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 18, 2017
Farmers & Merchants Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
| Ohio | 001-38084 | 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 2.02. | Results of Operation and Financial Condition |
On October 18, 2017, Farmers & Merchants Bancorp, Inc. issued a press release announcing its earnings for the third quarter ended September 30, 2017. A copy of the press release is furnished as Exhibit 99.
| ITEM 9.01. | Financial Statements and Exhibits |
| (d) | Exhibits. |
| Exhibit | ||
| Number |
Exhibit | |
| 99 | Company Press release dated October 18, 2017 | |
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 18, 2017 | /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 99
| 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 |
Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com |
Farmers & Merchants Bancorp, Inc. Reports
2017 Third-Quarter and Year-to-Date Financial Results
ARCHBOLD, OHIO, October 18, 2017, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2017 third quarter ended September 30, 2017.
2017 Third Quarter Financial Highlights Include (on a year-over-year basis unless noted):
| • | 58 consecutive quarters of profitability |
| • | Total assets up 4.4% to $1,090,155,000 |
| • | Total gross loans increased 7.9% to $795,205,000 |
| • | Net interest income after provision for loan losses increased 11.2% to $9,103,000 |
| • | Net income increased 6.9% to $3,222,000 |
| • | Earnings per basic and diluted shares increased 6.1% to $0.35 |
(share data has been adjusted to reflect the two-for-one stock split on September 20, 2017)
| • | Return on average assets increased three basis points to 1.20% |
| • | Return on average equity increased 18 basis points to 9.76% |
“F&M continues to generate record financial results, as the company implements its growth-oriented business plan,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “We are extremely pleased with the operating and financial milestones we have achieved this year. For the 2017 third quarter, total loans increased 7.9% to a record $795,205,000, and profitability improved 6.9%, driven by a net interest margin of 3.71% for the 2017 third quarter, which was an increase of 14 basis points over the prior year period. As a result of F&M’s strong performance, the board of directors during the 2017 third quarter approved a two-for-one stock split, and an 8.3% increase in the company’s declared quarterly dividend. We believe our growth-oriented focus and improvements to our capital structure, create a strong foundation to support strategic opportunities, while benefitting shareholders with greater liquidity. Throughout our recent growth phase, we remain committed to proactively managing risk. While our loan portfolio has increased nearly 8.0% over the past 12 months, our non-performing assets have declined 7.9%.”
Income Statement
Net income for the 2017 third quarter ended September 30, 2017, was $3,222,000, or $0.35 per basic and diluted share compared to $3,015,000, or $0.33 per basic and diluted share for the same period last year. The share data has been adjusted to reflect the two-for-one stock split that became effective on September 20, 2017. The 6.9% improvement in net income for the 2017 third quarter was primarily due to an 11.2% increase in interest income after provision for loan losses, partially offset by a 9.6% decrease in noninterest income and a 6.3% increase in noninterest expense. Net income for the 2017 nine-month period was $9,284,000, or $1.00 per basic and diluted share compared to $8,470,000, or $0.92 per basic and diluted share for the nine-month period of 2016.
Loan Portfolio and Asset Quality
Total loans, net of allowance and deferred fees and costs, at September 30, 2017, increased 7.7% to a record $788,335,000, compared to $732,070,000 at September 30, 2016, and up 4.9% from $751,310,000 at December 31, 2016. Year-over-year loan growth was strong across many of the company’s lending areas and included a 17.2% increase in consumer loans, a 17.1% increase in commercial and industrial loans, an 11.3% increase in industrial development bonds, a 10.0% increase in agricultural loans, a 6.9% increase in agricultural real estate loans, and a 6.5% increase in commercial real estate loans, partially offset by a 2.3% reduction in consumer real estate loans.
The company’s provision for loan losses for the 2017 third quarter was $99,000, compared to $308,000 for the 2016 third quarter. Year-to-date, the provision for loan losses was $197,000, compared to $924,000 for the same period last year.
F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 397.4% at September 30, 2017, compared to 584.2% at September 30, 2016. Net charge-offs for the third quarter ended September 30, 2017 were $87,000, or 0.01% of average loans, compared to $189,000 or 0.03% of average loans, at September 30, 2016. Year-to-date, net charge-offs were $111,000, or 0.01% of average loans outstanding, compared to $369,000, or 0.05% of average loans outstanding for the same period last year.
Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $128,278,000 at September 30, 2017, compared to $120,763,000 at December 31, 2016, and $122,048,000 at September 30, 2016. On a per share basis, tangible stockholders’ equity at September 30, 2017, was $13.84, compared with $13.02 at December 31, 2016, and $13.20 at September 30, 2016. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At September 30, 2017, the company had a Tier 1 leverage ratio of 12.02%, compared to 11.74% at September 30, 2016.
For the 2017 third quarter, the company declared and raised the cash dividend by 8.3% to $0.13 per share, which represented a dividend payout ratio of 37.0% compared to 34.9% for the same period last year.
Mr. Siebenmorgen concluded, “Economic trends within our Northwest Ohio and Northeast Indiana markets remain stable, helping F&M produce strong financial results. We continue to focus on building F&M’s brand throughout our new markets, such as Fort Wayne, Indiana and Bowling Green, Ohio. To this end, I am pleased F&M was once again voted the best bank in the 2017 Readers Choice competition in the Fort Wayne market. Over the past three years, we have opened three locations, and we are excited about the opportunities to expand our footprint in future periods as F&M’s customer focus, and community banking orientation resonates with customers. In addition, our strong capitalization and profitability, combined with our successful and proactive risk management, provides F&M with the financial flexibility to support our strategic growth opportunities. With one quarter remaining, we continue to expect 2017 will be another good year for the bank.”
About Farmers & 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 24 offices. Our locations are in Fulton, Defiance, 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 filings, 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, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2017 |
September 30, 2016 |
September 30, 2017 |
September 30, 2016 |
|||||||||||||
| Interest Income |
||||||||||||||||
| Loans, including fees |
$ | 9,547 | $ | 8,629 | $ | 27,367 | $ | 24,997 | ||||||||
| Debt securities: |
||||||||||||||||
| U.S. Treasury and government agencies |
605 | 559 | 1,870 | 1,734 | ||||||||||||
| Municipalities |
290 | 344 | 905 | 1,093 | ||||||||||||
| Dividends |
49 | 36 | 135 | 111 | ||||||||||||
| Federal funds sold |
7 | 7 | 10 | 9 | ||||||||||||
| Other |
37 | 15 | 93 | 37 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest income |
10,535 | 9,590 | 30,380 | 27,981 | ||||||||||||
| Interest Expense |
||||||||||||||||
| Deposits |
1,161 | 947 | 3,289 | 2,686 | ||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase |
135 | 115 | 366 | 346 | ||||||||||||
| Borrowed funds |
37 | 37 | 110 | 110 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
| Total interest expense |
1,333 | 1,099 | 3,765 | 3,142 | ||||||||||||
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|
|
|
|
|||||||||
| Net Interest Income – Before Provision for Loan Losses |
9,202 | 8,491 | 26,615 | 24,839 | ||||||||||||
| Provision for Loan Losses |
99 | 308 | 197 | 924 | ||||||||||||
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| Net Interest Income After Provision |
||||||||||||||||
| For Loan Losses |
9,103 | 8,183 | 26,418 | 23,915 | ||||||||||||
| Noninterest Income |
||||||||||||||||
| Customer service fees |
1,320 | 1,711 | 4,131 | 4,497 | ||||||||||||
| Other service charges and fees |
1,134 | 941 | 3,214 | 2,850 | ||||||||||||
| Net gain on sale of loans |
181 | 216 | 600 | 619 | ||||||||||||
| Net gain on sale of available for sale securities |
— | 47 | 47 | 503 | ||||||||||||
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|
|||||||||
| Total noninterest income |
2,635 | 2,915 | 7,992 | 8,469 | ||||||||||||
| Noninterest Expense |
||||||||||||||||
| Salaries and Wages |
3,236 | 2,981 | 9,374 | 8,661 | ||||||||||||
| Employee benefits |
943 | 849 | 2,648 | 2,426 | ||||||||||||
