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) April 19, 2018
Farmers & Merchants Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
| Ohio | 001-38084 | 34-1469491 | ||
| (State or Other Jurisdiction | (Commission | (IRS Employer | ||
| of Incorporation) | File Number) | 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 April 19, 2018, Farmers & Merchants Bancorp, Inc. issued a press release announcing its earnings for the first quarter ended March 31, 2018. 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 April 19, 2018 | |
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: April 19, 2018 | /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 Press Release dated April 19, 2018
|
Post Office Box 216 307 North Defiance Street Archbold, Ohio 43502 |
NEWS RELEASE |
| 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
2018 First-Quarter Financial Results
ARCHBOLD, OHIO, April 19, 2018, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2018 first quarter ended March 31, 2018.
2018 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):
| • | 60 consecutive quarters of profitability |
| • | Total loans increased 8.2% to $834,737,000, and were up 1.4% from the fourth quarter |
| • | Net interest income after provision for loan losses increased 13.7% to $9,633,000 |
| • | Net income increased 32.7% to $3,767,000 |
| • | Earnings per basic and diluted share increased 32.3% to $0.41 |
| • | Return on average assets was 1.35%, up from 1.07% |
| • | Return on average equity was 11.20%, up from 8.97% |
Paul S. Siebenmorgen, President and Chief Executive Officer, stated, “I am pleased with the strong start to the new year as we continue to execute our growth-oriented business plan. From 2007 to March 31, 2018, F&M has expanded its footprint by opening 11 new locations. Total loans at these branches have grown from 7% of our loan portfolio to nearly 49% of our loan portfolio at March 31, 2018. The success of F&M’s de novo growth strategy provides us with growing confidence in our real estate strategy and belief that there are many compelling markets around our core geographies that need the community oriented financial services F&M provides. Most recently we opened our 25th full-service office in Findlay, Ohio. This full-service office will offer the latest banking technology to serve customers, enabling F&M to offer the benefits of both self-service video banking and the branch experience in one solution. I am pleased with the continued strength of our business, and expect 2018 to be another good year for F&M.”
Income Statement
Net income for the first quarter ended March 31, 2018, was $3,767,000, or $0.41 per basic and diluted share, compared to the same period last year’s net income of $2,839,000, or $0.31 per basic and diluted share, which was adjusted for a two-for-one stock split paid in September 2017. The 32.7% improvement in net income for the 2018 first quarter was primarily due to a 13.7% increase in net interest income after provision for loan losses, partially offset by an 8.0% increase in noninterest expense. As a result of the Tax Cuts and Job Act, the Bank’s tax rate was lowered which benefitted earnings.
Loan Portfolio and Asset Quality
Total loans at March 31, 2018, increased 8.2% to a record $834,737,000, compared to $771,206,000 at March 31, 2017, and up 1.4% from $823,024,000 at December 31, 2017. The year-over-year improvement resulted primarily from an 8.5% increase in commercial real estate loans, a 7.0% increase in commercial and industrial loans, a 14.8% increase in agricultural loans, a 14.0% increase in consumer loans, and a 7.6% increase in agricultural real estate loans.
The company’s provision for loan losses for the 2018 first quarter was $40,000, compared to $73,000 for the 2017 first quarter.
F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 755.2% at March 31, 2018, compared to 479.0% at March 31, 2017. Net charge-offs for the quarter ended March 31, 2018, were $108,000, or 0.01% of average loans, compared to $7,000 or 0.00% of average loans for the quarter ended March 31, 2017.
Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $130,668,000 at March 31, 2018, compared to $129,667,000 at December 31, 2017, and $122,984,000 at March 31, 2017. On a per share basis, tangible stockholders’ equity at March 31, 2018, was $14.06, compared to $13.99 at December 31, 2017, and $13.31, at March 31, 2017. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At March 31, 2018, the company had a Tier 1 leverage ratio of 12.11%, compared to 11.81% at March 31, 2017.
For the 2018 first quarter, the company declared cash dividends of $0.13 per share, which represents a dividend payout ratio of 31.7% compared to 37.1% for the same period last year.
Mr. Siebenmorgen concluded, “Economic trends remain stable within our local communities. Loan demand was strong for the 2018 first quarter, compared to the same period last year, as total loans increased 8.2%, while non-performing assets declined 29.6%. The year-over-year growth in loans was a result of strong demand across all our loan segments. Net charge-offs for the quarter were very low at 0.01%, compared to last year when they were 0.00%. Total interest income was up 14.6% during the 2018 first quarter, driven by loan growth and higher yield on earnings assets. Overall, we are pleased with the direction we are headed, and optimistic favorable financial and business trends will continue in 2018, as we focus on proactively managing risk with asset growth, expanding market share in our Fort Wayne and Toledo markets, and executing our de-novo and acquisition growth strategies.”
