8-K
FARMERS & MERCHANTS BANCORP INC (FMAO)
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 19, 2022
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)
☐ 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 19, 2022, Farmers & Merchants Bancorp, Inc. issued a press release (the “Release”) announcing its earnings for the three and nine months ended September 30, 2022. 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>Number | Exhibit |
|---|---|
| 99 | Company Press Release dated October 19, 2022 |
| 104 | The Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| --- | --- |
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 19, 2022 | /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 |
EX-99
Exhibit 99
 <br><br>Post Office Box 216<br><br>307 North Defiance Street<br><br>Archbold, Ohio 43502 |
NEWS RELEASE |
|---|---|
| Company Contact: | Investor and Media Contact: |
| --- | --- |
| Lars B. Eller<br><br>President and Chief Executive Officer<br><br>Farmers & Merchants Bancorp, Inc.<br><br>(419) 446-2501<br><br>leller@fm.bank | Andrew M. Berger<br><br>Managing Director<br><br>SM Berger & Company, Inc.<br><br>(216) 464-6400<br><br>andrew@smberger.com |
Farmers & Merchants Bancorp, Inc. Reports
2022 Third-Quarter and Year-to-Date Financial Results
ARCHBOLD, OHIO, October 19, 2022, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2022 third quarter and year-to-date September 30, 2022.
2022 Third Quarter Financial Highlights Include
(Compared to the 2021 third quarter period unless noted):
• Net income increased 51.3% to a quarterly record of $9.0 million, from $5.9 million
• Earnings increased 28.3% to $0.68 per basic and diluted share, from $0.53 per basic and diluted share
• Average shares outstanding increased 16.7% as a result of the Perpetual Federal Savings Bank Acquisition
• Efficiency rate improved to 51.19% for the 2022 third quarter, and 53.16% for the 2022 nine months
• Organic loan growth of 21.3%, excluding PPP loans and loan balances at time of acquisitions
• Total loans were a record of $2.143 billion and increased 15.4% from $1.857 billion at December 31, 2021
• Total assets increased 25.5% to a record $2.784 billion
• Deposits increased 22.3% to $2.283 billion
• Strong asset quality continues as nonperforming loans declined 12.5% to $5.5 million, or 0.26% of total loans
• Net charge-offs to average loans were 0.00%, the sixth consecutive quarter at or below 0.00%
• Return on average equity, increased to 12.53% from 9.32%
• Return on average tangible equity, based on regulatory calculations, increased to 15.50% from 12.23% on a year-over-year basis
• 2022 third quarter cash dividend increased by 16.7% year-over-year to $0.21 per share
• Eric Faust named Senior Vice President and Chief Risk Officer of Farmers & Merchants State Bank
• Benét Rupp, Chief Administrative Officer, promoted to Executive Vice President
• Completed the Peoples-Sidney Financial Corporation acquisition on October 1, 2022
Lars B. Eller, President and Chief Executive Officer, stated, “Record third quarter results demonstrate the continued success of our strategic growth plan, the value we provide our local communities, and the power of our financial model. Throughout 2022, we have experienced strong organic loan growth across our Ohio, Indiana and Michigan markets as loans increased organically by $301.4 million, or 21.3% on a year-over-year basis. Robust loan growth, combined with our recent acquisitions, excellent asset quality, and stable net interest margin, have driven a 30.0% increase in net interest income after the provision for loan losses. These outstanding trends and our focus on prudently controlling operating expenses are supporting a powerful financial model as we achieved record quarterly and year-to-date net income and earnings per share.”
Mr. Eller continued, “As we enter the fourth quarter, positive momentum across many areas of our business remains strong and we started the quarter with a robust pipeline of news loans expected to close over the next three months. On
October 1, 2022, we completed the Peoples-Sidney Financial Corporation acquisition. Peoples adds slightly over $130 million in total assets to F&M, expands F&M’s community banking franchise into compelling markets throughout Shelby County Ohio, and excluding one-time transaction costs, is expected to be accretive to 2023 earnings by approximately 2.5%. We also continue to pursue opportunities for de novo growth. Expansion plans underway include new full-service offices that are expected to open over the next 12 months in Toledo, Ohio, Fort Wayne, Indiana, and Birmingham, Michigan as well as an office relocation in Auburn, Indiana.”
Income Statement
Net income for the 2022 third quarter ended September 30, 2022, was $9.0 million, compared to $5.9 million for the same period last year. Net income per basic and diluted share for the 2022 third quarter was $0.68, compared to $0.53 for the same period last year. Net income for the 2022 nine months ended September 30, 2022, was $25.3 million, compared to $15.8 million for the same period last year. Net income per basic and diluted share for the 2022 nine months was $1.94, compared to $1.41 for the same period last year.
