8-K

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) February 5, 2020

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)

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

Title of each class	Trading Symbol(s)	Name of Each Exchange
Common Stock, No Par Value	FMAO	NASDAQ Capital Market

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)
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☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17-CFR 240.13e-4(c))
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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 February 5, 2020, Farmers & Merchants Bancorp, Inc. issued a press release announcing its earnings for the year ended December 31, 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

(d)	Exhibits.
Exhibit<br><br><br>Number	Exhibit
---	---
99	Company Press release dated February 5, 2020

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: February 5, 2020		/s/ Lars B. Eller
		Lars B. Eller
		President and Chief Executive Officer
		/s/ Barbara J. Britenriker
		Barbara J. Britenriker
		Executive Vice President and Chief Financial Officer

fmao-ex99_6.htm

Exhibit 99

<br><br><br><br><br><br>Post Office Box 216<br><br><br>307 North Defiance Street<br><br><br>Archbold, Ohio 43502	NEWS RELEASE
Company Contact:	Investor and Media Contact:
---	---
Lars B. Eller<br><br><br>President and Chief Executive Offcer<br><br><br>Farmers & Merchants Bancorp, Inc.<br><br><br>(419) 446-2501<br><br><br>leller@fm.bank	Andrew M. Berger<br><br><br>Managing Director<br><br><br>SM Berger & Company, Inc.<br><br><br>(216) 464-6400<br><br><br>andrew@smberger.com

Farmers & Merchants Bancorp, Inc. Reports Record

2019 Fourth-Quarter and Full-Year Financial Results

Record 2019 Financial Results Driven by Strong Operating Performance and Benefits of the Bank of Geneva Acquisition

ARCHBOLD, OHIO, February 5, 2020, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2019 fourth quarter and twelve months ended December 31, 2019.

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

•	Total loans at December 31, 2019 increased 5.2% from September 30, 2019
•	Net interest income after provision for loan losses increased 25.1% to $12.6 million
---	---
•	Net income increased 47.9% to $4.7 million
---	---
•	Earnings increased 26.5% to $0.43 per basic and diluted share, despite a 19.9% increase in the weighted average shares outstanding
---	---
•	Return on average assets increased to 1.18%, compared to 1.15% for the same period last year
---	---

2019 Full-Year Financial Highlights Include (on a year-over-year basis unless noted):

•	Total loans increased 44.3% to $1.212 billion as a result of the contribution from the Bank of Geneva acquisition and strong organic loan growth
•	Organic loan growth increased by 511.78% or $90.3 million, a record increase of $112.2 million
---	---
•	Total assets increased 44.0% to a record $1.607 billion
---	---
•	Deposits increased 38.7% to a record $1.288 billion
---	---
•	Organic deposit growth increased by 1,619.98%, or $143.6 million, to a record increase of  $153.1 million
---	---
•	Net interest income after provision for loan losses increased 32.6% to $52.4 million
---	---
•	Net income increased 23.1% to a record $18.4 million
---	---
•	Earnings increased 3.1% to a record $1.66 per basic and diluted share, despite a 19.9% increase in the weighted average shares outstanding (Earnings adjusted for acquisition expenses were $1.69 per basic and diluted share)
---	---
•	Book value per share increased 34.0% to $20.68 per share
---	---
•	Tangible book value per share increased 4.8% to $16.01 per share
---	---
•	2019 cash dividend increased 8.9% to $0.61 per share
---	---

“I am proud of the significant accomplishments we achieved during 2019, which includes the successful completion of the Bank of Geneva acquisition, strong organic loan and deposit growth, and improvements in profitability.  As a result, 2019 was the fifth consecutive year of record assets and earnings,” stated Lars B. Eller, President and Chief Executive Officer. “During 2019, we also developed a new three-year strategic plan and we have a clear roadmap to follow in 2020 and beyond, as we focus on our goal of becoming a financial institution with over $3 billion in assets.  We invested across our platform to build the necessary resources to support our growth initiatives and I am particularly pleased with the progress we made attracting, developing, and retaining key members of our leadership, lending and banking teams.  This will be an important initiative for F&M during 2020 and I look forward to reporting on our progress.  As we look to the future, I am encouraged by F&M’s position to consistently and profitably grow,

while supporting our customers, local communities and employees.  I am excited by the direction we are headed and expect 2020 to be a year of execution and strong financial performance for F&M.”

