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

ARCHBOLD, Ohio, July 18, 2018 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq:FMAO) today reported financial results for the 2018 second quarter and year-to-date June 30, 2018.

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

  • 61 consecutive quarters of profitability
  • Total loans increased 5.1% to $831,015,000
  • Net interest income after provision for loan losses increased 11.7% to $9,878,000
  • Net income increased 27.6% to $4,114,000
  • Earnings per basic and diluted share increased 25.7% to $0.44
  • Return on average assets was 1.48%, up from 1.21%
  • Return on average equity was 12.08%, up from 9.96%

“Continued loan growth, stable asset quality, expansion in our net interest spread, and the benefits of tax reform continued to drive record profitability during the 2018 second quarter,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “Net income increased 27.6% to a quarterly record $4,114,000, while return on average equity was up 212 basis points compared to the same period last year.  We are committed to returning our record results with our shareholders and recently increased our quarterly cash dividend by 7.7%, which represents the 19th consecutive annual increase in our dividend payment.  In addition, we are investing in our business by expanding our geographic footprint through our branch growth plan and upgrading our branches to new modern layouts that better serve evolving customer preferences.  During the second quarter, we upgraded our Waterville branch and will complete the upgrade to our Perrysburg branch by the end of the third quarter.  Initial customer response to our new branch layout has been encouraging.”

Income Statement
Net income for the 2018 second quarter ended June 30, 2018, was $4,114,000, or $0.44 per basic and diluted share compared to $3,223,000, or $0.35 per basic and diluted share for the same period last year, which was adjusted for a two-for-one stock split paid in September 2017. The 27.6% improvement in net income for the 2018 second quarter was primarily due to an 11.7% increase in net interest income after provision for loan losses, partially offset by a 7.6% increase in noninterest expense.  Net income for the 2018 first half was $7,881,000, or $0.85 per basic and diluted share compared to $6,062,000, or $0.66 per basic and diluted share for the first half 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 June 30, 2018, increased 5.1% to $831,015,000, compared to $790,838,000 at June 30, 2017, and up 1.0% from $823,024,000 at December 31, 2017.  The year-over-year improvement resulted primarily from an 4.3% increase in commercial real estate loans, a 25.4% increase in agricultural loans, a 14.5% increase in consumer loans, and an 8.8% increase in agricultural real estate.

The company’s provision for loan losses for the 2018 second quarter was $132,000, compared to $25,000 for the 2017 second quarter. Year-to-date, the provision for loan losses was $172,000, compared to $98,000 for the same period last year.

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 751.5% at June 30, 2018, compared to 502.2% at June 30, 2017.  Net charge-offs for the second quarter ended June 30, 2018, were $143,000, or 0.02% of average loans, compared to $17,000 or 0.00% of average loans, at June 30, 2017. Year-to-date, net charge-offs were $251,000, or 0.03% of average loans outstanding, compared to $24,000, or 0.00% of average loans outstanding for the same period last year. 

Stockholders’ Equity and Dividends
Tangible stockholders’ equity increased to $133,091,000 at June 30, 2018, compared to $129,667,000 at December 31, 2017, and $126,582,000 at June 30, 2017.  On a per share basis, tangible stockholders’ equity at June 30, 2018, was $14.36, compared with $13.99 at December 31, 2017, and $13.70 at June 30, 2017. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At June 30, 2018, the company had a Tier 1 leverage ratio of 12.38%, compared to 11.96% at June 30, 2017. 

For the 2018 second quarter, the company declared cash dividends of $0.14 per share, which represents a dividend payout ratio of 31.2% compared to 35.5% for the same period last year.

Mr. Siebenmorgen concluded, “I am pleased with the 5.1% increase in total loans over the past 12 months as a result of growth throughout much of our loan portfolio.  Our pipeline of new loans remains strong and we continue to experience stable economic trends throughout our Western Ohio and Eastern Indiana communities.  Tariffs on soybeans have impacted crop pricing, which has caused some of our customers to delay equipment and land purchases, but agricultural customer financial statements remain strong and we have not experienced a material decline in asset quality.  Overall, I am encouraged by our financial and business outlook for the remainder of 2018 and expect 2018 will be another strong year for the company.” 

