Farmers & Merchants Bancorp, Inc. Reports 2023 First Quarter Financial Results

Farmers & Merchants Bancorp, Inc.

ARCHBOLD, Ohio, April 19, 2023 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2023 first quarter ended March 31, 2023.

2023 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

• Net interest income before provision for credit losses increased 9.6% to $21.7 million

• Adopted CECL accounting standards, which led to a one-time adjustment to equity of $3.4 million, net of tax

• Net income of $6.5 million, compared to $8.1 million

• Earnings were $0.47 per basic and diluted share, compared to $0.62 per basic and diluted share

• Total loans increased 24.7% to a record $2.447 billion

• Organic loan growth of 19.4%, excluding PPP loans and the Peoples-Sidney Financial Corporation acquisition

• Total assets increased 14.3% to a record $3.07 billion, and up 1.8% from December 31, 2022

• Deposits increased 11.5% to a record $2.51 billion, and up 1.8% from December 31, 2022

• Uninsured deposits to total deposits of approximately 18% at March 31, 2023

• Strong asset quality continues as nonperforming loans declined 10.1% to $7.7 million, or 0.32% of total loans

• Net charge-offs to average loans were 0.00%

• Allowance for credit losses, with the accretable yield adjustment from recent acquisitions, of 319.22% of nonperforming loans

Lars B. Eller, President and Chief Executive Officer, stated, “F&M’s increased scale, strong balance sheet, and highly profitable financial model supports our growth initiatives, while providing us with the flexibility to invest across our business and return capital to shareholders. Despite increased economic volatility, we remain focused on executing our new three-year strategic growth plan and I am pleased with the progress we are making. During the quarter, we successfully completed the integration of the October 2022 acquisition of the Peoples-Sidney Financial Corporation. We implemented CECL accounting standards, which maintained our allowance, even as non-performing loans declined 10.1% over the past 12 months. In the first quarter, we completed the conversion of our credit card sale with new cards issued and the scorecard rewards carried over to the new provider. In addition, we completed the first phase of our previously announced investments, preparing to open three new offices in the second quarter as well as enhancing our training, commercial and deposit operations, customer care center, and risk and compliance teams and capabilities. Finally, we added a new, highly experienced lending team in our Fort Wayne region to lead our growth within this compelling market.”

Mr. Eller continued, “We grew total deposits by $44.3 million over the past three months, despite extremely high competition for deposits. Competition for deposits has also significantly increased our cost of interest-bearing liabilities. Interest expense on deposits increased over five times from $1.4 million in the 2022 first quarter to $8.2 million, compared to an 11.5% increase in total deposits over this period. Despite these trends, net interest income before provision for credit losses increased 9.6% to a first quarter record as a result of strong loan growth and higher yields on loans.”

“Profitability was impacted by several strategic one-time expenses that we incurred during the 2023 first quarter including $541,000 of total charges related to the conversion of our credit card platform. In addition, we sold $21.6 million of investments and recognized a loss of $891,000 during the quarter, which temporarily reduced ROA by 9 basis points and ROE by 93 basis points. We expect this opportunistic sale to contribute to earnings going forward and earn a payback in approximately eight months. Offsetting these actions was significant growth in income from agriculture servicing rights, which were recognized at a value of $1.5 million during the first quarter. Overall, first quarter profitability was in line with our expectations. We expect the actions taken in the first quarter will enhance profitability going forward and we remain focused on investing in our growth initiatives, controlling operating expenses, and managing our cost of funds,” continued Mr. Eller.

Income Statement

Net income for the 2023 first quarter ended March 31, 2023, was $6.5 million, compared to $8.1 million for the same period last year. Net income per basic and diluted share for the 2023 first quarter was $0.47, compared to $0.62 for the same period last year.

Deposits
At March 31, 2023, total deposits were a record $2.513 billion, an increase of 11.5% from March 31, 2022, and an increase of 1.8% from December 31, 2022. The Company’s cost of interest-bearing liabilities increased to 1.85% for the quarter ended March 31, 2023, compared to 0.45% for the quarter ended March 31, 2022, and 1.32% for the quarter ended December 31, 2022.

At March 31, 2023, F&M’s average deposit account had an average balance of $25,544. In addition, uninsured deposits to total deposits were approximately 18% for the quarter ended March 31, 2023.

