Farmers & Merchants Bancorp, Inc. Reports 2023 First Quarter Financial Results
ARCHBOLD, Ohio, April 19, 2023 (GLOBE NEWSWIRE) — Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2023 first quarter ended March 31, 2023.
2023 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):
- Net interest income before provision for credit losses increased 9.6% to $21.7 million
- Adopted CECL accounting standards, which led to a one-time adjustment to equity of $3.4 million, net of tax
- Net income of $6.5 million, compared to $8.1 million
- Earnings were $0.47 per basic and diluted share, compared to $0.62 per basic and diluted share
- Total loans increased 24.7% to a record $2.447 billion
- Organic loan growth of 19.4%, excluding PPP loans and the Peoples-Sidney Financial Corporation acquisition
- Total assets increased 14.3% to a record $3.07 billion, and up 1.8% from December 31, 2022
- Deposits increased 11.5% to a record $2.51 billion, and up 1.8% from December 31, 2022
- Uninsured deposits to total deposits of approximately 18% at March 31, 2023
- Strong asset quality continues as nonperforming loans declined 10.1% to $7.7 million, or 0.32% of total loans
- Net charge-offs to average loans were 0.00%
- Allowance for credit losses, with the accretable yield adjustment from recent acquisitions, of 319.22% of nonperforming loans
Lars B. Eller, President and Chief Executive Officer, stated, “F&M’s increased scale, strong balance sheet, and highly profitable financial model supports our growth initiatives, while providing us with the flexibility to invest across our business and return capital to shareholders. Despite increased economic volatility, we remain focused on executing our new three-year strategic growth plan and I am pleased with the progress we are making. During the quarter, we successfully completed the integration of the October 2022 acquisition of the Peoples-Sidney Financial Corporation. We implemented CECL accounting standards, which maintained our allowance, even as non-performing loans declined 10.1% over the past 12 months. In the first quarter, we completed the conversion of our credit card sale with new cards issued and the scorecard rewards carried over to the new provider. In addition, we completed the first phase of our previously announced investments, preparing to open three new offices in the second quarter as well as enhancing our training, commercial and deposit operations, customer care center, and risk and compliance teams and capabilities. Finally, we added a new, highly experienced lending team in our Fort Wayne region to lead our growth within this compelling market.”
Mr. Eller continued, “We grew total deposits by $44.3 million over the past three months, despite extremely high competition for deposits. Competition for deposits has also significantly increased our cost of interest-bearing liabilities. Interest expense on deposits increased over five times from $1.4 million in the 2022 first quarter to $8.2 million, compared to an 11.5% increase in total deposits over this period. Despite these trends, net interest income before provision for credit losses increased 9.6% to a first quarter record as a result of strong loan growth and higher yields on loans.”
“Profitability was impacted by several strategic one-time expenses that we incurred during the 2023 first quarter including $541,000 of total charges related to the conversion of our credit card platform. In addition, we sold $21.6 million of investments and recognized a loss of $891,000 during the quarter, which temporarily reduced ROA by 9 basis points and ROE by 93 basis points. We expect this opportunistic sale to contribute to earnings going forward and earn a payback in approximately eight months. Offsetting these actions was significant growth in income from agriculture servicing rights, which were recognized at a value of $1.5 million during the first quarter. Overall, first quarter profitability was in line with our expectations. We expect the actions taken in the first quarter will enhance profitability going forward and we remain focused on investing in our growth initiatives, controlling operating expenses, and managing our cost of funds,” continued Mr. Eller.
Income Statement
Net income for the 2023 first quarter ended March 31, 2023, was $6.5 million, compared to $8.1 million for the same period last year. Net income per basic and diluted share for the 2023 first quarter was $0.47, compared to $0.62 for the same period last year.
Deposits
At March 31, 2023, total deposits were a record $2.513 billion, an increase of 11.5% from March 31, 2022, and an increase of 1.8% from December 31, 2022. The Company’s cost of interest-bearing liabilities increased to 1.85% for the quarter ended March 31, 2023, compared to 0.45% for the quarter ended March 31, 2022, and 1.32% for the quarter ended December 31, 2022.
At March 31, 2023, F&M’s average deposit account had an average balance of $25,544. In addition, uninsured deposits to total deposits were approximately 18% for the quarter ended March 31, 2023.
Loan Portfolio and Asset Quality
Total loans, net at March 31, 2023, increased 24.5%, or by $476.6 million to a record $2.422 billion, compared to $1.945 billion at March 31, 2022, and up 3.7% from $2.336 billion at December 31, 2022. The year-over-year improvement resulted primarily from the contribution of continued strong organic loan growth and the completion of the Peoples acquisition. Not including the Peoples acquisition, total net loans increased 19.1% organically, or by $371.9 million from the same period a year ago.
