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CST: 21/10/2019 20:23:22   

Farmers & Merchants Bancorp, Inc. Reports Record 2019 First Quarter Financial Results

178 Days ago

Successful Integration of the Limberlost Acquisition and Organic Expansion of Deposits Drives Strong Growth Opportunities

ARCHBOLD, Ohio, April 26, 2019 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2019 first quarter ended March 31, 2019.

2019 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 64 consecutive quarters of profitability
  • Limberlost acquisition closed and conversion successfully completed in the first quarter
  • Strong organic deposit growth, which has increased 5.4% or $52,416,000 year-to-date
  • Net interest income after provision for loan losses increased 32.3% to $12,747,000
  • Net income was $3,224,000; excluding one-time tax adjusted acquisition related expenses of $1,029,000, first quarter net income would have increased 31.9% to $4,253,000
  • Earnings per basic and diluted share were $0.29, which takes into account one-time tax adjusted acquisition related expenses of $0.09 per basic and diluted share, as well as an increase in additional outstanding shares of 16.5%
  • Net interest margin expands 15 basis points to 3.87%

“2019 is off to an excellent start as a result of the successful closing and integration of the Limberlost acquisition, as well as strong first quarter financial results and robust organic deposit growth,” stated Lars B. Eller, President and Chief Executive Officer. “The addition of Limberlost’s six highly productive offices, talented associates and management team, and approximately 5,400 customers accelerate our Indiana growth plans.  F&M’s larger scale and improved scope are expected to improve earnings, while offering Bank of Geneva’s customers a diverse offering of community-oriented financial products.  While F&M’s size has increased, we remain committed to providing our local communities with valuable financial services that improve our customers’ financial wellbeing.  This commitment is resonating in our markets and during the 2019 first quarter we achieved strong year-to-date organic deposit growth of 5.4% or $52,416,000.” 

On January 1, 2019, F&M completed the acquisition of Limberlost Bancshares, Inc. (“Limberlost”), the holding company for Bank of Geneva. Immediately following the acquisition, Bank of Geneva was merged into The Farmers and Merchants State Bank. This transaction resulted in the addition of $257,183,000 in loans, net, $206,134,000 in deposits and six full-service offices in the northeast Indiana communities of Geneva, Berne, Decatur, Monroe, Portland and Monroeville.

Income Statement
Net income for the 2019 first quarter ended March 31, 2019, was $3,224,000, compared to $3,767,000 for the same period last year.  Excluding the $1,029,000 of one-time tax adjusted acquisition related expenses recorded in the 2019 first quarter, net income for the 2019 first quarter would have increased 31.9% to $4,253,000. 

Net income per diluted share for the 2019 first quarter was $0.29 per basic and diluted share, compared to $0.41 per basic and diluted share for the same period last year.  One-time tax adjusted acquisition related expenses for the 2019 first quarter were $0.09 per basic and diluted share.  In addition, at March 31, 2019, F&M had 16.5% more shares outstanding as a result of the Limberlost acquisition. 

In addition to the $1,029,000, or $0.09 per share of one-time tax adjusted acquisition related expenses, the company incurred soft acquisition costs such as employee overtime and less time focused on production that also impacted growth and profitability during the first quarter.  As the company completes the integration of the Limberlost acquisition, management expects accelerating year-over-year improvements in earnings will occur throughout the remainder of 2019.  

F&M’s net interest margin for the 2019 first quarter increased 15 basis points to 3.87%, from 3.72% for the same period last year.  The net interest margin is benefitting as the yield on earnings assets outpaces growth in funding costs.  In addition, upon completion of the acquisition, F&M retired more than half of Limberlost’s higher cost funding sources which also benefitted net interest margin during the quarter. 

Loan Portfolio and Asset Quality
Total loans, net at March 31, 2019, increased 32.0% or by $267,226,000 to $1,101,963,000, compared to $834,737,000 at March 31, 2018. The year-over-year improvement resulted primarily from the contribution of the Limberlost acquisition and organic loan growth. 

F&M’s asset quality remains strong. Despite the 30.4% year-over-year increase in total assets at March 31, 2019, nonperforming assets were up only $147,000 or 9.5%.  In addition, nonperforming loans to total loans remains low and at March 31, 2019 were 0.11% and in line with the same period last year.  The allowance for loan losses to nonperforming loans was 558.9% at March 31, 2019, compared to 755.2% at March 31, 2018.  Net charge-offs for the year ended March 31, 2019 were $169,000, or 0.02% of average loans, compared to $108,000 or 0.01% of average loans, at March 31, 2018. 

