Farmers & Merchants Bancorp, Inc. Reports 2023 Fourth-Quarter and Full-Year Financial Results

Farmers & Merchants Bancorp, Inc.

ARCHBOLD, Ohio, Feb. 13, 2024 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2023 fourth quarter and twelve months ended December 31, 2023.

2023 Fourth Quarter Financial and Operating Highlights (on a year-over-year basis unless noted):

• 83 consecutive quarters of profitability

• Net income was $5.5 million, or $0.41 per basic and diluted share

• Asset quality remains strong as nonperforming loans were 0.87% of total loans

• Net charge-offs to average loans were 0.03%

• Allowance for credit losses was 111.95% of nonperforming loans

• Tier 1 leverage ratio was 8.20%

• Opened first bank office in Michigan and new regional headquarters in Fort Wayne, Indiana

• Added Ian D. Boyce to the Board of Directors of both the Company and the Bank

• Realigned organizational structure to support future growth and drive profitability

• Dividend raised 4.8% year-over-year, representing the 29^th consecutive annual increase in the Company’s regular dividend payment since 1994

2023 Full-Year Financial Highlights Include (on a year-over-year basis unless noted):

• Total loans were a record of $2.58 billion and increased 9.5% from $2.36 billion at December 31, 2022

• Total assets increased 8.9% to a record $3.28 billion

• Deposits increased to 5.6% to a record $2.61 billion

• Stockholders’ equity increased 6.2% to a record $316.5 million

• Net interest income after provision for credit losses decreased 3.1% to $79.7 million

• Net income was $22.8 million, or $1.67 per basic and diluted share

• Return on average tangible equity was 12.17%

• Opened a total of four new bank offices including new offices in Ohio, Indiana and Michigan

• Successfully launched new forward-looking logo and brand-name

• Provided a record $802,000 of charitable donations to support organizations throughout Ohio and Indiana

Lars B. Eller, President and Chief Executive Officer, stated, “I am extremely proud of how F&M’s team responded to the challenging operating environment in 2023 as unprecedented rate increases caused significant competition for deposits and elevated our costs of funds. While these trends impacted earnings growth in 2023, we ended the year with record total assets, loans, net, and total deposits, as well as stockholders’ equity. Our ability to grow our balance sheet throughout the year is a testament to the value we provide to our Ohio, Indiana and Michigan communities and the successful execution of our growth-oriented strategic plan.”

Mr. Eller continued, “As we successfully navigated the challenging macro-landscape in 2023, we simultaneously invested in our business to make sure we had the right platform in place to support F&M’s current and future needs. As a result, throughout 2023 we made calculated investments to expand our office network, enhance our products, add new IT capabilities, refine our corporate organization, and redesign our brand strategy. Highlights include adding offices in new markets including Oxford, OH and Birmingham MI, as well as expanding our local presence by adding a new office in Fort Wayne and a new regional office in downtown Toledo. In addition, our brand refresh to F&M has helped differentiate the Bank in our non-legacy markets, while doubling down on the strength of the F&M brand in our existing markets. During 2023, we also made several organizational changes to our leadership structure and added new back-office capabilities that we believe can support a bank with $4 billion in assets.”

Income Statement
Net income for the 2023 fourth quarter ended December 31, 2023, was $5.5 million, compared to $7.2 million for the same period last year. Net income per basic and diluted share for the 2023 fourth quarter was $0.41, compared to $0.53 for the same period last year. Net income for the 2023 twelve months ended December 31, 2023, was $22.8 million, compared to $32.5 million for the same period last year. Net income per basic and diluted share for the 2023 twelve months was $1.67, compared to $2.46 for the same period last year.

“Throughout 2023, the rapid rise in the Federal Funds Rate impacted our cost of funds and increased the competition for deposits. As a result, our cost of interest-bearing liabilities increased to 2.53% for the year ended December 31, 2023, from 0.74% last year. Our loan portfolio has also lagged in capturing sufficient yield to match the higher cost of funds mainly due to the timing to reprice our commercial real estate adjustable-rate mortgages. Approximately 25% of our loan portfolio will be subject to repricing in 2024. A challenging rate environment impacted overall profitability, as net interest income declined year-over-year by 10.7% for the fourth quarter, and by 3.1% for the full year. We are optimistic that the Federal Funds Rate has peaked and with a more stable rate environment expected in 2024, we believe we are well positioned for improved profitability this year,” continued Mr. Eller.

