Farmers & Merchants Bancorp Reports 2015 Second-Quarter and First-Half Financial Results

Jul 29, 2015, 17:42 ET from Farmers & Merchants Bancorp, Inc.

ARCHBOLD, Ohio, July 29, 2015 /PRNewswire/ -- Farmers & Merchants Bancorp, Inc. (OTCQX: FMAO) today reported financial results for the 2015 second quarter and first half ended June 30, 2015.

2015 Second Quarter Financial Highlights Include (on a year-over-year basis unless noted):

  • 49 consecutive quarters of profitability
  • Quarterly cash dividend increased 4.8% - representing annual dividend increases since 2004
  • Net interest income increased 5.0% to $7,235,000
  • Noninterest income up 4.2% to $2,699,000
  • Noninterest expenses were 5.6% higher
  • Net income for the 2015 first half improved 9.7% to $4,948,000 and for the 2015 second quarter increased 1.7% to $2,597,000
  • Earnings per basic and diluted share for the 2015 first half improved 10.3% to $1.07 and for the 2015 second quarter increased 1.8% to $0.56
  • Tangible equity increased 2.3% from December 31, 2014
  • Announced construction of a new branch in Ft. Wayne, Indiana beginning in the third quarter

Paul S. Siebenmorgen, President and Chief Executive Officer, stated, "Profitability continues to increase despite a slow economic recovery, competitive marketplace, and continued low interest rate environment.  The improvement in earnings is a result of our diversified sources of income and prudent expense management.  While we have experienced higher operating expenses primarily due to higher salaries and wages, we have managed other general and administrative expenses and significantly reduced our cost of funds.  Our net interest margin expanded 6 basis points in the 2015 first half to 3.45%, primarily due to lower funding costs.  The improvement in net interest margin was offset by lower earning asset balances.  If interest rates remain low, we expect interest income to increase throughout the remainder of the year as our loan balances grow."

Income Statement

Net income for the 2015 second quarter ended June 30, 2015 was $2,597,000, or $0.56 per basic and diluted share compared to $2,554,000, or $0.55 per basic and diluted share for the same period last year.  The 1.7% improvement in net income for the 2015 second quarter was primarily due to a 4.2% increase in noninterest income, and a 10.2% reduction in interest expense, offset by a 5.6% increase in noninterest expenses. 

Net income for the 2015 first half was $4,948,000, or $1.07 per basic and diluted share compared to $4,511,000, or $0.97 per basic and diluted share for the period ended June 30, 2014.  The 9.7% improvement in net income for the 2015 six month period was primarily due to an 8.6% increase in noninterest income, and a 9.7% reduction in interest expense, offset by a 5.7% increase in noninterest expenses.

Loan Portfolio and Asset Quality

Total loans at June 30, 2015 were $620,591,000, compared to $621,926,000 at December 31, 2014 and $597,839,000 at June 30, 2014.  While down slightly year-to-date, total loans are up 3.8% year-over-year, primarily due to a 4.9% increase in commercial real estate loans, a 17.3% increase in agricultural loans, and a 10.2% increase in agricultural real estate loans, offset by a 9.6% reduction in consumer real estate loans. 

Asset quality remains strong as the company's provision for loan losses for the 2015 second quarter was $183,000, a 58.8% reduction from the 2014 second quarter.  The provision for loan losses for the 2015 first half was $297,000, a 65.9% reduction from the same period a year ago.  The allowance for loan losses to nonperforming loans was 192.5% at June 30, 2015, compared to 426.9% at June 30, 2014.  Net charge-offs for the 2015 second quarter were $233,000, or 0.04% of average loans, compared to $106,000 or 0.02% of average loans, for the 2014 second quarter.  Year-to-date, net charge-offs were $275,000, or 0.04% of average loans outstanding, compared to $403,000, or 0.07% of average loans outstanding for the same period last year.  

Stockholders' Equity and Dividends

Tangible stockholders' equity increased to $111,594,000 as of June 30, 2015, compared to $109,034,000 at December 31, 2014 and $104,834,000 at June 30, 2014.  On a per share basis, tangible stockholders' equity increased 6.5% to $25.08 at June 30, 2015 from $23.56 at December 31, 2014 and $22.72 at June 30, 2014. The increase is the result of growth in retained earnings and higher year-to-date profitability. At June 30, 2015, the company had a Tier 1 leverage ratio of 11.90%, up from 11.01% at June 30, 2014.

