Farmers & Merchants Bancorp Inc.

04/22/2021 | Press release | Distributed by Public on 04/22/2021 13:25

Current Report (SEC Filing - 8-K)

fmao-ex99_6.htm

Exhibit 99

Post Office Box 216

307 North Defiance Street

Archbold, Ohio 43502

NEWS RELEASE

Company Contact:

Investor and Media Contact:

Lars B. Eller

President and Chief Executive Officer Farmers & Merchants Bancorp, Inc.

(419) 446-2501

[email protected]

Andrew M. Berger

Managing Director

SM Berger & Company, Inc.

(216) 464-6400

[email protected]

Farmers & Merchants Bancorp, Inc. Reports Record

2021 First Quarter Financial Results

ARCHBOLD, OHIO, April 21, 2021, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2021 first quarter ended March 31, 2021.

2021 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

•

Net income increased 19.6% to $4.9 million

•

Earnings increased 18.9% to $0.44 per basic and diluted share

•

Net interest income after provision for loan losses increased by 5.7% to $13.3 million, which included a $0.3 million increase in the first quarter provision for loan losses

•

Noninterest income increased 59.9% to $5.0 million

•

First quarter after-tax income benefited from $0.5 million of accelerated fees associated with the Paycheck Protection Program ('PPP')

•

Strong organic growth supported a 7.1% increase in net total loans and a 24.8% increase in total deposits

•

Originated $43.5 million of new loans under the latest Paycheck Protection Program, helping F&M protect over 18,000 jobs throughout the program

•

Return on average tangible equity increased to 10.10% from 9.13% for the first quarter last year

•

Loans 30 days past due to total loans, excluding COVID related loans, was only 0.18%

•

New full-service office in Fort Wayne, IN opened in 2021 second quarter

'2021 is off to a strong start as our markets emerge from the COVID-19 crisis and we continue to focus on providing local services and leading financial products to our retail, commercial, and agriculture customers. As a result, we are gaining market share and benefitting from robust growth in loans, deposits, and noninterest income, which have helped us successfully offset higher provision for loan losses and operating expenses during the 2021 first quarter,' stated Lars B. Eller, President and Chief Executive Officer. 'I am grateful to our team members who continue to work diligently and support the financial needs of our local customers and communities.'

'The acquisition of Ossian Financial Services is expected to close in the coming weeks, and we are well positioned to quickly integrate Ossian into F&M's platform. Once completed, we expect the acquisition will add approximately $122 million in assets to F&M and will begin contributing to earnings in 2021. In addition, we expect to see the benefit to noninterest expense of our office realignment strategy over the next several quarters, and we will use a portion of the savings to reinvest in expanding our digital and online offerings.'

Income Statement

Net income for the 2021 first quarter ended March 31, 2021, was $4.9 million, compared to $4.1 million for the same period last year. Earnings per basic and diluted share for the 2021 first quarter was $0.44, compared to $0.37 for the same period last year.

Higher provision for loan losses and operating expenses were successfully offset by increased interest income, successful reductions in cost of funds, interest and fees earned from the Paycheck Protection Program, and a 59.9% or $1.9 million year-over-year increase in noninterest income. Increases in Customer Service Fees and Gain on sales of both 1-4 family mortgage loans and fixed rate agricultural loans were the biggest contributors in noninterest income. F&M's provision for loan losses increased from $1.4 million for the three months ended March 31, 2020, to $1.7 million for the three months ended March 31, 2021, as the Company prudently increased its allowance of loan losses primarily associated with continued economic uncertainty caused by the COVID-19 crisis. In addition, noninterest expense increased by $1.7 million, due to higher operating expenses supporting a 20% larger Company in asset size and servicing a larger footprint. It also included a one-time expense of $0.3 million related to the Company's pension.

Deposits

At March 31, 2021, total deposits were $1.684 billion, an increase of 24.8% from March 31, 2020, and an increase of 5.5% from December 31, 2020. The significant organic deposit growth being experienced is a result of continued strength in expanding relationships with new and existing customers, and the benefits of PPP activity. In addition, we continue to see growing customer preferences to more stable and secure saving instruments as deposits have increased since the COVID-19 crisis began.