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 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 | ||||||||
| March 31, 2018 | March 31, 2017 | |||||||
| Interest Income |
||||||||
| Loans, including fees |
$ | 10,102 | $ | 8,700 | ||||
| Debt securities: |
||||||||
| U.S. Treasury and government agencies |
623 | 642 | ||||||
| Municipalities |
281 | 315 | ||||||
| Dividends |
55 | 42 | ||||||
| Federal funds sold |
15 | — | ||||||
| Other |
60 | 22 | ||||||
|
|
|
|
|
|||||
| Total interest income |
11,136 | 9,721 | ||||||
| Interest Expense |
||||||||
| Deposits |
1,319 | 1,030 | ||||||
| Federal funds purchased and securities sold under agreements to repurchase |
124 | 113 | ||||||
| Borrowed funds |
20 | 36 | ||||||
|
|
|
|
|
|||||
| Total interest expense |
1,463 | 1,179 | ||||||
|
|
|
|
|
|||||
| Net Interest Income – Before Provision for Loan Losses |
9,673 | 8,542 | ||||||
| Provision for Loan Losses |
40 | 73 | ||||||
|
|
|
|
|
|||||
| Net Interest Income After Provision |
||||||||
| For Loan Losses |
9,633 | 8,469 | ||||||
| Noninterest Income |
||||||||
| Customer service fees |
1,466 | 1,481 | ||||||
| Other service charges and fees |
1,012 | 871 | ||||||
| Net gain on sale of loans |
132 | 201 | ||||||
| Net gain on sale of available-for-sale securities |
— | 31 | ||||||
|
|
|
|
|
|||||
| Total noninterest income |
2,610 | 2,584 | ||||||
| Noninterest Expense |
||||||||
| Salaries and wages |
3,310 | 3,001 | ||||||
| Employee benefits |
1,136 | 922 | ||||||
| Net occupancy expense |
387 | 413 | ||||||
| Furniture and equipment |
507 | 472 | ||||||
| Data processing |
331 | 311 | ||||||
| Franchise taxes |
239 | 225 | ||||||
| ATM expense |
312 | 305 | ||||||
| Advertising |
186 | 175 | ||||||
| Net loss on sale of other assets owned |
17 | — | ||||||
| FDIC assessment |
87 | 83 | ||||||
| Mortgage servicing rights amortization |
85 | 84 | ||||||
| Other general and administrative |
1,043 | 1,080 | ||||||
|
|
|
|
|
|||||
| Total noninterest expense |
7,640 | 7,071 | ||||||
|
|
|
|
|
|||||
| Income Before Income Taxes |
4,603 | 3,982 | ||||||
| Income Taxes |
836 | 1,143 | ||||||
|
|
|
|
|
|||||
| Net Income |
3,767 | 2,839 | ||||||
|
|
|
|
|
|||||
| Other Comprehensive Income (Loss) (Net of Tax): |
||||||||
| Net unrealized gain (loss) on available-for-sale securities |
(2,471 | ) | 412 | |||||
| Reclassification adjustment for gain on sale of available-for-sale securities |
— | (31 | ) | |||||
|
|
|
|
|
|||||
| Net unrealized gain (loss) on available-for-sale securities |
(2,471 | ) | 381 | |||||
| Tax expense (benefit) |
(519 | ) | 129 | |||||
|
|
|
|
|
|||||
| Other comprehensive income (loss) |
(1,952 | ) | 252 | |||||
|
|
|
|
|
|||||
| Comprehensive Income |
$ | 1,815 | $ | 3,091 | ||||
|
|
|
|
|
|||||
| Earnings Per Share – Basic and Diluted (1) |
$ | 0.41 | $ | 0.31 | ||||
|
|
|
|
|
|||||
| Dividends Declared (1) |
$ | 0.13 | $ | 0.12 | ||||
|
|
|
|
|
|||||
| (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) | ||||||||
| March 31, 2018 |
December 31, 2017 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Cash and due from banks |
$ | 39,349 | $ | 33,480 | ||||
| Federal funds sold |
559 | 987 | ||||||
|
|
|
|
|
|||||
| Total cash and cash equivalents |
39,908 | 34,467 | ||||||
| Interest-bearing time deposits |
4,019 | 4,018 | ||||||
| Securities – available-for-sale |
192,859 | 196,398 | ||||||
| Other securities, at cost |
3,717 | 3,717 | ||||||
| Loans held for sale |
2,769 | 1,221 | ||||||
| Loans, net |
827,937 | 816,156 | ||||||
| Premises and equipment |
21,980 | 21,726 | ||||||
| Goodwill |
4,074 | 4,074 | ||||||
| Mortgage servicing rights |
2,313 | 2,299 | ||||||
| Other real estate owned |
651 | 674 | ||||||
| Bank owned life insurance |
14,604 | 14,523 | ||||||
| Other assets |
