Farmers & Merchants Bancorp, Inc. Reports Strong 2016

ARCHBOLD, Ohio, Oct. 19, 2016 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (OTCQX:FMAO) today reported financial results for the 2016 third quarter ended September 30, 2016.

2016 Third Quarter Financial Highlights Include (on a year-over-year basis unless noted):

• 54 consecutive quarters of profitability
• Total assets up 9.1% to $1,044,447,000
• Total loans increased 16.3% to $738,682,000
• Net interest income after provision for loan losses increased 12.6% to $8,183,000
• Net income increased 15.1% to $3,015,000
• Earnings per basic and diluted shares increased 14.0% to $0.65
• Return on average assets increased 7 basis points to 1.17%
• Return on average equity increased 71 basis points to 9.58%
• July quarterly dividend increased 4.5% to $0.23 per share

“Our financial results continued to demonstrate strong improvements in the 2016 third quarter as a result of strong loan growth, higher net interest margin, controlled operating expenses, and increased fee based income,” stated Paul S. Siebenmorgen, President and Chief Executive Officer.  “The double-digit loan growth we achieved in the third quarter, was a result of higher commercial real estate and commercial and industrial loans, which increased 22.7% and 25.6%, respectively from the prior year period. Our loan to deposit ratio at the end of the 2016 third quarter was 88.1%, which has increased 540 basis points from 82.7% at September 30, 2015. I am encouraged by these strong growth trends, which reflect the team of experienced commercial lenders we have assembled over the past several years, and F&M’s focus on managing risk with quick underwriting decisions and superior customer service.  Our local markets continue to show stable economic trends and we are cautiously optimistic 2016 will be another good year for the bank.” 

Income Statement Net income for the 2016 third quarter ended September 30, 2016 was $3,015,000, or $0.65 per basic and diluted share compared to $2,620,000, or $0.57 per basic and diluted share for the same period last year. The 15.1% improvement in net income for the 2016 third quarter was primarily due to a 12.6% increase in interest income after provision for loan losses and a 3.1% increase in noninterest income, partially offset by a 6.3% increase in noninterest expense. 

Loan Portfolio and Asset Quality Total loans at September 30, 2016 increased 16.3% to a record $738,682,000, compared to $635,239,000 at September 30, 2015, and up 7.7% from $685,878,000 at December 31, 2015.  Year-over-year loan growth was strong across the company’s lending areas and included a 22.7% increase in commercial real estate loans, a 15.7% increase in consumer loans, a 9.3% increase in agricultural real estate loans, an 8.2% increase in agricultural, and a 25.6% increase in commercial and industrial loans, offset by a 1.1% reduction in consumer real estate loans, and an 11.4% decrease in industrial development bonds. 

The company’s provision for loan losses for the 2016 third quarter was $308,000, compared to $234,000 for the 2015 third quarter. Year-to-date, the provision for loan losses was $924,000, compared to $540,000 for the same period last year. The third quarter increase in provision expense was a result of the significant growth the company has experienced in its loan portfolio. 

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 584.2% at September 30, 2016, compared to 266.7% at September 30, 2015.  Net charge-offs for the third quarter ended September 30, 2016 were $189,000, or 0.03% of average loans, compared to $5,000 or 0.00% of average loans, at September 30, 2015. Year-to-date, net charge-offs were $369,000, or 0.05% of average loans outstanding, compared to $280,000, or 0.05% of average loans outstanding for the same period last year. 

Stockholders’ Equity and Dividends Tangible stockholders’ equity increased to $122,048,000 at September 30, 2016, compared to $114,960,000 at December 31, 2015, and $114,276,000 at September 30, 2015.  On a per share basis, tangible stockholders’ equity at September 30, 2016 was $26.41, compared with $24.92 at December 31, 2015, and $24.71 at September 30, 2015. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At September 30, 2016, the company had a Tier 1 leverage ratio of 11.74%, compared to 11.98% at September 30, 2015.  The 24 basis point year-over-year decline was a result of the company’s average assets increasing at a faster pace than the company’s Tier 1 capital. 

For the 2016 third quarter, the company declared and raised the cash dividend by 4.5% to $0.23 per share, which represented a dividend payout ratio of 34.9% compared to 38.5% for the same period last year.

Mr. Siebenmorgen concluded, “We continue to work hard on extending our leadership position in our existing core-markets, while developing new markets, such as Ft. Wayne, Indiana and Bowling Green, Ohio.  We look forward to opening our Bowling Green location this month, after several construction-related delays. Home to Bowling Green State University and its nearly 17,000 students and more than 2,000 faculty members, Bowling Green is an exciting market supported by compelling demographics and a strong economic anchor.  In addition, the majority of deposits in this market are located at large, super-regional financial institutions.  We are optimistic, F&M’s customer focus, and community banking orientation will be a welcomed addition to the Bowling Green market, and we have assembled an experienced team to roll out F&M’s full suite of financial products and services.  I am encouraged by the direction we are headed as we execute our growth strategies, and focus on creating value for our customers, employees, and shareholders.”

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 23 offices. Our locations are in Fulton, Defiance, 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: Marty Filogamo Senior Vice President – Marketing Manager Farmers & Merchants Bancorp, Inc. (419) 445-3501 ext. 15435 mfilogamo@fm-bank.com Investor and Media Contact: Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com