Noninterest expense for the 2022 third quarter and nine months included approximately $0.5 million and approximately $0.5 million, respectively of one-time expenses associated with the Company’s recent acquisitions. Noninterest expense for the 2021 third quarter and nine months included $1.4 million and $2.7 million, respectively of one-time expenses associated with the Company’s recent acquisitions.
Profitability is benefitting from F&M’s larger scale, strong asset quality, and prudent expense management. The Company’s efficiency ratio improved to 51.19% during the 2022 third quarter, and 53.16% for the 2022 nine-month period. Strong profitability also drove higher returns, and ROAA, ROAE, and ROATCE all expanded on a year-over-year basis.
Deposits
At September 30, 2022, total deposits were $2.283 billion, an increase of 22.3% from September 30, 2021, and an increase of 4.1% from December 31, 2021. F&M continues to see growing customer preferences to more stable and secure saving instruments as deposits have increased since the COVID-19 crisis began. The Company’s cost of interest-bearing liabilities was 0.68% for the quarter ended September 30, 2022, compared to 0.45% for the quarter ended September 30, 2021, and 0.51% for the quarter ended December 31, 2021.
Loan Portfolio and Asset Quality
Total net loans, at September 30, 2022, increased 43.3%, or by $647.1 million to $2.143 billion, compared to $1.496 billion at September 30, 2021, and up 15.4% from $1.857 billion at December 31, 2021. The year-over-year improvement resulted primarily from the contribution of continued organic loan growth and the completion of the Perpetual Federal Savings Bank and Ossian Financial Services acquisitions.
Not including the Ossian acquisition and PPP, loans increased 21.3% organically or by $301.4 million from the same period a year ago. Additionally, there were only $7,000 of PPP loans within F&M’s loan portfolio at September 30, 2022.
F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $5.5 million, or 0.26% of total loans at September 30, 2022, compared to $6.2 million, or 0.42% at September 30, 2021. Due to loan growth, F&M continues to prudently fund its allowance for loan and lease losses which has increased 27.3% on a year-over-year basis.
At September 30, 2022, the Company’s allowance for loan and lease losses to nonperforming loans was 365.44%, compared to 251.26% at September 30, 2021. As a result of F&M’s recent acquisitions, the Company has a total gross credit mark of nearly $6.0 million, which further enhances F&M’s allowance at September 30, 2022. Including the total gross credit mark, F&M’s allowance for loan and lease losses to total loans improved to 1.21% at September 30, 2022.
Mr. Eller concluded, “Economic uncertainty continues to increase as a result of more restrictive monetary policies and rapid inflation. We are watching our markets closely and working with our business, retail, and agricultural customers to help them navigate a more fluid economic environment. Overall, F&M is well positioned for changes in the economic cycle as our asset quality remains strong, and we remain well capitalized. In addition, while we anticipate inflation to impact noninterest expenses and competition for deposits to increase our cost of funds in the coming quarters, our
efficiency ratio is strong, and our larger scale continues to benefit profitability. As you can see, trends in our business are at record levels, and we believe 2022 will be another record year of earnings and growth for F&M.”
Stockholders’ Equity and Dividends
Total stockholders’ equity increased 10.1% to $280.6 million at September 30, 2022, from $254.7 million at September 30, 2021. At September 30, 2022, the Company had a Tier 1 leverage ratio of 9.11%, compared to 9.45% at September 30, 2021.
Tangible stockholders’ equity on a regulatory basis increased to $234.1 million at September 30, 2022, compared to $194.6 million at September 30, 2021. On a per share basis, tangible stockholders’ equity at September 30, 2022, was $17.86 per share, compared to $17.33 per share at September 30, 2021.
For the nine months ended September 30, 2022, the Company has declared cash dividends of $0.6025 per share, which is a 15.9% increase over the same period last year. Dividends declared for the 2022 nine months included a special one-time cash dividend of $0.0125 to honor F&M’s 125th anniversary, and a 16.7% year-over-year increase for the 2022 third quarter dividend payment to $0.21 per share. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over 28 consecutive years. For the nine months ended September 30, 2022, the dividend payout ratio was 40.58% compared to 36.55% for the same period last year.
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. Our locations are in Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Shelby, Williams, and Wood counties in Western Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties, and we have Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Bryan and Oxford, Ohio.