F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $7.7 million, or 0.32% of total loans at March 31, 2023, compared to $8.6 million, or 0.44% of total loans at March 31, 2022. Loans past due were 0.52% of the loan portfolio at March 31, 2023, which included one large farm loan that was paid off after the quarter ended and another loan that is expected to be refinanced through another bank in the 2023 second quarter. Past due loans adjusted for these two credits as a percent of the loan portfolio would have been 0.13% at March 31, 2023. CRE loans represented 50.1% of the Company’s total loan portfolio at March 31, 2023.
F&M maintains a well-balanced, diverse and high performing CRE portfolio, which included the following categories at March 31, 2023:
CRE Category | Dollar | Percent of | Percent of Total | ||||
| Multi Family | $204,510 | 16.7% | 8.4% | ||||
| Retail | $217,447 | 17.7% | 8.9% | ||||
| Industrial | $174,296 | 14.2% | 7.1% | ||||
| Hotels | $151,562 | 12.4% | 6.2% | ||||
| Office | $96,087 | 7.8% | 3.9% | ||||
| Gas Stations | $59,239 | 4.8% | 2.4% | ||||
| Senior Living | $41,407 | 3.4% | 1.7% | ||||
| Food Service | $32,788 | 2.7% | 1.3% | ||||
| Other | $247,979 | 20.2% | 10.1% | ||||
| Total CRE | $1,225,315 | 100.0% | 50.1% | ||||
* Numbers have been rounded
On January 1, 2023, F&M adopted ASU 2016-13 – Measurement of Credit Losses on Financial Instruments and implemented the current expected credit losses (“CECL”) accounting standards. As a result, the Company recorded the one-time adjustment from equity into the allowance for credit losses and unfunded commitment liability in the amount of $4.3 million, or $3.4 million, net of tax. The adoption of CECL did not have a material impact on the Bank’s regulatory capital ratios.
At March 31, 2023, the Company’s allowance for credit losses to nonperforming loans was 319.22%, compared to 198.29% at March 31, 2022. As a result of F&M’s recent acquisitions, the Company has an accretable yield adjustment of $5.8 million, which further enhances F&M’s allowance at March 31, 2023. Including the accretable yield adjustment, F&M’s allowance for credit losses to total loans was 1.24% at March 31, 2023, compared to 1.22% at March 31, 2022.
Mr. Eller concluded, “We expect to make approximately $7 million of annual strategic investments during 2023 across our business. These investments combined with a higher cost of funds are expected to temporarily impact profitability in 2023. We believe earnings growth will reaccelerate in 2024 as we benefit from the investments and strategies we are pursuing. I am encouraged by the progress we are making and the dedication of our team members, as we remain focused on supporting the financial needs of our Ohio, Indiana and Michigan communities.”
Stockholders’ Equity and Dividends
Total stockholders’ equity increased 6.7% to $305.8 million at March 31, 2023, from $286.5 million at March 31, 2022. At March 31, 2023, the Company had a Tier 1 leverage ratio of 8.36%, compared to 8.51% at March 31, 2022.
Based on a regulatory basis, tangible stockholders’ equity increased to $244.2 million at March 31, 2023, compared to $221.6 million at March 31, 2022. On a per share basis, regulatory tangible stockholders’ equity at March 31, 2023, was $17.92 per share, compared to $16.96 per share at March 31, 2022. A non-GAAP reconciliation is provided as a table in this press release.
For the 2023 first quarter, the company declared cash dividends of $0.21 per share, which is a 10.5% increase over the 2022 first quarter declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 28 consecutive years. For the 2023 first quarter, the dividend payout ratio was 43.79% compared to 30.64% for the same period last year.
About Farmers & Merchants State Bank:
The Farmers & Merchants State Bank is a local independent community bank that has been serving Northwest Ohio and Northeast Indiana since 1897. The Farmers & Merchants State Bank provides commercial banking, retail banking and other financial services. Our locations are in Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Shelby, Williams, and Wood counties in Western Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties, and we have Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Bryan and Oxford, Ohio.
Safe harbor statement
Farmers & Merchants Bancorp, Inc. (“F&M”) wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995. Statements by F&M, including management’s expectations and comments, may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Exchange Act of 1934, as amended. Actual results could vary materially depending on risks and uncertainties inherent in general and local banking conditions, competitive factors specific to markets in which F&M and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions, capital market conditions, or the effects of the COVID-19 pandemic, and its impacts on our credit quality and business operations, as well as its impact on general economic and financial market conditions. F&M assumes no responsibility to update this information. For more details, please refer to F&M’s SEC filing, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. Such filings can be viewed at the SEC’s website, www.sec.gov or through F&M’s website www.fm.bank.
Non-GAAP Financial Measures
This press release includes disclosure of financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers & Merchants Bancorp, Inc. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers & Merchants Bancorp, Inc.’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial measures is included within this press release.