Mr. Eller continued, “Economic trends within our markets remain stable, supporting F&M’s growth and excellent asset quality.  While our loan portfolio is up significantly year-to-date, loans 30 days past due, as a percent of the portfolio were up only eight basis points to 0.17% at March 31, 2019 compared to 0.09% at December 31, 2018.  In addition, one of the many benefits of the Limberlost acquisition, is the diversification it has created in our loan portfolio.  Total agricultural loans were $307,823,000 at March 31, 2019 and within the agricultural loan portfolio, our lending capabilities have expanded to new concentrations including separate credit types for poultry barns, hog barns and soybean farming.” 

Deposits
Over the past three months, deposits have increased organically 5.4% or by $52,416,000, while total deposits over this period have grown 27.8% to $1,187,424,000 at March 31, 2019.  The significant year-to-date organic deposit growth is primarily due to new product development that has allowed the company to attract new customers and expand existing customer holdings. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $165,528,000 at March 31, 2019, compared to $138,885,000 at December 31, 2018, and $134,446,000 at March 31, 2018.  On a per share basis, tangible stockholders’ equity at March 31, 2019, was $14.90, compared to $14.96 at December 31, 2018, and $14.06, at March 31, 2018.  Tangible stockholders’ equity per share at March 31, 2019 was impacted by a 16.5% increase in the number of shares outstanding as a result of the Limberlost acquisition.  At March 31, 2019, the company had a Tier 1 leverage ratio of 13.35%, compared to 12.11% at March 31, 2018. 

Showing the core value of the Limberlost acquisition, goodwill associated with the acquisition was $43,266,000 at March 31, 2019.  Stockholders’ equity increased 60.8% to $216,934,000 at March 31, 2019, from $134,877,000 at March 31, 2018 and increased 51.4% from $143,287,000 at December 31, 2018.

For the 2019 first quarter, the company declared cash dividends of $0.15 per share, which is a 15.4% increase over the 2018 first quarter declared dividend payment.  F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over nine consecutive years. 

“With the Limberlost integration behind us, we will continue to focus on executing our growth-oriented business plan and we are planning to open a new office in Ft. Wayne as well as remodel several existing offices to our new, modern banking format.  F&M has a compelling platform of talented, experienced and motivated bankers to support our many growth opportunities.  The additional equity we acquired from the acquisition enhances our flexibility to deploy capital to grow our business and enhance shareholders’ return.  I am excited by our near- and long-term potential and expect 2019 to be another strong year for F&M,” concluded Mr. Eller. 

About Farmers & Merchants State Bank:
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 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 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 or through F&M’s website www.fm.bank.