Safe harbor statement
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, capital market conditions, or the effects of the COVID-19 pandemic, and its impacts on our credit quality and business operations, as well as its impact on general economic and financial 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. A reconciliation of GAAP to non-GAAP financial measures is included within this press release.
MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
(Unaudited) (in thousands of dollars, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September<br> 30, 2022 | June<br>30, 2022 | March<br>31, 2022 | December<br>31, 2021 | September<br>30, 2021 | September<br> 30, 2022 | September<br>30, 2021 | ||||||||||||||
| Interest Income | ||||||||||||||||||||
| Loans, including fees | $ | 24,119 | $ | 22,388 | $ | 20,455 | $ | 21,008 | $ | 18,766 | $ | 66,962 | $ | 50,637 | ||||||
| Debt securities: | ||||||||||||||||||||
| U.S. Treasury and <br> government <br> agencies | 1,049 | 1,035 | 1,023 | 964 | 924 | 3,107 | 2,532 | |||||||||||||
| Municipalities | 373 | 322 | 300 | 289 | 284 | 995 | 881 | |||||||||||||
| Dividends | 93 | 57 | 42 | 49 | 44 | 192 | 125 | |||||||||||||
| Federal funds sold | - | 9 | 10 | 10 | 10 | 19 | 21 | |||||||||||||
| Other | 213 | 100 | 69 | 103 | 94 | 382 | 221 | |||||||||||||
| Total interest income | 25,847 | 23,911 | 21,899 | 22,423 | 20,122 | 71,657 | 54,417 | |||||||||||||
| Interest Expense | ||||||||||||||||||||
| Deposits | 2,166 | 1,379 | 1,360 | 1,581 | 1,221 | 4,905 | 3,837 | |||||||||||||
| Federal funds purchased <br> and securities sold <br> under agreement to <br> repurchase | 416 | 166 | 152 | 155 | 165 | 734 | 494 | |||||||||||||
| Borrowed funds | 398 | 218 | 335 | 361 | 87 | 951 | 424 | |||||||||||||
| Subordinated notes | 284 | 284 | 269 | 291 | 199 | 837 | 199 | |||||||||||||
| Total interest <br> expense | 3,264 | 2,047 | 2,116 | 2,388 | 1,672 | 7,427 | 4,954 | |||||||||||||
| Net Interest Income - <br> Before Provision for <br> Loan Losses | 22,583 | 21,864 | 19,783 | 20,035 | 18,450 | 64,230 | 49,463 | |||||||||||||
| Provision for Loan <br> Losses | 1,637 | 1,628 | 580 | 444 | 659 | 3,845 | 3,000 | |||||||||||||
| Net Interest Income <br> After Provision for <br> Loan Losses | 20,946 | 20,236 | 19,203 | 19,591 | 17,791 | 60,385 | 46,463 | |||||||||||||
| Noninterest Income | ||||||||||||||||||||
| Customer service fees | 2,300 | 2,148 | 2,648 | 2,417 | 2,242 | 7,096 | 7,254 | |||||||||||||
| Other service charges<br> and fees | 1,105 | 1,008 | 998 | 1,026 | 1,010 | 3,111 | 2,722 | |||||||||||||
| Net gain on sale of loans | 327 | 164 | 697 | 1,074 | 822 | 1,188 | 2,823 | |||||||||||||
| Net gain on sale of <br> available-for-sale <br> securities | - | - | - | - | - | - | 293 | |||||||||||||
| Total noninterest <br> income | 3,732 | 3,320 | 4,343 | 4,517 | 4,074 | 11,395 | 13,092 | |||||||||||||
| Noninterest Expense | ||||||||||||||||||||
| Salaries and wages | 5,479 | 5,366 | 5,502 | 5,761 | 5,442 | 16,347 | 14,423 | |||||||||||||
| Employee benefits | 1,392 | 1,546 | 2,054 | 1,792 | 1,621 | 4,992 | 5,530 | |||||||||||||
| Net occupancy expense | 693 | 522 | 598 | 532 | 529 | 1,813 | 1,652 | |||||||||||||
| Furniture and equipment | 1,047 | 1,008 | 1,056 | 782 | 903 | 3,111 | 2,542 | |||||||||||||
| Data processing | 781 | 654 | 604 | 1,020 | 1,548 | 2,039 | 2,481 | |||||||||||||