Deposits
At December 31, 2023, total deposits were $2.61 billion, an increase of 5.6% from December 31, 2022. The Company’s cost of interest-bearing liabilities was 3.02% for the quarter ended December 31, 2023, compared to 1.32% for the quarter ended December 31, 2022 and for the 2023 twelve months ended December 31, 2023 was 2.53% compared to 0.74% in the prior year.

Loan Portfolio and Asset Quality
Total loans, net at December 31, 2023, increased 9.5%, or by $224.8 million to $2.58 billion, compared to $2.36 billion at December 31, 2022. The year-over-year improvement resulted primarily from the contribution of continued organic loan growth.

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $22.4 million, or 0.87% of total loans at December 31, 2023, compared to $4.7 million, or 0.20% at December 31, 2022, and $22.4 million, or 0.89% at September 30, 2023. The year-over-year increase in nonperforming loans was primarily due to two agricultural relationships, representing a combined balance of $19.4 million. F&M does not foresee a loss on either loan and expects to receive settlements during the 2024 first and second quarters.

F&M maintains a well-balanced, diverse and high performing CRE portfolio. CRE loans represented 51.8% of the Company’s total loan portfolio at December 31, 2023. In addition, F&M’s commercial real estate office credit exposure represented 5.3% of the Company's total loan portfolio at December 31, 2023, with a weighted average loan-to-value of approximately 63% and an average loan of $888,000.

F&M’s CRE portfolio included the following categories at December 31, 2023:

CRE Category		Dollar Balance			Percent of CRE Portfolio(*)		Percent of Total Loan Portfolio(*)
Industrial		$	253,683		19.0%		9.8%
Multi-family		$	232,776		17.4%		9.0%
Retail		$	218,580		16.3%		8.5%
Office		$	137,573		10.3%		5.3%
Hotels		$	127,646		9.6%		4.9%
Gas Stations		$	63,151		4.7%		2.4%
Food Service		$	50,990		3.8%		2.0%
Senior Living		$	32,290		2.4%		1.3%
Auto Dealers		$	29,714		2.2%		1.2%
Development		$	28,045		2.1%		1.1%
Other		$	163,318		12.2%		6.3%
Total CRE		$	1,337,766		100.0%		51.8%
* Numbers have been rounded

At December 31, 2023, the Company’s allowance for credit losses to nonperforming loans was 111.95%, compared to 273.67% at December 31, 2022. The allowance to total loans was 0.97% at December 31, 2023, compared to 0.86% at December 31, 2022. As a result of F&M’s recent acquisitions, the Company had an accretable yield adjustment of $4.0 million at December 31, 2023, which further enhances F&M’s allowance, compared to $6.4 million at December 31, 2022. Including the accretable yield adjustment, F&M’s allowance for credit losses to total loans was 1.13% at December 31, 2023, compared to 1.13% at December 31, 2022.

Mr. Eller concluded, “Looking to 2024 and beyond, we believe we are well positioned to support a larger and more profitable bank in the future as a result of the investments we made over the past 12 months. With strong asset quality and a more stable rate environment expected in 2024, we are focused on supporting customers across our Ohio, Indiana and Michigan communities and reaccelerating earnings growth.”

Stockholders’ Equity and Dividends
Total stockholders’ equity increased 6.2% to $316.5 million at December 31, 2023, from $298.1 million at December 31, 2022. At December 31, 2023, the Company had a Tier 1 leverage ratio of 8.20%, compared to 8.39% at December 31, 2022.

Based on a regulatory basis, tangible stockholders’ equity increased to $253.8 million at December 31, 2023, compared to $240.7 million at December 31, 2022. On a per share basis, tangible stockholders’ equity at December 31, 2023, was $18.60 per share, compared to $17.69 per share at December 31, 2022.