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME | ||||||||||||||||||||||
| (Unaudited) (in thousands of dollars, except per share data) | ||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||
| March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||||
| Interest Income | ||||||||||||||||||||||
| Loans, including fees | $ | 29,703 | $ | 27,302 | $ | 24,119 | $ | 22,388 | $ | 20,455 | ||||||||||||
| Debt securities: | ||||||||||||||||||||||
| U.S. Treasury and government agencies | 1,068 | 1,118 | 1,049 | 1,035 | 1,023 | |||||||||||||||||
| Municipalities | 408 | 420 | 373 | 322 | 300 | |||||||||||||||||
| Dividends | 123 | 126 | 93 | 57 | 42 | |||||||||||||||||
| Federal funds sold | 21 | 2 | – | 9 | 10 | |||||||||||||||||
| Other. | 479 | 524 | 213 | 100 | 69 | |||||||||||||||||
| Total interest income | 31,802 | 29,492 | 25,847 | 23,911 | 21,899 | |||||||||||||||||
| Interest Expense | ||||||||||||||||||||||
| Deposits | 8,151 | 4,978 | 2,166 | 1,379 | 1,360 | |||||||||||||||||
| Federal funds purchased and securities sold | ||||||||||||||||||||||
| under agreements to repurchase | 405 | 463 | 416 | 166 | 152 | |||||||||||||||||
| Borrowed funds | 1,280 | 1,209 | 398 | 218 | 335 | |||||||||||||||||
| Subordinated notes | 284 | 285 | 284 | 284 | 269 | |||||||||||||||||
| Total interest expense | 10,120 | 6,935 | 3,264 | 2,047 | 2,116 | |||||||||||||||||
| Net Interest Income – Before Provision for Credit Losses* | 21,682 | 22,557 | 22,583 | 21,864 | 19,783 | |||||||||||||||||
| Provision for Credit Losses* | 817 | 755 | 1,637 | 1,628 | 580 | |||||||||||||||||
| Net Interest Income After Provision for Credit Losses* | 20,865 | 21,802 | 20,946 | 20,236 | 19,203 | |||||||||||||||||
| Noninterest Income | ||||||||||||||||||||||
| Customer service fees | 2,447 | 2,862 | 2,300 | 2,148 | 2,648 | |||||||||||||||||
| Other service charges and fees | 2,554 | 1,115 | 1,105 | 1,008 | 998 | |||||||||||||||||
| Net gain on sale of loans | 67 | 165 | 327 | 164 | 697 | |||||||||||||||||
| Net loss on sale of available-for-sale securities | (891 | ) | – | – | – | – | ||||||||||||||||
| Total noninterest income | 4,177 | 4,142 | 3,732 | 3,320 | 4,343 | |||||||||||||||||
| Noninterest Expense | ||||||||||||||||||||||
| Salaries and wages | 6,657 | 6,353 | 5,479 | 5,366 | 5,502 | |||||||||||||||||
| Employee benefits | 2,165 | 1,911 | 1,392 | 1,546 | 2,054 | |||||||||||||||||
| Net occupancy expense | 856 | 753 | 693 | 522 | 598 | |||||||||||||||||
| Furniture and equipment | 1,252 | 1,096 | 1,047 | 1,008 | 1,056 | |||||||||||||||||
| Data processing | 726 | 1,917 | 781 | 654 | 604 | |||||||||||||||||
| Franchise taxes | 366 | (45 | ) | 254 | 757 | 418 | ||||||||||||||||
| ATM expense | 623 | 561 | 580 | 544 | 532 | |||||||||||||||||
| Advertising | 514 | 531 | 578 | 300 | 237 | |||||||||||||||||
| Net (gain) loss on sale of other assets owned | – | 12 | – | (266 | ) | (5 | ) | |||||||||||||||
| FDIC assessment | 306 | 250 | 271 | 270 | 114 | |||||||||||||||||
| Mortgage servicing rights amortization | 159 | 110 | (50 | ) | 59 | 26 | ||||||||||||||||
| Consulting fees | 230 | 637 | 254 | 233 | 178 | |||||||||||||||||
| Other general and administrative | 3,139 | 2,964 | 2,192 | 2,242 | 2,179 | |||||||||||||||||
| Total noninterest expense | 16,993 | 17,050 | 13,471 | 13,235 | 13,493 | |||||||||||||||||
| Income Before Income Taxes | 8,049 | 8,894 | 11,207 | 10,321 | 10,053 | |||||||||||||||||
| Income Taxes | 1,583 | 1,706 | 2,253 | 2,050 | 1,951 | |||||||||||||||||
| Net Income | 6,466 | 7,188 | 8,954 | 8,271 | 8,102 | |||||||||||||||||
| Other Comprehensive Income (Loss) (Net of Tax): | ||||||||||||||||||||||