Loan Portfolio and Asset Quality

Total loans, net at March 31, 2021, increased 7.5% or by $94.0 million to $1.342 billion, compared to $1.248 billion at March 31, 2020, and up from $1.303 billion at December 31, 2020. The year-over-year improvement resulted primarily from the contribution of continued strong organic loan growth. In addition, during the 2021 first quarter, the Company processed $27.5 million of PPP loan forgiveness and principal payments received and originated $43.5 million of new PPP loans, resulting in a total of $51.8 million of PPP loans within F&M's loan portfolio.

Mr. Eller continued, 'Since the start of the crisis, we strengthened our relationships by increasing the amount of financial relief, assistance, and advice we are providing customers. During the first quarter, we processed more than 1,200 new PPP loans, and throughout the PPP process, we have helped our small business customers protect more than 18,000 jobs within our markets.'

'Our local relationships continue to produce strong organic growth, and loans not including PPP loans, increased nearly 2.3% during the 2021 first quarter. We are experiencing organic loan growth across our Ohio, Indiana, and Michigan markets, due to our recently opened LPOs and our strong, experienced, and local lenders. Our agriculture portfolios are also demonstrating compelling growth and strong asset performance as farmers benefit from robust market dynamics.'

Mr. Eller continued: 'At March 31, 2021 there were only five commercial and agricultural real estate loans totaling $10.4 million of COVID-related payment modifications, all of which are interest-only modifications and secured by real estate. This compares to 190 loans representing a balance of $165 million in deferrals at the peak last year. Given the uncertainty surrounding the COVID-19 crisis, we continue to fund our allowance for loan and lease losses, which increased by 69.0% over the past 12 months. Our allowance for loan and lease losses to total loans, adjusted for our PPP balances, is now over 1.23% and includes the $1.5 million credit mark associated with the 2019 Bank of Geneva acquisition.'

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $8.1 million, or 0.61% of total loans at March 31, 2021, compared to $3.3 million, or 0.27% at March 31, 2020. The year-over-year increase in nonperforming loans is primarily due to the impacts of the COVID-19 crisis.

Mr. Eller concluded: '2021 is expected to be a transformative year for F&M. Throughout the year, we will focus on executing our strategic plan, completing and integrating the Ossian acquisition, integrating last year's acquisition of Adams County Financial Resources, achieving the benefits from our office realignment program, and driving strong organic growth by supporting our local communities. I am proud of our continued strong performance and excited to update shareholders in the coming quarters on the progress we are making.'

Stockholders' Equity and Dividends

Total stockholders' equity increased 4.4% to $246.8 million at March 31, 2021, from $236.5 million at March 31, 2020. At March 31, 2021, the Company had a Tier 1 leverage ratio of 10.39%, compared to 11.56% at March 31, 2020.

Tangible stockholders' equity increased to $195.9 million at March 31, 2021, compared to $180.9 million at March 31, 2020. On a per share basis, tangible stockholders' equity at March 31, 2021, was $17.50 per share, compared to $16.26 per share at March 31, 2020.

For the 2021 first quarter, the company declared cash dividends of $0.17 per share, which is a 6.3% increase over the 2020 first quarter declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 26 consecutive years. For the 2021 first quarter, the dividend payout ratio was 38.48% compared to 43.07% 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 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, 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, 2021

December
31, 2020

September
30, 2020

June
30, 2020

March
31, 2020

Interest Income

Loans, including fees

$

15,612

$

17,061

$

16,181

$

16,192

$

15,883

Debt securities:

