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Farmers & Merchants Bancorp, Inc. Reports Record 2019 Fourth-Quarter and Full-Year Financial Results

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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, Feb. 05, 2020 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (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”) (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.

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


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 government 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 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 and securities sold

under agreements to repurchase

207

201

141

185

127

734

503

Borrowed funds

270

257

269

287

20

1,083

80

Total interest expense

3,813

4,112

3,749

3,085

1,817

14,759

6,572

Net Interest Income - Before Provision for 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 Provision For Loan 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 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 of available-for-sale securities

-

-

-

(26

)

(19

)

(26

)

(9

)

Total noninterest 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 of other assets owned

16

22

28

15

27

81

44

FDIC assessment

(11

)

-

98

96

77

183

326

Mortgage servicing rights amortization

158

149

105

75

100

487

364

Consulting fees

264

196

95

113

461

668

928

Other general and administrative

1,482

1,667

1,551

1,679

1,167

6,379

4,318

Total noninterest expense

9,766

10,606

9,712

11,511

8,817

41,595

32,221

Income Before Income 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 Income (Loss) (Net of Tax):

Net unrealized gain (loss) on available-for-sale securities

(472

)

841

3,061

1,749

2,374

5,179

(1,058

)

Reclassification adjustment for (gain) loss on sale of available-for-sale securities

-

-

-

26

19

26

9

Net unrealized gain (loss) on available-for-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 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 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 sold under agreements to repurchase

48,073

30,056

27,102

25,521

32,181

Federal Home Loan Bank (FHLB) 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 shares authorized; issued

and outstanding 12,230,000 shares 12/31/19, 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, 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 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

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