8,911 | 7,736 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 1,123,742 | $ | 1,107,009 | ||||
|
|
|
|
|
|||||
| Liabilities and Stockholders’ Equity |
||||||||
| Liabilities |
||||||||
| Deposits |
||||||||
| Noninterest-bearing |
$ | 193,665 | $ | 199,114 | ||||
| Interest-bearing |
||||||||
| NOW accounts |
327,433 | 298,711 | ||||||
| Savings |
245,895 | 233,949 | ||||||
| Time |
186,345 | 187,566 | ||||||
|
|
|
|
|
|||||
| Total deposits |
953,338 | 919,340 | ||||||
| Federal Funds Purchased and securities sold under agreements to repurchase |
23,307 | 39,495 | ||||||
| Federal Home Loan Bank (FHLB) advances |
5,000 | 5,000 | ||||||
| Dividend payable |
1,193 | 1,193 | ||||||
| Accrued expenses and other liabilities |
6,027 | 7,844 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
988,865 | 972,872 | ||||||
|
|
|
|
|
|||||
| Commitments and Contingencies |
||||||||
| Stockholders’ Equity |
||||||||
| Common stock – No par value 20,000,000 shares authorized; issued and outstanding 10,400,000 shares 3/31/18 and 12/31/17 (1) |
11,690 | 11,546 | ||||||
| Treasury stock – 1,134,020 shares 3/31/18, 1,134,120 shares 12/31/17 (1) |
(12,158 | ) | (12,160 | ) | ||||
| Retained earnings |
139,483 | 136,577 | ||||||
| Accumulated other comprehensive loss |
(4,138 | ) | (1,826 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
134,877 | 134,137 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,123,742 | $ | 1,107,009 | ||||
|
|
|
|
|
|||||
| (1) | Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017 |
| For the Three Months Ended March 31 |
||||||||
| Selected financial data |
2018 | 2017 | ||||||
| Return on average assets |
1.35% | 1.07% | ||||||
| Return on average equity |
11.20% | 8.97% | ||||||
| Yield on earning assets |
4.28% | 3.98% | ||||||
| Cost of interest bearing liabilities |
0.75% | 0.65% | ||||||
| Net interest spread |
3.53% | 3.33% | ||||||
| Net interest margin |
3.72% | 3.50% | ||||||
| Efficiency |
61.88% | 62.86% | ||||||
| Dividend payout ratio |
31.67% | 37.09% | ||||||
| Tangible book value per share |
$ | 14.06 | $ | 13.31 | ||||
| Tier 1 Leverage Ratio |
12.11% | 11.81% | ||||||
| March 31 | ||||||||
| Loans |
2018 | 2017 | ||||||
| (Dollar amounts in thousands) | ||||||||
| Commercial real estate |
$ | 415,296 | $ | 382,758 | ||||
| Agricultural real estate |
67,596 | 62,840 | ||||||
| Consumer real estate |
84,501 | 84,465 | ||||||
| Commercial and industrial |
123,439 | 115,415 | ||||||
| Agricultural |
99,836 | 86,950 | ||||||
| Consumer |
38,569 | 33,840 | ||||||
| Industrial development bonds |
6,350 | 5,667 | ||||||
| Less: Net deferred loan fees and costs |
(850 | ) | (729 | ) | ||||
|
|
|
|
|
|||||
| Total loans |
$ | 834,737 | $ | 771,206 | ||||
|
|
|
|
|
|||||
| March 31 | ||||||||
| Asset quality data |
2018 | 2017 | ||||||
| (Dollar amounts in thousands) | ||||||||
| Nonaccrual loans |
$ | 900 | $ | 1,430 | ||||
| Troubled debt restructuring |
$ | 527 | $ | 551 | ||||
| 90 day past due and accruing |
$ | — | $ | — | ||||
| Nonperforming loans |
$ | 900 | $ | 1,430 | ||||
| Other real estate owned |
$ | 651 | $ | 774 | ||||
| Non-performing assets |
$ | 1,551 | $ | 2,204 | ||||
| (Dollar amounts in thousands) | ||||||||
| Allowance for loan and lease losses |
$ | 6,800 | $ | 6,850 | ||||
| Allowance for loan and lease losses/total loans |
0.81% | 0.89% | ||||||
| Net charge-offs: |
||||||||
|
Quarter-to-date |
$ | 108 | $ | 7 | ||||
|
Year-to-date |
$ | 108 | $ | 7 | ||||
| Net charge-offs to average loans |
||||||||
|
Quarter-to-date |
0.01% | 0.00% | ||||||
|
Year-to-date |
0.01% | 0.00% | ||||||
| Non-performing loans/total loans |
0.11% | 0.19% | ||||||
| Allowance for loan and lease losses/nonperforming loans |
755.19% | 478.96% | ||||||
| * | All stock related values reported for 2017 have been adjusted for a 2 for 1 stock split completed on September 20, 2017. |