| Net unrealized gain (loss) on available-for-sale securities | 9,812 | (628 | ) | (8,197 | ) | (14,602 | ) | (20,939 | ) | |||||||||||||
| Reclassification adjustment for realized loss on sale of available-for-sale securities | (891 | ) | – | – | – | – | ||||||||||||||||
| Net unrealized gain (loss) on available-for-sale securities | 8,921 | (628 | ) | (8,197 | ) | (14,602 | ) | (20,939 | ) | |||||||||||||
| Tax expense (benefit) | 1,874 | (132 | ) | (1,721 | ) | (3,067 | ) | (4,397 | ) | |||||||||||||
| Other comprehensive income (loss) | 7,047 | (496 | ) | (6,476 | ) | (11,535 | ) | (16,542 | ) | |||||||||||||
| Comprehensive Income (Loss) | $ | 13,513 | $ | 6,692 | $ | 2,478 | $ | (3,264 | ) | $ | (8,440 | ) | ||||||||||
| Basic Earnings Per Share | $ | 0.47 | $ | 0.53 | $ | 0.68 | $ | 0.63 | $ | 0.62 | ||||||||||||
| Diluted Earnings Per Share | $ | 0.47 | $ | 0.53 | $ | 0.68 | $ | 0.63 | $ | 0.62 | ||||||||||||
| Dividends Declared | $ | 0.2100 | $ | 0.2100 | $ | 0.2100 | $ | 0.2025 | $ | 0.1900 | ||||||||||||
| *ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period’s provision amount reflects the incurred loss method. | ||||||||||||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||||||
| (Unaudited) (in thousands of dollars, except share data) | |||||||||||||||||||||||
| March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash and due from banks | $ | 62,780 | $ | 83,085 | $ | 69,680 | $ | 69,955 | $ | 94,118 | |||||||||||||
| Federal funds sold | 1,545 | 1,324 | 990 | 1,484 | 45,404 | ||||||||||||||||||
| Total cash and cash equivalents | 64,325 | 84,409 | 70,670 | 71,439 | 139,522 | ||||||||||||||||||
| Interest-bearing time deposits | 4,435 | 4,442 | 5,187 | 6,684 | 8,677 | ||||||||||||||||||
| Securities – available-for-sale | 372,975 | 390,789 | 395,485 | 399,687 | 413,996 | ||||||||||||||||||
| Other securities, at cost | 11,543 | 9,799 | 8,227 | 8,735 | 8,568 | ||||||||||||||||||
| Loans held for sale | 951 | 827 | 2,182 | 4,230 | 6,060 | ||||||||||||||||||
| Loans, net | 2,422,018 | 2,336,074 | 2,122,626 | 2,016,394 | 1,945,449 | ||||||||||||||||||
| Premises and equipment | 28,679 | 28,381 | 26,484 | 26,492 | 26,653 | ||||||||||||||||||
| Construction in progress | 1,565 | 278 | – | – | – | ||||||||||||||||||
| Goodwill | 86,358 | 86,358 | 80,434 | 80,434 | 80,434 | ||||||||||||||||||
| Mortgage servicing rights | 4,985 | 3,549 | 3,583 | 3,426 | 3,336 | ||||||||||||||||||
| Other real estate owned | – | – | – | – | – | ||||||||||||||||||
| Bank owned life insurance | 33,269 | 33,073 | 28,051 | 27,874 | 27,715 | ||||||||||||||||||
| Other assets | 38,972 | 37,372 | 40,831 | 29,321 | 25,735 | ||||||||||||||||||
| Total Assets | $ | 3,070,075 | $ | 3,015,351 | $ | 2,783,760 | $ | 2,674,716 | $ | 2,686,145 | |||||||||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||
| Noninterest-bearing | $ | 520,145 | $ | 532,794 | $ | 506,928 | $ | 503,395 | $ | 497,249 | |||||||||||||
| Interest-bearing | |||||||||||||||||||||||
| NOW accounts | 800,230 | 750,887 | 705,888 | 678,552 | 681,975 | ||||||||||||||||||
| Savings | 590,854 | 627,203 | 607,375 | 617,850 | 626,787 | ||||||||||||||||||
| Time | 601,939 | 557,980 | 462,845 | 424,249 | 447,586 | ||||||||||||||||||
| Total deposits | 2,513,168 | 2,468,864 | 2,283,036 | 2,224,046 | 2,253,597 | ||||||||||||||||||
| Federal funds purchased and | |||||||||||||||||||||||
| securities sold under agreements to repurchase | 30,496 | 54,206 | 55,802 | 71,944 | 31,680 | ||||||||||||||||||
| Federal Home Loan Bank (FHLB) advances | 164,327 | 127,485 | 102,147 | 42,635 | 22,656 | ||||||||||||||||||
| Other borrowings | – | 10,000 | 10,000 | – | 40,000 | ||||||||||||||||||
