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) July 29, 2015
Farmers & Merchants Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
| Ohio | 000-14492 | 34-1469491 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer 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)
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)) |
ITEM 2.02. Results of Operation and Financial Condition
On July 29, 2015, Farmers & Merchants Bancorp, Inc. issued a press release announcing its earnings for the quarter and six-month period ended June 30, 2015. A copy of the press release is attached hereto as Exhibit 99 and is incorporated herein by reference.
ITEM 9.01. Financial Statements and Exhibits
| (d) | Exhibits. |
The following exhibit is filed with or incorporated by reference into this Current Report on Form 8-K:
| Exhibit |
Exhibit | |
| 99 | Company Press release dated July 29, 2015. | |
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: July 29, 2015 | /s/ Paul S. Siebenmorgen | |||||
| Paul S. Siebenmorgen | ||||||
| President & Chief Executive Officer | ||||||
| /s/ Barbara J. Britenriker | ||||||
| Barbara J. Britenriker | ||||||
| Executive Vice President & Chief Financial Officer | ||||||
Exhibit Index
| Exhibit |
Description of Exhibit | |
| 99 | Company Press Release dated July 29, 2015 | |
Exhibit 99
Company Press Release dated July 29, 2015
|
NEWS RELEASE | |||
| Post Office Box 216
307 North Defiance Street
Archbold, Ohio 43502 |
||||
| Company Contact: | Investor and Media Contact: | |||
| Marty Filogamo Senior Vice President – Marketing Manager Farmers & Merchants Bancorp, Inc. (419) 445-3501 ext. 15435 mfilogamo@fm-bank.com. |
Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com |
SECTION 1
SECTION 2 FARMERS & MERCHANTS BANCORP REPORTS
SECTION 3 2015 SECOND-QUARTER AND FIRST-HALF FINANCIAL RESULTS
ARCHBOLD, OHIO, July 29, 2015 Farmers & Merchants Bancorp, Inc. (OTCQX: FMAO) today reported financial results for the 2015 second quarter and first half ended June 30, 2015.
2015 Second Quarter Financial Highlights Include (on a year-over-year basis unless noted):
| • | 49 consecutive quarters of profitability |
| • | Quarterly cash dividend increased 4.8% - representing annual dividend increases since 2004 |
| • | Net interest income increased 5.0% to $7,235,000 |
| • | Noninterest income up 4.2% to $2,699,000 |
| • | Noninterest expenses were 5.6% higher |
| • | Net income for the 2015 first half improved 9.7% to $4,948,000 and for the 2015 second quarter increased 1.7% to $2,597,000 |
| • | Earnings per basic and diluted share for the 2015 first half improved 10.3% to $1.07 and for the 2015 second quarter increased 1.8% to $0.56 |
| • | Tangible equity increased 2.3% from December 31, 2014 |
| • | Announced construction of a new branch in Ft. Wayne, Indiana beginning in the third quarter |
Paul S. Siebenmorgen, President and Chief Executive Officer, stated, “Profitability continues to increase despite a slow economic recovery, competitive marketplace, and continued low interest rate environment. The improvement in earnings is a result of our diversified sources of income and prudent expense management. While we have experienced higher operating expenses primarily due to higher salaries and wages, we have managed other general and administrative expenses and significantly reduced our cost of funds. Our net interest margin expanded 6 basis points in the 2015 first half to 3.45%, primarily due to lower funding costs. The improvement in net interest margin was offset by lower earning asset balances. If interest rates remain low, we expect interest income to increase throughout the remainder of the year as our loan balances grow.”
Income Statement
Net income for the 2015 second quarter ended June 30, 2015 was $2,597,000, or $0.56 per basic and diluted share compared to $2,554,000, or $0.55 per basic and diluted share for the same period last year. The 1.7% improvement in net income for the 2015 second quarter was primarily due to a 4.2% increase in noninterest income, and a 10.2% reduction in interest expense, offset by a 5.6% increase in noninterest expenses.
Net income for the 2015 first half was $4,948,000, or $1.07 per basic and diluted share compared to $4,511,000, or $0.97 per basic and diluted share for the period ended June 30, 2014. The 9.7% improvement in net income for the 2015 six month period was primarily due to an 8.6% increase in noninterest income, and a 9.7% reduction in interest expense, offset by a 5.7% increase in noninterest expenses.
