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Farmers & Merchants Bancorp, Inc. Reports 2018 Third-Quarter and Year-to-Date Financial Results

ARCHBOLD, OHIO, Oct. 18, 2018 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2018 third quarter and year-to-date September 30, 2018.

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

  • 62 consecutive quarters of profitability
  • Total loans increased 5.5% to $838,698,000
  • Net interest income after provision for loan losses increased 9.2% to $9,941,000
  • Net income increased 20.3% to $3,875,000
  • Earnings per basic and diluted share increased 20.0% to $0.42
  • Return on average assets was 1.40%, up from 1.20%
  • Return on average equity was 11.19%, up from 9.76%

“2018 is shaping up to be a historic year for F&M as we continue to execute our growth initiatives and achieve strong financial results, while investing in our future,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “Throughout the year, our organic growth initiatives have focused on expanding our reach in newer markets and I am pleased with the success we have achieved so far.  F&M ended the quarter with record total loans, which increased 5.5% over the past 12 months.  In addition, we continue to convert offices into our new layout and will have upgraded two F&M offices by the end of 2018.  The investments in F&M’s physical locations, as well as in our digital and mobile banking platforms, are improving F&M’s customer experience and making it more efficient and convenient for our customers to interact with the Bank.  Finally, I am excited with the August 2018 announcement of the Limberlost Bancshares merger, which quickly expands F&M’s footprint in Indiana.  The merger brings together two well-performing banks that have a similar culture and focus on community banking values. We expect the merger to close at year end or in early first quarter 2019 and look forward to updating our shareholders, customers, communities, and associates on our progress.” 

Income Statement
Net income for the 2018 third quarter ended September 30, 2018, was $3,875,000, or $0.42 per basic and diluted share compared to $3,222,000, or $0.35 per basic and diluted share for the same period last year. The 20.3% improvement in net income for the 2018 third quarter was primarily due to a 9.2% increase in net interest income after provision for loan losses, partially offset by a 10.5% increase in noninterest expense.  Net income for the 2018 nine months was $11,756,000, or $1.27 per basic and diluted share compared to $9,284,000, or $1.01 per basic and diluted share for the nine months of 2017. As a result of the Tax Cuts and Job Act, the Bank’s tax rate was lowered which benefitted earnings.

Loan Portfolio and Asset Quality
Total loans at September 30, 2018, increased 5.5% to $838,698,000, compared to $795,205,000 at September 30, 2017, and up 1.9% from $823,024,000 at December 31, 2017.  The year-over-year improvement resulted primarily from a 5.8% increase in commercial real estate loans, a 19.0% increase in agricultural loans, a 15.6% increase in consumer loans, and a 7.8% increase in agricultural real estate.

The company’s provision for loan losses for the 2018 third quarter was $47,000, compared to $99,000 for the 2017 third quarter. Year-to-date, the provision for loan losses was $219,000, compared to $197,000 for the same period last year.

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 1,399.6% at September 30, 2018, compared to 397.4% at September 30, 2017. Net charge-offs for the third quarter ended September 30, 2018, were $81,000, or 0.01% of average loans, compared to $87,000 or 0.01% of average loans, at September 30, 2017. Year-to-date, net charge-offs were $332,000, or 0.04% of average loans outstanding, compared to $111,000, or 0.01% of average loans outstanding for the same period last year. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $134,903,000 at September 30, 2018, compared to $129,667,000 at December 31, 2017, and $128,278,000 at September 30, 2017.  On a per share basis, tangible stockholders’ equity at September 30, 2018, was $14.53, compared with $13.99 at December 31, 2017, and $13.84 at September 30, 2017. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At September 30, 2018, the company had a Tier 1 leverage ratio of 12.63%, compared to 12.02% at September 30, 2017. 

For the 2018 third quarter, the company declared cash dividends of $0.14 per share, which represents a dividend payout ratio of 33.2% compared to 37.0% for the same period last year.

