ARCHBOLD, Ohio, Feb. 13, 2019 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2018 fourth quarter and twelve months ended December 31, 2018.

2018 Fourth Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 63 consecutive quarters of profitability
  • Net interest income after provision for loan losses increased 6.3% to $10,081,000
  • Net income was $3,193,000 and included $742,000 of one-time merger related expenses
  • Earnings per basic and diluted share were $0.34 and included $0.07 per basic and diluted share of one-time merger related expenses
  • Return on average assets, excluding one-time merger related expenses, was 1.39%, compared to 1.25% for the same period last year
  • Return on average equity, excluding one-time merger related expenses, was 10.92%, compared to 10.29% for the same period last year

2018 Full-Year Financial Highlights Include (on a year-over-year basis unless noted):

  • Net interest income after provision for loan losses increased 10.1% to $39,533,000
  • Net income increased 17.5% to a record $14,949,000 and included $742,000 of one-time merger related expenses
  • Earnings per basic and diluted share increased 16.7% to a record $1.61 and included $0.07 per basic and diluted share of one-time merger related expenses
  • Excluding one-time merger related expenses, earnings per basic and diluted share increased 21.7% 
  • Total deposits increased $9,450,000 to $928,790,000
  • Return on average assets, excluding one-time merger related expenses, was 1.40%, compared to 1.18% for the same period last year
  • Return on average equity, excluding one-time merger related expenses, was 11.34%, compared to 9.75% for the same period last year
  • Tangible book value per share increased 6.9% to $14.96

“For the fourth consecutive year, F&M has achieved record results including record assets and earnings, and we ended 2018 with strong operational and financial momentum,” stated Lars B. Eller, President and Chief Executive Officer. “This is an exciting time at the company as we focus on integrating the Limberlost Bancshares acquisition, continuing our geographic expansion, and investing in new ways to engage with and provide value for our customers.  During the fourth quarter, we incurred one-time merger related expenses of $742,000, or $0.07 per basic and diluted share.  Backing out these one-time expenses, earnings per basic and diluted share increased 10.8% during the fourth quarter and 21.7% for 2018.  We are successfully integrating the Limberlost acquisition and I am pleased to report our system conversion was completed in January 2019 with no material business or customer disruptions.  With the contribution of Limberlost, F&M now has total assets of approximately $1.5 billion, loans of approximately $1.1 billion, and deposits of approximately $1.1 billion. The combination of Limberlost and F&M creates a compelling opportunity for future growth, and we are excited by the opportunities we have in 2019 and beyond.” 

Income Statement
Net income for the 2018 fourth quarter ended December 31, 2018, was $3,193,000, or $0.34 per basic and diluted share, compared to $3,436,000, or $0.37 per basic and diluted share for the same period last year. The 2018 fourth quarter included $742,000 of one-time expenses related to the Limberlost acquisition that was announced on August 20, 2018 and closed on January 1, 2019. 

Net income for 2018 was $14,949,000, or $1.61 per basic and diluted share compared to $12,720,000, or $1.38 per basic and diluted share for the twelve months ended December 31, 2017.  The 17.5% improvement in net income for 2018 was primarily due to a 10.1% increase in net interest income after provision for loan losses and the benefits of the Tax Cut and Jobs Act, partially offset by a 12.1% increase in noninterest expense.  The increase in noninterest expenses was primarily due to $742,000 of one-time expenses related to the Limberlost acquisition.

Loan Portfolio and Asset Quality
Total loans at December 31, 2018, increased by $23,350,000 to $846,374,000, compared to $823,024,000 at December 31, 2017. The year-over-year improvement resulted primarily from a 2.3% increase in commercial real estate loans, a 14.1% increase in agricultural loans, an 11.1% increase in consumer loans, and a 7.1% increase in agricultural real estate.

The company’s provision for loan losses for the 2018 fourth quarter was $105,000, compared to $25,000 for the 2017 fourth quarter.  The provision for loan losses for 2018 was $324,000, compared to $222,000 in 2017. 