U.S. Treasury and

government

agencies

751

695

761

767

1,146

Municipalities

308

295

279

243

262

Dividends

50

35

36

26

45

Federal funds sold

5

5

4

5

6

Other

39

48

32

40

122

Total interest income

16,765

18,139

17,293

17,273

17,464

Interest Expense

Deposits

1,340

1,619

1,864

2,254

2,901

Federal funds purchased

and securities sold

under agreement to

repurchase

166

170

174

187

244

Borrowed funds

222

226

231

257

266

Total interest

expense

1,728

2,015

2,269

2,698

3,411

Net Interest Income -

Before Provision for

Loan Losses

15,037

16,124

15,024

14,575

14,053

Provision for Loan Losses

1,700

1,995

1,987

1,569

1,430

Net Interest Income After

Provision For Loan

Losses

13,337

14,129

13,037

13,006

12,623

Noninterest Income

Customer service fees

2,814

2,750

2,299

2,258

1,586

Other service charges

and fees

838

980

879

704

1,039

Net gain on sale of loans

1,046

1,894

1,537

364

227

Net gain on sale of

available-for-sale

securities

293

-

-

-

270

Total noninterest

income

4,991

5,624

4,715

3,326

3,122

Noninterest Expense

Salaries and wages

4,390

5,068

5,102

4,095

4,223

Employee benefits

1,994

1,140

1,566

1,218

1,677

Net occupancy expense

577

585

558

564

564

Furniture and equipment

791

760

875

750

758

Data processing

505

428

490

408

442

Franchise taxes

446

241

368

369

368

ATM expense

449

456

444

376

414

Advertising

235

353

411

265

303

Net (gain) loss on sale

of other assets owned

(25

)

20

(7

)

(7

)

1

FDIC assessment

236

223

194

144

72

Mortgage servicing

rights amortization

505

247

296

356

132

Consulting fees

223

407

205

217

139

Other general and

administrative

2,033

1,358

1,553

1,612

1,575

Total noninterest

expense

12,359

11,286

12,055

10,367

10,668

Income Before Income

Taxes

5,969

8,467

5,697

5,965

5,077

Income Taxes

1,060

1,691

1,287

1,161

972

Net Income

4,909

6,776

4,410

4,804

4,105

Other Comprehensive

Income (Loss) (Net of

Tax):

Net unrealized gain

(loss) on available-for-

sale securities

(6,737

)

(207

)

639

661

4,998

Reclassification

adjustment for realized

gain on sale of

available-for-sale

securities

(293

)

-

-

-

(270

)

Net unrealized gain

(loss) on available-for-

sale securities

(7,030

)

(207

)

639

661

4,728

Tax expense (benefit)

(1,476

)

(44

)

134

139

993

Other comprehensive

income (loss)

(5,554

)

(163

)

505

522

3,735

Comprehensive Income (Loss)

$

(645

)

$

6,613

$

4,915

$

5,326

$

7,840

Basic and Diluted

Earnings Per Share

$

0.44

$

0.60

$

0.40

$

0.43

$

0.37

Dividends Declared

$

0.17

$

0.17

$

0.17

$

0.16

$

0.16

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (in thousands of dollars, except share data)

