Release Details

ARCHBOLD, Ohio, April 26, 2019 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2019 first quarter ended March 31, 2019.

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

• 64 consecutive quarters of profitability
• Limberlost acquisition closed and conversion successfully completed in the first quarter
• Strong organic deposit growth, which has increased 5.4% or $52,416,000 year-to-date
• Net interest income after provision for loan losses increased 32.3% to $12,747,000
• Net income was $3,224,000; excluding one-time tax adjusted acquisition related expenses of $1,029,000, first quarter net income would have increased 31.9% to $4,253,000
• Earnings per basic and diluted share were $0.29, which takes into account one-time tax adjusted acquisition related expenses of $0.09 per basic and diluted share, as well as an increase in additional outstanding shares of 16.5%
• Net interest margin expands 15 basis points to 3.87%

“2019 is off to an excellent start as a result of the successful closing and integration of the Limberlost acquisition, as well as strong first quarter financial results and robust organic deposit growth,” stated Lars B. Eller, President and Chief Executive Officer. “The addition of Limberlost’s six highly productive offices, talented associates and management team, and approximately 5,400 customers accelerate our Indiana growth plans.  F&M’s larger scale and improved scope are expected to improve earnings, while offering Bank of Geneva’s customers a diverse offering of community-oriented financial products.  While F&M’s size has increased, we remain committed to providing our local communities with valuable financial services that improve our customers’ financial wellbeing.  This commitment is resonating in our markets and during the 2019 first quarter we achieved strong year-to-date organic deposit growth of 5.4% or $52,416,000.” 

On January 1, 2019, F&M completed the acquisition of Limberlost Bancshares, Inc. (“Limberlost”), the holding company for Bank of Geneva. Immediately following the acquisition, Bank of Geneva was merged into The Farmers and Merchants State Bank. This transaction resulted in the addition of $257,183,000 in loans, net, $206,134,000 in deposits and six full-service offices in the northeast Indiana communities of Geneva, Berne, Decatur, Monroe, Portland and Monroeville.

Income Statement
Net income for the 2019 first quarter ended March 31, 2019, was $3,224,000, compared to $3,767,000 for the same period last year.  Excluding the $1,029,000 of one-time tax adjusted acquisition related expenses recorded in the 2019 first quarter, net income for the 2019 first quarter would have increased 31.9% to $4,253,000. 

Net income per diluted share for the 2019 first quarter was $0.29 per basic and diluted share, compared to $0.41 per basic and diluted share for the same period last year.  One-time tax adjusted acquisition related expenses for the 2019 first quarter were $0.09 per basic and diluted share.  In addition, at March 31, 2019, F&M had 16.5% more shares outstanding as a result of the Limberlost acquisition. 

In addition to the $1,029,000, or $0.09 per share of one-time tax adjusted acquisition related expenses, the company incurred soft acquisition costs such as employee overtime and less time focused on production that also impacted growth and profitability during the first quarter.  As the company completes the integration of the Limberlost acquisition, management expects accelerating year-over-year improvements in earnings will occur throughout the remainder of 2019.  

F&M’s net interest margin for the 2019 first quarter increased 15 basis points to 3.87%, from 3.72% for the same period last year.  The net interest margin is benefitting as the yield on earnings assets outpaces growth in funding costs.  In addition, upon completion of the acquisition, F&M retired more than half of Limberlost’s higher cost funding sources which also benefitted net interest margin during the quarter. 

Loan Portfolio and Asset Quality
Total loans, net at March 31, 2019, increased 32.0% or by $267,226,000 to $1,101,963,000, compared to $834,737,000 at March 31, 2018. The year-over-year improvement resulted primarily from the contribution of the Limberlost acquisition and organic loan growth. 

F&M’s asset quality remains strong. Despite the 30.4% year-over-year increase in total assets at March 31, 2019, nonperforming assets were up only $147,000 or 9.5%.  In addition, nonperforming loans to total loans remains low and at March 31, 2019 were 0.11% and in line with the same period last year.  The allowance for loan losses to nonperforming loans was 558.9% at March 31, 2019, compared to 755.2% at March 31, 2018.  Net charge-offs for the year ended March 31, 2019 were $169,000, or 0.02% of average loans, compared to $108,000 or 0.01% of average loans, at March 31, 2018. 

Mr. Eller continued, “Economic trends within our markets remain stable, supporting F&M’s growth and excellent asset quality.  While our loan portfolio is up significantly year-to-date, loans 30 days past due, as a percent of the portfolio were up only eight basis points to 0.17% at March 31, 2019 compared to 0.09% at December 31, 2018.  In addition, one of the many benefits of the Limberlost acquisition, is the diversification it has created in our loan portfolio.  Total agricultural loans were $307,823,000 at March 31, 2019 and within the agricultural loan portfolio, our lending capabilities have expanded to new concentrations including separate credit types for poultry barns, hog barns and soybean farming.” 

Deposits
Over the past three months, deposits have increased organically 5.4% or by $52,416,000, while total deposits over this period have grown 27.8% to $1,187,424,000 at March 31, 2019.  The significant year-to-date organic deposit growth is primarily due to new product development that has allowed the company to attract new customers and expand existing customer holdings. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $165,528,000 at March 31, 2019, compared to $138,885,000 at December 31, 2018, and $134,446,000 at March 31, 2018.  On a per share basis, tangible stockholders’ equity at March 31, 2019, was $14.90, compared to $14.96 at December 31, 2018, and $14.06, at March 31, 2018.  Tangible stockholders’ equity per share at March 31, 2019 was impacted by a 16.5% increase in the number of shares outstanding as a result of the Limberlost acquisition.  At March 31, 2019, the company had a Tier 1 leverage ratio of 13.35%, compared to 12.11% at March 31, 2018. 

Showing the core value of the Limberlost acquisition, goodwill associated with the acquisition was $43,266,000 at March 31, 2019.  Stockholders’ equity increased 60.8% to $216,934,000 at March 31, 2019, from $134,877,000 at March 31, 2018 and increased 51.4% from $143,287,000 at December 31, 2018.

For the 2019 first quarter, the company declared cash dividends of $0.15 per share, which is a 15.4% increase over the 2018 first 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. 

“With the Limberlost integration behind us, we will continue to focus on executing our growth-oriented business plan and we are planning to open a new office in Ft. Wayne as well as remodel several existing offices to our new, modern banking format.  F&M has a compelling platform of talented, experienced and motivated bankers to support our many growth opportunities.  The additional equity we acquired from the acquisition enhances our flexibility to deploy capital to grow our business and enhance shareholders’ return.  I am excited by our near- and long-term potential and expect 2019 to be another strong year for F&M,” 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 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.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME 
(Unaudited) (in thousands of dollars, except per share data)