| Net occupancy expense |
434 | 359 | 1,221 | 1,083 | ||||||||||||
| Furniture and equipment |
493 | 438 | 1,456 | 1,293 | ||||||||||||
| Data processing |
300 | 360 | 919 | 1,132 | ||||||||||||
| Franchise taxes |
226 | 219 | 676 | 658 | ||||||||||||
| Net (gain) loss on sale of other assets owned |
13 | (6 | ) | 27 | 39 | |||||||||||
| FDIC Assessment |
82 | 126 | 247 | 368 | ||||||||||||
| Mortgage servicing rights amortization |
85 | 123 | 266 | 311 | ||||||||||||
| Other general and administrative |
1,545 | 1,473 | 4,692 | 4,594 | ||||||||||||
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|
|||||||||
| Total other operating expenses |
7,357 | 6,922 | 21,526 | 20,565 | ||||||||||||
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|
|||||||||
| Income Before Income Taxes |
4,381 | 4,176 | 12,884 | 11,819 | ||||||||||||
| Income Taxes |
1,159 | 1,161 | 3,600 | 3,349 | ||||||||||||
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|
|||||||||
| Net Income |
3,222 | 3,015 | 9,284 | 8,470 | ||||||||||||
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|
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| Other Comprehensive Income (Loss) (Net of Tax): |
||||||||||||||||
| Net unrealized gain (loss) on available for sale securities |
(472 | ) | 58 | 1,984 | 2,652 | |||||||||||
| Reclassification adjustment for gain on sale of available for sale securities |
— | (47 | ) | (47 | ) | (503 | ) | |||||||||
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|
|||||||||
| Net unrealized gain (loss) on available for sale securities |
(472 | ) | 11 | 1,937 | 2,149 | |||||||||||
| Tax expense (benefit) |
(160 | ) | 4 | 659 | 731 | |||||||||||
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|
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| Other comprehensive income (loss) |
(312 | ) | 7 | 1,278 | 1,418 | |||||||||||
| Comprehensive Income |
$ | 2,910 | $ | 3,022 | $ | 10,562 | $ | 9,888 | ||||||||
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| Earnings Per Share – Basic and Diluted (1) |
$ | 0.35 | $ | 0.33 | $ | 1.00 | $ | 0.92 | ||||||||
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| Dividends Declared (1) |
$ | 0.13 | $ | 0.12 | $ | 0.37 | $ | 0.34 | ||||||||
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(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
| (in thousands of dollars) | ||||||||
| September 30, 2017 |
December 31, 2016 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Cash and due from banks |
$ | 48,313 | $ | 27,348 | ||||
| Federal funds sold |
791 | 974 | ||||||
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|
|||||
| Total cash and cash equivalents | 49,104 | 28,322 | ||||||
| Interest-bearing time deposits |
2,541 | 1,915 | ||||||
| Securities – available-for-sale |
192,811 | 218,527 | ||||||
| Other securities, at cost |
3,717 | 3,717 | ||||||
| Loans held for sale |
2,147 | 2,055 | ||||||
| Loans, net |
788,335 | 751,310 | ||||||
| Premises and equipment |
21,473 | 21,457 | ||||||
| Goodwill |
4,074 | 4,074 | ||||||
| Mortgage servicing rights |
2,264 | 2,192 | ||||||
| Other real estate owned |
615 | 774 | ||||||
| Bank owned life insurance |
14,446 | 14,376 | ||||||
| Other assets |
8,628 | 7,176 | ||||||
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|
|||||
| Total Assets |
$ | 1,090,155 | $ | 1,055,895 | ||||
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| Liabilities and Stockholders’ Equity |
||||||||
| Liabilities |
||||||||
| Deposits |
||||||||
| Noninterest-bearing | $189,963 | $186,390 | ||||||
| Interest-bearing | ||||||||
| NOW accounts | 294,911 | 230,446 | ||||||
| Savings | 224,911 | 226,537 | ||||||
| Time | 193,581 | 198,830 | ||||||
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|||||
| Total deposits | 903,366 | 842,203 | ||||||
| Federal Funds purchased and securities sold under agreements to repurchase |
35,550 | 70,324 | ||||||
| Federal Home Loan Bank (FHLB) advances |