Mr. Siebenmorgen concluded, “Our pipeline of new loans remains strong and we continue to experience stable economic trends throughout our Western Ohio and Eastern Indiana communities.  In addition, F&M’s asset quality is excellent as nonperforming loans fell to 0.06% of total loans and nonperforming assets have declined 48.8% over the past 12 months, compared to the 1.6% growth in total assets we have experienced over this period.  2018’s third quarter results demonstrate F&M is well positioned to achieve another strong year of growth and improved profitability.” 

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 through its 25 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 DeKalb, Allen 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   Nine Months Ended
      September 30, 2018 September 30, 2017   September 30, 2018 September 30, 2017
Interest Income              
Loans, including fees     $   10,725   $   9,547     $   31,348   $   27,367  
Debt securities:              
U.S. Treasury and government agencies         613       605         1,848       1,870  
Municipalities         275       290         845       905  
Dividends         56       49         164       135  
Federal funds sold and other         84       44         221       103  
Total interest income         11,753       10,535         34,426       30,380  
Interest Expense              
Deposits         1,611       1,161         4,319       3,289  
Federal funds purchased and securities sold              
under agreements to repurchase         134       135         376       366  
Borrowed funds         20       37         60       110  
Total interest expense         1,765       1,333         4,755       3,765  
Net Interest Income - Before Provision for Loan Losses         9,988       9,202         29,671       26,615  
Provision for Loan Losses          47       99         219       197  
Net Interest Income After Provision              
For Loan Losses         9,941       9,103         29,452       26,418  
Noninterest Income              
Customer service fees         1,392       1,320         4,323       4,131  
Other service charges and fees         1,097       1,134         3,149       3,214  
Net gain on sale of loans         184       181         617       600  
Net gain on sale of available-for-sale securities         10       -         10       47  
Total noninterest income         2,683       2,635         8,099       7,992  
Noninterest Expense              
Salaries and wages         3,391       3,236         9,926       9,374  
Employee benefits         1,029       943         3,013       2,648  
Net occupancy expense         478       434         1,306       1,221  
Furniture and equipment         588       493         1,660       1,456  
Data processing         364       300         1,000       919  
Franchise taxes         243       226         710       676  
ATM expense         327       256         972       853  
Advertising         236       181         669       548  
Net loss on sale of other assets owned         1       13         17       27  
FDIC assessment         81       82         249       247  
Mortgage servicing rights amortization         84       85         264       266  
Other general and administrative         1,304       1,108         3,618       3,291  
Total noninterest expense         8,126       7,357         23,404       21,526  
Income Before Income Taxes         4,498       4,381         14,147       12,884  
Income Taxes         623       1,159         2,391       3,600  
Net Income         3,875       3,222         11,756       9,284  
Other Comprehensive Income (Loss) (Net of Tax):              
Net unrealized gain (loss) on available-for-sale securities       (617 )     (472 )       (3,432 )     1,984  
Reclassification adjustment for gain on sale of available-for-sale
  securities
    (10 )     -         (10 )     (47 )
Net unrealized gain (loss) on available-for-sale securities       (627 )     (472 )       (3,442 )     1,937  
Tax expense (benefit)         (132 )     (160 )       (723 )     659  
Other comprehensive income (loss)         (495 )     (312 )       (2,719 )     1,278  
Comprehensive Income     $   3,380   $   2,910     $   9,037   $   10,562  
Basic and Diluted Earnings Per Share     $   0.42   $   0.35     $   1.27   $   1.01  
Dividends Declared     $   0.14   $   0.13     $   0.41   $   0.37  


FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

      (in thousands of dollars)
      September 30, 2018 December 31, 2017
      (Unaudited)  
Assets        
  Cash and due from banks   $   28,782   $   33,480      
  Federal funds sold       939       987      
  Total cash and cash equivalents       29,721       34,467      
         
  Interest-bearing time deposits       4,019       4,018      
  Securities - available-for-sale       183,075       196,398      
  Other securities, at cost       3,717       3,717      
  Loans held for sale       1,679       1,221      
  Loans, net       831,943       816,156      
  Premises and equipment       22,117       21,726      
  Goodwill       4,074       4,074      
  Mortgage servicing rights       2,373       2,299      
  Other real estate owned       717       674      
  Bank owned life insurance       14,799        14,523      
  Other assets       9,778       7,736      
         