| Subordinated notes, net of unamortized issuance costs | 34,615 | 34,586 | 34,557 | 34,528 | 34,499 | ||||||||||||||||||
| Dividend payable | 2,831 | 2,832 | 2,727 | 2,626 | 2,462 | ||||||||||||||||||
| Accrued expenses and other liabilities | 18,881 | 19,238 | 14,913 | 18,064 | 14,773 | ||||||||||||||||||
| Total liabilities | 2,764,318 | 2,717,211 | 2,503,182 | 2,393,843 | 2,399,667 | ||||||||||||||||||
| Commitments and Contingencies | |||||||||||||||||||||||
| Stockholders’ Equity | |||||||||||||||||||||||
| Common stock – No par value 20,000,000 shares authorized; issued and | |||||||||||||||||||||||
| outstanding 14,564,425 shares 3/31/23 and 12/31/22 | 135,241 | 135,497 | 121,811 | 123,145 | 122,886 | ||||||||||||||||||
| Treasury stock – 934,303 shares 3/31/23, 956,003 shares 12/31/22 | (11,310 | ) | (11,573 | ) | (11,547 | ) | (11,822 | ) | (11,739 | ) | |||||||||||||
| Retained earnings | 213,012 | 212,449 | 208,051 | 200,811 | 195,057 | ||||||||||||||||||
| Accumulated other comprehensive loss | (31,186 | ) | (38,233 | ) | (37,737 | ) | (31,261 | ) | (19,726 | ) | |||||||||||||
| Total stockholders’ equity | 305,757 | 298,140 | 280,578 | 280,873 | 286,478 | ||||||||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 3,070,075 | $ | 3,015,351 | $ | 2,783,760 | $ | 2,674,716 | $ | 2,686,145 | |||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||
| SELECT FINANCIAL DATA | |||||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||||
| Selected financial data | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||
| Return on average assets | 0.84% | 0.96% | 1.31% | 1.23% | 1.21% | ||||||||||||||||
| Return on average equity | 8.59% | 10.00% | 12.53% | 11.66% | 11.00% | ||||||||||||||||
| Yield on earning assets | 4.41% | 4.18% | 4.00% | 3.79% | 3.47% | ||||||||||||||||
| Cost of interest bearing liabilities | 1.85% | 1.32% | 0.68% | 0.44% | 0.45% | ||||||||||||||||
| Net interest spread | 2.56% | 2.86% | 3.32% | 3.35% | 3.02% | ||||||||||||||||
| Net interest margin | 3.01% | 3.20% | 3.49% | 3.47% | 3.14% | ||||||||||||||||
| Efficiency | 63.53% | 50.46% | 51.19% | 50.17% | 55.44% | ||||||||||||||||
| Dividend payout ratio | 43.79% | 39.39% | 30.45% | 30.02% | 30.64% | ||||||||||||||||
| Tangible book value per share (1) | $ | 17.92 | $ | 17.69 | $ | 17.86 | $ | 17.43 | $ | 16.96 | |||||||||||
| Tier 1 leverage ratio | 8.36% | 8.39% | 9.11% | 8.75% | 8.51% | ||||||||||||||||
| Average shares outstanding | 13,615,655 | 13,606,876 | 13,083,145 | 13,065,975 | 13,066,272 | ||||||||||||||||
| Loans | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||
| (Dollar amounts in thousands) | |||||||||||||||||||||
| Commercial real estate | $ | 1,225,315 | $ | 1,152,603 | $ | 1,063,661 | $ | 979,176 | $ | 910,839 | |||||||||||
| Agricultural real estate | 227,897 | 220,819 | 205,089 | 199,972 | 196,223 | ||||||||||||||||
| Consumer real estate | 502,974 | 494,423 | 416,001 | 410,450 | 410,120 | ||||||||||||||||
| Commercial and industrial | 241,598 | 242,360 | 229,388 | 232,975 | 216,918 | ||||||||||||||||
| Agricultural | 131,467 | 128,733 | 128,615 | 127,143 | 140,709 | ||||||||||||||||
| Consumer | 89,588 | 89,147 | 70,602 | 55,411 | 57,521 | ||||||||||||||||
| Other | 29,316 | 29,818 | 30,662 | 31,243 | 31,573 | ||||||||||||||||
| Less: Net deferred loan fees and costs | (1,503 | ) | (1,516 | ) | (1,402 | ) | (1,552 | ) | (1,683 | ) | |||||||||||
| Total loans,net | $ | 2,446,652 | $ | 2,356,387 | $ | 2,142,616 | $ | 2,034,818 | $ | 1,962,220 | |||||||||||
| Asset quality data | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||
| (Dollar amounts in thousands) | |||||||||||||||||||||
