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Farmers & Merchants Bancorp, Inc. Reports 2018 First Quarter Financial Results

ARCHBOLD, Ohio, April 19, 2018 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq:FMAO) today reported financial results for the 2018 first quarter ended March 31, 2018.

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

  • 60 consecutive quarters of profitability
  • Total loans increased 8.2% to $834,737,000, and were up 1.4% from the fourth quarter
  • Net interest income after provision for loan losses increased 13.7% to $9,633,000
  • Net income increased 32.7% to $3,767,000
  • Earnings per basic and diluted share increased 32.3% to $0.41
  • Return on average assets was 1.35%, up from 1.07%
  • Return on average equity was 11.20%, up from 8.97%

Paul S. Siebenmorgen, President and Chief Executive Officer, stated, “I am pleased with the strong start to the new year as we continue to execute our growth-oriented business plan.  From 2007 to March 31, 2018, F&M has expanded its footprint by opening 11 new locations.  Total loans at these branches have grown from 7% of our loan portfolio to nearly 49% of our loan portfolio at March 31, 2018.  The success of F&M’s de novo growth strategy provides us with growing confidence in our real estate strategy and belief that there are many compelling markets around our core geographies that need the community oriented financial services F&M provides.  Most recently we opened our 25th full-service office in Findlay, Ohio. This full-service office will offer the latest banking technology to serve customers, enabling F&M to offer the benefits of both self-service video banking and the branch experience in one solution. I am pleased with the continued strength of our business, and expect 2018 to be another good year for F&M.” 

Income Statement
Net income for the first quarter ended March 31, 2018, was $3,767,000, or $0.41 per basic and diluted share, compared to the same period last year’s net income of $2,839,000, or $0.31 per basic and diluted share, which was adjusted for a two-for-one stock split paid in September 2017. The 32.7% improvement in net income for the 2018 first quarter was primarily due to a 13.7% increase in net interest income after provision for loan losses, partially offset by an 8.0% increase in noninterest expense.  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 March 31, 2018, increased 8.2% to a record $834,737,000, compared to $771,206,000 at March 31, 2017, and up 1.4% from $823,024,000 at December 31, 2017.  The year-over-year improvement resulted primarily from an 8.5% increase in commercial real estate loans, a 7.0% increase in commercial and industrial loans, a 14.8% increase in agricultural loans, a 14.0% increase in consumer loans, and a 7.6% increase in agricultural real estate loans. 

The company’s provision for loan losses for the 2018 first quarter was $40,000, compared to $73,000 for the 2017 first quarter.

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 755.2% at March 31, 2018, compared to 479.0% at March 31, 2017.  Net charge-offs for the quarter ended March 31, 2018, were $108,000, or 0.01% of average loans, compared to $7,000 or 0.00% of average loans for the quarter ended March 31, 2017.

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $130,668,000 at March 31, 2018, compared to $129,667,000 at December 31, 2017, and $122,984,000 at March 31, 2017.  On a per share basis, tangible stockholders’ equity at March 31, 2018, was $14.06, compared to $13.99 at December 31, 2017, and $13.31, at March 31, 2017. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At March 31, 2018, the company had a Tier 1 leverage ratio of 12.11%, compared to 11.81% at March 31, 2017. 

For the 2018 first quarter, the company declared cash dividends of $0.13 per share, which represents a dividend payout ratio of 31.7% compared to 37.1% for the same period last year.

Mr. Siebenmorgen concluded, “Economic trends remain stable within our local communities.  Loan demand was strong for the 2018 first quarter, compared to the same period last year, as total loans increased 8.2%, while non-performing assets declined 29.6%.  The year-over-year growth in loans was a result of strong demand across all our loan segments.  Net charge-offs for the quarter were very low at 0.01%, compared to last year when they were 0.00%.  Total interest income was up 14.6% during the 2018 first quarter, driven by loan growth and higher yield on earnings assets.  Overall, we are pleased with the direction we are headed, and optimistic favorable financial and business trends will continue in 2018, as we focus on proactively managing risk with asset growth, expanding market share in our Fort Wayne and Toledo markets, and executing our de-novo and acquisition growth strategies.”

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.

         
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, 2018
  March 31, 2017
Interest Income                  
Loans, including fees   $ 10,102     $ 8,700  
Debt securities:                  
U.S. Treasury and government agencies   623       642  
Municipalities       281       315  
Dividends       55       42  
Federal funds sold       15       -  
Other           60         22  
Total interest income     11,136       9,721  
Interest Expense                  
Deposits       1,319       1,030  
Federal funds purchased and securities sold              
under agreements to repurchase   124       113  
Borrowed funds         20         36  
Total interest expense       1,463         1,179  
Net Interest Income - Before Provision for Loan Losses   9,673       8,542  
Provision for Loan Losses        40         73  
Net Interest Income After Provision              
For Loan Losses       9,633       8,469  
Noninterest Income                  
Customer service fees     1,466       1,481  
Other service charges and fees     1,012       871  
Net gain on sale of loans     132       201  
Net gain on sale of available-for-sale securities     -         31  
Total noninterest income     2,610       2,584  
Noninterest Expense                  
Salaries and wages       3,310       3,001  
Employee benefits       1,136       922  
Net occupancy expense     387       413  
Furniture and equipment     507       472  
Data processing       331       311  
Franchise taxes       239       225  
ATM expense       312       305  
Advertising       186       175  
Net loss on sale of other assets owned   17       -  
FDIC assessment       87       83  
Mortgage servicing rights amortization   85       84  
Other general and administrative     1,043         1,080  
Total noninterest expense       7,640         7,071  
Income Before Income Taxes     4,603       3,982  
Income Taxes         836         1,143  
Net Income         3,767         2,839  
Other Comprehensive Income (Loss) (Net of Tax):              
Net unrealized gain (loss) on available-for-sale securities   (2,471 )     412  
Reclassification adjustment for gain on sale of available-for-sale
  securities
      -         (31 )
Net unrealized gain (loss) on available-for-sale securities   (2,471 )     381  
Tax expense (benefit)       (519 )       129  
Other comprehensive income (loss)     (1,952 )       252  
Comprehensive Income   $   1,815     $   3,091  
Earnings Per Share - Basic and Diluted (1) $   0.41     $   0.31  
Dividends Declared (1)     $   0.13     $   0.12  
                     