Loan Portfolio and Asset Quality
Total loans at June 30, 2015 were $620,591,000, compared to $621,926,000 at December 31, 2014 and $597,839,000 at June 30, 2014. While down slightly year-to-date, total loans are up 3.8% year-over-year, primarily due to a 4.9% increase in commercial real estate loans, a 17.3% increase in agricultural loans, and a 10.2% increase in agricultural real estate loans, offset by a 9.6% reduction in consumer real estate loans.
Asset quality remains strong as the company’s provision for loan losses for the 2015 second quarter was $183,000, a 58.8% reduction from the 2014 second quarter. The provision for loan losses for the 2015 first half was $297,000, a 65.9% reduction from the same period a year ago. The allowance for loan losses to nonperforming loans was 192.5% at June 30, 2015, compared to 426.9% at June 30, 2014. Net charge-offs for the 2015 second quarter were $233,000, or 0.04% of average loans, compared to $106,000 or 0.02% of average loans, for the 2014 second quarter. Year-to-date, net charge-offs were $275,000, or 0.04% of average loans outstanding, compared to $403,000, or 0.07% of average loans outstanding for the same period last year.
Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $111,594,000 as of June 30, 2015, compared to $109,034,000 at December 31, 2014 and $104,834,000 at June 30, 2014. On a per share basis, tangible stockholders’ equity increased 6.5% to $25.08 at June 30, 2015 from $23.56 at December 31, 2014 and $22.72 at June 30, 2014. The increase is the result of growth in retained earnings and higher year-to-date profitability. At June 30, 2015, the company had a Tier 1 leverage ratio of 11.90%, up from 11.01% at June 30, 2014.
For the 2015 first half, the company has declared cash dividends of $0.43 per share, which represents a dividend payout ratio of 38.9% and includes a $0.01, or 4.8% increase in the quarterly dividend rate in the 2015 second quarter.
Mr. Siebenmorgen concluded, “We are excited about the long-term opportunities we have in our current and future markets. F&M has a strong deposit base and market share in our communities, which allows us to expand our footprint to higher growth regions. In June we announced plans to begin construction for our 23rd branch that will be located in Ft. Wayne, Indiana. This will be our fourth bank location in northeastern Indiana and we look forward to offering our financial products and services to this large and growing market when we finish construction sometime in early 2016. The wet weather in northwest Ohio and northeast Indiana has impacted the 2015 growing season and we are ready to support our agricultural customers and communities with financial resources as they look to recover from this difficult period. We are working on converting our pipeline of potential loans into income generating assets and expect our loan portfolio to grow throughout the remainder of 2015, while we remain prudent in our risk and expense management.”
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 22 offices, with expansion underway in the greater Ft. Wayne, Indiana market. Our locations are in Fulton, Defiance, Henry, Lucas, Williams, and Wood counties in northwest Ohio. In Northeast Indiana we have offices located in DeKalb 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.
| Condensed Consolidated Statement of Income & Comprehensive Income (in thousands of dollars, except per share data) |
||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2015 | June 30, 2014 | June 30, 2015 | June 30, 2014 | |||||||||||||
| Interest Income |
||||||||||||||||
| Loans, including fees |
$ | 7,163 | $ | 6,977 | $ | 14,257 | $ | 13,654 | ||||||||
| Debt securities: |
||||||||||||||||
| U.S. Treasury and government agency |
620 | 759 | 1,216 | 1,671 | ||||||||||||
| Municipalities |
458 | 522 | 905 | 1,047 | ||||||||||||
| Dividends |
37 | 40 | 74 | 83 | ||||||||||||
| Federal funds sold |
3 | 1 | 5 | 1 | ||||||||||||
| Other |
8 | 4 | 16 | 7 | ||||||||||||
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| Total interest income |
8,289 | 8,303 | 16,473 | 16,463 | ||||||||||||
| Interest Expense |
||||||||||||||||
| Deposits |
808 | 905 | 1,605 | 1,783 | ||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase |
63 | 65 | 124 | 127 | ||||||||||||
| Borrowed funds |
— | — | — | 4 | ||||||||||||