March
31, 2021

December
31, 2020

September
30, 2020

June
30, 2020

March
31, 2020

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Assets

Cash and due from banks

$

118,139

$

98,279

$

46,395

$

54,336

$

49,844

Federal funds sold

57,361

77,427

41,358

31,105

40,993

Total cash and cash equivalents

175,500

175,706

87,753

85,441

90,837

Interest-bearing time deposits

4,405

4,653

4,657

4,636

4,869

Securities - available-for-sale

352,974

307,812

259,041

236,292

204,121

Other securities, at cost

5,939

5,939

5,827

5,810

5,810

Loans held for sale

7,511

7,740

7,621

11,445

2,153

Loans, net

1,327,254

1,289,318

1,351,979

1,334,790

1,239,108

Premises and equipment

26,703

27,063

26,776

26,049

26,120

Goodwill

47,340

47,340

47,340

47,340

47,340

Mortgage servicing rights

3,444

3,320

3,027

2,740

2,672

Other real estate owned

148

71

206

135

185

Bank owned life insurance

25,347

25,208

15,501

15,399

15,313

Other assets

16,720

15,374

16,872

14,370

16,597

Total Assets

$

1,993,285

$

1,909,544

$

1,826,600

$

1,784,447

$

1,655,125

Liabilities and Stockholders' Equity

Liabilities

Deposits

Noninterest-bearing

$

384,558

$

351,147

$

330,845

$

336,027

$

261,786

Interest-bearing

NOW accounts

605,533

542,317

534,792

504,846

463,734

Savings

451,043

455,145

392,059

374,871

341,256

Time

242,717

247,553

261,177

261,631

281,931

Total deposits

1,683,851

1,596,162

1,518,873

1,477,375

1,348,707

Federal Funds Purchased and securities

sold under agreements to repurchase

30,072

30,239

29,859

30,949

30,585

Federal Home Loan Bank (FHLB)

advances

17,840

17,861

17,724

19,087

24,788

Dividend payable

1,889

1,889

1,882

1,768

1,768

Accrued expenses and other liabilities

12,805

14,233

14,841

14,971

12,820

Total liabilities

1,746,457

1,660,384

1,583,179

1,544,150

1,418,668

Commitments and Contingencies

Stockholders' Equity

Common stock - No par value 20,000,000

shares authorized; issued and outstanding

12,230,000 shares 3/31/21 and 12/31/20

82,030

81,804

81,577

82,134

81,844

Treasury stock - 1,033.256 shares 3/31/21,

1,032,456 shares 12/31/20

(11,962

)

(11,932

)

(12,397

)

(12,668

)

(12,636

)

Retained earnings

176,617

173,591

168,381

165,476

162,416

Accumulated other comprehensive

income

143

5,697

5,860

5,355

4,833

Total stockholders' equity

246,828

249,160

243,421

240,297

236,457

Total Liabilities and Stockholders' Equity

$

1,993,285

$

1,909,544

$

1,826,600

$

1,784,447

$

1,655,125

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

SELECT FINANCIAL DATA

For the Three Months Ended

Selected financial data

March
31, 2021

December
31, 2020

September
30, 2020

June
30, 2020

March
31, 2020

Return on average assets

1.01

%

1.43

%

0.98

%

1.10

%

1.02

%

Return on average equity

7.87

%

11.04

%

7.28

%

8.07

%

7.06

%

Yield on earning assets

3.71

%

4.09

%

4.04

%

4.25

%

4.66

%

Cost of interest bearing

liabilities

0.53

%

0.64

%

0.74

%

0.91

%

1.22

%

Net interest spread

3.18

%

3.45

%

3.30

%

3.34

%

3.44

%

Net interest margin

3.33

%

3.63

%

3.51

%

3.59

%

3.75

%

Efficiency

62.57

%

52.20

%

62.11

%

57.91

%

63.09

%

Dividend payout ratio

38.48

%

27.77

%

42.66

%

36.80

%

43.07

%

Tangible book value

per share (1)

$

17.50

$

17.19

$

16.78

$

16.33

$

16.26

Tier 1 capital to

average assets

10.39

%

10.46

%

10.65

%

10.70

%

11.56

%

Average Shares Outstanding

11,197,012

11,177,765

11,142,797

11,129,341

11,134,870

(1) Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities)

Loans

March
31, 2021

December
31, 2020

September
30, 2020

June
30, 2020

March
31, 2020

(Dollar amounts in thousands)

Commercial real estate

$

618,754

$

588,825

$

595,146

$

589,382

$

570,217

Agricultural real estate

179,945

189,159

192,883

194,606

194,383

Consumer real estate

175,675

175,588

175,963

174,069

174,731

Commercial and industrial

202,958

189,246

238,175

223,842

143,261

Agricultural

100,022

94,358

103,330

107,458

109,584

Consumer

54,445

52,540

53,320

50,108

49,022

Other

14,088

15,757

9,030

9,714

8,336

Less: Net deferred loan fees

and costs

(4,208

)

(2,483

)

(3,985

)

(4,456

)

(1,893

)