For the twelve months ended December 31, 2023, the Company has declared cash dividends of $0.85 per share, which is a 4.6% increase over the same period last year. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 29 consecutive years. For the twelve months ended December 31, 2023, the dividend payout ratio was 50.65% compared to 33.06% for the same period last year.

About Farmers & Merchants State Bank:
Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) is the holding company of F&M Bank, a local independent community bank that has been serving its communities since 1897. F&M Bank provides commercial banking, retail banking and other financial services. Our locations are in Butler, Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Shelby, Williams, and Wood counties in Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties. The Michigan footprint includes Oakland County, and F&M has Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Bryan, 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.

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, 2023			September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Interest Income
Loans, including fees	$	34,493		$	33,783			$	31,365			$	29,703			$	27,302			$	129,344			$	94,264
Debt securities:
U.S. Treasury and government agencies		987			1,005				1,030				1,068				1,118				4,090				4,225
Municipalities		397			392				401				408				420				1,598				1,415
Dividends		365			246				148				123				126				882				318
Federal funds sold		8			6				9				21				2				44				21
Other		2,020			927				424				479				524				3,850				906
Total interest income		38,270			36,359				33,377				31,802				29,492				139,808				101,149
Interest Expense
Deposits		15,015			13,323				10,434				8,151				4,978				46,923				9,883
Federal funds purchased and securities sold
under agreements to repurchase		293			349				427				405				463				1,474				1,197
Borrowed funds		2,742			2,741				2,113				1,280				1,209				8,876				2,160
Subordinated notes		285			284				285				284				285				1,138				1,122
Total interest expense		18,335			16,697				13,259				10,120				6,935				58,411				14,362
Net Interest Income - Before Provision for Credit Losses*		19,935			19,662				20,118				21,682				22,557				81,397				86,787
Provision for Credit Losses - Loans*		278			460				143				817				755				1,698				4,600
Provision for Credit Losses - Off Balance Sheet Credit Exposures*		189			(76	)			(129	)			62				-				46				-
Net Interest Income After Provision for Credit Losses*		19,468			19,278				20,104				20,803				21,802				79,653				82,187
Noninterest Income
Customer service fees		2,576			2,208				2,361				2,447				2,862				9,592				9,958
Other service charges and fees		1,121			1,162				1,803				2,554				1,115				6,640				4,226
Net gain on sale of loans		230			294				108				67				165				699				1,353
Net loss on sale of available-for-sale securities		-			-				-				(891	)			-				(891	)			-
Total noninterest income		3,927			3,664				4,272				4,177				4,142				16,040				15,537
Noninterest Expense
Salaries and wages		6,981			6,777				6,500				6,657				6,353				26,915				22,700
Employee benefits		1,218			2,066				2,071				2,165				1,911				7,520				6,903
Net occupancy expense		1,187			950				840				856				753				3,833				2,566
Furniture and equipment		1,370			1,189				1,211				1,252				1,096				5,022				4,207
Data processing		785			840				796				726				1,917				3,147				3,956
Franchise taxes		308			434				379				366				(45	)			1,487				1,384
ATM expense		665			640				683				623				561				2,611				2,217
Advertising		397			865				830				514				531				2,606				1,646
Net (gain) loss on sale of other assets owned		86			49				-				-				12				135				(259	)
FDIC assessment		594			586				496				306				250				1,982				905
Servicing rights amortization - net		182			106				164				159				110				611				145
Consulting fees		192			179				231				230				637				832				1,302
Other general and administrative		2,555			2,363				2,643				3,077				2,964				10,638				9,577