| Nonaccrual loans | $ | 7,717 | $ | 4,689 | $ | 5,470 | $ | 5,247 | $ | 8,581 | |||||||||||
| Troubled debt restructuring | $ | 3,516 | $ | 3,645 | $ | 3,978 | $ | 2,748 | $ | 7,268 | |||||||||||
| 90 day past due and accruing | $ | – | $ | – | $ | – | $ | – | $ | – | |||||||||||
| Nonperforming loans | $ | 7,717 | $ | 4,689 | $ | 5,470 | $ | 5,247 | $ | 8,581 | |||||||||||
| Other real estate owned | $ | – | $ | – | $ | – | $ | – | $ | – | |||||||||||
| Nonperforming assets | $ | 7,717 | $ | 4,689 | $ | 5,470 | $ | 5,247 | $ | 8,581 | |||||||||||
| Allowance for credit losses(2) | $ | 24,507 | $ | 20,313 | $ | 19,990 | $ | 18,424 | $ | 16,771 | |||||||||||
| Accretable yield adjustment | 5,754 | 6,427 | 5,959 | 6,724 | 7,201 | ||||||||||||||||
| Adjusted credit losses with accretable yield included(2) | 30,261 | $ | 26,740 | $ | 25,949 | $ | 25,148 | $ | 23,972 | ||||||||||||
| Allowance for credit losses/total loans(2) | $ | 1.00% | 0.86% | 0.93% | 0.91% | 0.85% | |||||||||||||||
| Adjusted credit losses with accretable yield/total loans(2) | $ | 1.24% | 1.13% | 1.21% | 1.24% | 1.22% | |||||||||||||||
| Net charge-offs: | |||||||||||||||||||||
| Quarter-to-date | 60 | $ | 431 | $ | 71 | $ | (25 | ) | $ | 51 | |||||||||||
| Year-to-date | 60 | $ | 529 | $ | 97 | $ | 26 | $ | 51 | ||||||||||||
| Net charge-offs to average loans | 0.28% | ||||||||||||||||||||
| Quarter-to-date | 0.00% | 0.02% | 0.00% | 0.00% | 0.00% | ||||||||||||||||
| Year-to-date | 0.00% | 0.03% | 0.00% | 0.00% | 0.00% | ||||||||||||||||
| Nonperforming loans/total loans | 0.32% | 0.20% | 0.26% | 0.26% | 0.44% | ||||||||||||||||
| Allowance for credit losses/nonperforming loans(2) | 319.22% | 273.67% | 365.44% | 351.44% | 198.29% | ||||||||||||||||
| (1) Tangible Equity = Stockholder Equity less goodwill, other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities) plus CECL adjustment | |||||||||||||||||||||
| (2) ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period’s provision amount reflects the incurred loss method. | |||||||||||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
| AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES | |||||||||||||||||||
| (in thousands of dollars, except percentages) | |||||||||||||||||||
| For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||
| Interest Earning Assets: | Average Balance | Interest/Dividends | Annualized Yield/Rate | Average Balance | Interest/Dividends | Annualized Yield/Rate | |||||||||||||
| Loans | $ | 2,397,061 | $ | 29,703 | 4.96 | % | $ | 1,907,478 | $ | 20,455 | 4.29 | % | |||||||
| Taxable investment securities | 397,480 | 1,499 | 1.51 | % | 429,899 | 1,295 | 1.20 | % | |||||||||||
| Tax-exempt investment securities | 26,352 | 100 | 1.92 | % | 18,587 | 70 | 1.91 | % | |||||||||||
| Fed funds sold & other | 68,557 | 500 | 2.92 | % | 167,319 | 79 | 0.19 | % | |||||||||||
| Total Interest Earning Assets | 2,889,450 | $ | 31,802 | 4.41 | % | 2,523,283 | $ | 21,899 | 3.47 | % | |||||||||
| Nonearning Assets | 180,259 | 165,064 | |||||||||||||||||
| Total Assets | $ | 3,069,709 | $ | 2,688,347 | |||||||||||||||
| Interest Bearing Liabilities: | |||||||||||||||||||
| Savings deposits | $ | 1,400,769 | $ | 4,943 | 1.41 | % | $ | 1,293,099 | $ | 588 | 0.18 | % | |||||||
| Other time deposits | 579,409 | 3,208 | 2.21 | % | 459,854 | 772 | 0.67 | % | |||||||||||
| Other borrowed money | 132,494 | 1,280 | 3.86 | % | 63,364 | 335 | 2.11 | % | |||||||||||
| Fed funds purchased & securities | |||||||||||||||||||
| sold under agreement to repurch. | 38,853 | 405 | 4.17 | % | 29,104 | 152 | 2.09 | % | |||||||||||