Loan Portfolio and Asset Quality
Total loans, net at March 31, 2023, increased 24.5%, or by $476.6 million to a record $2.422 billion, compared to $1.945 billion at March 31, 2022, and up 3.7% from $2.336 billion at December 31, 2022. The year-over-year improvement resulted primarily from the contribution of continued strong organic loan growth and the completion of the Peoples acquisition. Not including the Peoples acquisition, total net loans increased 19.1% organically, or by $371.9 million from the same period a year ago.

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $7.7 million, or 0.32% of total loans at March 31, 2023, compared to $8.6 million, or 0.44% of total loans at March 31, 2022. Loans past due were 0.52% of the loan portfolio at March 31, 2023, which included one large farm loan that was paid off after the quarter ended and another loan that is expected to be refinanced through another bank in the 2023 second quarter. Past due loans adjusted for these two credits as a percent of the loan portfolio would have been 0.13% at March 31, 2023. CRE loans represented 50.1% of the Company’s total loan portfolio at March 31, 2023.

F&M maintains a well-balanced, diverse and high performing CRE portfolio, which included the following categories at March 31, 2023:

CRE Category		Dollar Balance			Percent of RE Portfolio(*)		Percent of Total Loan Portfolio(*)
Multi Family		$204,510			16.7%		8.4%
Retail		$217,447			17.7%		8.9%
Industrial		$174,296			14.2%		7.1%
Hotels		$151,562			12.4%		6.2%
Office		$96,087			7.8%		3.9%
Gas Stations		$59,239			4.8%		2.4%
Senior Living		$41,407			3.4%		1.7%
Food Service		$32,788			2.7%		1.3%
Other		$247,979			20.2%		10.1%
Total CRE		$1,225,315			100.0%		50.1%

 * Numbers have been rounded

On January 1, 2023, F&M adopted ASU 2016-13 - Measurement of Credit Losses on Financial Instruments and implemented the current expected credit losses (“CECL”) accounting standards. As a result, the Company recorded the one-time adjustment from equity into the allowance for credit losses and unfunded commitment liability in the amount of $4.3 million, or $3.4 million, net of tax. The adoption of CECL did not have a material impact on the Bank’s regulatory capital ratios.

At March 31, 2023, the Company’s allowance for credit losses to nonperforming loans was 319.22%, compared to 198.29% at March 31, 2022. As a result of F&M’s recent acquisitions, the Company has an accretable yield adjustment of $5.8 million, which further enhances F&M’s allowance at March 31, 2023. Including the accretable yield adjustment, F&M’s allowance for credit losses to total loans was 1.24% at March 31, 2023, compared to 1.22% at March 31, 2022.

Mr. Eller concluded, “We expect to make approximately $7 million of annual strategic investments during 2023 across our business. These investments combined with a higher cost of funds are expected to temporarily impact profitability in 2023. We believe earnings growth will reaccelerate in 2024 as we benefit from the investments and strategies we are pursuing. I am encouraged by the progress we are making and the dedication of our team members, as we remain focused on supporting the financial needs of our Ohio, Indiana and Michigan communities.”

Stockholders’ Equity and Dividends
Total stockholders’ equity increased 6.7% to $305.8 million at March 31, 2023, from $286.5 million at March 31, 2022. At March 31, 2023, the Company had a Tier 1 leverage ratio of 8.36%, compared to 8.51% at March 31, 2022.

Based on a regulatory basis, tangible stockholders’ equity increased to $244.2 million at March 31, 2023, compared to $221.6 million at March 31, 2022. On a per share basis, regulatory tangible stockholders’ equity at March 31, 2023, was $17.92 per share, compared to $16.96 per share at March 31, 2022. A non-GAAP reconciliation is provided as a table in this press release.

For the 2023 first quarter, the company declared cash dividends of $0.21 per share, which is a 10.5% increase over the 2022 first quarter declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 28 consecutive years. For the 2023 first quarter, the dividend payout ratio was 43.79% compared to 30.64% 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
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, 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.