Total noninterest expense		16,520			17,044				16,844				16,931				17,050				67,339				57,249
Income Before Income Taxes		6,875			5,898				7,532				8,049				8,894				28,354				40,475
Income Taxes		1,332			1,121				1,531				1,583				1,706				5,567				7,960
Net Income		5,543			4,777				6,001				6,466				7,188				22,787				32,515
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities		13,261			(4,514	)			(5,996	)			8,030				(628	)			10,781				(44,366	)
Reclassification adjustment for realized loss on sale of available-for-sale securities		-			-				-				891				-				891				-
Net unrealized gain (loss) on available-for-sale securities		13,261			(4,514	)			(5,996	)			8,921				(628	)			11,672				(44,366	)
Tax expense (benefit)		2,784			(947	)			(1,260	)			1,874				(132	)			2,451				(9,317	)
Other comprehensive income (loss)		10,477			(3,567	)			(4,736	)			7,047				(496	)			9,221				(35,049	)
Comprehensive Income (Loss)	$	16,020		$	1,210			$	1,265			$	13,513			$	6,692			$	32,008			$	(2,534	)
Basic Earnings Per Share	$	0.41		$	0.35			$	0.44			$	0.47			$	0.53			$	1.67			$	2.46
Diluted Earnings Per Share	$	0.41		$	0.35			$	0.44			$	0.47			$	0.53			$	1.67			$	2.46
Dividends Declared	$	0.2200		$	0.2100			$	0.2100			$	0.2100			$	0.2100			$	0.8500			$	0.8125
*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)
		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Assets
Cash and due from banks		$	140,917			$	151,711			$	69,760			$	62,780			$	83,085
Federal funds sold			1,284				1,471				1,433				1,545				1,324
Total cash and cash equivalents			142,201				153,182				71,193				64,325				84,409
Interest-bearing time deposits			2,740				2,989				3,485				4,435				4,442
Securities - available-for-sale			358,478				348,255				363,225				372,975				390,789
Other securities, at cost			17,138				16,995				17,535				11,543				9,799
Loans held for sale			1,576				1,039				1,459				951				827
Loans, net			2,556,167				2,504,329				2,490,883				2,422,018				2,336,074
Premises and equipment			35,790				31,723				30,398				28,679				28,381
Construction in progress			8				3,044				2,290				1,565				278
Goodwill			86,358				86,358				86,358				86,358				86,358
Loan servicing rights			5,648				5,687				5,635				4,985				3,549
Bank owned life insurance			33,907				33,691				33,470				33,269				33,073
Other assets			43,218				47,388				41,512				38,972				37,372
Total Assets		$	3,283,229			$	3,234,680			$	3,147,443			$	3,070,075			$	3,015,351
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing		$	528,465			$	505,358			$	488,678			$	520,145			$	532,794
Interest-bearing
NOW accounts			816,790				778,133				770,113				800,230				750,887
Savings			599,191				591,344				581,192				590,854				627,203
Time			663,017				700,445				628,757				601,939				557,980
Total deposits			2,607,463				2,575,280				2,468,740				2,513,168				2,468,864
Federal funds purchased and securities
sold under agreements to repurchase			28,218				30,527				51,567				30,496				54,206
Federal Home Loan Bank (FHLB) advances			265,750				266,286				266,818				164,327				127,485
Other borrowings			-				-				-				-				10,000
Subordinated notes, net of unamortized issuance costs			34,702				34,673				34,644				34,615				34,586
Dividend payable			2,974				2,838				2,834				2,831				2,832
Accrued expenses and other liabilities			27,579				21,892				18,177				18,881				19,238
Total liabilities			2,966,686				2,931,496				2,842,780				2,764,318				2,717,211
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and
outstanding 14,564,425 shares 12/31/23 and 12/31/22			135,515				135,171				135,647				135,241				135,497
Treasury stock - 899,784 shares 12/31/23 and 956,003 shares 12/31/22			(11,040	)			(11,008	)			(11,298	)			(11,310	)			(11,573	)
Retained earnings			221,080				218,510				216,236				213,012				212,449
Accumulated other comprehensive loss			(29,012	)			(39,489	)			(35,922	)			(31,186	)			(38,233	)
Total stockholders' equity			316,543				303,184				304,663				305,757				298,140
Total Liabilities and Stockholders' Equity		$	3,283,229			$	3,234,680			$	3,147,443			$	3,070,075			$	3,015,351

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA
		For the Three Months Ended																				For the Twelve Months Ended
Selected financial data		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				December 31, 2023			December 31, 2022
Return on average assets			0.67	%			0.59	%			0.77	%			0.84	%			0.96	%		0.71	%		1.17	%
Return on average equity			7.27	%			6.26	%			7.84	%			8.59	%			10.00	%		7.46	%		11.30	%
Yield on earning assets			4.93	%			4.79	%			4.53	%			4.41	%			4.18	%		4.67	%		3.87	%
Cost of interest bearing liabilities			3.02	%			2.82	%			2.35	%			1.85	%			1.32	%		2.53	%		0.74	%
Net interest spread			1.91	%			1.97	%			2.18	%			2.56	%			2.86	%		2.14	%		3.13	%
Net interest margin			2.57	%			2.59	%			2.73	%			3.01	%			3.20	%		2.72	%		3.32	%
Efficiency			69.23	%			73.07	%			69.06	%			63.53	%			50.46	%		68.48	%		55.95	%
Dividend payout ratio			54.23	%			60.07	%			47.22	%			43.79	%			39.39	%		50.65	%		33.06	%
Tangible book value per share (1)		$	18.60			$	18.36			$	18.21			$	17.92			$	17.69
Tier 1 leverage ratio			8.20	%			8.02	%			9.85	%			8.36	%			8.39	%
Average shares outstanding			13,665,773				13,650,823				13,632,440				13,615,655				13,606,876			13,641,336			13,206,713
Loans		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
(Dollar amounts in thousands)
Commercial real estate		$	1,337,766			$	1,304,118			$	1,280,902			$	1,225,315			$	1,152,603
Agricultural real estate			223,791				225,672				230,837				227,897				220,819
Consumer real estate			521,895				512,973				506,866				502,974				494,423
Commercial and industrial			254,935				250,891				253,444				241,598				242,360
Agricultural			132,560				123,735				128,344				131,467				128,733
Consumer			79,591				83,024				88,312				89,588				89,147
Other			30,136				31,083				28,996				29,316				29,818
Less: Net deferred loan fees, costs and other (2)			517				(1,890	)			(1,908	)			(1,503	)			(1,516	)
Total loans,net		$	2,581,191			$	2,529,606			$	2,515,793			$	2,446,652		...	$	2,356,387
Asset quality data		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
(Dollar amounts in thousands)
Nonaccrual loans		$	22,353			$	22,447			$	6,295			$	7,717			$	4,689
90 day past due and accruing		$	-			$	-			$	-			$	-			$	-
Nonperforming loans		$	22,353			$	22,447			$	6,295			$	7,717			$	4,689
Other real estate owned		$	-			$	-			$	-			$	-			$	-
Nonperforming assets		$	22,353			$	22,447			$	6,295			$	7,717			$	4,689
Allowance for credit losses (3)		$	25,024			$	25,277			$	24,910			$	24,507			$	20,313
Accretable yield adjustment			4,018				4,565				5,209				5,754				6,427
Adjusted credit losses with accretable yield included (3)		$	29,042			$	29,842			$	30,119			$	30,261			$	26,740
Allowance for credit losses/total loans (3)			0.97	%			1.00	%			0.99	%			1.00	%			0.86	%
Adjusted credit losses with accretable yield/total loans (3)			1.13	%			1.18	%			1.20	%			1.24	%			1.13	%
Net charge-offs:
Quarter-to-date		$	893			$	93			$	(133	)		$	60			$	431
Year-to-date		$	990			$	97			$	(73	)		$	60			$	529
Net charge-offs to average loans
Quarter-to-date			0.03	%			0.00	%			-0.01	%			0.00	%			0.02	%
Year-to-date			0.04	%			0.00	%			0.00	%			0.00	%			0.03	%
Nonperforming loans/total loans			0.87	%			0.89	%			0.25	%			0.32	%			0.20	%
Allowance for credit losses/nonperforming loans (3)			111.95	%			112.61	%			395.71	%			319.22	%			273.67	%
NPA coverage ratio			129.92	%			132.94	%			478.46	%			392.13	%			570.27	%
(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) Includes carrying value adjustments of $2.7 million as of December 31, 2023 related to interest rate swaps associated with fixed rate loans