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| Total interest expense |
871 | 970 | 1,729 | 1,914 | ||||||||||||
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| Net Interest Income - Before provision for loan losses |
7,418 | 7,333 | 14,744 | 14,549 | ||||||||||||
| Provision for Loan Losses |
183 | 444 | 297 | 872 | ||||||||||||
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| Net Interest Income After Provision |
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| For Loan Losses |
7,235 | 6,889 | 14,447 | 13,677 | ||||||||||||
| Noninterest Income |
||||||||||||||||
| Customer service fees |
1,424 | 1,278 | 2,783 | 2,524 | ||||||||||||
| Other service charges and fees |
965 | 928 | 1,879 | 1,720 | ||||||||||||
| Net gain on sale of loans |
173 | 203 | 348 | 292 | ||||||||||||
| Net gain on sale of available-for-sale securities |
137 | 180 | 246 | 302 | ||||||||||||
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| Total noninterest income |
2,699 | 2,589 | 5,256 | 4,838 | ||||||||||||
| Noninterest Expense |
||||||||||||||||
| Salaries and Wages |
2,714 | 2,456 | 5,369 | 4,891 | ||||||||||||
| Employee benefits |
687 | 720 | 1,751 | 1,565 | ||||||||||||
| Net occupancy expense |
368 | 271 | 723 | 575 | ||||||||||||
| Furniture and equipment |
427 | 399 | 849 | 793 | ||||||||||||
| Data processing |
320 | 324 | 649 | 638 | ||||||||||||
| Franchise taxes |
187 | 195 | 374 | 391 | ||||||||||||
| Net loss on sale of other assets owned |
5 | 19 | 11 | 58 | ||||||||||||
| FDIC Assessment |
119 | 130 | 238 | 262 | ||||||||||||
| Mortgage servicing rights amortization |
103 | 84 | 183 | 166 | ||||||||||||
| Other general and administrative |
1,451 | 1,444 | 2,799 | 2,910 | ||||||||||||
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| Total noninterest expense |
6,381 | 6,042 | 12,946 | 12,249 | ||||||||||||
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| Income Before Income Taxes |
3,553 | 3,436 | 6,757 | 6,266 | ||||||||||||
| Income Taxes |
956 | 882 | 1,809 | 1,755 | ||||||||||||
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| Net Income |
$ | 2,597 | $ | 2,554 | $ | 4,948 | $ | 4,511 | ||||||||
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| Other Comprehensive Income (Loss)(Net of Tax): |
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| Net unrealized gain (loss) on available-for-sale securities |
(1,824 | ) | 1,464 | (94 | ) | 563 | ||||||||||
| Reclassification adjustment for gain on sale of available-for-sale securities |
(137 | ) | (180 | ) | (246 | ) | (302 | ) | ||||||||
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| Net unrealized gains (loss) on available-for-sale securities |
(1,961 | ) | 1,284 | (340 | ) | 261 | ||||||||||
| Tax effect |
(667 | ) | (437 | ) | (116 | ) | (89 | ) | ||||||||
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| Other Comprehensive Income (Loss) |
(1,294 | ) | 847 | (224 | ) | 172 | ||||||||||
| Comprehensive Income |
$ | 1,303 | $ | 3,401 | $ | 4,724 | $ | 4,683 | ||||||||
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| Earnings Per Share - Basic and Diluted |
$ | 0.56 | $ | 0.55 | $ | 1.07 | $ | 0.97 | ||||||||
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| Weighted Average Shares Outstanding |
4,608,453 | 4,626,309 | 4,615,846 | 4,632,054 | ||||||||||||
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| Dividends Declared |
$ | 0.22 | $ | 0.21 | $ | 0.43 | $ | 0.42 | ||||||||
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See Notes to Condensed Consolidated Unaudited Financial Statements
| Condensed Consolidated Balance Sheets (in thousands of dollars) |
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| June 30, 2015 | December 31, 2014 | |||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Cash and due from banks |
$ | 21,073 | $ | 22,246 | ||||
| Federal Funds Sold |
1,014 | 2,049 | ||||||
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| Total cash and cash equivalents |
22,087 | 24,295 | ||||||
| Securities - available-for-sale |
253,607 | 248,492 | ||||||
| Other Securities, at cost |
3,717 | 3,717 | ||||||
| Loans, net |
614,664 | 616,021 | ||||||
| Premises and equipment |
20,261 | 20,300 | ||||||
| Goodwill |
4,074 | 4,074 | ||||||
| Mortgage Servicing Rights |
2,028 | 2,023 | ||||||
| Other Real Estate Owned |
1,098 | 1,094 | ||||||
| Other assets |
21,027 | 21,197 | ||||||