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, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
Interest Income
Loans, including fees			$	29,703			$	27,302			$	24,119			$	22,388			$	20,455
Debt securities:
U.S. Treasury and government agencies				1,068				1,118				1,049				1,035				1,023
Municipalities				408				420				373				322				300
Dividends				123				126				93				57				42
Federal funds sold				21				2				-				9				10
Other.				479				524				213				100				69
Total interest income				31,802				29,492				25,847				23,911				21,899
Interest Expense
Deposits				8,151				4,978				2,166				1,379				1,360
Federal funds purchased and securities sold
under agreements to repurchase				405				463				416				166				152
Borrowed funds				1,280				1,209				398				218				335
Subordinated notes				284				285				284				284				269
Total interest expense				10,120				6,935				3,264				2,047				2,116
Net Interest Income - Before Provision for Credit Losses*				21,682				22,557				22,583				21,864				19,783
Provision for Credit Losses*				817				755				1,637				1,628				580
Net Interest Income After Provision for Credit Losses*				20,865				21,802				20,946				20,236				19,203
Noninterest Income
Customer service fees				2,447				2,862				2,300				2,148				2,648
Other service charges and fees				2,554				1,115				1,105				1,008				998
Net gain on sale of loans				67				165				327				164				697
Net loss on sale of available-for-sale securities				(891	)			-				-				-				-
Total noninterest income				4,177				4,142				3,732				3,320				4,343
Noninterest Expense
Salaries and wages				6,657				6,353				5,479				5,366				5,502
Employee benefits				2,165				1,911				1,392				1,546				2,054
Net occupancy expense				856				753				693				522				598
Furniture and equipment				1,252				1,096				1,047				1,008				1,056
Data processing				726				1,917				781				654				604
Franchise taxes				366				(45	)			254				757				418
ATM expense				623				561				580				544				532
Advertising				514				531				578				300				237
Net (gain) loss on sale of other assets owned				-				12				-				(266	)			(5	)
FDIC assessment				306				250				271				270				114
Mortgage servicing rights amortization				159				110				(50	)			59				26
Consulting fees				230				637				254				233				178
Other general and administrative				3,139				2,964				2,192				2,242				2,179
Total noninterest expense				16,993				17,050				13,471				13,235				13,493
Income Before Income Taxes				8,049				8,894				11,207				10,321				10,053
Income Taxes				1,583				1,706				2,253				2,050				1,951
Net Income				6,466				7,188				8,954				8,271				8,102
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities				9,812				(628	)			(8,197	)			(14,602	)			(20,939	)
Reclassification adjustment for realized loss on sale of available-for-sale securities				(891	)			-				-				-				-
Net unrealized gain (loss) on available-for-sale securities				8,921				(628	)			(8,197	)			(14,602	)			(20,939	)
Tax expense (benefit)				1,874				(132	)			(1,721	)			(3,067	)			(4,397	)
Other comprehensive income (loss)				7,047				(496	)			(6,476	)			(11,535	)			(16,542	)
Comprehensive Income (Loss)			$	13,513			$	6,692			$	2,478			$	(3,264	)		$	(8,440	)
Basic Earnings Per Share			$	0.47			$	0.53			$	0.68			$	0.63			$	0.62
Diluted Earnings Per Share			$	0.47			$	0.53			$	0.68			$	0.63			$	0.62
Dividends Declared			$	0.2100			$	0.2100			$	0.2100			$	0.2025			$	0.1900
*ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands of dollars, except share data)
			March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
			(Unaudited)								(Unaudited)				(Unaudited)				(Unaudited)
Assets
Cash and due from banks			$	62,780			$	83,085			$	69,680			$	69,955			$	94,118
Federal funds sold				1,545				1,324				990				1,484				45,404
	Total cash and cash equivalents			64,325				84,409				70,670				71,439				139,522
Interest-bearing time deposits				4,435				4,442				5,187				6,684				8,677
Securities - available-for-sale				372,975				390,789				395,485				399,687				413,996
Other securities, at cost				11,543				9,799				8,227				8,735				8,568
Loans held for sale				951				827				2,182				4,230				6,060
Loans, net				2,422,018				2,336,074				2,122,626				2,016,394				1,945,449
Premises and equipment				28,679				28,381				26,484				26,492				26,653
Construction in progress				1,565				278				-				-				-
Goodwill				86,358				86,358				80,434				80,434				80,434
Mortgage servicing rights				4,985				3,549				3,583				3,426				3,336
Other real estate owned				-				-				-				-				-
Bank owned life insurance				33,269				33,073				28,051				27,874				27,715
Other assets				38,972				37,372				40,831				29,321				25,735
Total Assets			$	3,070,075			$	3,015,351			$	2,783,760			$	2,674,716			$	2,686,145
	Liabilities and Stockholders' Equity
Liabilities
Deposits
	Noninterest-bearing		$	520,145			$	532,794			$	506,928			$	503,395			$	497,249
	Interest-bearing
	NOW accounts			800,230				750,887				705,888				678,552				681,975
	Savings			590,854				627,203				607,375				617,850				626,787
	Time			601,939				557,980				462,845				424,249				447,586
	Total deposits			2,513,168				2,468,864				2,283,036				2,224,046				2,253,597
Federal funds purchased and
securities sold under agreements to repurchase				30,496				54,206				55,802				71,944				31,680
Federal Home Loan Bank (FHLB) advances				164,327				127,485				102,147				42,635				22,656
Other borrowings				-				10,000				10,000				-				40,000
Subordinated notes, net of unamortized issuance costs				34,615				34,586				34,557				34,528				34,499
Dividend payable				2,831				2,832				2,727				2,626				2,462
Accrued expenses and other liabilities				18,881				19,238				14,913				18,064				14,773
	Total liabilities			2,764,318				2,717,211				2,503,182				2,393,843				2,399,667
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and
outstanding 14,564,425 shares 3/31/23 and 12/31/22				135,241				135,497				121,811				123,145				122,886
Treasury stock - 934,303 shares 3/31/23, 956,003 shares 12/31/22				(11,310	)			(11,573	)			(11,547	)			(11,822	)			(11,739	)
Retained earnings				213,012				212,449				208,051				200,811				195,057
Accumulated other comprehensive loss				(31,186	)			(38,233	)			(37,737	)			(31,261	)			(19,726	)
	Total stockholders' equity			305,757				298,140				280,578				280,873				286,478
Total Liabilities and Stockholders' Equity			$	3,070,075			$	3,015,351			$	2,783,760			$	2,674,716			$	2,686,145