Total Assets   $   1,108,012   $   1,107,009      
  Liabilities and Stockholders' Equity      
Liabilities      
  Deposits      
  Noninterest-bearing   $   197,088   $   199,114      
  Interest-bearing      
    NOW accounts       314,873       298,711      
    Savings       230,306       233,949      
    Time       186,592       187,566      
  Total deposits       928,859       919,340      
         
  Federal Funds Purchased and      
  securities sold under agreements to repurchase       27,026       39,495      
  Federal Home Loan Bank (FHLB) advances       5,000       5,000      
  Dividend payable       1,287       1,193      
  Accrued expenses and other liabilities       6,493       7,844      
  Total liabilities       968,665       972,872      
         
Commitments and Contingencies      
         
Stockholders' Equity      
  Common stock - No par value 20,000,000 shares authorized;      
  issued and outstanding 10,400,000 shares 9/30/18 and 12/31/17       10,589       11,546      
  Treasury stock - 1,114,739 shares 9/30/18, 1,134,120 shares 12/31/17     (12,409 )     (12,160 )    
  Retained earnings       146,072       136,577      
  Accumulated other comprehensive loss       (4,905 )     (1,826 )    
    Total stockholders' equity       139,347       134,137      
         
Total Liabilities and Stockholders' Equity   $   1,108,012   $   1,107,009      
         


    For the Three Months Ended   For the Nine Months Ended
    September 30   September 30
Selected financial data   2018       2017     2018       2017  
Return on average assets   1.40 %     1.20 %   1.41 %     1.16 %
Return on average equity   11.19 %     9.76 %   11.49 %     9.57 %
Yield on earning assets   4.52 %     4.24 %   4.41 %     4.12 %
Cost of interest bearing liabilities   0.92 %     0.72 %   0.83 %     0.68 %
Net interest spread   3.60 %     3.52 %   3.58 %     3.44 %
Net interest margin   3.85 %     3.71 %   3.80 %     3.61 %
Efficiency   63.86 %     61.41 %   61.66 %     61.49 %
Dividend payout ratio   33.21 %     37.03 %   32.02 %     36.51 %
Tangible book value per share (1) $   14.53     $   13.84            
Tier 1 capital to average assets   12.63 %     12.02 %          
                     
    September 30          
Loans   2018       2017            
(Dollar amounts in thousands)                    
Commercial real estate $   417,217      $   394,481            
Agricultural real estate     68,548         63,603            
Consumer real estate     83,134         84,283            
Commercial and industrial     119,536         124,078            
Agricultural     103,624         87,095            
Consumer     41,444         35,843            
Industrial development bonds     6,005         6,555            
  Less: Net deferred loan fees and costs     (810 )       (733 )          
Total loans,net $   838,698      $   795,205            
                     
    September 30          
Asset quality data   2018       2017            
(Dollar amounts in thousands)                    
Nonaccrual loans $   483      $   1,729            
Troubled debt restructuring $   205      $   679            
90 day past due and accruing $   -      $   -            
Nonperforming loans $   483      $   1,729            
Other real estate owned $   717      $   615            
Non-performing assets $   1,200      $   2,344            
                     
(Dollar amounts in thousands)                    
Allowance for loan and lease losses $ 6,755     $   6,870            
Allowance for loan and lease losses/total loans   0.81 %     0.86 %          
Net charge-offs:                    
  Quarter-to-date $ 81     $   87            
  Year-to-date $ 332     $   111            
Net charge-offs to average loans                    
  Quarter-to-date   0.01 %     0.01 %          
  Year-to-date   0.04 %     0.01 %          
Non-performing loans/total loans   0.06 %     0.22 %          
Allowance for loan and lease losses/nonperforming loans   1399.58 %     397.35 %          
                     
(1)  Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible)          




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