10,000 | 10,000 | ||||||
| Dividend payable |
1,193 | 1,053 | ||||||
| Accrued expenses and other liabilities |
7,157 | 6,738 | ||||||
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|
|||||
| Total liabilities | 957,266 | 930,318 | ||||||
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| Commitments and Contingencies |
||||||||
| Stockholders’ Equity |
||||||||
| Common stock – No par value 20,000,000 shares authorized; issued and outstanding 10,400,000 shares 9/30/17 and 12/31/16 (1) |
11,388 | 11,947 | ||||||
| Treasury Stock – 1,133,324 shares 9/30/17, 1,158,250 shares 12/31/16 (1) |
(12,126 | ) | (12,267 | ) | ||||
| Retained earnings |
134,320 | 127,869 | ||||||
| Accumulated other comprehensive loss |
(693 | ) | (1,972 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity | 132,889 | 125,577 | ||||||
|
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|
|
|
|||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,090,155 | $ | 1,055,895 | ||||
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|
|||||
(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 Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| Selected financial data |
2017 | 2016 | 2017 | 2016 | ||||||||||||
| Return on average assets |
1.20 | % | 1.17 | % | 1.16 | % | 1.11 | % | ||||||||
| Return on average equity |
9.76 | % | 9.58 | % | 9.57 | % | 9.13 | % | ||||||||
| Yield on earning assets |
4.24 | % | 4.03 | % | 4.12 | % | 4.00 | % | ||||||||
| Cost of interest bearing liabilities |
0.72 | % | 0.60 | % | 0.68 | % | 0.59 | % | ||||||||
| Net interest spread |
3.52 | % | 3.42 | % | 3.44 | % | 3.41 | % | ||||||||
| Net interest margin |
3.71 | % | 3.57 | % | 3.61 | % | 3.56 | % | ||||||||
| Efficiency |
61.41 | % | 60.09 | % | 61.49 | % | 61.70 | % | ||||||||
| Dividend payout ratio |
37.03 | % | 34.93 | % | 36.51 | % | 36.71 | % | ||||||||
| Tangible book value per share (1) |
$ | 13.84 | $ | 13.20 | ||||||||||||
| Tier 1 capital to average assets |
12.02 | % | 11.74 | % | ||||||||||||
| September 30 | ||||||||||||||||
| Loans |
2017 | 2016 | ||||||||||||||
| (Dollar amounts in thousands) | ||||||||||||||||
| Commercial real estate |
$ | 394,481 | $ | 370,315 | ||||||||||||
| Agricultural real estate |
63,603 | 59,502 | ||||||||||||||
| Consumer real estate |
84,283 | 86,301 | ||||||||||||||
| Commercial and industrial |
124,078 | 105,961 | ||||||||||||||
| Agricultural |
87,095 | 79,191 | ||||||||||||||
| Consumer |
35,843 | 30,585 | ||||||||||||||
| Industrial development bonds |
6,555 | 5,892 | ||||||||||||||
| Less: Net deferred loan fees and costs |
(733 | ) | (690 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total loans |
$ | 795,205 | $ | 737,057 | ||||||||||||
|
|
|
|
|
|||||||||||||
| September 30 | ||||||||||||||||
| Asset quality data |
2017 | 2016 | ||||||||||||||
| (Dollar amounts in thousands) | ||||||||||||||||
| Nonaccrual loans |
$ | 1,729 | $ | 1,132 | ||||||||||||
| Troubled debt restructuring |
$ | 679 | $ | 704 | ||||||||||||
| 90 day past due and accruing |
$ | — | $ | — | ||||||||||||
| Nonperforming loans |
$ | 1,729 | $ | 1,132 | ||||||||||||
| Other real estate owned |
$ | 615 | $ | 1,412 | ||||||||||||
| Non-performing assets |
$ | 2,344 | $ | 2,544 | ||||||||||||
| (Dollar amounts in thousands) | ||||||||||||||||
| Allowance for loan and lease losses |
$ | 6,870 | $ | 6,612 | ||||||||||||
| Allowance for loan and lease losses/total loans |
0.86 | % | 0.90 | % | ||||||||||||
| Net charge-offs: |
||||||||||||||||
|
Quarter-to-date |
$ | 87 | $ | 189 | ||||||||||||
|
Year-to-date |
$ | 111 | $ | 369 | ||||||||||||
| Net charge-offs to average loans |
||||||||||||||||
|
Quarter-to-date |
0.01 | % | 0.03 | % | ||||||||||||
|
Year-to-date |
0.01 | % | 0.05 | % | ||||||||||||
| Non-performing loans/total loans |
0.22 | % | 0.15 | % | ||||||||||||
| Allowance for loan and lease losses/nonperforming loans |
397.35 | % | 584.18 | % | ||||||||||||
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017