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA
			For the Three Months Ended
Selected financial data		March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
Return on average assets			0.84%				0.96%				1.31%				1.23%				1.21%
Return on average equity			8.59%				10.00%				12.53%				11.66%				11.00%
Yield on earning assets			4.41%				4.18%				4.00%				3.79%				3.47%
Cost of interest bearing liabilities			1.85%				1.32%				0.68%				0.44%				0.45%
Net interest spread			2.56%				2.86%				3.32%				3.35%				3.02%
Net interest margin			3.01%				3.20%				3.49%				3.47%				3.14%
Efficiency			63.53%				50.46%				51.19%				50.17%				55.44%
Dividend payout ratio			43.79%				39.39%				30.45%				30.02%				30.64%
Tangible book value per share (1)		$	17.92			$	17.69			$	17.86			$	17.43			$	16.96
Tier 1 leverage ratio			8.36%				8.39%				9.11%				8.75%				8.51%
Average shares outstanding			13,615,655				13,606,876				13,083,145				13,065,975				13,066,272
Loans		March 31, 2023					December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
(Dollar amounts in thousands)
Commercial real estate		$	1,225,315			$	1,152,603			$	1,063,661			$	979,176			$	910,839
Agricultural real estate			227,897				220,819				205,089				199,972				196,223
Consumer real estate			502,974				494,423				416,001				410,450				410,120
Commercial and industrial			241,598				242,360				229,388				232,975				216,918
Agricultural			131,467				128,733				128,615				127,143				140,709
Consumer			89,588				89,147				70,602				55,411				57,521
Other			29,316				29,818				30,662				31,243				31,573
Less: Net deferred loan fees and costs			(1,503	)			(1,516	)			(1,402	)			(1,552	)			(1,683	)
Total loans,net		$	2,446,652			$	2,356,387			$	2,142,616			$	2,034,818			$	1,962,220
Asset quality data		March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
(Dollar amounts in thousands)
Nonaccrual loans		$	7,717			$	4,689			$	5,470			$	5,247			$	8,581
Troubled debt restructuring		$	3,516			$	3,645			$	3,978			$	2,748			$	7,268
90 day past due and accruing		$	-			$	-			$	-			$	-			$	-
Nonperforming loans		$	7,717			$	4,689			$	5,470			$	5,247			$	8,581
Other real estate owned		$	-			$	-			$	-			$	-			$	-
Nonperforming assets		$	7,717			$	4,689			$	5,470			$	5,247			$	8,581
Allowance for credit losses(2)		$	24,507			$	20,313			$	19,990			$	18,424			$	16,771
Accretable yield adjustment			5,754				6,427				5,959				6,724				7,201
Adjusted credit losses with accretable yield included(2)			30,261			$	26,740			$	25,949			$	25,148			$	23,972
Allowance for credit losses/total loans(2)		$	1.00%				0.86%				0.93%				0.91%				0.85%
Adjusted credit losses with accretable yield/total loans(2)		$	1.24%				1.13%				1.21%				1.24%				1.22%
Net charge-offs:
Quarter-to-date			60			$	431			$	71			$	(25	)		$	51
Year-to-date			60			$	529			$	97			$	26			$	51
Net charge-offs to average loans					0.28%
Quarter-to-date			0.00%				0.02%				0.00%				0.00%				0.00%
Year-to-date			0.00%				0.03%				0.00%				0.00%				0.00%
Nonperforming loans/total loans			0.32%				0.20%				0.26%				0.26%				0.44%
Allowance for credit losses/nonperforming loans(2)			319.22%				273.67%				365.44%				351.44%				198.29%
(1) Tangible Equity = Stockholder Equity less goodwill, other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities) plus CECL adjustment
(2) ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method.