For the 2015 first half, the company has declared cash dividends of $0.43 per share, which represents a dividend payout ratio of 38.9% and includes a $0.01, or 4.8% increase in the quarterly dividend rate in the 2015 second quarter. 

Mr. Siebenmorgen concluded, "We are excited about the long-term opportunities we have in our current and future markets.  F&M has a strong deposit base and market share in our communities, which allows us to expand our footprint to higher growth regions.  In June we announced plans to begin construction for our 23rd branch that will be located in Ft. Wayne, Indiana.  This will be our fourth bank location in northeastern Indiana and we look forward to offering our financial products and services to this large and growing market when we finish construction sometime in early 2016.  The wet weather in northwest Ohio and northeast Indiana has impacted the 2015 growing season and we are ready to support our agricultural customers and communities with financial resources as they look to recover from this difficult period.  We are working on converting our pipeline of potential loans into income generating assets and expect our loan portfolio to grow throughout the remainder of 2015, while we remain prudent in our risk and expense management."  

About Farmer & 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 22 offices, with expansion underway in the greater Ft. Wayne, Indiana market. Our locations are in Fulton, Defiance, Henry, Lucas, Williams, and Wood counties in northwest Ohio. In Northeast Indiana we have offices located in DeKalb 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.





Condensed Consolidated Statement of Income & Comprehensive Income




(in thousands of dollars, except per share data)





Three  Months Ended 


Six  Months Ended 





June 30, 2015

June 30, 2014


June 30, 2015

June 30, 2014


Interest Income








Loans, including fees


$                         7,163

$                         6,977


$                       14,257

$                       13,654


Debt securities:








U.S. Treasury and government agency

620

759


1,216

1,671


Municipalities 


458

522


905

1,047


Dividends


37

40


74

83


Federal funds sold


3

1


5

1


Other


8

4


16

7


Total interest income

8,289

8,303


16,473

16,463


Interest Expense








Deposits


808

905


1,605

1,783


Federal funds purchased and securities sold 







under agreements to repurchase

63

65


124

127


Borrowed funds


-

-


-

4


Total interest expense

871

970


1,729

1,914


Net Interest Income - Before provision for loan losses

7,418

7,333


14,744

14,549


Provision for Loan Losses  


183

444


297

872


Net Interest Income After Provision








For Loan Losses


7,235

6,889


14,447

13,677


Noninterest Income








Customer service fees


1,424

1,278


2,783

2,524


Other service charges and fees


965

928


1,879

1,720


Net gain on sale of loans 


173

203


348

292


Net gain on sale of available-for-sale securities

137

180


246

302


Total noninterest income

2,699

2,589


5,256

4,838


Noninterest Expense








Salaries and Wages


2,714

2,456


5,369

4,891


Employee benefits


687

720


1,751

1,565


Net occupancy expense


368

271


723

575


Furniture and equipment


427

399


849

793


Data processing


320

324


649

638


Franchise taxes


187

195


374

391


Net loss on sale of other assets owned

5

19


11

58


FDIC Assessment


119

130


238

262


Mortgage servicing rights amortization 

103

84


183

166


Other general and administrative


1,451

1,444


2,799

2,910


                            Total noninterest expense

6,381

6,042


12,946

12,249


Income Before Income Taxes


3,553

3,436


6,757

6,266


Income Taxes


956

882


1,809

1,755


Net Income


$                         2,597

$                         2,554


$                         4,948

$                         4,511


Other Comprehensive Income (Loss)(Net of Tax):







Net unrealized gain (loss) on available-for-sale securities

(1,824)

1,464


(94)

563


Reclassification adjustment for gain on sale of available-for-sale securities

(137)

(180)


(246)

(302)


Net unrealized gains (loss) on available-for-sale securities

(1,961)

1,284


(340)

261


Tax effect


(667)

(437)


(116)

(89)


Other Comprehensive Income (Loss)

(1,294)

847


(224)

