U.S. Markets closed

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

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  null