Income Statement

Net income for the fourth quarter ended December 31, 2019, was $4.7 million, compared to $3.2 million for the same period last year.  Earnings per basic and diluted share for the 2019 fourth quarter was $0.43, compared to $0.34 for the same period last year.  2019 fourth quarter earnings included $0.02 per basic and diluted share of one-time acquisition related expenses and a 19.9% increase in the weighted average common shares outstanding due to the additional shares from the Limberlost acquisition.  2018’s fourth quarter earnings included one-time merger related expenses of $0.07 per basic and diluted share.

Net income for the year ended December 31, 2019, was $18.4 million, compared to $14.9 million for the year ended December 31, 2018.  Earnings per basic and diluted share for 2019 was $1.66, compared to $1.61 for the same period last year.  2019 earnings included $0.03 per basic and diluted share of one-time acquisition related expenses, and a 19.9% increase in the weighted average common shares outstanding due to the additional shares from the Limberlost acquisition.  2018’s earnings included one-time merger related expenses of $0.07 per basic and diluted share.

Mr. Eller continued, “We ended 2019 with record annual and quarterly net income as a result of a 32.6% annual increase in net interest income after provision for loan losses and an 8.8% annual increase in noninterest income.  For the year 2019, we worked hard and lowered our operating efficiency ratio to 60.96% at the Bank level, excluding acquisition and captive expenses.  We expect interest rates will remain low throughout 2020 as a result of Federal Reserve monetary policies, which we believe will put pressure on interest income across our industry.  We are focused on offsetting the macro related impact on interest income during 2020 by maintaining a stable net interest margin, increasing core deposits, driving loan growth and managing risk.”

Deposits

At December 31, 2019, total deposits were $1.288 billion, an increase of 38.7% from December 31, 2018.  The significant organic deposit growth we have been experiencing continues to be due primarily to new product development that has allowed F&M to attract new customers and expand existing customer holdings.

Loan Portfolio

Total loans, net at December 31, 2019, increased 44.3%, or by $372.2 million to $1.212 billion, compared to $839.6 million at December 31, 2018, and up 5.2%, or $59.8 million from $1.152 billion at September 30, 2019. The year-over-year improvement resulted primarily from the contribution of the Bank of Geneva acquisition and organic loan growth.

“F&M’s market share increased throughout 2019 as we experienced strong organic loan and deposit growth and, for the month of December 2019 alone, net loans increased over $58 million. In addition, fourth quarter 2019 ended with the largest number of 1-4 family loans being closed in the last ten years.  Our strong loan and deposit growth are primarily due to our leading position in many of the markets we serve, our strong network of local bankers, and our compelling financial products and services.”

“During 2019, we completed a comprehensive review of each loan from the Bank of Geneva merger.  As a result, our nonperforming assets to total assets increased from 0.10% at December 31, 2018, to 0.22% at December 31, 2019, and our over-30-day past due loans to total loans increased from 0.09% at December 31, 2018 to 0.18% at December 31, 2019. Despite these increases, our net charge-offs to average loans was stable year-over-year and our overall asset quality remains significantly better than many of our peers. Provision expense for the fourth quarter was higher than previous quarters as we provided for the significant amount of organic loan growth and our reviewed and subsequently refinanced acquisition loans.  In addition, our allowance for loan and lease does not include a $2.1 million credit mark associated with the Limberlost acquisition, which further supports the future performance of our loan portfolio.  With stable asset quality and strong liquidity, we have significant capital to support our growth initiatives,” concluded Mr. Eller.

Stockholders’ Equity and Dividends

Total stockholders’ equity increased 60.7% to $230.3 million at December 31, 2019, from $143.3 million at December 31, 2018.  At December 31, 2019, the company had a Tier 1 leverage ratio of 11.52%, compared to 12.81%

at December 31, 2018.  The decline in the Tier 1 leverage ratio was primarily due to the added goodwill associated with the Limberlost acquisition.

Tangible stockholders’ equity increased to $178.3 million at December 31, 2019, compared to $141.9 million at December 31, 2018.  On a per share basis, tangible stockholders’ equity at December 31, 2019, was $16.01 per share, compared to $15.28 per share at December 31, 2018.