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   Six Months Ended
  June 30, 2018   June 30, 2017   June 30, 2018   June 30, 2017
Interest Income                      
Loans, including fees $ 10,521   $ 9,120   $ 20,623   $ 17,820
Debt securities:                      
U.S. Treasury and government agencies   612     623     1,235     1,265
Municipalities   289     300     570     615
Dividends   53     44     108     86
Federal funds sold and other   62     37     137     59
Total interest income   11,537     10,124     22,673     19,845
Interest Expense                      
Deposits   1,389     1,098     2,708     2,128
Federal funds purchased and securities sold            
under agreements to repurchase   118     118     242     231
Borrowed funds   20     37     40     73
Total interest expense   1,527     1,253     2,990     2,432
Net Interest Income - Before Provision for Loan Losses   10,010     8,871     19,683     17,413
Provision for Loan Losses    132     25     172     98
Net Interest Income After Provision                      
For Loan Losses   9,878     8,846     19,511     17,315
Noninterest Income                      
Customer service fees   1,465     1,330     2,931     2,811
Other service charges and fees   1,040     1,209     2,052     2,080
Net gain on sale of loans   301     218     433     419
Net gain on sale of available-for-sale securities   -     16     -     47
Total noninterest income   2,806     2,773     5,416     5,357
Noninterest Expense                      
Salaries and wages   3,225     3,137     6,535     6,138
Employee benefits   848     783     1,984     1,705
Net occupancy expense   441     374     828     787
Furniture and equipment   565     491     1,072     963
Data processing   305     308     636     619
Franchise taxes   228     225     467     450
ATM expense   333     292     645     597
Advertising   247     192     433     367
Net loss on sale of other assets owned   (1)     14     16     14
FDIC assessment   81     82     168     165
Mortgage servicing rights amortization   95     97     180     181
Other general and administrative   1,271     1,103     2,314     2,183
Total noninterest expense   7,638     7,098     15,278     14,169
Income Before Income Taxes   5,046     4,521     9,649     8,503
Income Taxes   932     1,298     1,768     2,441
Net Income   4,114     3,223     7,881     6,062
Other Comprehensive Income (Loss) (Net of Tax):                      
Net unrealized gain (loss) on available-for-sale securities   (344)     2,044     (2,815)     2,456
Reclassification adjustment for gain on sale of available-for-sale
  securities
  -     (16)     -     (47)
Net unrealized gain (loss) on available-for-sale securities   (344)     2,028     (2,815)     2,409
Tax expense (benefit)   (72)     690     (591)     819
Other comprehensive income (loss)   (272)     1,338     (2,224)     1,590
Comprehensive Income $ 3,842   $ 4,561   $ 5,657   $ 7,652
Earnings Per Share - Basic and Diluted (1) $ 0.44   $ 0.35   $ 0.85   $ 0.66
Dividends Declared (1) $ 0.14   $ 0.12   $ 0.27   $ 0.24
 
(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)
  June 30, 2018   December 31, 2017
  (Unaudited)        
Assets              
Cash and due from banks $ 31,838     $ 33,480  
Federal funds sold   726       987  
Total cash and cash equivalents   32,564       34,467  
               
Interest-bearing time deposits   4,019       4,018  
Securities - available-for-sale   187,036       196,398  
Other securities, at cost   3,717       3,717  
Loans held for sale   913       1,221  
Loans, net   824,226       816,156  
Premises and equipment   21,957       21,726  
Goodwill   4,074       4,074  
Mortgage servicing rights   2,356       2,299  
Other real estate owned   649       674  
Bank owned life insurance   14,692       14,523  
Other assets   9,129       7,736  
               
Total Assets $ 1,105,332     $ 1,107,009  
Liabilities and Stockholders' Equity
             
Liabilities              
Deposits              
Noninterest-bearing $ 200,067     $ 199,114  
Interest-bearing              
NOW accounts   311,185       298,711  
Savings   238,167       233,949  
Time   181,347       187,566  
Total deposits   930,766       919,340  
               
Federal Funds Purchased and              
securities sold under agreements to repurchase   23,898       39,495  
Federal Home Loan Bank (FHLB) advances   5,000       5,000  
Dividend payable   1,284       1,193  
Accrued expenses and other liabilities   6,808       7,844  
Total liabilities   967,756       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)   11,842       11,546  
Treasury stock - 1,134,020 shares 3/31/18, 1,134,120 shares 12/31/17 (1)   (12,186 )     (12,160 )
Retained earnings   142,330       136,577  
Accumulated other comprehensive loss   (4,410 )     (1,826 )
Total stockholders' equity   137,576       134,137  
               
Total Liabilities and Stockholders' Equity $ 1,105,332     $ 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   For the Six Months Ended
    June 30   June 30
Selected financial data   2018     2017   2018   2017
Return on average assets   1.48%     1.21%   1.41%   1.14%
Return on average equity   12.08%     9.96%   11.64%   9.47%
Yield on earning assets   4.41%     4.11%   4.35%   4.05%
Cost of interest bearing liabilities   0.79%     0.68%   0.78%   0.66%
Net interest spread   3.62%     3.43%   3.57%   3.39%
Net interest margin   3.83%     3.61%   3.78%   3.56%
Efficiency   60.89%     60.27%   60.55%   61.53%
Dividend payout ratio   31.21%     35.49%   31.43%   36.24%
Tangible book value per share $ 14.36   $ 13.70        
Tier 1 capital to average assets   12.38%     11.96%        
                   
    June 30        
Loans   2018     2017        
(Dollar amounts in thousands)                  
Commercial real estate $ 411,509   $ 394,649        
Agricultural real estate   69,701     64,035        
Consumer real estate   82,853     84,307        
Commercial and industrial   116,351     122,950        
Agricultural   104,830     83,614        
Consumer   40,513     35,394        
Industrial development bonds   6,071     6,617        
Less: Net deferred loan fees and costs   (813)     (728)        
Total loans $ 831,015   $ 790,838        
                   
    June 30        
Asset quality data   2018     2017        
(Dollar amounts in thousands)                  
Nonaccrual loans $ 903   $ 1,365        
Troubled debt restructuring $ 218   $ 662        
90 day past due and accruing $ -   $ -        
Nonperforming loans $ 903   $ 1,365        
Other real estate owned $ 649   $ 630        
Non-performing assets $ 1,552   $ 1,995        
                   
(Dollar amounts in thousands)                  
Allowance for loan and lease losses $ 7,104   $ 7,077        
Allowance for loan and lease losses/total loans   0.85%     0.89%        
Net charge-offs:                  
Quarter-to-date $ 143   $ 17        
Year-to-date $ 251   $ 24        
Net charge-offs to average loans                  
Quarter-to-date   0.02%     0.00%        
Year-to-date   0.03%     0.00%        
Non-performing loans/total loans   0.11%     0.17%        
Allowance for loan and lease losses/nonperforming loans   751.49%     502.23%        
                   
* All stock related values reported for 2017 have been adjusted for a 2 for 1 stock spilt 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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