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| Total Assets |
$ | 942,563 | $ | 941,213 | ||||
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| Liabilities and Stockholders’ Equity |
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| Liabilities |
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| Deposits |
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| Noninterest-bearing |
$ | 160,077 | $ | 164,009 | ||||
| Interest-bearing |
||||||||
| NOW accounts |
183,376 | 179,862 | ||||||
| Savings |
225,356 | 223,189 | ||||||
| Time |
192,839 | 195,500 | ||||||
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| Total deposits |
761,648 | 762,560 | ||||||
| Federal funds purchased and securities sold under agreements to repurchase |
57,983 | 55,962 | ||||||
| Dividend payable |
1,007 | 965 | ||||||
| Accrued expenses and other liabilities |
5,033 | 7,233 | ||||||
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| Total liabilities |
825,671 | 826,720 | ||||||
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| Commitments and Contingencies |
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| Stockholders’ Equity |
||||||||
| Common stock - No par value - 6,500,000 shares authorized 5,200,000 shares issued |
13,102 | 12,222 | ||||||
| Treasury Stock - 591,547 shares 2015, 572,662 shares 2014 |
(13,165 | ) | (11,928 | ) | ||||
| Retained earnings |
116,735 | 113,755 | ||||||
| Accumulated other comprehensive income |
220 | 444 | ||||||
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| Total stockholders’ equity |
116,892 | 114,493 | ||||||
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| Total Liabilities and Stockholders’ Equity |
$ | 942,563 | $ | 941,213 | ||||
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| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
| Selected financial data |
2015 | 2014 | 2015 | 2014 | ||||||||||||
| Return on average assets |
1.10 | % | 1.07 | % | 1.05 | % | 0.94 | % | ||||||||
| Return on average equity |
8.90 | % | 9.33 | % | 8.52 | % | 8.28 | % | ||||||||
| Yield on earning assets |
3.85 | % | 3.80 | % | 3.85 | % | 3.82 | % | ||||||||
| Cost of interest bearing liabilities |
0.53 | % | 0.53 | % | 0.53 | % | 0.53 | % | ||||||||
| Net interest spread |
3.32 | % | 3.27 | % | 3.32 | % | 3.29 | % | ||||||||
| Net interest margin |
3.45 | % | 3.37 | % | 3.45 | % | 3.39 | % | ||||||||
| June 30, 2015 |
June 30, 2014 |
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| Efficiency |
65.37 | % | 63.76 | % | ||||
| Tier 1 capital to average assets |
11.90 | % | 11.01 | % | ||||
| Tangible book value per share |
$ | 25.08 | $ | 22.72 | ||||
| Dividend payout ratio |
38.90 | % | 42.96 | % | ||||
| June 30, | June 30, | |||||||
| Loans |
2015 | 2014 | ||||||
| (Dollar amounts in thousands) | ||||||||
| Commercial real estate |
$ | 279,002 | $ | 265,902 | ||||
| Agricultural real estate |
$ | 52,614 | $ | 47,745 | ||||
| Consumer real estate |
$ | 86,641 | $ | 95,863 | ||||
| Commercial and industrial |
$ | 95,370 | $ | 98,292 | ||||
| Agricultural |
$ | 74,352 | $ | 63,393 | ||||
| Consumer |
$ | 25,160 | $ | 22,481 | ||||
| Industrial Development Bonds |
$ | 7,452 | $ | 4,163 | ||||
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| $ | 620,591 | $ | 597,839 | |||||
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| June 30, | June 30, | |||||||
| Asset quality data |
2015 | 2014 | ||||||
| (Dollar amounts in thousands) | ||||||||
| Non-accrual loans |
$ | 3,063 | $ | 1,327 | ||||
| Troubled debt restructuring |
$ | 1,300 | $ | 964 | ||||
| 90 day past due and accruing |
$ | — | $ | — | ||||
| Non-performing loans |
$ | 3,063 | $ | 1,327 | ||||
| Other real estate owned |
$ | 1,098 | $ | 1,541 | ||||
| Non-performing assets |
$ | 4,161 | $ | 2,868 | ||||
| (Dollar amounts in thousands) | ||||||||
| Allowance for loan and lease losses |
$ | 5,927 | $ | 5,663 | ||||
| Allowance for loan and lease losses/total loans |
0.96 | % | 0.95 | % | ||||
| Net charge-offs: |
||||||||
| Quarter-to-date |
$ | 233 | $ | 106 | ||||
| Year-to-date |
$ | 275 | $ | 403 | ||||
| Net charge-offs to average loans |
||||||||
| Quarter-to-date |
0.04 | % | 0.02 | % | ||||
| Year-to-date |
0.04 | % | 0.07 | % | ||||
| Non-performing loans/total loans |
0.49 | % | 0.22 | % | ||||
| Allowance for loan and lease losses/non-performing loans |
192.52 | % | 426.85 | % | ||||