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Farmers & Merchants Bancorp, Inc. Reports Record 2022 First Quarter Financial Results
Source: Nasdaq GlobeNewswire / 20 Apr 2022 08:00:02 America/New_York
ARCHBOLD, Ohio, April 20, 2022 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2022 first quarter ended March 31, 2022.
2022 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):
- Net income increased 65.0% to a quarterly record of $8.1 million, from $4.9 million
- Earnings increased 40.9% to $0.62 per basic and diluted share, from $0.44 per basic and diluted share
- Average shares outstanding increased 16.7% as a result of the Perpetual Federal Savings Bank Acquisition
- Total loans increased 46.3% to a record $1.962 billion, and included $463,000 of PPP loans
- Organic loan growth of 22.0%, excluding PPP loans and loan balances at time of acquisitions
- Total loans increased 5.6% from $1.857 billion at December 31, 2021
- Total assets increased 34.8% to a record $2.686 billion, and up 1.8% from December 31, 2021
- Deposits increased 33.8% to a record $2.254 billion, and up 2.7% from December 31, 2021
- Net charge-offs to average loans were 0.00%, the fourth consecutive quarter at or below 0.00%
- Return on average equity increased to 11.00% from 7.87%
- Return on average tangible equity increased to 14.86% from 10.10% on a year-over-year basis
Lars B. Eller, President and Chief Executive Officer, stated, “F&M achieved record financial results for the first quarter, as our business benefits from the Perpetual Federal Savings Bank, Inc., and Ossian Financial Services, Inc. acquisitions, the Adams County Financial Resources asset purchase, our new Fort Wayne office, our three new LPOs, and the completion of our office realignment program. Organic loan growth increased 22.0% on a year-over-year basis and loans are up 5.6% from December 31, 2021. In fact, this is our third consecutive quarter of year-over-year organic loan growth over 10.0%. While we expect our growth rate to normalize in 2022, positive momentum across our business remains strong and we believe we are well positioned to grow our balance sheet and earnings throughout 2022.”
Income Statement
Net income for the 2022 first quarter ended March 31, 2022, was $8.1 million, compared to $4.9 million for the same period last year. Net income per basic and diluted share for the 2022 first quarter was $0.62, compared to $0.44 for the same period last year.
Mr. Eller continued, “Profitability is benefitting from our larger scale, strong asset quality, and prudent expense management. Our efficiency ratio improved to 55.44% during the 2022 first quarter, compared to 62.57% at March 31, 2021, and 58.76% at December 31, 2021. Strong profitability also drove higher returns, and ROAA, ROAE, and ROATCE all expanded on a year-over-year and sequential basis.”
Deposits
At March 31, 2022, total deposits were $2.254 billion, an increase of 33.8% from March 31, 2021, and an increase of 2.7% from December 31, 2021. F&M continues to see growing customer preferences to more stable and secure saving instruments as deposits have increased since the COVID-19 crisis began. The Company’s cost of interest-bearing liabilities improved to 0.45% for the quarter ended March 31, 2022, compared to 0.53% for the quarter ended March 31, 2021, and 0.51% for the quarter ended December 31, 2021.Loan Portfolio and Asset Quality
Total loans, net at March 31, 2022, increased 46.3%, or by $620.5 million to $1.962 billion, compared to $1.342 billion at March 31, 2021, and up 5.6% from $1.857 billion at December 31, 2021. The year-over-year improvement resulted primarily from the contribution of continued strong organic loan growth and the completion of both the Perpetual Federal Savings Bank, Inc. and Ossian Financial Services, Inc. acquisitions.Loans increased 22.0% organically from the same period a year ago when not including the Perpetual and Ossian acquisitions, and the impact of PPP loans. During the 2022 first quarter, the Company processed $2.4 million of PPP loan forgiveness and principal payments received, resulting in a total of $463,000 of PPP loans within F&M’s loan portfolio at March 31, 2022.
F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $8.6 million, or 0.44% of total loans at March 31, 2022, compared to $8.1 million, or 0.61% at March 31, 2021. The $500,000 year-over-year increase in nonperforming loans was primarily a result of the addition of $385.1 million of loans associated with the Perpetual and Ossian acquisitions, reflecting strong asset quality at F&M as well as its recently acquired banks.
Mr. Eller continued, “Despite the significant loan growth we have recently experienced, we have remained focused on controlling risk. Nonperforming assets have increased 3.5% over the past 12 months, despite a 46.3% increase in our loan portfolio over this period. As a result, nonperforming assets to total assets were 0.32% at March 31, 2022, compared to 0.42% at March 31, 2021. In addition, we continue to prudently fund our allowance for loan and lease losses which has increased 16.3% on a year-over-year basis. At March 31, 2022, our allowance for loan and lease losses to nonperforming loans was 198.29%, compared to 177.24% at March 31, 2021.”