| Subordinated notes | 34,596 | 284 | 3.28 | % | 34,480 | 269 | 3.12 | % | |||||||||||
| Total Interest Bearing Liabilities | $ | 2,186,121 | $ | 10,120 | 1.85 | % | $ | 1,879,901 | $ | 2,116 | 0.45 | % | |||||||
| Noninterest Bearing Liabilities | 582,345 | 513,745 | |||||||||||||||||
| Stockholders’ Equity | $ | 301,243 | $ | 294,701 | |||||||||||||||
| Net Interest Income and Interest Rate Spread | $ | 21,682 | 2.56 | % | $ | 19,783 | 3.02 | % | |||||||||||
| Net Interest Margin | 3.01 | % | 3.14 | % | |||||||||||||||
| Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts | |||||||||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||
| AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES | |||||||||||||||||||||||||
| (in thousands of dollars, except percentages) | |||||||||||||||||||||||||
| For the Three Months Ended March 31, 2023 | For the Three Months Ended March 31, 2022 | ||||||||||||||||||||||||
| As Reported | Excluding Acc/Amort | Difference | As Reported | Excluding Acc/Amort | Difference | ||||||||||||||||||||
| $ | Yield | $ | Yield | $ | Yield | $ | Yield | $ | Yield | $ | Yield | ||||||||||||||
| Loans | 29,703 | 4.96 | % | 29,036 | 4.85 | % | 667 | 0.11 | % | 20,455 | 4.29 | % | 20,081 | 4.12 | % | 374 | 0.17 | % | |||||||
| Taxable investment securities | 1,499 | 1.51 | % | 1,499 | 1.51 | % | – | 0.00 | % | 1,295 | 1.20 | % | 1,295 | 1.20 | % | – | 0.00 | % | |||||||
| Tax-exempt investment securities | 100 | 1.92 | % | 100 | 1.92 | % | – | 0.00 | % | 70 | 1.91 | % | 70 | 1.91 | % | – | 0.00 | % | |||||||
| Fed funds sold & other | 500 | 2.92 | % | 500 | 2.92 | % | – | 0.00 | % | 79 | 0.19 | % | 79 | 0.19 | % | – | 0.00 | % | |||||||
| Total Interest Earning Assets | 31,802 | 4.41 | % | 31,135 | 4.31 | % | 667 | 0.10 | % | 21,899 | 3.47 | % | 21,525 | 3.42 | % | 374 | 0.05 | % | |||||||
| Savings deposits | 4,943 | 1.41 | % | 4,943 | 1.41 | % | – | 0.00 | % | 588 | 0.18 | % | 588 | 0.18 | % | – | 0.00 | % | |||||||
| Other time deposits | 3,208 | 2.21 | % | 3,667 | 2.53 | % | (459 | ) | -0.32 | % | 772 | 0.67 | % | 1,391 | 1.21 | % | (619 | ) | -0.54 | % | |||||
| Other borrowed money | 1,280 | 3.86 | % | 1,298 | 3.92 | % | (18 | ) | -0.06 | % | 335 | 2.11 | % | 356 | 2.25 | % | (21 | ) | -0.14 | % | |||||
| Federal funds purchased and | |||||||||||||||||||||||||
| securities sold under agreement to | |||||||||||||||||||||||||
| repurchase | 405 | 4.17 | % | 405 | 4.17 | % | – | 0.00 | % | 152 | 2.09 | % | 152 | 2.09 | % | – | 0.00 | % | |||||||
| Subordinated notes | 284 | 3.28 | % | 284 | 3.28 | % | – | 0.00 | % | 269 | 3.12 | % | 269 | 3.12 | % | – | 0.00 | % | |||||||
| Total Interest Bearing Liabilities | 10,120 | 1.85 | % | 10,597 | 1.94 | % | (477 | ) | -0.09 | % | 2,116 | 0.45 | % | 2,756 | 0.59 | % | (640 | ) | -0.14 | % | |||||
| Interest/Dividend income/yield | 31,802 | 4.41 | % | 31,135 | 4.31 | % | 667 | 0.10 | % | 21,899 | 3.47 | % | 21,525 | 3.42 | % | 374 | 0.05 | % | |||||||
| Interest Expense / yield | 10,120 | 1.85 | % | 10,597 | 1.94 | % | (477 | ) | -0.09 | % | 2,116 | 0.45 | % | 2,756 | 0.59 | % | (640 | ) | -0.14 | % | |||||
| Net Interest Spread | 21,682 | 2.56 | % | 20,538 | 2.37 | % | 1,144 | 0.19 | % | 19,783 | 3.02 | % | 18,769 | 2.83 | % | 1,014 | 0.19 | % | |||||||
| Net Interest Margin | 3.01 | % | 2.85 | % | 0.16 | % | 3.14 | % | 2.98 | % | 0.16 | % | |||||||||||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | ||||||||
| NON-GAAP RECONCILIATION OF NET INCOME | ||||||||
| (in thousands of dollars) | ||||||||
| Three Months Ended | ||||||||
| Non-GAAP Reconciliation of Net Income | March 31, 2023 | March 31, 2022 | ||||||
| (Unaudited) | ||||||||
| Net income as reported | $ | 6,466 | $ | 8,102 | ||||
