1 leverage ratio of 12.02%, compared to 11.77% at December 31, 2016. 

For 2017, the company declared cash dividends of $0.50 per share, which is an 8.7% increase over 2016’s declared dividend.  For 2017, the dividend payout ratio was 34.72% compared to 32.97% for the same period last year.

Mr. Siebenmorgen concluded, “F&M remains well positioned in its local Northwest Ohio and Northeast Indiana markets, which continue to demonstrate favorable economic trends.  While we had many financial and operating achievements during 2017, we are not complacent.  Across all layers of the company we remain focused on executing our growth-oriented business plan and see significant growth opportunities throughout 2018 and beyond within our existing markets, as well as the three new markets we have entered in the past three years.  The company continues to implement its proactive de novo growth strategy, and during the 2018 first quarter, F&M opened its 25th branch in Findlay, Ohio.  I am excited to enter Hancock County and begin offering our community-oriented banking services to customer within this compelling market.  Our 2017 financial results demonstrate the success we are having achieving our growth goals and we are optimistic 2018 will be another good year for the bank.”

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 25 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 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   Twelve  Months Ended
      December 31, 2017 December 31, 2016   December 31, 2017 December 31, 2016
Interest Income              
Loans, including fees     $   9,828   $   8,706     $   37,195   $   33,703  
Debt securities:              
U.S. Treasury and government agencies         610       639         2,480       2,373  
Municipalities         288       344         1,193       1,437  
Dividends         52       38         187       149  
Federal funds sold         59       13         69       22  
Other         31       6         124       43  
Total interest income         10,868       9,746         41,248       37,727  
Interest Expense                              
Deposits         1,194       931         4,483       3,617  
Federal funds purchased and securities sold                              
under agreements to repurchase         131       112         497       458  
Borrowed funds         37       38         147       148  
Total interest expense         1,362       1,081         5,127       4,223  
Net Interest Income - Before Provision for Loan Losses         9,506       8,665         36,121       33,504  
Provision for Loan Losses          25       197         222       1,121  
Net Interest Income After Provision                              
For Loan Losses         9,481       8,468         35,899       32,383  
Noninterest Income                              
Customer service fees         1,478       1,621         5,609       6,118  
Other service charges and fees         1,054       924         4,268       3,774  
Net gain on sale of loans         211       269         811       888  
Net gain on sale of available for sale securities         -       85         47       588  
Total noninterest income         2,743       2,899         10,735       11,368  
Noninterest Expense                              
Salaries and Wages         3,239       2,959         12,613       11,620  
Employee benefits         987       897         3,635       3,323  
Net occupancy expense         268       376         1,489       1,459  
Furniture and equipment         402       431         1,858       1,724  
Data processing         294       277         1,213       1,409  
Franchise taxes         226       220         902       878  
Net (gain) loss on sale of other assets owned         -       42         27       81  
FDIC Assessment         83       39         330       407  
Mortgage servicing rights amortization         88       108         354       419  
Other general and administrative         1,618       1,517         6,310       6,111  
Total other operating expenses         7,205       6,866         28,731       27,431  
Income Before Income Taxes         5,019       4,501         17,903       16,320  
Income Taxes         1,583       1,307         5,183       4,656  
Net Income         3,436       3,194         12,720       11,664  
Other Comprehensive Income (Loss) (Net of Tax):                              
Net unrealized gain (loss) on available for sale securities       (1,717 )     (5,373 )       267       (2,721 )
Reclassification adjustment for gain on sale of available for
  sale securities
  -     (85 )      (47 )   (588 )
Net unrealized gain (loss) on available for sale securities       (1,717 )     (5,458 )       220       (3,309 )
Tax expense (benefit)         (585 )     (1,856 )       74       (1,125 )
Other comprehensive income (loss)         (1,132 )     (3,602 )       146       (2,184 )
Comprehensive Income (Loss)     $   2,304   $   (408 )   $   12,866   $   9,480  
Earnings Per Share - Basic and Diluted (1)     $   0.37   $   0.35     $   1.38   $   1.27  
Dividends Declared (1)     $   0.13   $   0.12     $   0.50   $   0.46  
                               
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017        

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2017 AND 2016
(in thousands of dollars)
 
      (in thousands of dollars)
      December 31, 2017 December 31, 2016
      (Unaudited)  
Assets                
Cash and due from banks   $   33,480   $   27,348  
Federal Funds Sold       987       974  
  Total cash and cash equivalents       34,467       28,322  
                 