Total loans, net

$

1,341,679

$

1,302,990

$

1,363,862

$

1,344,723

$

1,247,641

Asset quality data

March
31, 2021

December
31, 2020

September
30, 2020

June
30, 2020

March
31, 2020

(Dollar amounts in thousands)

Nonaccrual loans

$

8,139

$

9,404

$

7,870

$

8,473

$

3,344

Troubled debt restructuring

$

5,774

$

6,514

$

7,028

$

7,034

$

1,934

90 day past due and accruing

$

-

$

-

$

-

$

-

$

-

Nonperforming loans

$

8,139

$

9,404

$

7,870

$

8,473

$

3,344

Other real estate owned

$

148

$

71

$

206

$

135

$

185

Non-performing assets

$

8,287

$

9,475

$

8,076

$

8,608

$

3,529

(Dollar amounts in thousands)

Allowance for loan and lease losses

$

14,425

$

13,672

$

11,883

$

10,538

$

8,533

Allowance for loan and lease

losses/total loans

1.08

%

1.05

%

0.87

%

0.78

%

0.68

%

Net charge-offs:

Quarter-to-date

$

947

$

205

$

37

$

169

$

125

Year-to-date

$

947

$

537

$

331

$

294

$

125

Net charge-offs to average loans

Quarter-to-date

0.07

%

0.02

%

0.00

%

0.01

%

0.01

%

Year-to-date

0.07

%

0.04

%

0.03

%

0.02

%

0.01

%

Non-performing loans/total loans

0.61

%

0.72

%

0.58

%

0.63

%

0.27

%

Allowance for loan and lease

losses/nonperforming loans

177.24

%

177.96

%

151.01

%

117.24

%

256.66

%

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, 2021

March 31, 2020

Interest Earning Assets:

Average

Balance

Interest/

Dividends

Annualized

Yield/Rate

Average

Balance

Interest/

Dividends

Annualized

Yield/Rate

Loans

$

1,328,571

$

15,612

4.70

%

$

1,236,848

$

15,883

5.14

%

Taxable Investment Securities

324,536

1,009

1.24

%

190,158

1,321

2.78

%

Tax-exempt Investment Securities

20,375

100

2.49

%

28,832

132

2.32

%

Fed Funds Sold & Other

136,663

44

0.13

%

46,393

128

1.10

%

Total Interest Earning Assets

1,810,145

$

16,765

3.71

%

1,502,231

$

17,464

4.66

%

Nonearning Assets

126,579

114,326

Total Assets

$

1,936,724

$

1,616,557

Interest Bearing Liabilities:

Savings Deposits

$

1,014,392

$

574

0.23

%

$

773,130

$

1,485

0.77

%

Other Time Deposits

242,033

766

1.27

%

277,579

1,416

2.04

%

Other Borrowed Money

17,848

222

4.98

%

24,787

266

4.29

%

Fed Funds Purchased & Securities

Sold under Agreement to Repurchase

30,210

166

2.20

%

38,954

244

2.51

%

Total Interest Bearing Liabilities

$

1,304,483

$

1,728

0.53

%

$

1,114,450

$

3,411

1.22

%

Noninterest bearing Liabilities

382,640

269,550

Stockholders Equity

$

249,601

$

232,557

Net Interest Income and

interest rate spread

$

15,037

3.18

%

$

14,053

3.44

%

Net Interest Margin

3.33

%

3.75

%

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

ALLOWANCE RECONCILIATION

(in thousands of dollars, except percentages)

For the Three

Months Ended

March 31, 2021

Allowance for Loan Losses

$

14,425

Credit Mark

1,500

Total Credit Mark and Allowance for Loan Losses

15,925

Loans

$

1,341,679

Adjustments

PPP Loans

(51,789

)

Loans excluding PPP Loans

$

1,289,890

Allowance for Loan Losses

1.08

%

Effect of Credit Mark

0.11

%

Effect of PPP Loans

0.04

%

Allowance for Loan Losses, excluding PPP Loans

1.23

%