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
		March 31, 2023									March 31, 2022
Interest Earning Assets:		Average Balance			Interest/Dividends			Annualized Yield/Rate			Average Balance			Interest/Dividends			Annualized Yield/Rate
Loans		$	2,397,061		$	29,703		4.96	%		$	1,907,478		$	20,455		4.29	%
Taxable investment securities			397,480			1,499		1.51	%			429,899			1,295		1.20	%
Tax-exempt investment securities			26,352			100		1.92	%			18,587			70		1.91	%
Fed funds sold & other			68,557			500		2.92	%			167,319			79		0.19	%
Total Interest Earning Assets			2,889,450		$	31,802		4.41	%			2,523,283		$	21,899		3.47	%
Nonearning Assets			180,259									165,064
Total Assets		$	3,069,709								$	2,688,347
Interest Bearing Liabilities:
Savings deposits		$	1,400,769		$	4,943		1.41	%		$	1,293,099		$	588		0.18	%
Other time deposits			579,409			3,208		2.21	%			459,854			772		0.67	%
Other borrowed money			132,494			1,280		3.86	%			63,364			335		2.11	%
Fed funds purchased & securities
sold under agreement to repurch.			38,853			405		4.17	%			29,104			152		2.09	%
Subordinated notes			34,596			284		3.28	%			34,480			269		3.12	%
Total Interest Bearing Liabilities		$	2,186,121		$	10,120		1.85	%		$	1,879,901		$	2,116		0.45	%
Noninterest Bearing Liabilities			582,345									513,745
Stockholders' Equity		$	301,243								$	294,701
Net Interest Income and Interest Rate Spread					$	21,682		2.56	%					$	19,783		3.02	%
Net Interest Margin								3.01	%								3.14	%
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
(in thousands of dollars, except percentages)
	For the Three Months Ended March 31, 2023													For the Three Months Ended March 31, 2022
	As Reported				Excluding Acc/Amort				Difference					As Reported				Excluding Acc/Amort				Difference
	$	Yield			$	Yield			$		Yield			$	Yield			$	Yield			$		Yield
Loans	29,703	4.96	%		29,036	4.85	%		667		0.11	%		20,455	4.29	%		20,081	4.12	%		374		0.17	%
Taxable investment securities	1,499	1.51	%		1,499	1.51	%		-		0.00	%		1,295	1.20	%		1,295	1.20	%		-		0.00	%
Tax-exempt investment securities	100	1.92	%		100	1.92	%		-		0.00	%		70	1.91	%		70	1.91	%		-		0.00	%
Fed funds sold & other	500	2.92	%		500	2.92	%		-		0.00	%		79	0.19	%		79	0.19	%		-		0.00	%
Total Interest Earning Assets	31,802	4.41	%		31,135	4.31	%		667		0.10	%		21,899	3.47	%		21,525	3.42	%		374		0.05	%
Savings deposits	4,943	1.41	%		4,943	1.41	%		-		0.00	%		588	0.18	%		588	0.18	%		-		0.00	%
Other time deposits	3,208	2.21	%		3,667	2.53	%		(459	)	-0.32	%		772	0.67	%		1,391	1.21	%		(619	)	-0.54	%
Other borrowed money	1,280	3.86	%		1,298	3.92	%		(18	)	-0.06	%		335	2.11	%		356	2.25	%		(21	)	-0.14	%
Federal funds purchased and
securities sold under agreement to
repurchase	405	4.17	%		405	4.17	%		-		0.00	%		152	2.09	%		152	2.09	%		-		0.00	%
Subordinated notes	284	3.28	%		284	3.28	%		-		0.00	%		269	3.12	%		269	3.12	%		-		0.00	%
Total Interest Bearing Liabilities	10,120	1.85	%		10,597	1.94	%		(477	)	-0.09	%		2,116	0.45	%		2,756	0.59	%		(640	)	-0.14	%
Interest/Dividend income/yield	31,802	4.41	%		31,135	4.31	%		667		0.10	%		21,899	3.47	%		21,525	3.42	%		374		0.05	%
Interest Expense / yield	10,120	1.85	%		10,597	1.94	%		(477	)	-0.09	%		2,116	0.45	%		2,756	0.59	%		(640	)	-0.14	%
Net Interest Spread	21,682	2.56	%		20,538	2.37	%		1,144		0.19	%		19,783	3.02	%		18,769	2.83	%		1,014		0.19	%
Net Interest Margin		3.01	%			2.85	%				0.16	%			3.14	%			2.98	%				0.16	%