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 1,249.6% at December 31, 2018, compared to 684.8% at December 31, 2017.  Net charge-offs for the year ended December 31, 2018 were $417,000, or 0.05% of average loans, compared to $138,000 or 0.02% of average loans, at December 31, 2017. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $138,885,000 as of December 31, 2018, compared to $129,667,000 at December 31, 2017.  On a per share basis, tangible stockholders’ equity at December 31, 2018 was $14.96 compared to $13.99 at December 31, 2017. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability.  At December 31, 2018, the company had a Tier 1 leverage ratio of 12.81%, compared to 12.02% at December 31, 2017. 

For 2018, the company declared cash dividends of $0.56 per share, which is a 12.0% increase over 2017’s declared dividend.  For 2018, the dividend payout ratio was 34.40% compared to 36.02% for the same period last year.

Mr. Eller continued, “F&M’s success is a direct result of the value we provide customers throughout Northwest Ohio, Northeast Indiana, and Southern Michigan. These markets support compelling growth opportunities for F&M as a result of stable economic trends and our strengthening market position.  During 2019, we plan on opening a new office in southwest Fort Wayne and we have recently relocated our Decatur office to a new freestanding location.  While we are focused on growth and expansion, we continue to proactively manage risk and ended 2018 with excellent asset quality.  Nonperforming loans declined to 0.06% of total loans, compared to 0.12% last year.” 

“I appreciate Paul Siebenmorgen’s support through the leadership transition and on behalf of everyone at F&M, I want to thank him for his 14 plus years of experience, dedication and service to F&M.  Since I joined the company in September 2018, I have had the privilege to engage with many of F&M’s customers, employees, and shareholders.  I am confident in the direction we are headed and believe 2019 will be a strong year for the bank,” concluded Mr. Eller. 

About Farmers & Merchants Bancorp, Inc.:
Farmers & Merchants Bancorp, Inc. (“F&M”) (NASDAQ: FMAO), is the holding company for the Farmers & Merchants State Bank, 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 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 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.

Company Contact:Investor and Media Contact:
Marty Filogamo
Senior Vice President – Marketing Manager
Farmers & Merchants Bancorp, Inc.
(419) 445-3501 ext. 15435
mfilogamo@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, 2018
 September
30, 2018
 June
30, 2018
 March
31, 2018
 December
31, 2017
 December
31, 2018
 December
31, 2017
Interest Income            
Loans, including fees$  10,955  $  10,725  $  10,521  $  10,102  $  9,828  $  42,303  $  37,195 
Debt securities:            
U.S. Treasury and government agencies   630     613     612     623     610     2,478     2,480 
Municipalities    250     275     289     281     288     1,095     1,193 
Dividends   56     56     53     55     52     220     187 
Federal funds sold and other   112     84     62     75     90     333     193 
Total interest income   12,003     11,753     11,537     11,136     10,868     46,429     41,248 
Interest Expense            
Deposits   1,670     1,611     1,389     1,319     1,194     5,989     4,483 
Federal funds purchased and securities sold             
under agreements to repurchase   127     134     118     124     131     503     497 
Borrowed funds   20     20     20     20     37     80     147 
Total interest expense   1,817     1,765     1,527     1,463     1,362     6,572     5,127 
Net Interest Income - Before Provision for Loan Losses   10,186     9,988     10,010     9,673     9,506     39,857     36,121 
Provision for Loan Losses    105     47     132     40     25     324     222 
Net Interest Income After Provision For Loan Losses   10,081     9,941     9,878     9,633     9,481     39,533     35,899 
Noninterest Income            
Customer service fees   1,612     1,392     1,465     1,466     1,478     5,935     5,609 
Other service charges and fees   1,032     1,097     1,040     1,012     1,054     4,181     4,268 
Net gain on sale of loans    140     184     301     132     211     757     811 
Net gain (loss) on sale of available-for-sale securities   (19)    10     -     -     -     (9)    47 
Total noninterest income    2,765     2,683     2,806     2,610     2,743     10,864     10,735 
Noninterest Expense            
Salaries and wages   3,834     3,391     3,225     3,310     3,239     13,760     12,613 
Employee benefits   1,102     1,029     848     1,136     987     4,115     3,635 
Net occupancy expense   451     478     441     387     268     1,757     1,489 
Furniture and equipment   450     588     565     507     402     2,110     1,858 
Data processing   318     364     305     331     294     1,318     1,213 
Franchise taxes   244     243     228     239     226     954     902 
ATM expense   368     327     333     312     320     1,340     1,173 
Advertising   218     236     247     186     209     887     757 
Net loss on sale of other assets owned   27     1     (1)    17     -     44     27 
FDIC assessment   77     81     81     87     83     326     330 
Mortgage servicing rights amortization    100     84     95     85     87     364     353 
Consulting fees   461     179     178     110     98     928     377 
Other general and administrative   1,167     1,125     1,093     933     992     4,318     4,004 
Total noninterest expense   8,817     8,126     7,638     7,640     7,205     32,221     28,731 
Income Before Income Taxes   4,029     4,498     5,046     4,603     5,019     18,176     17,903 
Income Taxes   836     623     932     836     1,583     3,227     5,183 
Net Income   3,193     3,875     4,114     3,767     3,436     14,949     12,720 
Other Comprehensive Income (Loss) (Net of Tax):            
Net unrealized gain (loss) on available-for-sale securities   2,374     (617)    (344)    (2,471)    (1,717)    (1,058)    267 
Reclassification adjustment for (gain) loss on sale of available-for-sale
  securities
   19     (10)    -     -     -     9     (47)
Net unrealized gain (loss) on available-for-sale securities   2,393     (627)    (344)    (2,471)    (1,717)    (1,049)    220 
Tax expense (benefit)   503     (132)    (72)    (519)    (585)    (220)    74 
Other comprehensive income (loss)   1,890     (495)    (272)    (1,952)    (1,132)    (829)    146 
Comprehensive Income$  5,083  $  3,380  $  3,842  $  1,815  $  2,304  $  14,120  $  12,866 
Basic and Diluted Earnings Per Share$  0.34  $  0.42  $  0.44  $  0.41  $  0.37  $  1.61  $  1.38 
Dividends Declared$  0.15  $  0.14  $  0.14  $  0.13  $  0.13  $  0.56  $  0.50 
                    


FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
  
 (in thousands of dollars)
 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017
 (Unaudited)        
Assets         
Cash and due from banks$  37,492  $  28,782  $  31,838  $  39,349  $  33,480 
Federal funds sold   873     939     726     559     987 
Total cash and cash equivalents   38,365     29,721     32,564     39,908     34,467 
          
Interest-bearing time deposits   4,019     4,019     4,019     4,019     4,018 
Securities - available-for-sale    168,447     183,075     187,036     192,859     196,398 
Other securities, at cost   3,679     3,717     3,717     3,717     3,679 
Loans held for sale   495     1,679     913     2,769     1,221 
Loans, net   839,599     831,943     824,226     827,937     816,156 
Premises and equipment   22,612     22,117     21,957     21,980     21,617 
Construction in progress   3     -     -     -     109 
Goodwill   4,074     4,074     4,074     4,074     4,074 
Mortgage servicing rights   2,385     2,373     2,356     2,313     2,299 
Other real estate owned    600     717     649     651     674 
Bank owned life insurance   14,884     14,799     14,692     14,604     14,523 
Other assets    17,001     9,778     9,129     8,911     7,774 
          
Total Assets$  1,116,163  $  1,108,012  $  1,105,332  $  1,123,742  $  1,107,009 
Liabilities and Stockholders' Equity         
Liabilities         
Deposits          
Noninterest-bearing$  215,422  $  197,088  $  200,067  $  193,665  $  199,114 
Interest-bearing         
    NOW accounts    298,254     314,873     311,185     327,433     298,711 
    Savings   227,701     230,306     238,167     245,895     233,949 
    Time   187,413     186,592     181,347     186,345     187,566 
            Total deposits   928,790     928,859     930,766     953,338     919,340 
          
Federal Funds Purchased and        
  securities sold under agreements to repurchase   32,181     27,026     23,898     23,307     39,495 
Federal Home Loan Bank (FHLB) advances    -     5,000     5,000     5,000     5,000 
Dividend payable   1,379     1,287     1,284     1,193     1,193 
Accrued expenses and other liabilities   10,526     6,493     6,808     6,027     7,844 
            Total liabilities   972,876     968,665     967,756     988,865     972,872 
          