(3) 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
		December 31, 2023									December 31, 2022
Interest Earning Assets:		Average Balance			Interest/Dividends			Annualized Yield/Rate			Average Balance			Interest/Dividends			Annualized Yield/Rate
Loans		$	2,553,023		$	34,493		5.41	%		$	2,301,204		$	27,302		4.75	%
Taxable investment securities			386,931			1,660		1.72	%			422,247			1,556		1.47	%
Tax-exempt investment securities			24,145			89		1.87	%			28,522			108		1.92	%
Fed funds sold & other			142,642			2,028		5.69	%			74,876			526		2.81	%
Total Interest Earning Assets			3,106,741		$	38,270		4.93	%			2,826,849		$	29,492		4.18	%
Nonearning Assets			189,202									173,048
Total Assets		$	3,295,943								$	2,999,897
Interest Bearing Liabilities:
Savings deposits		$	1,392,304		$	8,570		2.46	%		$	1,394,663		$	3,427		0.98	%
Other time deposits			701,347			6,445		3.68	%			485,461			1,551		1.28	%
Other borrowed money			265,948			2,742		4.12	%			135,013			1,209		3.58	%
Fed funds purchased & securities
sold under agreement to repurch.			28,739			293		4.08	%			53,506			463		3.46	%
Subordinated notes			34,683			285		3.29	%			34,567			285		3.30	%
Total Interest Bearing Liabilities		$	2,423,021		$	18,335		3.02	%		$	2,103,210		$	6,935		1.32	%
Noninterest Bearing Liabilities			567,813									609,253
Stockholders' Equity		$	305,109								$	287,434
Net Interest Income and Interest Rate Spread					$	19,935		1.91	%					$	22,557		2.86	%
Net Interest Margin								2.57	%								3.20	%
Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts
		For the Twelve Months Ended									For the Twelve Months Ended
		December 31, 2023									December 31, 2022
Interest Earning Assets:		Average Balance			Interest/Dividends			Annualized Yield/Rate			Average Balance			Interest/Dividends			Annualized Yield/Rate
Loans		$	2,491,502		$	129,344		5.19	%		$	2,073,737		$	94,264		4.55	%
Taxable investment securities			394,424			6,204		1.57	%			424,229			5,621		1.32	%
Tax-exempt investment securities			24,686			366		1.88	%			23,472			337		1.82	%
Fed funds sold & other			85,018			3,894		4.58	%			95,301			927		0.97	%
Total Interest Earning Assets			2,995,630		$	139,808		4.67	%			2,616,739		$	101,149		3.87	%
Nonearning Assets			197,726									158,361
Total Assets		$	3,193,356								$	2,775,100
Interest Bearing Liabilities:
Savings deposits		$	1,376,318		$	27,424		1.99	%		$	1,335,271		$	6,378		0.48	%
Other time deposits			640,390			19,499		3.04	%			451,013			3,505		0.78	%
Other borrowed money			220,175			8,876		4.03	%			74,379			2,160		2.90	%
Fed funds purchased & securities
sold under agreement to repurch.			35,421			1,474		4.16	%			45,314			1,197		2.64	%
Subordinated notes			34,640			1,138		3.29	%			34,524			1,122		3.25	%
Total Interest Bearing Liabilities		$	2,306,944		$	58,411		2.53	%		$	1,940,501		$	14,362		0.74	%
Noninterest Bearing Liabilities			580,931									546,731
Stockholders' Equity		$	305,481								$	287,868
Net Interest Income and Interest Rate Spread					$	81,397		2.14	%					$	86,787		3.13	%
Net Interest Margin								2.72	%								3.32	%
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 December 31, 2023																For the Three Months Ended December 31, 2022
	As Reported					Excluding Acc/Amort					Difference						As Reported				Excluding Acc/Amort				Difference
	$		Yield			$		Yield			$			Yield			$	Yield			$	Yield			$			Yield
Interest Earning Assets:
Loans	$	34,493	5.41	%		$	33,769	5.29	%		$	724		0.12	%		27,302	4.75	%		26,628	4.63	%		$	674		0.12	%