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017

 

 
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
      (in thousands of dollars)
      March 31, 2018
  December 31, 2017
      (Unaudited)
       
Assets                  
Cash and due from banks     $ 39,349     $ 33,480  
Federal funds sold         559         987  
Total cash and cash equivalents       39,908       34,467  
                   
Interest-bearing time deposits       4,019       4,018  
Securities - available-for-sale       192,859       196,398  
Other securities, at cost       3,717       3,717  
Loans held for sale       2,769       1,221  
Loans, net       827,937       816,156  
Premises and equipment       21,980       21,726  
Goodwill       4,074       4,074  
Mortgage servicing rights       2,313       2,299  
Other real estate owned       651       674  
Bank owned life insurance       14,604       14,523  
Other assets         8,911         7,736  
                   
Total Assets     $   1,123,742     $   1,107,009  
Liabilities and Stockholders' Equity                  
Liabilities                  
Deposits                  
Noninterest-bearing     $ 193,665     $ 199,114  
Interest-bearing                  
NOW accounts       327,433       298,711  
Savings       245,895       233,949  
Time         186,345         187,566  
Total deposits       953,338       919,340  
                   
Federal Funds Purchased and                  
securities sold under agreements to repurchase       23,307       39,495  
Federal Home Loan Bank (FHLB) advances       5,000       5,000  
Dividend payable       1,193       1,193  
Accrued expenses and other liabilities         6,027         7,844  
Total liabilities         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 3/31/18 and 12/31/17 (1)       11,690       11,546  
Treasury stock - 1,134,020 shares 3/31/18, 1,134,120 shares 12/31/17 (1)       (12,158 )     (12,160 )
Retained earnings       139,483       136,577  
Accumulated other comprehensive loss         (4,138 )       (1,826 )
Total stockholders' equity         134,877         134,137  
                   
Total Liabilities and Stockholders' Equity     $   1,123,742     $   1,107,009  
                   
(1) Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017                  

 

    For the Three Months Ended  
    March 31  
Selected financial data   2018     2017  
Return on average assets   1.35 %     1.07 %  
Return on average equity 11.20 %     8.97 %  
Yield on earning assets 4.28 %     3.98 %  
Cost of interest bearing liabilities 0.75 %     0.65 %  
Net interest spread 3.53 %     3.33 %  
Net interest margin 3.72 %     3.50 %  
Efficiency   61.88 %     62.86 %  
Dividend payout ratio 31.67 %     37.09 %  
Tangible book value per share $ 14.06     $ 13.31    
Tier 1 Leverage Ratio 12.11 %     11.81 %  
             
    March 31  
Loans   2018     2017  
(Dollar amounts in thousands)              
Commercial real estate $ 415,296     $ 382,758    
Agricultural real estate 67,596       62,840    
Consumer real estate 84,501       84,465    
Commercial and industrial 123,439       115,415    
Agricultural 99,836       86,950    
Consumer   38,569       33,840    
Industrial development bonds 6,350       5,667    
Less: Net deferred loan fees and costs (850 )     (729 )  
Total loans $ 834,737     $ 771,206    
             
    March 31  
Asset quality data   2018     2017  
(Dollar amounts in thousands)                
Nonaccrual loans $ 900     $ 1,430    
Troubled debt restructuring $ 527     $ 551    
90 day past due and accruing $ -     $ -    
Nonperforming loans $ 900     $ 1,430    
Other real estate owned $ 651     $ 774    
Non-performing assets $ 1,551     $ 2,204    
             
(Dollar amounts in thousands)        
Allowance for loan and lease losses $ 6,800     $ 6,850    
Allowance for loan and lease losses/total loans 0.81 %     0.89 %  
Net charge-offs:          
Quarter-to-date $ 108     $ 7    
Year-to-date $ 108     $ 7    
Net charge-offs to average loans        
Quarter-to-date 0.01 %     0.00 %  
Year-to-date 0.01 %     0.00 %  
Non-performing loans/total loans 0.11 %     0.19 %  
Allowance for loan and lease losses/nonperforming loans 755.19 %     478.96 %  
             
             
* All stock related values reported for 2017 have been adjusted for a 2 for 1 stock split completed on September 20, 2017.

  

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

 

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