Commitments and Contingencies         
          
Stockholders' Equity         
Common stock - No par value 20,000,000 shares authorized;      
  issued and outstanding 10,400,000 shares 12/31/18 and 12/31/17   10,823     10,589     11,842     11,690     11,546 
Treasury stock - 1,114,739 shares 12/31/18, 1,134,120 shares 12/31/17   (12,409)    (12,409)    (12,186)    (12,158)    (12,160)
Retained earnings   147,887     146,072     142,330     139,483     136,577 
Accumulated other comprehensive loss   (3,014)    (4,905)    (4,410)    (4,138)    (1,826)
            Total stockholders' equity    143,287     139,347     137,576     134,877     134,137 
          
Total Liabilities and Stockholders' Equity$  1,116,163  $  1,108,012  $  1,105,332  $  1,123,742  $  1,107,009 


 For the Three Months Ended For the Twelve Months Ended
Selected financial data December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017 December 31, 2018  December 31, 2017
Return on average assets  1.15%  1.40%  1.48%  1.35%  1.25% 1.34%  1.18%
Return on average equity  9.04%  11.19%  12.08%  11.20%  10.29% 10.86%  9.75%
Yield on earning assets  4.52%  4.52%  4.41%  4.28%  4.24% 4.46%  4.16%
Cost of interest bearing liabilities  0.92%  0.92%  0.79%  0.75%  0.71% 0.86%  0.68%
Net interest spread  3.60%  3.60%  3.62%  3.53%  3.53% 3.60%  3.48%
Net interest margin  3.85%  3.85%  3.83%  3.72%  3.72% 3.83%  3.65%
Efficiency  67.59%  63.86%  60.89%  61.88%  58.15% 63.19%  60.62%
Dividend payout ratio  43.16%  33.21%  31.21%  31.67%  34.72% 25.18%  36.02%
Tangible book value per share (1) $  14.96  $  14.53  $  14.36  $  14.06  $  13.99      
Tier 1 capital to average assets  12.81%  12.63%  12.38%  12.11%  12.02%     
          
         
Loans December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017     
(Dollar amounts in thousands)                    
Commercial real estate $  419,784   $   417,217   $   411,509   $   415,296   $   410,520      
Agricultural real estate    68,609     68,548     69,701     67,596     64,073      
Consumer real estate    80,766     83,134     82,853     84,501     83,620      
Commercial and industrial    121,793     119,536     116,351     123,439     126,275      
Agricultural    108,495     103,624     104,830     99,836     95,111      
Consumer    41,953     41,444     40,513     38,569     37,757      
Industrial development bonds    5,889     6,005     6,071     6,350     6,415      
  Less: Net deferred loan fees and costs    (915)    (810)    (813)    (850)    (747)     
Total loans,net $  846,374   $   838,698   $   831,015   $   834,737   $   823,024      
     
      
Asset quality data December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017    
(Dollar amounts in thousands)                  
Nonaccrual loans $  542  $  483  $  903  $  900   $   1,003     
Troubled debt restructuring $  178  $  205  $  218  $  527   $   683     
90 day past due and accruing $  -  $  -  $  -  $  -   $   -      
Nonperforming loans $  542  $  483  $  903  $  900   $   1,003     
Other real estate owned $  600  $  717  $  649  $  651   $   674     
Non-performing assets $  1,142  $  1,200  $  1,552  $  1,551   $   1,677     
                   
(Dollar amounts in thousands)                  
Allowance for loan and lease losses $6,755  $6,755  $7,104  $6,800  $  6,868    
Allowance for loan and lease losses/total loans 0.80%  0.81%  0.85%  0.81%  0.83%    
Net charge-offs:                
  Quarter-to-date $84  $81  $143  $108  $  27     
  Year-to-date $417  $332  $251  $108  $  138     
Net charge-offs to average loans                 
  Quarter-to-date 0.01%  0.01%  0.02%  0.01% 0.00%    
  Year-to-date 0.05%  0.04%  0.03%  0.01%  0.02%    
Non-performing loans/total loans 0.06%  0.06%  0.11%  0.11% 0.12%    
Allowance for loan and lease losses/nonperforming loans 1249.57%  1399.58%  751.49%  755.19% 684.83%    
 
(1)  Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible)