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 19, 2019

 

Farmers & Merchants Bancorp, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Registrant's Telephone Number, including Area Code (419) 446-2501

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

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):

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 July 19, 2019, Farmers & Merchants Bancorp, Inc. issued a press release announcing its earnings for the quarter ended June 30, 2019.  A copy of the press release is attached hereto as Exhibit 99 and is incorporated by reference herein.

ITEM 9.01.Financial Statements and Exhibits

 

 

---

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.

 

 

Exhibit 99

 

 

Farmers & Merchants Bancorp, Inc. Reports

2019 Second-Quarter and Year-to-Date Financial Results

Positive Operating Momentum Drives Strong Second Quarter Financial Results

 

ARCHBOLD, OHIO, July 19, 2019, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2019 second quarter and year-to-date June 30, 2019.

 

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

 

“Strong operating momentum continued in the 2019 second quarter and earnings per diluted share increased 27.3% to $0.56,” stated Lars B. Eller, President and Chief Executive Officer. “While earnings benefited from a nice recovery in the second quarter, core profitability remains strong as a result of year-over-year loan growth, improved margins, and favorable asset quality.  In addition, the Limberlost acquisition, which was completed on January 1, 2019, is now fully integrated and has started contributing to our financial performance and earnings.  I am extremely pleased with the quick combination of Limberlost and F&M and the opportunities our larger scale will create for F&M in the future.”  

 

“Total loans declined slightly over the past three months, primarily due to the impacts a wet planting season had on agricultural customers across our markets and the payoff of several classified loans that occurred in the second quarter, which was higher than normal.  Our loan portfolio would have increased sequentially, if second quarter payoffs and paydowns were in line with historical trends.  We have a strong pipeline of new loans that will be originated during the third quarter, including several large loans to customers in Southern Michigan.  This market supports a compelling opportunity for F&M and we already have $62.8 million in loans and $16.3 million in deposits in Southern Michigan, even though we have no physical presence in the market.  As large regional financial institutions focus on bigger markets and opportunities, we believe F&M is well positioned to grow our brand throughout our Ohio, Indiana and Michigan markets.”  

---

 

Income Statement

Net income for the 2019 second quarter ended June 30, 2019, was $6.2 million, compared to $4.1 million for the same period last year.  Net income for the 2019 second quarter included $31,000 of one-time acquisition related expenses and a $1.6 million benefit from recoveries.  Net income per basic and diluted share for the 2019 second quarter was $0.56, compared to $0.44 for the same period last year.  2019 second quarter earnings included $0.00 per basic and diluted share of one-time acquisition related expenses and a $0.14 per basic and diluted share benefit from recoveries.  

 

Cost of funds outpaced asset yield improvements for the 2019 second quarter and first half as a result of higher dollar volume of deposits and increased rates on deposits.  Overall, the company believes profitability from core operations is on track to match the expectations for 2019 with the acquisition factored in.

 

Net income for the 2019 first half ended June 30, 2019, was $9.4 million, compared to $7.9 million for the same period last year.  Net income for the 2019 first half included $1.2 million of one-time acquisition related expenses and a $1.6 million benefit from recoveries.  Net income per basic and diluted share for the 2019 first half was $0.85, compared to $0.85 for the same period last year.  2019 first half earnings included $0.09 per basic and diluted share of one-time acquisition related expenses and a $0.14 per basic and diluted share benefit from recoveries.  

 

Loan Portfolio and Asset Quality

Total loans, net at June 30, 2019, increased 31.3% or by $260.1 million to $1.091 billion, compared to $831.0 million at June 30, 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 38.5% year-over-year increase in total assets at June 30, 2019, nonperforming assets were up only $105,000 or 6.7%.  In addition, nonperforming loans to total loans remains low and at June 30, 2019 were 0.12%, compared to 0.11% for the same period last year.  The allowance for loan losses to nonperforming loans was 375.5% at June 30, 2019, compared to 751.5% at June 30, 2018.  Net charge-offs for the quarter ended June 30, 2019, were $86,000, or 0.01% of average loans, compared to $143,000 or 0.02% of average loans, at June 30, 2018.  Year-to-date, net charge-offs at June 30, 2019, were $255,000, or 0.02% of average loans, compared to $251,000 or 0.03% of average loans at June 30, 2018.  

 

Mr. Eller continued, “Economic trends within our markets remain stable, supporting F&M’s growth and excellent asset quality.  Total agricultural loans were $307.5 million at June 30, 2019, compared to $307.8 million at March 31, 2019, and $174.5 million at June 30, 2018.  Most of our agricultural customers utilize crop insurance, which will protect them from the wettest planting season in approximately 40 years and the impacts weather has on farm revenues.  Agricultural lending is one of F&M’s core competencies.  All of F&M’s agricultural lenders are farmers themselves and many of our communities are dependent on the farm economy.  F&M is dedicated to helping our agricultural customers during this difficult season, especially as other larger lenders have pulled back from this market.”  

 

Deposits

Over the past three months, deposits have increased organically 4.6% or by $54.9 million to $1.242 billion at June 30, 2019.  The significant organic deposit growth we have been experiencing continues to be due primarily 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 $172.0 million at June 30, 2019, compared to $165.5 million at March 31, 2019, and $137.5 million at June 30, 2018.  On a per share basis, tangible stockholders’ equity at June 30, 2019, was $15.49 per share, compared to $14.90 per share at March 31, 2019, and $14.36 at June 30, 2018.  

 

Total stockholders’ equity increased 62.9% to $224.0 million at June 30, 2019, from $137.6 million at June 30, 2018, and increased 3.3% from $216.9 million at March 31, 2019.  At June 30, 2019, the company had a Tier 1 leverage ratio of 11.77%, compared to 12.38% at June 30, 2018.  The decline in the Tier 1 leverage ratio was primarily due to the added goodwill associated with the Limberlost acquisition.  

 

 

---

For the 2019 second quarter, the company declared cash dividends of $0.15 per share, which is a 7.1% increase over the 2018 second 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.  

 

“Over the past year we have made significant investments across our organization to strengthen F&M’s platform and expand our leadership team, while remodeling our offices and providing our customers with new, market-leading financial products and services.  In addition, attracting, developing, and retaining our employees is an important component of our strategy and during the second quarter, we announced the addition of Benét Rupp as F&M’s Chief People Officer.  The investments we are making are focused on supporting the current and future needs of both F&M and our customers, and I am encouraged by our progress.  We are currently working on a three-year strategic plan, which will be the basis of our success in the future.  I remain excited by our near- and long-term potential and based on our strong year-to-date financial results, expect 2019 to be another record 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 with $1.5 billion in assets 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)

 

---

---

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (in thousands of dollars, except share data)

 

 

 

 

---

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

SELECT FINANCIAL DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

---

 

 

 

 

 

 

 

 

 

 

---

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(in thousands of dollars, except per share data)

PRO-FORMA EARNINGS PER SHARE

 

 

The results of operations of Bank of Geneva have been included in the Company’s consolidated financial statements since the acquisition date of January 1, 2019.  The following schedule includes pro-forma results for the three and six months ended June 30, 2019 and 2018 as if the Bank of Geneva acquisitions had occurred as of the beginning of the comparable prior reporting period.

 

 

---

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES

(in thousands of dollars, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

---