For 2019, we raised our dividend again.  The company declared cash dividends of $0.61 per share, an 8.9% increase over $0.56 per share declared in 2018.  For 2019, the dividend payout ratio was 36.59% compared to 25.18% for the same period last year.

About Farmers & Merchants Bancorp, Inc.

Farmers & Merchants Bancorp, Inc. (“F&M”) (Nasdaq: FMAO), is the holding company for the Farmers & Merchants State Bank, a local independent community bank with $1.6 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.

Non-GAAP Financial Measures

This press release includes disclosure of financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers & Merchants Bancorp, Inc. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers & Merchants Bancorp, Inc.’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures are included in the tables following Consolidated Financial Highlights below.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME

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

				Three Months Ended										Twelve Months Ended
	December 31, 2019			September 30, 2019		June 30, 2019		March 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Interest Income
Loans, including fees	$	15,608		$	15,202	$	16,723	$	14,680		$	10,955		$	62,213		$	42,303
Debt securities:
U.S. Treasury and<br><br><br>government<br><br><br>agencies		840			972		816		713			630			3,341			2,478
Municipalities		225			190		211		211			250			837			1,095
Dividends		60			69		76		88			56			293			220
Federal funds sold<br><br><br>and other		416			579		457		170			112			1,622			333
Total interest income		17,149			17,012		18,283		15,862			12,003			68,306			46,429
Interest Expense
Deposits		3,336			3,654		3,339		2,613			1,670			12,942			5,989
Federal funds purchased<br><br><br>and securities sold<br><br><br>under agreement to<br><br><br>repurchase		207			201		141		185			127			734			503
Borrowed funds		270			257		269		287			20			1,083			80
Total interest<br><br><br>expense		3,813			4,112		3,749		3,085			1,817			14,759			6,572
Net Interest Income -<br><br><br>Before Provision for<br><br><br>Loan Losses		13,336			12,900		14,534		12,777			10,186			53,547			39,857
Provision for Loan Losses		728			247		133		30			105			1,138			324
Net Interest Income After<br><br><br>Provision For Loan<br><br><br>Losses		12,608			12,653		14,401		12,747			10,081			52,409			39,533
Noninterest Income
Customer service fees		1,732			1,722		1,694		1,578			1,612			6,726			5,935
Other service charges<br><br><br>and fees		1,132			1,179		1,091		1,041			1,032			4,443			4,181
Net gain on sale of loans		119			260		196		102			140			677			757
Net gain (loss) on sale<br><br><br>of available-for-sale<br><br><br>securities		-			-		-		(26	)		(19	)		(26	)		(9	)
Total noninterest<br><br><br>income		2,983			3,161		2,981		2,695			2,765			11,820			10,864
Noninterest Expense
Salaries and wages		4,029			4,158		3,830		4,312			3,834			16,329			13,760
Employee benefits		1,410			1,331		1,223		1,594			1,102			5,558			4,115
Net occupancy expense		406			630		614		667			451			2,317			1,757
Furniture and equipment		596			720		763		696			450			2,775			2,110
Data processing		396			482		376		1,299			318			2,553			1,318
Franchise taxes		246			248		229		258			244			981			954
ATM expense		434			416		418		447			368			1,715			1,340
Advertising		340			587		382		260			218			1,569			887
Net loss on sale<br><br><br>of other assets owned		16			22		28		15			27			81			44
FDIC assessment		(11	)		-		98		96			77			183			326
Mortgage servicing<br><br><br>rights amortization		158			149		105		75			100			487			364
Consulting fees		264			196		95		113			461			668			928
Other general and<br><br><br>administrative		1,482			1,667		1,551		1,679			1,167			6,379			4,318
Total noninterest<br><br><br>expense		9,766			10,606		9,712		11,511		8,817		41,595		32,221
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Income Before Income<br><br><br>Taxes		5,825			5,208		7,670		3,931		4,029		22,634		18,176
Income Taxes		1,102			933		1,490		707		836		4,232		3,227
Net Income		4,723			4,275		6,180		3,224		3,193		18,402		14,949
Other Comprehensive<br><br><br>Income (Loss) (Net of<br><br><br>Tax):
Net unrealized gain<br><br><br>(loss) on available-for-<br><br><br>sale securities		(472	)		841		3,061		1,749		2,374		5,179		(1,058	)
Reclassification<br><br><br>adjustment for (gain)<br><br><br>loss on sale of<br><br><br>available-for-sale<br><br><br>securities		-			-		-		26		19		26		9
Net unrealized gain<br><br><br>(loss) on available-for-<br><br><br>sale securities		(472	)		841		3,061		1,775		2,393		5,205		(1,049	)
Tax expense (benefit)		(99	)		176		643		373		503		1,093		(220	)
Other comprehensive<br><br><br>income (loss)		(373	)		665		2,418		1,402		1,890		4,112		(829	)
Comprehensive Income	$	4,350		$	4,940	$	8,598	$	4,626	$	5,083	$	22,514	$	14,120
Basic and Diluted<br><br><br>Earnings Per Share	$	0.43		$	0.38	$	0.56	$	0.29	$	0.34	$	1.66	$	1.61
Dividends Declared	$	0.16		$	0.15	$	0.15	$	0.15	$	0.15	$	0.61	$	0.56