 
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, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
Interest Income                  
Loans, including fees $   14,680     $   10,955     $   10,725     $   10,521     $   10,102  
Debt securities:                  
U.S. Treasury and government agencies     713         630         613         612         623  
Municipalities      211         250         275         289         281  
Dividends     88         56         56         53         55  
Federal funds sold and other     170         112         84         62         75  
Total interest income     15,862         12,003         11,753         11,537         11,136  
Interest Expense                  
Deposits     2,613         1,670         1,611         1,389         1,319  
Federal funds purchased and securities sold                   
under agreements to repurchase     185         127         134         118         124  
Borrowed funds     287         20         20         20         20  
Total interest expense     3,085         1,817         1,765         1,527         1,463  
Net Interest Income - Before Provision for Loan Losses     12,777         10,186         9,988         10,010         9,673  
Provision for Loan Losses       30         105         47         132         40  
Net Interest Income After Provision For Loan Losses     12,747         10,081         9,941         9,878         9,633  
Noninterest Income                  
Customer service fees     1,578         1,612         1,392         1,465         1,466  
Other service charges and fees     1,041         1,032         1,097         1,040         1,012  
Net gain on sale of loans      102         140         184         301         132  
Net gain (loss) on sale of available-for-sale securities     (26 )       (19 )       10         -         -  
Total noninterest income      2,695         2,765         2,683         2,806         2,610  
Noninterest Expense                  
Salaries and wages     4,312         3,834         3,391         3,225         3,310  
Employee benefits     1,594         1,102         1,029         848         1,136  
Net occupancy expense     667         451         478         441         387  
Furniture and equipment     696         450         588         565         507  
Data processing     1,299         318         364         305         331  
Franchise taxes     258         244         243         228         239  
ATM expense     447         368         327         333         312  
Advertising     260         218         236         247         186  
Net (gain) loss on sale of other assets owned     15         27         1         (1 )       17  
FDIC assessment     96         77         81         81         87  
Mortgage servicing rights amortization      75         100         84         95         85  
Consulting fees     113         461         179         178         110  
Other general and administrative     1,679         1,167         1,125         1,093         933  
Total noninterest expense     11,511         8,817         8,126         7,638         7,640  
Income Before Income Taxes     3,931         4,029         4,498         5,046         4,603  
Income Taxes     707         836         623         932         836  
Net Income     3,224         3,193         3,875         4,114         3,767  
Other Comprehensive Income (Loss) (Net of Tax):                  
Net unrealized gain (loss) on available-for-sale securities     1,749         2,374         (617 )       (344 )       (2,471 )
Reclassification adjustment for (gain) loss on sale of available-for-sale
  securities
    26         19         (10 )       -         -  
Net unrealized gain (loss) on available-for-sale securities     1,775         2,393         (627 )       (344 )       (2,471 )
Tax expense (benefit)     373         503         (132 )       (72 )       (519 )
Other comprehensive income (loss)     1,402         1,890         (495 )       (272 )       (1,952 )
Comprehensive Income $   4,626     $   5,083     $   3,380     $   3,842     $   1,815  
Basic and Diluted Earnings Per Share $   0.29     $   0.34     $   0.42     $   0.44     $   0.41  
Dividends Declared $   0.15     $   0.15     $   0.14     $   0.14     $   0.13  
 

 

 
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(Unaudited) (in thousands of dollars, except share data) 
 
    (in thousands of dollars)
  March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
  (Unaudited)                
Assets                    
  Cash and due from banks $   48,740     $   37,492     $   28,782     $   31,838     $   39,349  
  Federal funds sold     33,109         873         939         726         559  
  Total cash and cash equivalents     81,849         38,365         29,721         32,564         39,908  
                     
  Interest-bearing time deposits     4,509         4,019         4,019         4,019         4,019  
  Securities - available-for-sale      174,682         168,447         183,075         187,036         192,859  
  Other securities, at cost     5,789         3,679         3,717         3,717         3,717  
  Loans held for sale     859         495         1,679         913         2,769  
  Loans, net     1,091,829         839,599         831,943         824,226         827,937  
  Premises and equipment     25,205         22,615         22,117         21,957         21,980  
  Goodwill     47,340         4,074         4,074         4,074         4,074  
  Mortgage servicing rights     2,397         2,385         2,373         2,356         2,313  
  Other real estate owned      510         600         717         649         651  
  Bank owned life insurance     14,963         14,884         14,799         14,692         14,604  
  Other assets      15,729         17,001         9,778         9,129         8,911  
                     
Total Assets $   1,465,661     $   1,116,163     $   1,108,012     $   1,105,332     $   1,123,742  
  Liabilities and Stockholders' Equity                  
Liabilities                  
  Deposits                   
  Noninterest-bearing $   236,847     $   215,422     $   197,088     $   200,067     $   193,665  
  Interest-bearing                  
    NOW accounts      418,773         298,254         314,873         311,185         327,433  
    Savings     272,875         227,701         230,306         238,167         245,895  
    Time     258,929         187,413         186,592         181,347         186,345  
  Total deposits     1,187,424         928,790         928,859         930,766         953,338  
                     
  Federal Funds Purchased and                  
  securities sold under agreements to repurchase     25,521         32,181         27,026         23,898         23,307  
  Federal Home Loan Bank (FHLB) advances      24,682         -         5,000         5,000         5,000  
  Dividend payable     1,654         1,379         1,287         1,284         1,193  
  Accrued expenses and other liabilities     9,446         10,526         6,493         6,808         6,027  
  Total liabilities     1,248,727         972,876         968,665         967,756         988,865  
                     