| Franchise taxes | 254 | 757 | 418 | 361 | 372 | 1,429 | 1,112 | |||||||||||||
| ATM expense | 580 | 544 | 532 | 478 | 460 | 1,656 | 1,368 | |||||||||||||
| Advertising | 578 | 300 | 237 | 431 | 439 | 1,115 | 1,005 | |||||||||||||
| Net (gain) loss on sale <br> of other assets owned | - | (266 | ) | (5 | ) | 13 | 219 | (271 | ) | 421 | ||||||||||
| FDIC assessment | 271 | 270 | 114 | 265 | 296 | 655 | 808 | |||||||||||||
| Mortgage servicing <br> rights amortization | (50 | ) | 59 | 26 | 266 | 285 | 35 | 1,314 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Consulting fees | 254 | 233 | 178 | 761 | 256 | 665 | 873 | |||||||||||||
| Other general and <br> administrative | 2,192 | 2,242 | 2,179 | 1,964 | 1,951 | 6,613 | 6,211 | |||||||||||||
| Total noninterest <br> expense | 13,471 | 13,235 | 13,493 | 14,426 | 14,321 | 40,199 | 39,740 | |||||||||||||
| Income Before Income<br> Taxes | 11,207 | 10,321 | 10,053 | 9,682 | 7,544 | 31,581 | 19,815 | |||||||||||||
| Income Taxes | 2,253 | 2,050 | 1,951 | 1,999 | 1,624 | 6,254 | 4,003 | |||||||||||||
| Net Income | 8,954 | 8,271 | 8,102 | 7,683 | 5,920 | 25,327 | 15,812 | |||||||||||||
| Other Comprehensive <br> Income (Loss) (Net of <br> Tax): | ||||||||||||||||||||
| Net unrealized gain <br> (loss) on available-<br> for-sale securities | (8,197 | ) | (14,602 | ) | (20,939 | ) | (5,170 | ) | 173 | (43,738 | ) | (5,778 | ) | |||||||
| Reclassification <br> adjustment for realized <br> gain on sale of <br> available-for-sale <br> securities | - | - | - | - | - | - | (293 | ) | ||||||||||||
| Net unrealized gain <br> (loss) on available-<br> for-sale securities | (8,197 | ) | (14,602 | ) | (20,939 | ) | (5,170 | ) | 173 | (43,738 | ) | (6,071 | ) | |||||||
| Tax expense (benefit) | (1,721 | ) | (3,067 | ) | (4,397 | ) | (1,085 | ) | 36 | (9,185 | ) | (1,275 | ) | |||||||
| Other comprehensive<br> income (loss) | (6,476 | ) | (11,535 | ) | (16,542 | ) | (4,085 | ) | 137 | (34,553 | ) | (4,796 | ) | |||||||
| Comprehensive Income <br> (Loss) | $ | 2,478 | $ | (3,264 | ) | $ | (8,440 | ) | $ | 3,598 | $ | 6,057 | $ | (9,226 | ) | $ | 11,016 | |||
| Basic and Diluted <br> Earnings Per Share | $ | 0.68 | $ | 0.63 | $ | 0.62 | $ | 0.59 | $ | 0.53 | $ | 1.94 | $ | 1.41 | ||||||
| Dividends Declared | $ | 0.2100 | $ | 0.2025 | $ | 0.1900 | $ | 0.1900 | $ | 0.1800 | $ | 0.6025 | $ | 0.5200 |
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands of dollars, except share data)
| September<br> 30, 2022 | June<br>30, 2022 | March<br>31, 2022 | December<br>31, 2021 | September<br>30, 2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Assets | |||||||||||||||
| Cash and due from banks | $ | 69,680 | $ | 69,955 | $ | 94,118 | $ | 135,485 | $ | 112,875 | |||||
| Federal funds sold | 990 | 1,484 | 45,404 | 45,338 | 45,203 | ||||||||||
| Total cash and cash equivalents | 70,670 | 71,439 | 139,522 | 180,823 | 158,078 | ||||||||||
| Interest-bearing time deposits | 5,187 | 6,684 | 8,677 | 10,913 | 14,622 | ||||||||||
| Securities - available-for-sale | 395,485 | 399,687 | 413,996 | 429,931 | 426,717 | ||||||||||
| Other securities, at cost | 8,227 | 8,735 | 8,568 | 8,162 | 4,905 | ||||||||||
| Loans held for sale | 2,182 | 4,230 | 6,060 | 7,714 | 3,735 | ||||||||||
| Loans, net | 2,122,626 | 2,016,394 | 1,945,449 | 1,841,177 | 1,479,864 | ||||||||||
| Premises and equipment | 26,484 | 26,492 | 26,653 | 26,913 | 26,476 | ||||||||||
| Goodwill | 80,434 | 80,434 | 80,434 | 80,434 | 55,214 | ||||||||||
| Mortgage servicing rights | 3,583 | 3,426 | 3,336 | 3,157 | 3,097 | ||||||||||
| Other real estate owned | - | - | - | 159 | 167 | ||||||||||
| Bank owned life insurance | 28,051 | 27,874 | 27,715 | 27,558 | 27,397 | ||||||||||
| Other assets | 40,831 | 29,321 | 25,735 | 21,359 | 18,711 | ||||||||||
| Total Assets | $ | 2,783,760 | $ | 2,674,716 | $ | 2,686,145 | $ | 2,638,300 | $ | 2,218,983 | |||||
| Liabilities and Stockholders' Equity | |||||||||||||||
| Liabilities | |||||||||||||||
| Deposits | |||||||||||||||
| Noninterest-bearing | $ | 506,928 | $ | 503,395 | $ | 497,249 | $ | 473,689 | $ | 438,076 | |||||
| Interest-bearing | |||||||||||||||
| NOW accounts | 705,888 | 678,552 | 681,975 | 650,466 | 646,237 | ||||||||||
| Savings | 607,375 | 617,850 | 626,787 | 597,828 | 529,532 | ||||||||||
| Time | 462,845 | 424,249 | 447,586 | 471,479 | 252,383 | ||||||||||
| Total deposits | 2,283,036 | 2,224,046 | 2,253,597 | 2,193,462 | 1,866,228 | ||||||||||
| Federal funds purchased and securities <br> sold under agreements to repurchase | 55,802 | 71,944 | 31,680 | 29,268 | 29,601 | ||||||||||
| Federal Home Loan Bank (FHLB) <br> advances | 102,147 | 42,635 | 22,656 | 24,065 | 17,868 | ||||||||||
| Other borrowings | 10,000 | - | 40,000 | 40,000 | - | ||||||||||
| Subordinated notes, net of unamortized<br> issuance costs | 34,557 | 34,528 | 34,499 | 34,471 | 34,441 | ||||||||||
| Dividend payable | 2,727 | 2,626 | 2,462 | 2,461 | 2,002 | ||||||||||
| Accrued expenses and other liabilities | 14,913 | 18,064 | 14,773 | 17,406 | 14,097 | ||||||||||
| Total liabilities | 2,503,182 | 2,393,843 | 2,399,667 | 2,341,133 | 1,964,237 | ||||||||||
| Commitments and Contingencies | |||||||||||||||
| Stockholders' Equity | |||||||||||||||
| Common stock - No par value 20,000,000 <br> shares authorized; issued and outstanding <br> 14,063,999 shares 9/30/22 and 12/31/21 | 121,811 | 123,145 | 122,886 | 122,674 | 81,382 | ||||||||||
| Treasury stock - 956,499 shares 9/30/22, <br> 997,766 shares 12/31/21 | (11,547 | ) | (11,822 | ) | (11,739 | ) | (11,724 | ) | (11,718 | ) | |||||
| Retained earnings | 208,051 | 200,811 | 195,057 | 189,401 | 184,181 | ||||||||||
| Accumulated other comprehensive <br> income (loss) | (37,737 | ) | (31,261 | ) | (19,726 | ) | (3,184 | ) | 901 | ||||||
| Total stockholders' equity | 280,578 | 280,873 | 286,478 | 297,167 | 254,746 | ||||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,783,760 | $ | 2,674,716 | $ | 2,686,145 | $ | 2,638,300 | $ | 2,218,983 |
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected financial data | September<br> 30, 2022 | June<br>30, 2022 | March<br>31, 2022 | December<br>31, 2021 | September<br>30, 2021 | September<br> 30, 2022 | September<br>30, 2021 | ||||||||||||||
| Return on average assets | 1.31 | % | 1.23 | % | 1.21 | % | 1.17 | % | 1.07 | % | 1.25 | % | 1.01 | % | |||||||
| Return on average equity | 12.53 | % | 11.66 | % | 11.00 | % | 10.94 | % | 9.32 | % | 11.72 | % | 8.40 | % | |||||||
| Yield on earning assets | 4.00 | % | 3.79 | % | 3.47 | % | 3.59 | % | 3.85 | % | 3.76 | % | 3.70 | % | |||||||
| Cost of interest bearing <br> liabilities | 0.68 | % | 0.44 | % | 0.45 | % | 0.51 | % | 0.45 | % | 0.53 | % | 0.47 | % | |||||||
| Net interest spread | 3.32 | % | 3.35 | % | 3.02 | % | 3.08 | % | 3.40 | % | 3.23 | % | 3.23 | % | |||||||
| Net interest margin | 3.49 | % | 3.47 | % | 3.14 | % | 3.21 | % | 3.53 | % | 3.37 | % | 3.36 | % | |||||||
| Efficiency | 51.19 | % | 50.17 | % | 55.44 | % | 58.76 | % | 63.50 | % | 53.16 | % | 63.70 | % | |||||||
| Dividend payout ratio | 30.45 | % | 30.02 | % | 30.64 | % | 32.03 | % | 33.81 | % | 40.58 | % | 36.55 | % | |||||||
| Tangible book value <br> per share (1) | $ | 17.86 | $ | 17.43 | $ | 16.96 | $ | 16.49 | $ | 17.33 | |||||||||||
| Tier 1 capital to <br> average assets | 9.11 | % | 8.75 | % | 8.51 | % | 8.47 | % | 9.45 | % | |||||||||||
| Average Shares Outstanding | 13,083,145 | 13,065,975 | 13,066,272 | 13,046,299 | 11,209,732 | 13,071,859 | 11,199,309 | ||||||||||||||
| (1) Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities) | |||||||||||||||||||||
| Loans | September<br> 30, 2022 | June<br>30, 2022 | March<br>31, 2022 | December<br>31, 2021 | September<br>30, 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| (Dollar amounts in thousands) | |||||||||||||||||||||
| Commercial real estate | $ | 1,063,661 | $ | 979,176 | $ | 910,839 | $ | 848,477 | $ | 728,852 | |||||||||||
| Agricultural real estate | 205,089 | 199,972 | 196,223 | 198,343 | 179,374 | ||||||||||||||||
| Consumer real estate | 416,001 | 410,450 | 410,120 | 395,873 | 202,454 | ||||||||||||||||
| Commercial and industrial | 229,388 | 232,975 | 216,918 | 208,270 | 194,767 | ||||||||||||||||
| Agricultural | 128,615 | 127,143 | 140,709 | 118,368 | 105,580 | ||||||||||||||||
| Consumer | 70,602 | 55,411 | 57,521 | 57,737 | 55,521 | ||||||||||||||||
| Other | 30,662 | 31,243 | 31,573 | 32,089 | 31,096 | ||||||||||||||||
| Less: Net deferred loan fees <br> and costs | (1,402 | ) | (1,552 | ) | (1,683 | ) | (1,738 | ) | (2,082 | ) | |||||||||||
| Total loans, net | $ | 2,142,616 | $ | 2,034,818 | $ | 1,962,220 | $ | 1,857,419 | $ | 1,495,562 |
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA (continued)
| Asset quality data | September<br> 30, 2022 | June<br>30, 2022 | March<br>31, 2022 | December<br>31, 2021 | September<br>30, 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollar amounts in thousands) | |||||||||||||||
| Nonaccrual loans | $ | 5,470 | $ | 5,247 | $ | 8,581 | $ | 8,076 | $ | 6,248 | |||||
| Troubled debt restructuring | $ | 3,978 | $ | 2,748 | $ | 7,268 | $ | 7,614 | $ | 6,035 | |||||
| 90 day past due and accruing | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
| Nonperforming loans | $ | 5,470 | $ | 5,247 | $ | 8,581 | $ | 8,076 | $ | 6,248 | |||||
| Other real estate owned | $ | - | $ | - | $ | - | $ | 159 | $ | 167 | |||||
| Nonperforming assets | $ | 5,470 | $ | 5,247 | $ | 8,581 | $ | 8,235 | $ | 6,415 | |||||
| Allowance for loan and lease losses <br> (ALLL) | $ | 19,990 | $ | 18,424 | $ | 16,771 | $ | 16,242 | $ | 15,698 | |||||
| Total credit mark | 5,959 | 6,724 | 7,201 | 7,616 | 2,348 | ||||||||||
| Adjusted ALLL with credit mark <br> included | $ | 25,949 | $ | 25,148 | $ | 23,972 | $ | 23,858 | $ | 18,046 | |||||
| Allowance for loan and lease<br> losses/total loans | 0.93 | % | 0.91 | % | 0.85 | % | 0.87 | % | 1.05 | % | |||||
| Adjusted ALLL with credit mark/total <br> loans | 1.21 | % | 1.24 | % | 1.22 | % | 1.28 | % | 1.21 | % | |||||
| Net charge-offs: | |||||||||||||||
| Quarter-to-date | $ | 71 | $ | (25 | ) | $ | 51 | $ | (101 | ) | $ | 48 | |||