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Assets
Cash and due from banks	$	50,137		$	103,188		$	108,085		$	48,740		$	37,492
Federal funds sold		1,159			11,404			15,193			33,109			873
Total cash and cash equivalents		51,296			114,592			123,278			81,849			38,365
Interest-bearing time deposits		4,309			4,554			4,509			4,509			4,019
Securities - available-for-sale		222,293			190,465			204,415			174,682			168,447
Other securities, at cost		5,810			5,789			5,789			5,789			3,679
Loans held for sale		4,248			606			1,909			859			495
Loans, net		1,211,771			1,151,937			1,084,448			1,091,829			839,599
Premises and equipment		26,351			25,990			26,013			25,205			22,615
Goodwill		47,340			47,340			47,340			47,340			4,074
Mortgage servicing rights		2,629			2,556			2,465			2,397			2,385
Other real estate owned		214			351			329			510			600
Bank owned life insurance		15,235			15,151			15,050			14,963			14,884
Other assets		15,834			15,549			15,002			15,729			17,001
Total Assets	$	1,607,330		$	1,574,880		$	1,530,547		$	1,465,661		$	1,116,163
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	265,156		$	261,719		$	242,510		$	236,847		$	215,422
Interest-bearing
NOW accounts		423,655			430,646			430,505			418,773			298,254
Savings		322,973			310,667			293,179			272,875			227,701
Time		276,563			274,996			276,153			258,929			187,413
Total deposits		1,288,347			1,278,028			1,242,347			1,187,424			928,790
Federal Funds Purchased and securities<br><br><br>sold under agreements to repurchase		48,073			30,056			27,102			25,521			32,181
Federal Home Loan Bank (FHLB)<br><br><br>advances		24,806			24,669			24,532			24,682			-
Dividend payable		1,768			1,657			1,654			1,654			1,379
Accrued expenses and other liabilities		14,078			13,062			10,865			9,446			10,526
Total liabilities		1,377,072			1,347,472			1,306,500			1,248,727			972,876
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000<br><br><br>shares authorized; issued and outstanding<br><br><br>12,230,000 shares 12/31/19,<br><br><br>10,400,000 shares 12/31/18		81,535			81,264			81,955			81,760			10,823
Treasury stock - 1,093,065 shares 12/31/19,<br><br><br>1,114,739 shares 12/31/18		(12,456	)		(12,453	)		(12,707	)		(12,680	)		(12,409	)
Retained earnings		160,081			157,126			153,993			149,466			147,887
Accumulated other comprehensive<br><br><br>income (loss)		1,098			1,471			806			(1,612	)		(3,014	)
Total stockholders' equity		230,258			227,408			224,047			216,934			143,287
Total Liabilities and Stockholders' Equity	$	1,607,330		$	1,574,880		$	1,530,547		$	1,465,661		$	1,116,163

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

SELECT FINANCIAL DATA

	For the Three Months Ended															For the Twelve Months Ended
Selected financial data	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Return on average assets		1.18	%		1.10	%		1.63	%		1.00	%		1.15	%		1.23	%		1.34	%
Return on average equity		8.26	%		7.54	%		11.21	%		7.16	%		9.04	%		8.26	%		10.86	%
Yield on earning assets		4.63	%		4.74	%		5.25	%		4.80	%		4.61	%		4.85	%		4.46	%
Cost of interest bearing<br><br><br>liabilities		1.40	%		1.55	%		1.45	%		1.26	%		0.96	%		1.42	%		0.86	%
Net interest spread		3.23	%		3.19	%		3.80	%		3.54	%		3.65	%		3.43	%		3.60	%
Net interest margin		3.60	%		3.60	%		4.18	%		3.87	%		3.92	%		3.80	%		3.83	%
Efficiency		63.67	%		65.86	%		56.00	%		73.11	%		67.59	%		63.42	%		63.19	%
Dividend payout ratio		43.34	%		38.67	%		26.78	%		42.77	%		43.16	%		36.59	%		25.18	%
Tangible book value<br><br><br>per share (1)	$	16.01		$	15.45		$	15.49		$	14.90		$	15.28
Tier 1 capital to<br><br><br>average assets		11.52	%		11.45	%		11.77	%		13.35	%		12.81	%
(1)  Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities)
Loans	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Dollar amounts in thousands)
Commercial real estate	$	551,309		$	502,137		$	443,257		$	440,993		$	419,784
Agricultural real estate		199,105			200,791			193,768			191,752			68,609
Consumer real estate		165,349			159,074			159,540			160,967			80,766
Commercial and industrial		135,631			130,150			125,609			137,949			121,793
Agricultural		111,820			110,270			113,755			112,898			108,495
Consumer		49,237			49,552			48,952			47,647			41,953
Other		8,314			8,167			7,341			7,392			5,889
Less: Net deferred loan fees<br><br><br>and costs		(1,766	)		(1,445	)		(1,091	)		(1,133	)		(915	)
Total loans, net	$	1,218,999		$	1,158,696		$	1,091,131		$	1,098,465		$	846,374
Asset quality data	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Dollar amounts in thousands)
Nonaccrual loans	$	3,400		$	3,275		$	1,328		$	1,188		$	542
Troubled debt restructuring	$	956		$	1,051		$	981		$	102		$	178
90 day past due and accruing	$	-		$	-		$	-		$	-		$	-
Nonperforming loans	$	3,400		$	3,275		$	1,328		$	1,188		$	542
Other real estate owned	$	214		$	351		$	329		$	510		$	600
Non-performing assets	$	3,614		$	3,626		$	1,657		$	1,698		$	1,142
(Dollar amounts in thousands)
Allowance for loan and lease losses	$	7,228		$	6,759		$	6,964		$	6,636		$	6,755
Allowance for loan and lease<br><br><br>losses/total loans		0.59	%		0.58	%		0.64	%		0.60	%		0.80	%
Net charge-offs:
Quarter-to-date	$	295		$	171		$	86		$	169		$	84
Year-to-date	$	685		$	426		$	255		$	169		$	417
Net charge-offs to average loans
Quarter-to-date		0.03	%		0.02	%		0.01	%		0.02	%		0.01	%
Year-to-date		0.06	%		0.04	%		0.02	%		0.02	%		0.05	%
Non-performing loans/total loans		0.28	%		0.28	%		0.12	%		0.11	%		0.06	%
Allowance for loan and lease<br><br><br>losses/nonperforming loans		187.17	%		173.25	%		375.51	%		558.92	%		1249.57	%

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

	Pro-forma Three Months Ended						Pro-forma Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Earnings per share
Net income	$	4,732		$	3,546		$	19,431		$	20,358
Less: distributed earnings allocated to<br><br><br>participating securities		(14	)		(14	)		(581	)		(52	)
Less: undistributed earnings allocated to<br><br><br>participating securities		(25	)		(16	)		(95	)		(119	)
Net earnings available to common shareholders	$	4,693		$	3,516		$	18,755		$	20,187
Weighted average common shares outstanding<br><br><br>including participating securities		11,137,004			11,115,261			11,113,810			11,102,964
Less: average unvested restricted shares		(88,711	)		(93,940	)		(83,369	)		(93,000	)
Weighted average common shares outstanding		11,048,293			11,021,321			11,030,441			11,009,964
Basic earnings and diluted per share	$	0.43		$	0.32		$	1.75		$	1.83

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

(in thousands of dollars)