“Our record first quarter financial results reflect the power of our strategic growth plan, the value we provide our local communities, and the hard work and dedication of our team members. While uncertainty has expanded across the global economy and interest rates have started increasing, I believe 2022 will be another record year of earnings growth and value creation for our shareholders, customers, employees, and communities,” concluded Mr. Eller.
Stockholders’ Equity and Dividends
Total stockholders’ equity increased 16.1% to $286.5 million at March 31, 2022, from $246.8 million at March 31, 2021. At March 31, 2022, the Company had a Tier 1 leverage ratio of 8.51%, compared to 10.39% at March 31, 2021.Tangible stockholders’ equity increased to $221.6 million at March 31, 2022, compared to $195.9 million at March 31, 2021. On a per share basis, tangible stockholders’ equity at March 31, 2022, was $16.96 per share, compared to $17.50 per share at March 31, 2021. The 3.1% year-over-year decline in tangible book value per share was due to a 16.7% year-over-year increase in the average shares outstanding as a result of the Perpetual Federal Savings Bank acquisition.
For the 2022 first quarter, the company declared cash dividends of $0.19 per share, which is an 11.8% increase over the 2021 first quarter declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 27 consecutive years. For the 2022 first quarter, the dividend payout ratio was 30.64% compared to 38.48% for the same period last year.
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. Our locations are in Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Williams, and Wood counties in Western Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties, and we have Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Oxford, Ohio.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, capital market conditions, or the effects of the COVID-19 pandemic, and its impacts on our credit quality and business operations, as well as its impact on general economic and financial 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.Non-GAAP Financial Measures
This press release includes disclosure of financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers & Merchants Bancorp, Inc. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers & Merchants Bancorp, Inc.’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP.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, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Interest Income Loans, including fees $ 20,455 $ 21,008 $ 18,766 $ 16,259 $ 15,612 Debt securities: U.S. Treasury and government agencies 1,023 964 924 857 751 Municipalities 300 289 284 289 308 Dividends 42 49 44 31 50 Federal funds sold 10 10 10 6 5 Other. 69 103 94 88 39 Total interest income 21,899 22,423 20,122 17,530 16,765 Interest Expense Deposits 1,360 1,581 1,221 1,276 1,340 Federal funds purchased and securities sold under agreements to repurchase 152 155 165 163 166 Borrowed funds 335 361 87 115 222 Subordinated notes 269 291 199 - - Total interest expense 2,116 2,388 1,672 1,554 1,728 Net Interest Income - Before Provision for Loan Losses 19,783 20,035 18,450 15,976 15,037 Provision for Loan Losses 580 444 659 641 1,700 Net Interest Income After Provision For Loan Losses 19,203 19,591 17,791 15,335 13,337 Noninterest Income Customer service fees 2,648 2,417 2,242 2,198 2,814 Other service charges and fees 998 1,026 1,010 874 838 Net gain on sale of loans 697 1,074 822 955 1,046 Net gain on sale of available-for-sale securities - - - - 293 Total noninterest income 4,343 4,517 4,074 4,027 4,991 Noninterest Expense Salaries and wages 5,502 5,761 5,442 4,591 4,390 Employee benefits 2,054 1,792 1,621 1,915 1,994 Net occupancy expense 598 532 529 546 577 Furniture and equipment 1,056 782 903 848 791 Data processing 604 1,020 1,548 428 505 Franchise taxes 418 361 372 294 446 ATM expense 532 478 460 459 449 Advertising 237 431 439 331 235 Net (gain) loss on sale of other assets owned (5 ) 13 219 227 (25 ) FDIC