| Year-to-date | $ | 97 | $ | 26 | $ | 51 | $ | 874 | $ | 974 | |||||
| Net charge-offs to average loans | |||||||||||||||
| Quarter-to-date | 0.00 | % | 0.00 | % | 0.00 | % | -0.01 | % | 0.00 | % | |||||
| Year-to-date | 0.00 | % | 0.00 | % | 0.00 | % | 0.06 | % | 0.07 | % | |||||
| Nonperforming loans/total loans | 0.26 | % | 0.26 | % | 0.44 | % | 0.43 | % | 0.42 | % | |||||
| Allowance for loan and lease <br> losses/nonperforming loans | 365.44 | % | 351.44 | % | 198.29 | % | 201.11 | % | 251.26 | % |
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 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | |||||||||||||
| Interest Earning Assets: | Average <br>Balance | Interest/<br>Dividends | Annualized<br>Yield/Rate | Average <br>Balance | Interest/<br>Dividends | Annualized<br>Yield/Rate | ||||||||
| Loans | $ | 2,082,486 | $ | 24,119 | 4.63 | % | $ | 1,490,988 | $ | 18,766 | 5.04 | % | ||
| Taxable investment securities | 422,250 | 1,426 | 1.35 | % | 398,060 | 1,177 | 1.18 | % | ||||||
| Tax-exempt investment securities | 25,169 | 89 | 1.79 | % | 17,293 | 75 | 2.20 | % | ||||||
| Fed funds sold & other | 58,266 | 213 | 1.46 | % | 187,398 | 104 | 0.22 | % | ||||||
| Total Interest Earning Assets | 2,588,171 | $ | 25,847 | 4.00 | % | 2,093,739 | $ | 20,122 | 3.85 | % | ||||
| Nonearning Assets | 150,044 | 127,160 | ||||||||||||
| Total Assets | $ | 2,738,215 | $ | 2,220,899 | ||||||||||
| Interest Bearing Liabilities: | ||||||||||||||
| Savings deposits | $ | 1,328,344 | $ | 1,586 | 0.48 | % | $ | 1,181,103 | $ | 560 | 0.19 | % | ||
| Other time deposits | 423,668 | 580 | 0.55 | % | 252,966 | 661 | 1.05 | % | ||||||
| Other borrowed money | 60,455 | 398 | 2.63 | % | 17,868 | 87 | 1.95 | % | ||||||
| Fed funds purchased & securities | ||||||||||||||
| sold under agreement to repurchase | 63,388 | 416 | 2.63 | % | 29,729 | 165 | 2.22 | % | ||||||
| Subordinated notes | 34,538 | 284 | 3.29 | % | 23,807 | 199 | 3.34 | % | ||||||
| Total Interest Bearing Liabilities | $ | 1,910,393 | $ | 3,264 | 0.68 | % | $ | 1,505,473 | $ | 1,672 | 0.45 | % | ||
| Noninterest Bearing Liabilities | 542,077 | 461,252 | ||||||||||||
| Stockholders' Equity | $ | 285,745 | $ | 254,174 | ||||||||||
| Net Interest Income and <br> Interest Rate Spread | $ | 22,583 | 3.32 | % | $ | 18,450 | 3.40 | % | ||||||
| Net Interest Margin | 3.49 | % | 3.53 | % | ||||||||||
| 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 |
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES (continued)
(in thousands of dollars, except percentages)
| For the Nine Months Ended | For the Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | |||||||||||||
| Interest Earning Assets: | Average <br>Balance | Interest/<br>Dividends | Annualized<br>Yield/Rate | Average <br>Balance | Interest/<br>Dividends | Annualized<br>Yield/Rate | ||||||||
| Loans | $ | 1,997,081 | $ | 66,962 | 4.47 | % | $ | 1,413,625 | $ | 50,637 | 4.78 | % | ||
| Taxable investment securities | 424,882 | 4,065 | 1.28 | % | 363,284 | 3,286 | 1.21 | % | ||||||
| Tax-exempt investment securities | 21,794 | 229 | 1.77 | % | 18,387 | 252 | 2.31 | % | ||||||
| Fed funds sold & other | 101,922 | 401 | 0.52 | % | 171,015 | 242 | 0.19 | % | ||||||
| Total Interest Earning Assets | 2,545,679 | $ | 71,657 | 3.76 | % | 1,966,311 | $ | 54,417 | 3.70 | % | ||||
| Nonearning Assets | 158,378 | 134,108 | ||||||||||||