Taxable investment securities		1,660	1.72	%			1,660	1.72	%			-		0.00	%		1,556	1.47	%		1,556	1.47	%			-		0.00	%
Tax-exempt investment securities		89	1.87	%			89	1.87	%			-		0.00	%		108	1.92	%		108	1.92	%			-		0.00	%
Fed funds sold & other		2,028	5.69	%			2,028	5.69	%			-		0.00	%		526	2.81	%		526	2.81	%			-		0.00	%
Total Interest Earning Assets		38,270	4.93	%			37,546	4.84	%			724		0.09	%		29,492	4.18	%		28,818	4.08	%			674		0.10	%
Interest Bearing Liabilities:
Savings deposits	$	8,570	2.46	%		$	8,570	2.46	%		$	-		0.00	%		3,427	0.98	%		3,427	0.98	%		$	-		0.00	%
Other time deposits		6,445	3.68	%			6,381	3.64	%			64		0.04	%		1,551	1.28	%		2,010	1.66	%			(459	)	-0.38	%
Other borrowed money		2,742	4.12	%			2,760	4.15	%			(18	)	-0.03	%		1,209	3.58	%		1,227	3.64	%			(18	)	-0.06	%
Federal funds purchased and
securities sold under agreement to
repurchase		293	4.08	%			293	4.08	%			-		0.00	%		463	3.46	%		463	3.46	%			-		0.00	%
Subordinated notes		285	3.29	%			285	3.29	%			-		0.00	%		285	3.30	%		285	3.30	%			-		0.00	%
Total Interest Bearing Liabilities		18,335	3.02	%			18,289	3.02	%			46		0.00	%		6,935	1.32	%		7,412	1.41	%			(477	)	-0.09	%
Interest/Dividend income/yield		38,270	4.93	%			37,546	4.84	%			724		0.09	%		29,492	4.18	%		28,818	4.08	%			674		0.10	%
Interest Expense / yield		18,335	3.02	%			18,289	3.02	%			46		0.00	%		6,935	1.32	%		7,412	1.41	%			(477	)	-0.09	%
Net Interest Spread		19,935	1.91	%			19,257	1.82	%			678		0.09	%		22,557	2.86	%		21,406	2.67	%			1,151		0.19	%
Net Interest Margin			2.57	%				2.48	%					0.09	%			3.20	%			3.03	%					0.17	%
	For the Twelve Months Ended December 31, 2023																For the Twelve Months Ended December 31, 2022
	As Reported					Excluding Acc/Amort					Difference						As Reported				Excluding Acc/Amort				Difference
	$		Yield			$		Yield			$			Yield			$	Yield			$	Yield			$			Yield
Interest Earning Assets:
Loans	$	129,344	5.19	%		$	126,133	5.06	%		$	3,211		0.13	%		94,264	4.55	%		92,132	4.45	%		$	2,132		0.10	%
Taxable investment securities		6,204	1.57	%			6,204	1.57	%			-		0.00	%		5,621	1.32	%		5,621	1.32	%			-		0.00	%
Tax-exempt investment securities		366	1.88	%			366	1.88	%			-		0.00	%		337	1.82	%		337	1.82	%			-		0.00	%
Fed funds sold & other		3,894	4.58	%			3,894	4.58	%			-		0.00	%		927	0.97	%		927	0.97	%			-		0.00	%
Total Interest Earning Assets		139,808	4.67	%			136,597	4.57	%			3,211		0.10	%		101,149	3.87	%		99,017	3.79	%			2,132		0.08	%
Interest Bearing Liabilities:
Savings deposits	$	27,424	1.99	%		$	27,424	1.99	%		$	-		0.00	%		6,378	0.48	%		6,378	0.48	%		$	-		0.00	%
Other time deposits		19,499	3.04	%			19,839	3.10	%			(340	)	-0.06	%		3,505	0.78	%		5,822	1.29	%			(2,317	)	-0.51	%
Other borrowed money		8,876	4.03	%			8,947	4.06	%			(71	)	-0.03	%		2,160	2.90	%		2,241	3.01	%			(81	)	-0.11	%
Federal funds purchased and
securities sold under agreement to
repurchase		1,474	4.16	%			1,474	4.16	%			-		0.00	%		1,197	2.64	%		1,197	2.64	%			-		0.00	%
Subordinated notes		1,138	3.29	%			1,138	3.29	%			-		0.00	%		1,122	3.25	%		1,122	3.25	%			-		0.00	%
Total Interest Bearing Liabilities		58,411	2.53	%			58,822	2.55	%			(411	)	-0.02	%		14,362	0.74	%		16,760	0.86	%			(2,398	)	-0.12	%
Interest/Dividend income/yield		139,808	4.67	%			136,597	4.57	%			3,211		0.10	%		101,149	3.87	%		99,017	3.79	%			2,132		0.08	%
Interest Expense / yield		58,411	2.53	%			58,822	2.55	%			(411	)	-0.02	%		14,362	0.74	%		16,760	0.86	%			(2,398	)	-0.12	%
Net Interest Spread		81,397	2.14	%			77,775	2.02	%			3,622		0.12	%		86,787	3.13	%		82,257	2.93	%			4,530		0.20	%
Net Interest Margin			2.72	%				2.60	%					0.12	%			3.32	%			3.15	%					0.17	%