assessment 114 265 296 276 236 Mortgage servicing rights amortization 26 266 285 524 505 Consulting fees 178 761 256 394 223 Other general and administrative 2,179 1,964 1,951 2,227 2,033 Total noninterest expense 13,493 14,426 14,321 13,060 12,359 Income Before Income Taxes 10,053 9,682 7,544 6,302 5,969 Income Taxes 1,951 1,999 1,624 1,319 1,060 Net Income 8,102 7,683 5,920 4,983 4,909 Other Comprehensive Income (Loss) (Net of Tax): Net unrealized gain (loss) on available-for-sale securities (20,939 ) (5,170 ) 173 786 (6,737 ) Reclassification adjustment for realized gain on sale of available-for-sale securities - - - - (293 ) Net unrealized gain (loss) on available-for-sale securities (20,939 ) (5,170 ) 173 786 (7,030 ) Tax expense (benefit) (4,397 ) (1,085 ) 36 165 (1,476 ) Other comprehensive income (loss) (16,542 ) (4,085 ) 137 621 (5,554 ) Comprehensive Income $ (8,440 ) $ 3,598 $ 6,057 $ 5,604 $ (645 ) Basic and Diluted Earnings Per Share $ 0.62 $ 0.59 $ 0.53 $ 0.44 $ 0.44 Dividends Declared $ 0.19 $ 0.19 $ 0.18 $ 0.17 $ 0.17
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of dollars, except share data) March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Assets Cash and due from banks $ 94,118 $ 135,485 $ 112,875 $ 93,636 $ 118,139 Federal funds sold 45,404 45,338 45,203 57,483 57,361 Total cash and cash equivalents 139,522 180,823 158,078 151,119 175,500 Interest-bearing time deposits 8,677 10,913 14,622 18,597 4,405 Securities - available-for-sale 413,996 429,931 426,717 407,500 352,974 Other securities, at cost 8,568 8,162 4,905 6,419 5,939 Loans held for sale 6,060 7,714 3,735 8,041 7,511 Loans, net 1,945,449 1,841,177 1,479,864 1,443,336 1,327,254 Premises and equipment 26,653 26,913 26,476 26,915 26,703 Goodwill 80,434 80,434 55,214 56,066 47,340 Mortgage servicing rights 3,336 3,157 3,097 3,146 3,444 Other real estate owned - 159 167 198 148 Bank owned life insurance 27,715 27,558 27,397 27,218 25,347 Other assets 25,735 21,359 18,711 18,310 16,720 Total Assets $ 2,686,145 $ 2,638,300 $ 2,218,983 $ 2,166,865 $ 1,993,285 Liabilities and Stockholders' Equity Liabilities Deposits Noninterest-bearing $ 497,249 $ 473,689 $ 438,076 $ 443,863 $ 384,558 Interest-bearing NOW accounts 681,975 650,466 646,237 652,078 605,533 Savings 626,787 597,828 529,532 501,687 451,043 Time 447,586 471,479 252,383 256,445 242,717 Total deposits 2,253,597 2,193,462 1,866,228 1,854,073 1,683,851 Federal funds purchased and securities sold under agreements to repurchase 31,680 29,268 29,601 29,882 30,072 Federal Home Loan Bank (FHLB) advances 22,656 24,065 17,868 17,868 17,840 Other borrowings 40,000 40,000 - - - Subordinated notes, net of unamortized issuance costs 34,499 34,471 34,441 - - Dividend payable 2,462 2,461 2,002 1,888 1,889 Accrued expenses and other liabilities 14,773 17,406 14,097 12,569 12,805 Total liabilities 2,399,667 2,341,133 1,964,237 1,916,280 1,746,457 Commitments and Contingencies Stockholders' Equity Common stock - No par value 20,000,000 shares authorized; issued and outstanding 14,063,999 shares 3/31/22 and 12/31/21 122,886 122,674 81,382 82,259 82,030 Treasury stock - 997,916 shares 3/31/22, 997,766 shares 12/31/21 (11,739 ) (11,724 ) (11,718 ) (12,172 ) (11,962 ) Retained earnings 195,057 189,401 184,181 179,734 176,617 Accumulated other comprehensive income (loss) (19,726 ) (3,184 ) 901 764 143 Total stockholders' equity 286,478 297,167 254,746 250,585 246,828 Total Liabilities and Stockholders' Equity $ 2,686,145 $ 2,638,300 $ 2,218,983 $ 2,166,865 $ 1,993,285