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME
(in thousands of dollars)
		Three Months Ended
Non-GAAP Reconciliation of Net Income		March 31, 2023				March 31, 2022
		(Unaudited)
Net income as reported		$	6,466			$	8,102
Acquisition expenses			96				145
Tax effect on acquisition expenses			(19	)			(30	)
Net income excluding acquisition expenses and tax effect		$	6,543			$	8,217
Weighted average common shares outstanding including participating securities			13,615,655				13,066,272
Basic and diluted earnings per share		$	0.48			$	0.63

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
		March 31, 2023				March 31, 2022				March 31, 2023				March 31, 2022
Shares Outstanding			13,630,122				13,066,083				13,630,122				13,066,083
Tangible Equity
Equity		$	305,757			$	286,478			$	305,757			$	286,478
Goodwill			86,358				80,434				86,358				80,434
Other Intangible			8,882				4,203				8,882				4,203
Comprehensive Loss Adjustment*			-				-				31,186				19,726
CECL Adjustment**			-				-				2,528				-
Tangible Equity		$	210,517			$	201,841			$	244,231			$	221,566
Shares Outstanding			13,630				13,066				13,630				13,066
Tangible Book Equity per Share		$	15.44			$	15.45			$	17.92			$	16.96
		Actual Average								Regulatory Average
		Year to Date								Year to Date
		March 31, 2023				March 31, 2022				March 31, 2023				March 31, 2022
Net Income		$	6,466			$	8,102			$	6,466			$	8,102
Acquisition Costs - Tax Adjusted			77				115				77				115
Average Shares Outstanding			13,206,713				11,664,852				13,206,713				11,664,852
Average Tangible Equity
Average Equity		$	301,243			$	294,701			$	301,243			$	294,701
Average Goodwill			86,358				80,434				86,358				80,434
Average Other Intangible			9,167				4,356				9,167				4,356
Average Comprehensive Loss Adjustment*			-				-				36,764				8,155
Average CECL Adjustment**			-				-				2,528
Average Tangible Equity		$	205,718			$	209,911			$	245,010			$	218,066
Average Shares Outstanding			13,616				13,066				13,616				13,066
Average Tangible Book Equity per Share		$	15.11			$	16.07			$	17.99			$	16.69
Return on Average Tangible Equity			12.57	%			15.44	%			10.56	%			14.86	%
Return on Average Tangible Equity w/o Acquisition			12.72	%			15.66	%			10.68	%			15.07	%
*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.
**ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method and
the Bank has elected to spread the Capital adjustment over three years. The first year permits 75% of the capital adjustment to be removed
from the calculation of tangible equity for regulatory purposes.

Company Contact:	Investor and Media Contact:
Lars B. Eller President and Chief Executive Officer Farmers & Merchants Bancorp, Inc. (419) 446-2501 leller@fm.bank	Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com