Commitments and Contingencies                  
                     
Stockholders' Equity                  
  Common stock - No par value 20,000,000 shares authorized; issued and                   
  outstanding 12,230,000 shares 3/31/19, 10,400,000 shares 12/31/18     81,760         10,823         10,589         11,842         11,690  
  Treasury stock - 1,122,937 shares 3/31/19, 1,114,739 shares 12/31/18     (12,680 )       (12,409 )       (12,409 )       (12,186 )       (12,158 )
  Retained earnings     149,466         147,887         146,072         142,330         139,483  
  Accumulated other comprehensive loss     (1,612 )       (3,014 )       (4,905 )       (4,410 )       (4,138 )
    Total stockholders' equity      216,934         143,287         139,347         137,576         134,877  
                     
Total Liabilities and Stockholders' Equity $   1,465,661     $   1,116,163     $   1,108,012     $   1,105,332     $   1,123,742  
 

 

 
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA
                             
  For the Three Months Ended
Selected financial data March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
Return on average assets   1.00 %     1.15 %     1.40 %     1.48 %     1.35 %
Return on average equity   7.16 %     9.04 %     11.19 %     12.08 %     11.20 %
Yield on earning assets   4.80 %     4.52 %     4.52 %     4.41 %     4.28 %
Cost of interest bearing liabilities   1.26 %     0.92 %     0.92 %     0.79 %     0.75 %
Net interest spread   3.54 %     3.60 %     3.60 %     3.62 %     3.53 %
Net interest margin   3.87 %     3.85 %     3.85 %     3.83 %     3.72 %
Efficiency   73.11 %     67.59 %     63.86 %     60.89 %     61.88 %
Dividend payout ratio   42.77 %     43.16 %     33.21 %     31.21 %     31.67 %
Tangible book value per share (1) $   14.90     $   14.96     $   14.53     $   14.36     $   14.06  
Tier 1 capital to average assets   13.35 %     12.81 %     12.63 %     12.38 %     12.11 %
                             
     
Loans March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
(Dollar amounts in thousands)                            
Commercial real estate $   441,200     $   419,784      $    417,217      $    411,509      $    415,296  
Agricultural real estate     192,903         68,609         68,548         69,701         67,596  
Consumer real estate     161,180         80,766         83,134         82,853         84,501  
Commercial and industrial     137,936         121,793         119,536         116,351         123,439  
Agricultural     114,920         108,495         103,624         104,830         99,836  
Consumer     47,573         41,953         41,444         40,513         38,569  
Industrial development bonds     7,384         5,889         6,005         6,071         6,350  
  Less: Net deferred loan fees and costs     (1,133 )       (915 )       (810 )       (813 )       (850 )
Total loans,net $   1,101,963     $   846,374      $    838,698      $    831,015      $    834,737  
                             
     
Asset quality data March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
(Dollar amounts in thousands)                            
Nonaccrual loans $   1,188     $   542     $   483     $   903     $   900  
Troubled debt restructuring $   102     $   178     $   205     $   218     $   527  
90 day past due and accruing $   -     $   -     $   -     $   -     $   -  
Nonperforming loans $   1,188     $   542     $   483     $   903     $   900  
Other real estate owned $   510     $   600     $   717     $   649     $   651  
Non-performing assets $   1,698     $   1,142     $   1,200     $   1,552     $   1,551  
                             
(Dollar amounts in thousands)                            
Allowance for loan and lease losses $ 6,636     $ 6,755     $ 6,755     $ 7,104     $ 6,800  
Allowance for loan and lease losses/total loans   0.60 %     0.80 %     0.81 %     0.85 %     0.81 %
Net charge-offs:                            
  Quarter-to-date $ 169     $ 84     $ 81     $ 143     $ 108  
  Year-to-date $ 169     $ 417     $ 332     $ 251     $ 108  
Net charge-offs to average loans                            
  Quarter-to-date   0.02 %     0.01 %     0.01 %     0.02 %     0.01 %
  Year-to-date   0.02 %     0.05 %     0.04 %     0.03 %     0.01 %
Non-performing loans/total loans   0.11 %     0.06 %     0.06 %     0.11 %     0.11 %
Allowance for loan and lease losses/nonperforming loans   558.92 %     1249.57 %     1399.58 %     751.49 %     755.19 %
                             
(1)  Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible)                  


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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