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES SELECT FINANCIAL DATA For the Three Months Ended Selected financial data March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Return on average assets 1.21 % 1.10 % 1.17 % 1.12 % 0.90 % 1.01 % Return on average equity 11.00 % 7.54 % 10.94 % 9.32 % 8.00 % 7.87 % Yield on earning assets 3.47 % 4.74 % 3.59 % 3.85 % 3.53 % 3.71 % Cost of interest bearing liabilities 0.45 % 1.55 % 0.51 % 0.45 % 0.44 % 0.53 % Net interest spread 3.02 % 3.19 % 3.08 % 3.40 % 3.09 % 3.18 % Net interest margin 3.14 % 3.60 % 3.21 % 3.53 % 3.21 % 3.33 % Efficiency 55.44 % 65.86 % 58.76 % 63.50 % 64.98 % 62.57 % Dividend payout ratio 30.64 % 38.67 % 32.03 % 33.81 % 37.89 % 38.48 % Tangible book value per share (1) $ 16.96 15.68 $ 16.49 $ 17.33 $ 16.94 $ 17.50 Tier 1 capital to average assets 8.51 % 11.45 % 8.47 % 9.45 % 8.78 % 10.39 % Average Shares Outstanding 13,066,272 13,046,299 11,209,732 11,191,043 11,197,012 Loans March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 (Dollar amounts in thousands) Commercial real estate $ 910,839 502,137 $ 848,477 $ 728,852 $ 691,122 $ 618,754 Agricultural real estate 196,223 200,791 198,343 179,374 189,742 179,945 Consumer real estate 410,120 159,074 395,873 202,454 194,715 175,675 Commercial and industrial 216,918 130,150 208,270 194,767 216,609 202,958 Agricultural 140,709 110,270 118,368 105,580 100,756 100,022 Consumer 57,521 49,552 57,737 55,521 56,427 54,445 Other 31,573 8,167 32,089 31,096 13,549 14,088 Less: Net deferred loan fees and costs (1,683 ) (1,738 ) (2,082 ) (4,497 ) (4,208 ) Total loans,net $ 1,962,220 $ 1,857,419 $ 1,495,562 $ 1,458,423 $ 1,341,679 Asset quality data March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 (Dollar amounts in thousands) Nonaccrual loans $ 8,581 3,275 $ 8,076 $ 6,248 $ 7,031 $ 8,139 Troubled debt restructuring $ 7,268 1,051 $ 7,614 $ 6,035 $ 5,492 $ 5,774 90 day past due and accruing $ - - $ - $ - $ - $ - Nonperforming loans $ 8,581 3,275 $ 8,076 $ 6,248 $ 7,031 $ 8,139 Other real estate owned $ - 351 $ 159 $ 167 $ 198 $ 148 Nonperforming assets $ 8,581 3,626 $ 8,235 $ 6,415 $ 7,229 $ 8,287 (Dollar amounts in thousands) Allowance for loan and lease losses $ 16,771 6,759 $ 16,242 $ 15,698 $ 15,087 $ 14,425 Allowance for loan and lease losses/total loans 0.85 % 0.58 % 0.87 % 1.05 % 1.03 % 1.08 % Net charge-offs: Quarter-to-date $ 51 171 $ (101 ) $ 48 $ (21 ) $ 947 Year-to-date $ 51 426 $ 874 $ 974 $ 926 $ 947 Net charge-offs to average loans Quarter-to-date 0.00 % 0.02 % -0.01 % 0.00 % 0.00 % 0.07 % Year-to-date 0.00 % 0.04 % 0.06 % 0.07 % 0.07 % 0.07 % Nonperforming loans/total loans 0.44 % 0.28 % 0.43 % 0.42 % 0.48 % 0.61 % Allowance for loan and lease losses/nonperforming loans 198.29 % 173.25 % 201.11 % 251.26 % 214.58 % 177.24 % (1) Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities)
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES (in thousands of dollars, except percentages) For the Three Months Ended For the Three Months Ended March 31, 2022 March 31, 2021 Interest Earning Assets: Average Balance Interest/Dividends Annualized Yield/Rate Average Balance Interest/Dividends Annualized Yield/Rate Loans $ 1,907,478 $ 20,455 4.29 % $ 1,328,571 $ 15,612 4.70 % Taxable investment securities 429,899 1,295 1.20 % 324,536 1,009 1.24 % Tax-exempt investment securities 18,587 70 1.91 % 20,375 100 2.49 % Fed funds sold & other 167,319 79 0.19 % 136,663 44 0.13 % Total Interest Earning Assets 2,523,283 $ 21,899 3.47 % 1,810,145 $ 16,765 3.71 % Nonearning Assets 165,064 126,579 Total Assets $ 2,688,347 $ 1,936,724 Interest Bearing Liabilities: Savings deposits $ 1,293,099 $ 588 0.18 % $ 1,014,392 $ 574 0.23 % Other time deposits 459,854 772 0.67 % 242,033 766 1.27 % Other borrowed money 63,364 335 2.11 % 17,848 222 4.98 % Fed funds purchased & securities sold under agreement to repurch. 29,104 152 2.09 % 30,210 166 2.20 % Subordinated notes 34,480 269 3.12 % - - 0.00 % Total Interest Bearing Liabilities $ 1,879,901 $ 2,116 0.45 % $ 1,304,483 $ 1,728 0.53 % Noninterest Bearing Liabilities 513,745 382,640 Stockholders' Equity $ 294,701 $ 249,601 Net Interest Income and Interest Rate Spread $ 19,783 3.02 % $ 15,037 3.18 % Net Interest Margin 3.14 % 3.33 % Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts Company Contact: Investor and Media Contact: Lars B. Eller
President and Chief Executive Officer
Farmers & Merchants Bancorp, Inc.
(419) 446-2501
leller@fm.bankAndrew M. Berger
Managing Director
SM Berger & Company, Inc.
(216) 464-6400
andrew@smberger.com