| Acquisition expenses | 96 | 145 | ||||||
| Tax effect on acquisition expenses | (19 | ) | (30 | ) | ||||
| Net income excluding acquisition expenses and tax effect | $ | 6,543 | $ | 8,217 | ||||
| Weighted average common shares outstanding including participating securities | 13,615,655 | 13,066,272 | ||||||
| Basic and diluted earnings per share | $ | 0.48 | $ | 0.63 | ||||
| FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||
| NON-GAAP RECONCILIATION OF TANGIBLE BOOK VALUE | |||||||||||||||||
| Actual End of Period | Regulatory End of Period | ||||||||||||||||
| Non-GAAP Reconciliation of Tangible Book Value | Year to Date | Year to Date | |||||||||||||||
| March 31, 2023 | March 31, 2022 | March 31, 2023 | March 31, 2022 | ||||||||||||||
| Shares Outstanding | 13,630,122 | 13,066,083 | 13,630,122 | 13,066,083 | |||||||||||||
| Tangible Equity | |||||||||||||||||
| Equity | $ | 305,757 | $ | 286,478 | $ | 305,757 | $ | 286,478 | |||||||||
| Goodwill | 86,358 | 80,434 | 86,358 | 80,434 | |||||||||||||
| Other Intangible | 8,882 | 4,203 | 8,882 | 4,203 | |||||||||||||
| Comprehensive Loss Adjustment* | – | – | 31,186 | 19,726 | |||||||||||||
| CECL Adjustment** | – | – | 2,528 | – | |||||||||||||
| Tangible Equity | $ | 210,517 | $ | 201,841 | $ | 244,231 | $ | 221,566 | |||||||||
| Shares Outstanding | 13,630 | 13,066 | 13,630 | 13,066 | |||||||||||||
| Tangible Book Equity per Share | $ | 15.44 | $ | 15.45 | $ | 17.92 | $ | 16.96 | |||||||||
| Actual Average | Regulatory Average | ||||||||||||||||
| Year to Date | Year to Date | ||||||||||||||||
| March 31, 2023 | March 31, 2022 | March 31, 2023 | March 31, 2022 | ||||||||||||||
| Net Income | $ | 6,466 | $ | 8,102 | $ | 6,466 | $ | 8,102 | |||||||||
| Acquisition Costs – Tax Adjusted | 77 | 115 | 77 | 115 | |||||||||||||
| Average Shares Outstanding | 13,206,713 | 11,664,852 | 13,206,713 | 11,664,852 | |||||||||||||
| Average Tangible Equity | |||||||||||||||||
| Average Equity | $ | 301,243 | $ | 294,701 | $ | 301,243 | $ | 294,701 | |||||||||
| Average Goodwill | 86,358 | 80,434 | 86,358 | 80,434 | |||||||||||||
| Average Other Intangible | 9,167 | 4,356 | 9,167 | 4,356 | |||||||||||||
| Average Comprehensive Loss Adjustment* | – | – | 36,764 | 8,155 | |||||||||||||
| Average CECL Adjustment** | – | – | 2,528 | ||||||||||||||
| Average Tangible Equity | $ | 205,718 | $ | 209,911 | $ | 245,010 | $ | 218,066 | |||||||||
| Average Shares Outstanding | 13,616 | 13,066 | 13,616 | 13,066 | |||||||||||||
| Average Tangible Book Equity per Share | $ | 15.11 | $ | 16.07 | $ | 17.99 | $ | 16.69 | |||||||||
| Return on Average Tangible Equity | 12.57 | % | 15.44 | % | 10.56 | % | 14.86 | % | |||||||||
| Return on Average Tangible Equity w/o Acquisition | 12.72 | % | 15.66 | % | 10.68 | % | 15.07 | % | |||||||||
| *The Bank has adopted the Accumulated Other Comprehensive Income (AOCI) opt out election which removed AOCI | |||||||||||||||||
| from the calculation of tangible equity for regulatory purposes. | |||||||||||||||||
| **ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period’s provision amount reflects the incurred loss method and | |||||||||||||||||
| the Bank has elected to spread the Capital adjustment over three years. The first year permits 75% of the capital adjustment to be removed | |||||||||||||||||
| from the calculation of tangible equity for regulatory purposes. | |||||||||||||||||
| Company Contact: | Investor and Media Contact: |
| Lars B. Eller President and Chief Executive Officer Farmers & Merchants Bancorp, Inc. (419) 446-2501 leller@fm.bank | Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com |
