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 28, 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 October 28, 2015, Farmers & Merchants Bancorp, Inc. issued a press release announcing its earnings for the quarter and nine-month period ended September 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 October 28, 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: October 28, 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 October 28, 2015 | |
Exhibit 99
|
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 THIRD-QUARTER AND NINE MONTH FINANCIAL RESULTS
ARCHBOLD, OHIO, October 28, 2015 Farmers & Merchants Bancorp, Inc. (OTCQX: FMAO) today reported financial results for the 2015 third quarter and nine months ended September 30, 2015.
2015 Third Quarter Financial Highlights Include (on a year-over-year basis unless noted):
| • | 50 consecutive quarters of profitability |
| • | Net interest income after provision for loan losses declined by 0.4% to $7,266,000 |
| • | Net income increased 5.9% to $2,620,000, and year-to-date improved 8.3% to $7,568,000 |
| • | Earnings per basic and diluted share increased 5.6% to $0.57, and year-to-date improved 8.6% to $1.64 |
| • | Noninterest income improved 2.4% to $2,827,000 |
| • | Noninterest expenses declined by 1.0% |
| • | Tangible equity increased 4.5% from December 31, 2014 |
| • | Construction of Ft. Wayne, Indiana branch is on track for a 2016 spring opening |
Paul S. Siebenmorgen, President and Chief Executive Officer, stated, “Loans, assets, and net income all increased during the 2015 third quarter, while we controlled noninterest expenses. We have a strong pipeline of loans, but converting this pipeline into earnings assets has taken longer than expected. Despite this delay in closing loans, our loan portfolio increased 2.4% from June 30, 2015 and is up 4.4% from September 30, 2014. We are cautiously optimistic our closing rate will improve in the coming quarters and will result in an accelerating pace of loan growth. With this said, we remain committed to strict underwriting standards that manage risk while producing adequate returns for our shareholders. Our asset quality levels remain strong with nonperforming assets to total assets at September 30, 2015 of less than 0.4% and our provision for loan losses declined 13.8% to $243,000 in the 2015 third quarter. As a result of our strong asset quality, low cost of funds, and controlled operating expenses, F&M grew earnings 5.6% to $0.57 per diluted share in the quarter. Looking ahead, we are excited about a number of banking products and services that will be available to customers during the fourth quarter and into next year.”
Income Statement
Net income for the 2015 third quarter ended September 30, 2015 was $2,620,000, or $0.57 per basic and diluted share compared to $2,474,000, or $0.54 per basic and diluted share for the same period last year. The 5.9% improvement in net income for the 2015 third quarter was primarily due to a 2.4% increase in noninterest income, a 1.0% decline in noninterest expense, offset by slightly lower net interest income.
Net income for the 2015 nine months was $7,568,000, or $1.64 per basic and diluted share compared to $6,985,000, or $1.51 per basic and diluted share for the nine months ended September 30, 2014. The 8.3% improvement in net income for the 2015 nine month period was primarily due to a 6.4% increase in noninterest income, and a 5.2% reduction in interest expense. Total interest income for the 2015 nine month period, compared with the same period last year, was basically flat, and noninterest expenses increased 3.3%.
Loan Portfolio and Asset Quality
Total loans at September 30, 2015 were $635,239,000, compared to $621,926,000 at December 31, 2014, and $608,604,000 at September 30, 2014. Total loans for the 2015 third quarter compared with the same period last year increased 4.4%, and since the beginning of the year are up 2.1%. The year-over-year improvement resulted primarily from a 10.1% increase in commercial real estate loans, an 8.9% increase in agricultural loans, and a 12.8% increase in agricultural real estate loans, offset by a 9.7% reduction in consumer real estate loans and a 9.2% reduction in commercial and industrial loans.
Asset quality remains strong as the company’s provision for loan losses for the 2015 third quarter was $243,000, a 13.8% reduction from the 2014 third quarter. The provision for loan losses for the 2015 nine month was $540,000, a 53.2% reduction from the same period a year ago. The allowance for loan losses to nonperforming loans was 266.7% at September 30, 2015, compared to 362.1% at September 30, 2014. Year-to-date, net charge-offs were $280,000, or 0.04% of total loans, compared to $432,000 or 0.07% of total loans, at September 30, 2014.
Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $115,419,000 as of September 30, 2015, compared to $109,034,000 at December 31, 2014 and $107,948,000 at September 30, 2014. On a per share basis, tangible stockholders’ equity at September 30, 2015 was $24.21 compared with $23.56 at December 31, 2014 and $23.00 at September 30, 2014. The increase tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At September 30, 2015, the company had a Tier 1 leverage ratio of 12.04%, up from 11.90% at September 30, 2014.
For the 2015 nine months, the company has declared cash dividends of $0.65 per share, which represents a dividend payout ratio of 39.6% and includes a $0.01 per share, or 4.8% increase in the quarterly dividend rate in the 2015 third quarter compared with the same period last year.
Mr. Siebenmorgen concluded, “According to the FDIC’s recently released annual deposit market share study, as of June 30, 2015, F&M continued to achieve the number one position in market share in the six Northwest Ohio counties where we are located. The Sylvania, Ohio office we opened in 2014 is performing well and providing new growth opportunities, meanwhile construction is underway on our Ft. Wayne, Indiana office which is expected to be completed by the end of first quarter 2016. We continue to enhance the way customers interact with the bank and I am pleased to report that mobile transactions have increased 17.2% year-to-date as more customers choose to interact with the bank using their mobile devices. As we enter the final quarter of 2015, we are cautiously optimistic 2015 will be another good year for F&M.”
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.
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
(Unaudited)
| Condensed Consolidated Statement of Income & Comprehensive Income | ||||||||||||||||
| (in thousands of dollars, except per share data) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | |||||||||||||
| Interest Income |
||||||||||||||||
| Loans, including fees |
$ | 7,341 | $ | 7,108 | $ | 21,598 | $ | 20,762 | ||||||||
| Debt securities: |
||||||||||||||||
| U.S. Treasury and government agency |
603 | 811 | 1,819 | 2,482 | ||||||||||||
| Municipalities |
456 | 512 | 1,361 | 1,559 | ||||||||||||
| Dividends |
37 | 36 | 111 | 119 | ||||||||||||
| Federal funds sold |
2 | 3 | 7 | 4 | ||||||||||||
| Other |
5 | 1 | 21 | 8 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest income |
8,444 | 8,471 | 24,917 | 24,934 | ||||||||||||
| Interest Expense |
||||||||||||||||
| Deposits |
841 | 832 | 2,446 | 2,615 | ||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase |
94 | 63 | 218 | 190 | ||||||||||||
| Borrowed funds |
— | — | — | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest expense |
935 | 895 | 2,664 | 2,809 | ||||||||||||
|
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|
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|
|
|
|
|||||||||
| Net Interest Income - Before provision for loan losses |
7,509 | 7,576 | 22,253 | 22,125 | ||||||||||||
| Provision for Loan Losses |
243 | 282 | 540 | 1,154 | ||||||||||||
|
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|
|
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|
|
|
|||||||||
| Net Interest Income After Provision For Loan Losses |
7,266 | 7,294 | 21,713 | 20,971 | ||||||||||||
| Noninterest Income |
||||||||||||||||
| Customer service fees |
1,388 | 1,317 | 4,171 | 3,841 | ||||||||||||
| Other service charges and fees |
1,084 | 1,047 | 2,963 | 2,767 | ||||||||||||
| Net gain on sale of loans |
183 | 205 | 531 | 497 | ||||||||||||
| Net gain on sale of available-for-sale securities |
172 | 192 | 418 | 494 | ||||||||||||
|
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|
|
|
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|
|
|
|||||||||
| Total noninterest income |
2,827 | 2,761 | 8,083 | 7,599 | ||||||||||||
| Noninterest Expense |
||||||||||||||||
| Salaries and Wages |
2,714 | 2,638 | 8,083 | 7,529 | ||||||||||||
| Employee benefits |
804 | 927 | 2,555 | 2,492 | ||||||||||||
| Net occupancy expense |
289 | 267 | 1,012 | 842 | ||||||||||||
| Furniture and equipment |
475 | 439 | 1,324 | 1,232 | ||||||||||||
| Data processing |
318 | 305 | 967 | 943 | ||||||||||||
| Franchise taxes |
186 | 195 | 560 | 586 | ||||||||||||
| Net loss on sale of other assets owned |
32 | 95 | 43 | 153 | ||||||||||||
| FDIC Assessment |
126 | 126 | 364 | 388 | ||||||||||||
| Mortgage servicing rights amortization |
93 | 92 | 276 | 258 | ||||||||||||
| Other general and administrative |
1,475 | 1,495 | 4,274 | 4,405 | ||||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Total noninterest expense |
6,512 | 6,579 | 19,458 | 18,828 | ||||||||||||
|
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|
|
|||||||||
| Income Before Income Taxes |
3,581 | 3,476 | 10,338 | 9,742 | ||||||||||||
| Income Taxes |
961 | 1,002 | 2,770 | 2,757 | ||||||||||||
|
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|
|
|
|||||||||
| Net Income |
2,620 | 2,474 | 7,568 | 6,985 | ||||||||||||
|
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|
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|
|||||||||
| Other Comprehensive Income (Loss) (Net of Tax): |
||||||||||||||||
| Net unrealized gain (loss) on available-for-sale securities |
1,210 | (117 | ) | 1,116 | 446 | |||||||||||
| Reclassification adjustment for gain on sale of available-for-sale securities |
(172 | ) | (192 | ) | (418 | ) | (494 | ) | ||||||||
|
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|
|
|||||||||
| Net unrealized gain (loss) on available-for-sale securities |
1,038 | (309 | ) | 698 | (48 | ) | ||||||||||
| Tax effect |
353 | (105 | ) | 237 | (16 | ) | ||||||||||
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|
|
|||||||||
| Other Comprehensive Income (Loss) |
685 | (204 | ) | 461 | (32 | ) | ||||||||||
| Comprehensive Income |
$ | 3,305 | $ | 2,270 | $ | 8,029 | $ | 6,953 | ||||||||
|
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| Earnings Per Share - Basic and Diluted |
$ | 0.57 | $ | 0.54 | $ | 1.64 | $ | 1.51 | ||||||||
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|||||||||
| Weighted Average Shares Outstanding |
4,615,379 | 4,621,298 | 4,615,689 | 4,628,429 | ||||||||||||
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| Dividends Declared |
$ | 0.22 | $ | 0.21 | $ | 0.65 | $ | 0.63 | ||||||||
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FINANCIAL STATEMENTS
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| Condensed Consolidated Balance Sheets (in thousands of dollars) |
||||||||
| September 30, 2015 | December 31, 2014 | |||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Cash and due from banks |
$ | 30,352 | $ | 22,246 | ||||
| Federal Funds Sold |
866 | 2,049 | ||||||
|
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|
|
|
|||||
| Total cash and cash equivalents |
31,218 | 24,295 | ||||||
| Securities - available-for-sale |
244,786 | 248,492 | ||||||
| Other Securities, at cost |
3,717 | 3,717 | ||||||
| Loans, net |
629,074 | 616,021 | ||||||
| Premises and equipment |
20,107 | 20,300 | ||||||
| Goodwill |
4,074 | 4,074 | ||||||
| Mortgage Servicing Rights |
2,045 | 2,023 | ||||||
| Other Real Estate Owned |
1,133 | 1,094 | ||||||
| Other assets |
21,368 | 21,197 | ||||||
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|
|||||
| Total Assets |
$ | 957,522 | $ | 941,213 | ||||
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|||||
| Liabilities and Stockholders’ Equity |
||||||||
| Liabilities |
||||||||
| Deposits |
||||||||
| Noninterest-bearing |
$ | 161,978 | $ | 164,009 | ||||
| Interest-bearing |
||||||||
| NOW accounts |
188,362 | 179,862 | ||||||
| Savings |
226,318 | 223,189 | ||||||
| Time |
191,384 | 195,500 | ||||||
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|
|||||
| Total deposits |
768,042 | 762,560 | ||||||
| Federal funds purchased and securities sold under agreements to repurchase |