172










Comprehensive Income


$                         1,303

$                         3,401


$                         4,724

$                         4,683


Earnings Per Share - Basic and Diluted

$                           0.56

$                           0.55


$                           1.07

$                           0.97


Weighted Average Shares Outstanding

4,608,453

4,626,309


4,615,846

4,632,054


Dividends Declared 


$                           0.22

$                           0.21


$                           0.43

$                           0.42








See Notes to Condensed Consolidated Unaudited Financial Statements 






 

 

 





Condensed Consolidated Balance Sheets






(in thousands of dollars)













June 30, 2015

December 31, 2014






(Unaudited)



Assets







          Cash and due from banks



$                      21,073

$                  22,246


          Federal Funds Sold



1,014

2,049



Total cash and cash equivalents


22,087

24,295









          Securities - available-for-sale 



253,607

248,492


          Other Securities, at cost



3,717

3,717


          Loans, net



614,664

616,021


          Premises and equipment



20,261

20,300


          Goodwill



4,074

4,074


          Mortgage Servicing Rights



2,028

2,023


          Other Real Estate Owned 



1,098

1,094


          Other assets 



21,027

21,197









Total Assets



$                    942,563

$                941,213



         Liabilities and Stockholders' Equity





Liabilities






          Deposits 







Noninterest-bearing



$                    160,077

$                164,009



Interest-bearing







     NOW accounts 



183,376

179,862



     Savings



225,356

223,189



     Time



192,839

195,500










Total deposits



761,648

762,560









          Federal funds purchased and securities





               sold under agreements to repurchase


57,983

55,962


          Dividend payable



1,007

965


          Accrued expenses and other liabilities


5,033

7,233










Total liabilities



825,671

826,720









Commitments and Contingencies













Stockholders' Equity






          Common stock - No par value - 6,500,000 shares






authorized 5,200,000 shares issued


13,102

12,222


          Treasury Stock - 591,547 shares 2015, 572,662 shares 2014

(13,165)

(11,928)


          Retained earnings



116,735

113,755


          Accumulated other comprehensive income


220

444










                 Total stockholders' equity 



116,892

114,493









Total Liabilities and Stockholders' Equity


$                    942,563

$                941,213









 

 



For the Three Months Ended



For the Six Months Ended



June 30,



June 30,

Selected financial data


2015



2014



2015



2014

Return on average assets


1.10%



1.07%



1.05%



0.94%

Return on average equity


8.90%



9.33%



8.52%



8.28%

Yield on earning assets


3.85%



3.80%



3.85%



3.82%

Cost of interest bearing liabilities


0.53%



0.53%



0.53%



0.53%

Net interest spread


3.32%



3.27%



3.32%



3.29%

Net interest margin


3.45%



3.37%



3.45%



3.39%















June 30,



June 30,









2015



2014







Efficiency


65.37%



63.76%







Tier 1 capital to average assets


11.90%



11.01%







Tangible book value per share

$

25.08


$

22.72







Dividend payout ratio


38.90%



42.96%





















June 30,



June 30,







Loans


2015



2014







(Dollar amounts in thousands)










Commercial real estate

$

279,002


$

265,902







Agricultural real estate

$

52,614


$

47,745







Consumer real estate

$

86,641


$

95,863







Commercial and industrial

$

95,370


$

98,292







Agricultural

$

74,352


$

63,393







Consumer

$

25,160


$

22,481







Industrial Development Bonds

$

7,452


$

4,163








$

620,591


$

597,839





















June 30,



June 30,







Asset quality data


2015



2014







(Dollar amounts in thousands)










Non-accrual loans

$

3,063


$

1,327







Troubled debt restructuring

$

1,300


$

964







90 day past due and accruing

$

-


$

-







Non-performing loans

$

3,063


$

1,327







Other real estate owned

$

1,098


$

1,541







Non-performing assets

$

4,161


$

2,868



















(Dollar amounts in thousands)










Allowance for loan and lease losses

$

5,927


$

5,663







Allowance for loan and lease losses/total loans


0.96%



0.95%







Net charge-offs:












   Quarter-to-date

$

233


$

106







   Year-to-date

$

275


$

403







Net charge-offs to average loans












   Quarter-to-date


0.04%



0.02%







   Year-to-date


0.04%



0.07%







Non-performing loans/total loans


0.49%



0.22%







Allowance for loan and lease losses/non-performing loans


192.52%



426.85%







 

SOURCE Farmers & Merchants Bancorp, Inc.