| Total Assets | $ | 2,704,057 | $ | 2,100,419 | ||||||||||
| Interest Bearing Liabilities: | ||||||||||||||
| Savings deposits | $ | 1,315,793 | $ | 2,951 | 0.30 | % | $ | 1,106,674 | $ | 1,700 | 0.20 | % | ||
| Other time deposits | 439,534 | 1,954 | 0.59 | % | 248,426 | 2,137 | 1.15 | % | ||||||
| Other borrowed money | 54,184 | 951 | 2.34 | % | 17,859 | 424 | 3.17 | % | ||||||
| Fed funds purchased & securities | ||||||||||||||
| sold under agreement to repurchase | 42,584 | 734 | 2.30 | % | 29,973 | 494 | 2.20 | % | ||||||
| Subordinated notes | 34,509 | 837 | 3.23 | % | 8,023 | 199 | 3.31 | % | ||||||
| Total Interest Bearing Liabilities | $ | 1,886,604 | $ | 7,427 | 0.53 | % | $ | 1,410,955 | $ | 4,954 | 0.47 | % | ||
| Noninterest Bearing Liabilities | 529,439 | 438,518 | ||||||||||||
| Stockholders' Equity | $ | 288,014 | $ | 250,946 | ||||||||||
| Net Interest Income and <br> Interest Rate Spread | $ | 64,230 | 3.23 | % | $ | 49,463 | 3.23 | % | ||||||
| Net Interest Margin | 3.37 | % | 3.36 | % | ||||||||||
| 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 |
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF TANGIBLE BOOK VALUE
| Actual End of Period | Regulatory End of Period | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-GAAP Reconciliation of Tangible Book Value | Year to Date | Year to Date | ||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||
| Shares Outstanding | 13,107,500 | 11,232,320 | 13,107,500 | 11,232,320 | ||||||||
| Tangible Equity | ||||||||||||
| Equity | $ | 280,578 | $ | 254,746 | $ | 280,578 | $ | 254,746 | ||||
| Goodwill | 80,434 | 55,214 | 80,434 | 55,214 | ||||||||
| Other Intangible | 3,744 | 3,994 | 3,744 | 3,994 | ||||||||
| Comprehensive Adjustment* | - | - | 37,737 | (901 | ) | |||||||
| Tangible Equity | $ | 196,400 | $ | 195,538 | $ | 234,137 | $ | 194,637 | ||||
| Shares Outstanding | 13,108 | 11,232 | 13,108 | 11,232 | ||||||||
| Tangible Book Equity per Share | $ | 14.98 | $ | 17.41 | $ | 17.86 | $ | 17.33 | ||||
| Actual Average | Regulatory Average | |||||||||||
| Year to Date | Year to Date | |||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||
| Net Income | $ | 25,327 | $ | 15,812 | $ | 25,327 | $ | 15,812 | ||||
| Acquisition Costs - Tax Adjusted | 463 | 2,155 | 463 | 2,155 | ||||||||
| Average Shares Outstanding | 13,071,859 | 11,199,309 | 13,071,859 | 11,199,309 | ||||||||
| Average Tangible Equity | ||||||||||||
| Average Equity | $ | 288,014 | $ | 250,946 | $ | 288,014 | $ | 250,946 | ||||
| Average Goodwill | 80,434 | 51,884 | 80,434 | 51,884 | ||||||||
| Average Other Intangible | 4,119 | 3,887 | 4,119 | 3,887 | ||||||||
| Average Comprehensive Adjustment* | - | - | 21,181 | (2,442 | ) | |||||||
| Average Tangible Equity | $ | 203,461 | $ | 195,175 | $ | 224,642 | $ | 192,733 | ||||
| Average Shares Outstanding | 13,072 | 11,199 | 13,072 | 11,199 | ||||||||
| Average Tangible Book Equity per Share | $ | 15.56 | $ | 17.43 | $ | 17.19 | $ | 17.21 | ||||
| Return on Average Tangible Equity | 16.60 | % | 10.80 | % | 15.03 | % | 10.94 | % | ||||
| Return on Average Tangible Equity w/o Acquisition | 16.90 | % | 12.27 | % | 15.31 | % | 12.43 | % | ||||
| *The Bank has adopted the Accumulated Other Comprehensive Income (AOCI) opt out election which removed AOCI from the calculation of tangible equity for regulatory purposes. |