61,504 | 55,962 | ||||||
| Dividend payable |
1,009 | 965 | ||||||
| Accrued expenses and other liabilities |
7,474 | 7,233 | ||||||
|
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|
|||||
| Total liabilities |
838,029 | 826,720 | ||||||
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|
|||||
| Commitments and Contingencies |
||||||||
| Stockholders’ Equity |
||||||||
| Common stock - No par value - 6,500,000 shares authorized 5,200,000 shares issued |
12,976 | 12,222 | ||||||
| Treasury Stock - 575,647 shares 2015, 572,662 shares 2014 |
(13,047 | ) | (11,928 | ) | ||||
| Retained earnings |
118,422 | 113,755 | ||||||
| Accumulated other comprehensive income |
1,142 | 444 | ||||||
|
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|
|
|
|||||
| Total stockholders’ equity |
119,493 | 114,493 | ||||||
|
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|
|
|
|||||
| Total Liabilities and Stockholders’ Equity |
$ | 957,522 | $ | 941,213 | ||||
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|
|||||
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| Selected financial data |
2015 | 2014 | 2015 | 2014 | ||||||||||||
| Return on average assets |
1.10 | % | 1.06 | % | 1.06 | % | 0.98 | % | ||||||||
| Return on average equity |
8.87 | % | 8.89 | % | 8.64 | % | 8.49 | % | ||||||||
| Yield on earning assets |
3.96 | % | 3.99 | % | 3.92 | % | 3.97 | % | ||||||||
| Cost of interest bearing liabilities |
0.57 | % | 0.52 | % | 0.54 | % | 0.52 | % | ||||||||
| Net interest spread |
3.39 | % | 3.47 | % | 3.38 | % | 3.45 | % | ||||||||
| Net interest margin |
3.53 | % | 3.58 | % | 3.52 | % | 3.53 | % | ||||||||
| Efficiency |
64.07 | % | 64.85 | % | 65.04 | % | 64.41 | % | ||||||||
|
September 30, |
||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Tier 1 leverage ratio |
12.04 | % | 11.90 | % | ||||||||||||
| Tangible book value per share |
$ | 24.21 | $ | 23.00 | ||||||||||||
| Dividend payout ratio |
39.63 | % | 41.72 | % | ||||||||||||
|
September 30, |
||||||||||||||||
| Loans |
2015 | 2014 | ||||||||||||||
| (Dollar amounts in thousands) | ||||||||||||||||
| Commercial real estate |
$ | 301,841 | $ | 274,074 | ||||||||||||
| Agricultural real estate |
$ | 55,059 | $ | 48,812 | ||||||||||||
| Consumer real estate |
$ | 88,222 | $ | 97,651 | ||||||||||||
| Commercial and industrial |
$ | 84,371 | $ | 92,926 | ||||||||||||
| Agricultural |
$ | 73,193 | $ | 67,221 | ||||||||||||
| Consumer |
$ | 26,440 | $ | 23,455 | ||||||||||||
| Industrial development bonds |
$ | 6,649 | $ | 4,854 | ||||||||||||
| Less: Net deferred loan fees and costs |
(536 | ) | (389 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total loans |
$ | 635,239 | $ | 608,604 | ||||||||||||
|
|
|
|
|
|||||||||||||
|
September 30, |
||||||||||||||||
| Asset quality data |
2015 | 2014 | ||||||||||||||
| (Dollar amounts in thousands) | ||||||||||||||||
| Non-accrual loans |
$ | 2,294 | $ | 1,634 | ||||||||||||
| Troubled debt restructuring |
$ | 1,239 | $ | 824 | ||||||||||||
| 90 day past due and accruing |
$ | — | $ | — | ||||||||||||
| Nonperforming loans |
$ | 2,294 | $ | 1,634 | ||||||||||||
| Other real estate owned |
$ | 1,133 | $ | 1,264 | ||||||||||||
| Non-performing assets |
$ | 3,427 | $ | 2,898 | ||||||||||||
|
(Dollar amounts in thousands) |
||||||||||||||||
| Allowance for loan and lease losses |
$ | 6,165 | $ | 5,916 | ||||||||||||
| Allowance for loan and lease losses/total loans |
0.97 | % | 0.97 | % | ||||||||||||
| Net charge-offs: |
||||||||||||||||
| Quarter-to-date |
$ | 5 | $ | 29 | ||||||||||||
| Year-to-date |
$ | 280 | $ | 432 | ||||||||||||
| Net charge-offs to average loans |
||||||||||||||||
| Quarter-to-date |
0.00 | % | 0.00 | % | ||||||||||||
| Year-to-date |
0.05 | % | 0.07 | % | ||||||||||||
| Non-performing loans/total loans |
0.36 | % | 0.27 | % | ||||||||||||
| Allowance for loan and lease losses/nonperforming loans |
266.69 | % | 362.07 | % | ||||||||||||