Interest-bearing time deposits       4,018       1,915  
Securities - available-for-sale       196,398       218,527  
Other Securities, at cost       3,717       3,717  
Loans held for sale        1,221       2,055  
Loans, net       816,156       751,310  
Premises and equipment       21,617       21,457  
Construction in Progress       109       -  
Goodwill       4,074       4,074  
Mortgage Servicing Rights       2,299       2,192  
Other Real Estate Owned       674       774  
Bank Owned Life Insurance       14,523       14,376  
Other assets       7,736       7,176  
                 
Total Assets   $   1,107,009   $   1,055,895  
  Liabilities and Stockholders' Equity              
Liabilities              
Deposits              
  Noninterest-bearing   $   199,114   $   186,390  
  Interest-bearing              
  NOW accounts       298,711       230,446  
  Savings       233,949       226,537  
  Time       187,566       198,830  
  Total deposits       919,340       842,203  
                 
Federal Funds Purchased and              
Securities sold under agreements to repurchase       39,495       70,324  
Federal Home Loan Bank (FHLB) advances       5,000       10,000  
Dividend payable       1,193       1,053  
Accrued expenses and other liabilities       7,844       6,738  
  Total liabilities       972,872       930,318  
                 
Commitments and Contingencies              
                 
Stockholders' Equity              
Common stock - No par value 20,000,000 shares authorized;       11,546       11,947  
issued and outstanding 10,400,000 shares 12/31/17 and 12/31/16 (1)            
Treasury Stock - 1,134,120 shares 12/31/17, 1,158,250 shares 12/31/16 (1)     (12,160 )     (12,267 )
Retained earnings       136,577       127,869  
Accumulated other comprehensive loss       (1,826 )     (1,972 )
    Total stockholders' equity       134,137       125,577  
                 
Total Liabilities and Stockholders' Equity   $   1,107,009   $   1,055,895  
                 
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017  
         

 

    For the Three Months Ended   For the Twelve Months Ended
    December 31   December 31
Selected financial data   2017       2016     2017       2016  
Return on average assets   1.25%       1.22%     1.18%       1.14%  
Return on average equity   10.29%       10.12%     9.75%       9.38%  
Yield on earning assets   4.24%       4.05%     4.12%       4.00%  
Cost of interest bearing liabilities   0.71%       0.55%     0.68%       0.59%  
Net interest spread   3.53%       3.49%     3.44%       3.41%  
Net interest margin   3.72%       3.61%     3.61%       3.56%  
Efficiency   58.15%       58.98%     60.62%       61.00%  
Dividend payout ratio   34.72%       32.97%     36.02%       35.68%  
Tangible book value per share (1) $   13.99     $   13.07            
Tier 1 capital to average assets   12.02%       11.77%            
                     
    December 31          
Loans   2017       2016            
(Dollar amounts in thousands)                    
Commercial real estate $   410,520      $   377,481            
Agricultural real estate     64,073         62,375            
Consumer real estate     83,620         86,234            
Commercial and industrial     126,275         109,256            
Agricultural     95,111         84,563            
Consumer     37,757         33,179            
Industrial development bonds     6,415         5,732            
Less: Net deferred loan fees and costs     (747 )       (726 )          
Total loans $   823,024      $   758,094            
                     
    December 31          
Asset quality data   2017      2016           
(Dollar amounts in thousands)                    
Nonaccrual loans $   1,003      $   1,384            
Troubled debt restructuring $   683      $   697            
90 day past due and accruing $   -      $   -            
Nonperforming loans $   1,003      $   1,384            
Other real estate owned $   674      $   774            
Non-performing assets $   1,677      $   2,158            
                     
(Dollar amounts in thousands)                    
Allowance for loan and lease losses $ 6,868     $   6,784            
Allowance for loan and lease losses/total loans   0.83%       0.89%            
Net charge-offs:                    
Quarter-to-date $ 27     $   25            
Year-to-date $ 138     $   394            
Net charge-offs to average loans                    
Quarter-to-date   0.00%       0.00%            
Year-to-date   0.02%       0.05%            
Non-performing loans/total loans   0.12%       0.18%            
Allowance for loan and lease losses/nonperforming loans   684.83%       490.39%            
                     
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017                    
                     

 

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