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME
(in thousands of dollars, except share data)
		Three Months Ended								Twelve Months Ended
Non-GAAP Reconciliation of Net Income		December 31, 2023				December 31, 2022				December 31, 2023				December 31, 2022
		(Unaudited)								(Unaudited)
Net income as reported		$	5,543			$	7,188			$	22,787			$	32,515
Acquisition expenses			24				2,019				208				2,511
Tax effect on acquisition expenses			(5	)			(386	)			(42	)			(455	)
Net income excluding acquisition expenses and tax effect		$	5,562			$	8,821			$	22,953			$	34,571
Weighted average common shares outstanding including participating securities			13,665,773				13,606,876				13,641,336				13,206,713
Basic and diluted earnings per share		$	0.41			$	0.65			$	1.68			$	2.62

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
		December 31, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Shares Outstanding			13,664,641				13,608,422				13,664,641				13,608,422
Tangible Equity
Equity		$	316,543			$	298,140			$	316,543			$	298,140
Goodwill			86,358				86,358				86,358				86,358
Other Intangible			7,548				9,327				7,548				9,327
Comprehensive Loss Adjustment*			-				-				29,012				38,233
CECL Adjustment**			-				-				2,528				-
Tangible Equity		$	222,637			$	202,455			$	254,177			$	240,688
Shares Outstanding			13,665				13,608				13,665				13,608
Tangible Book Equity per Share		$	16.29			$	14.88			$	18.60			$	17.69
		Actual Average								Regulatory Average
		Year to Date								Year to Date
		December 31, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Net Income		$	22,787			$	32,515			$	22,787			$	32,515
Acquisition Costs - Tax Adjusted			166				2,066				166				2,066
Average Shares Outstanding			13,641,336				13,206,713				13,641,336				13,206,713
Average Tangible Equity
Average Equity		$	305,481			$	287,868			$	305,481			$	287,868
Average Goodwill			86,358				80,164				86,358				80,164
Average Other Intangible			8,494				4,997				8,494				4,997
Average Comprehensive Loss Adjustment*			-				-				36,443				26,393
Average CECL Adjustment**			-				-				2,528				-
Average Tangible Equity		$	210,629			$	202,707			$	249,600			$	229,100
Average Shares Outstanding			13,641				13,207				13,641				13,207
Average Tangible Book Equity per Share		$	15.44			$	15.35			$	18.30			$	17.35
Return on Average Tangible Equity			10.82	%			16.04	%			9.13	%			14.19	%
Return on Average Tangible Equity w/o Acquisition			10.90	%			17.06	%			9.20	%			15.09	%
*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.