NON-GAAP RECONCILIATION OF NET INCOME

	Non-GAAP Three Months Ended						Non-GAAP Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Non-GAAP Reconciliation of Net Income
Net income	$	4,723		$	3,193		$	18,402		$	14,949
Acquisition expenses		11			553			1,281			742
Accretion/amortization fair value adjustments		289			-			(825	)		-
Tax effect		(62	)		(59	)		(79	)		(78	)
Net income excluding acquisition expenses	$	4,961		$	3,687		$	18,779		$	15,613

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES

(in thousands of dollars, except percentages)

	For the Three Months Ended							For the Three Months Ended
	December 31, 2019							December 31, 2018
Interest Earning Assets:	Average<br><br><br>Balance		Interest/<br><br><br>Dividends		Yield/<br><br><br>Rate			Average<br><br><br>Balance		Interest/<br><br><br>Dividends		Yield/<br><br><br>Rate
Loans	$	1,174,748	$	15,608		5.32	%	$	836,055	$	10,955		5.24	%
Taxable Investment Securities		165,745		975		2.35	%		142,353		727		2.04	%
Tax-exempt Investment Securities		31,831		150		2.39	%		43,307		209		2.44	%
Fed Funds Sold & Other		114,278		416		1.46	%		24,469		112		1.83	%
Total Interest Earning Assets		1,486,602	$	17,149		4.63	%		1,046,184	$	12,003		4.61	%
Nonearning Assets		111,367							65,904
Total Assets	$	1,597,969						$	1,112,088
Interest Bearing Liabilities:
Savings Deposits	$	758,594	$	1,746		0.92	%	$	541,786	$	956		0.71	%
Other Time Deposits		275,406		1,590		2.31	%		185,734		714		1.54	%
Other Borrowed Money		24,715		270		4.37	%		4,785		20		1.67	%
Fed Funds Purchased & Securities
Sold under Agreement to Repurch.		30,464		207		2.72	%		25,752		127		1.97	%
Total Interest Bearing Liabilities	$	1,089,179	$	3,813		1.40	%	$	758,057	$	1,817		0.96	%
Noninterest bearing Liabilities		280,027							212,714
Stockholders Equity	$	228,763						$	141,317
Net Interest Income and<br><br><br>interest rate spread			$	13,336		3.23	%			$	10,186		3.65	%
Net Interest Margin						3.60	%						3.92	%
Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts
	For the Twelve Months Ended							For the Twelve Months Ended
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	December 31, 2019							December 31, 2018
Interest Earning Assets:	Average<br><br><br>Balance		Interest/<br><br><br>Dividends		Yield/<br><br><br>Rate			Average<br><br><br>Balance		Interest/<br><br><br>Dividends		Yield/<br><br><br>Rate
Loans	$	1,129,231	$	62,213		5.51	%	$	831,614	$	42,303		5.09	%
Taxable Investment Securities		163,777		3,832		2.34	%		147,186		2,863		1.95	%
Tax-exempt Investment Securities		33,112		639		2.44	%		48,059		930		2.45	%
Fed Funds Sold & Other		86,971		1,622		1.86	%		21,218		333		1.57	%
Total Interest Earning Assets		1,413,091	$	68,306		4.85	%		1,048,077	$	46,429		4.46	%
Nonearning Assets		86,119							64,136
Total Assets	$	1,499,210						$	1,112,213
Interest Bearing Liabilities:
Savings Deposits	$	720,879	$	7,323		1.02	%	$	551,746	$	3,453		0.63	%
Other Time Deposits		265,046		5,619		2.12	%		183,512		2,536		1.38	%
Other Borrowed Money		25,538		1,083		4.24	%		4,946		80		1.62	%
Fed Funds Purchased & Securities
Sold under Agreement to Repurch.		29,859		734		2.46	%		26,252		503		1.92	%
Total Interest Bearing Liabilities	$	1,041,322	$	14,759		1.42	%	$	766,456	$	6,572		0.86	%
Noninterest bearing Liabilities		235,010							208,118
Stockholders Equity	$	222,878						$	137,639
Net Interest Income and<br><br><br>interest rate spread			$	53,547		3.43	%			$	39,857		3.60	%
Net Interest Margin						3.80	%						3.83	%
Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts