Farmers & Merchants Bancorp, Inc. Reports 2024 Third-Quarter and Year-to-Date Financial Results
ARCHBOLD, Ohio, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) today reported financial results for the 2024 third quarter and year-to-date ended September 30, 2024.
2024 Third Quarter Financial and Operating Highlights (on a year-over-year basis unless noted):
86 consecutive quarters of profitability
Net income increased 36.4% to $6.5 million, or $0.48 per basic and diluted share, from $4.8 million, or $0.35 per basic and diluted share, and net income expanded 14.7% from the 2024 second quarter
Net interest margin increased 12 basis points to 2.71%
Efficiency ratio improved to 67.98%, compared to 73.07% for the same period a year ago, and 69.03% for the 2024 second quarter
Total net loans remain stable at $2.54 billion at September 30, 2024
Total assets increased 4.8% to a record $3.39 billion
Deposits increased 4.3% to a record $2.68 billion
Stockholders' equity increased 10.6% to a record $335.4 million
Asset quality remains at historically strong levels with nonperforming loans of only $2.9 million at September 30, 2024, compared to $22.4 million at September 30, 2023
Allowance for credit losses was 879.37% of nonperforming loans
F&M ended the quarter with excellent liquidity levels, and over $635 million in contingent funding sources, and a cash-to-assets ratio of 7.2%
According to the FDIC, F&M continued to have the third largest share of deposits out of the 58 financial institutions that are also operating within its local markets
Lars B. Eller, President and Chief Executive Officer, stated, "F&M produced excellent earnings growth on a year-over-year and sequential basis, driven by higher net interest income, historically strong asset quality, and prudent expense management. Most importantly, our third quarter results reflect the talent of our associates, as we continue to work hard to drive operating improvements at F&M, serve our local Ohio, Indiana, and Michigan communities, and position F&M for long-term success. In addition, I am pleased to report that F&M was the third largest bank out of 58 financial institutions within the markets we compete, according to the FDIC, reflecting the leading value we provide to our local communities. In fact, F&M is the number one bank, based on deposits, in almost half of the communities in which we operate."
Income StatementNet income for the 2024 third quarter ended September 30, 2024, was $6.5 million, compared to $4.8 million for the same period last year. Net income per basic and diluted share for the 2024 third quarter was $0.48, compared to $0.35 for the same period last year. Net income for the 2024 nine months ended September 30, 2024, was $17.6 million, compared to $17.2 million for the same period last year. Net income per basic and diluted share for the 2024 nine months was $1.28, compared to $1.26 for the same period last year.
Mr. Eller continued, "Our 2024 third quarter and year-to-date performance demonstrate the success of the near-term strategies we are pursuing to navigate a complex operating environment and improve earnings. Most importantly, while the demand for loans is high across our markets, our approach to risk and pricing remains conservative. This near-term strategy has contributed to excellent asset quality. In addition, we continue to focus on strategies aimed at optimizing our deposit base and growing low-cost checking (DDA) deposits. Since the beginning of 2024, we have added over 5,600 new checking accounts, and benefited from new and expanded relationships at offices that were opened in 2023. As a result, we ended the quarter with a loan-to-deposit ratio of 93.6%, compared to 97.2% at September 30, 2023, and 96.0% at June 30, 2024. Our third quarter of 2024 loan-to-deposit ratio was the lowest quarterly value in two years. The final near-term strategy we are pursuing is focused on controlling expenses, and I am encouraged by the continued year-over-year and sequential improvement in our efficiency ratio. This reflects the opportunities we are pursuing to manage operating costs and expand productivity."
DepositsAt September 30, 2024, total deposits were $2.68 billion, an increase of 4.3% from September 30, 2023. The Company's cost of interest-bearing liabilities was 3.2% for the quarter ended September 30, 2024, compared to 2.82% for the quarter ended September 30, 2023, and 3.02% for the 2023 fourth quarter ended December 31, 2023.
Loan Portfolio and Asset Quality"F&M's teams continue to do an excellent job managing our cost of funds, loan pricing, deposit growth and overall net interest margin. Since the quarter ended December 31, 2023, our yield on earning assets has increased by 34 basis points, compared to a 19 basis point increase in our cost of interest bearing liabilities, representing the third consecutive quarter our yield on earning assets has outpaced our cost of interest bearing liabilities. We expect this trend will continue as more of our loan portfolio reprices in 2024," continued Mr. Eller.
Total loans, net at September 30, 2024, increased 0.3%, or by $8.7 million to $2.54 billion, compared to $2.53 billion at September 30, 2023. The year-over-year growth was driven by higher consumer real estate, commercial and industrial, and agricultural loans, partially offset by lower commercial real estate, agricultural real estate, and consumer loans.
F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $2.9 million, or 0.11% of total loans at September 30, 2024, compared to $22.4 million, or 0.89% of total loans at September 30, 2023, and $22.4 million, or 0.87% at December 31, 2023.
F&M maintains a well-balanced, diverse and high performing CRE portfolio. CRE loans represented 51.3% of the Company's total loan portfolio at September 30, 2024. In addition, F&M's commercial real estate office credit exposure represented 5.3% of the Company's total loan portfolio at September 30, 2024, with a weighted average loan-to-value of approximately 64% and an average loan of approximately $880,000.
F&M's CRE portfolio included the following categories at September 30, 2024:
CRE Category
Dollar Balance
Percent of CRE Portfolio(*)
Percent of Total Loan Portfolio(*)
Industrial
$
274,953
21.1
%
10.8
%
Retail
$
237,622
18.2
%
9.4
%
Multi-family
$
223,926
17.2
%
8.8
%
Hotels
$
141,642
10.9
%
5.6
%
Office
$
134,973
10.4
%
5.3
%
Gas Stations
$
62,028
4.8
%
2.5
%
Food Service
$
46,526
3.6
%
1.8
%
Development
$
30,999
2.4
%
1.2
%
Senior Living
$
29,866
2.3
%
1.2
%
Auto Dealers
$
25,068
1.9
%
1.0
%
Other
$
93,557
7.2
%
3.7
%
Total CRE
$
1,301,160
100.0
%
51.3
%
* Numbers have been rounded
At September 30, 2024, the Company's allowance for credit losses to nonperforming loans was 879.37%, compared to 112.61% at September 30, 2023, and 111.95% at December 31, 2023. The allowance to total loans was 1.01% at September 30, 2024, compared to 1.00% at September 30, 2023. Including accretable yield adjustments, associated with the Company's recent acquisitions, F&M's allowance for credit losses to total loans was 1.10% at September 30, 2024, compared to 1.18% at September 30, 2023.
Mr. Eller concluded, "With two months remaining in 2024, I am encouraged by F&M's strong financial and operating performance to date. F&M ended the quarter with record stockholders' equity, historically strong asset quality, record deposits, and excellent liquidity levels with over $635 million in contingent funding sources, and a cash-to-assets ratio of 7.2%. We remain focused on continual improvements, managing the items under our control, and providing our customers and communities with outstanding, and local financial services. As a result, F&M's financial and operating performance continues to strengthen and I believe the Company is well positioned to create lasting value for our communities, customers, team members, and shareholders."
Stockholders' Equity and DividendsTotal stockholders' equity increased 10.6% to $335.4 million, or $24.48 per share at September 30, 2024, from $303.2 million, or $22.19 per share at September 30, 2023. The Company's Tier 1 leverage ratio of 8.04%, remained stable compared to September 30, 2023.
Tangible stockholders' equity increased to $242.8 million at September 30, 2024, compared to $208.8 million at September 30, 2023. On a per share basis, tangible stockholders' equity at September 30, 2024, was $17.72 per share, compared to $15.28 per share at September 30, 2023.
For the nine months ended September 30, 2024, the Company has declared cash dividends of $0.66125 per share, which is a 5.0% increase over the same period last year. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 30 consecutive years. For the nine months ended September 30, 2024, the dividend payout ratio was 50.99% compared to 49.50% for the same period last year.
About Farmers & Merchants State Bank: Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) is the holding company of F&M Bank, a local independent community bank that has been serving its communities since 1897. F&M Bank provides commercial banking, retail banking and other financial services. Our locations are in Butler, Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Shelby, Williams, and Wood counties in Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties. The Michigan footprint includes Oakland County, and we have Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Perrysburg and Bryan, Ohio.
Safe Harbor StatementFarmers & 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. A reconciliation of GAAP to non-GAAP financial measures is included within this press release.
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME (Unaudited) (in thousands of dollars, except per share data)
Three Months Ended
Nine Months Ended
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
September 30, 2024
September 30, 2023
Interest Income
Loans, including fees
$
36,873
$
36,593
$
35,200
$
34,493
$
33,783
$
108,666
$
94,851
Debt securities:
U.S. Treasury and government agencies
1,467
1,148
1,045
987
1,005
3,660
3,103
Municipalities
387
389
394
397
392
1,170
1,201
Dividends
334
327
333
365
246
994
517
Federal funds sold
7
7
7
8
6
21
36
Other
2,833
2,702
1,675
2,020
927
7,210
1,830
Total interest income
41,901
41,166
38,654
38,270
36,359
121,721
101,538
Interest Expense
Deposits
16,947
16,488
15,279
15,015
13,323
48,714
31,908
Federal funds purchased and securities sold under agreements to repurchase
277
276
284
293
349
837
1,181
Borrowed funds
2,804
2,742
2,689
2,742
2,741
8,235
6,134
Subordinated notes
284
285
284
285
284
853
853
Total interest expense
20,312
19,791
18,536
18,335
16,697
58,639
40,076
Net Interest Income - Before Provision for Credit Losses
21,589
21,375
20,118
19,935
19,662
63,082
61,462
Provision for Credit Losses - Loans
282
605
(289
)
278
460
598
1,420
Provision for Credit Losses - Off Balance Sheet Credit Exposures
(267
)
(18
)
(266
)
189
(76
)
(551
)
(143
)
Net Interest Income After Provision for Credit Losses
21,574
20,788
20,673
19,468
19,278
63,035
60,185
Noninterest Income
Customer service fees
300
189
598
415
248
1,087
917
Other service charges and fees
1,155
1,085
1,057
1,090
1,133
3,297
3,253
Interchange income
1,315
1,330
1,429
1,310
1,266
4,074
4,008
Loan servicing income
710
513
539
666
502
1,762
3,739
Net gain on sale of loans
215
314
107
230
294
636
469
Increase in cash surrender value of bank owned life insurance
265
236
216
216
221
717
618
Net loss on sale of available-for-sale securities
-
-
-
-
-
-
(891
)
Total noninterest income
3,960
3,667
3,946
3,927
3,664
11,573
12,113
Noninterest Expense
Salaries and wages
7,713
7,589
7,846
6,981
6,777
23,148
19,934
Employee benefits
2,112
2,112
2,171
1,218
2,066
6,395
6,302
Net occupancy expense
1,054
999
1,027
1,187
950
3,080
2,646
Furniture and equipment
1,472
1,407
1,353
1,370
1,189
4,232
3,652
Data processing
339
448
500
785
840
1,287
2,362
Franchise taxes
410
265
555
308
434
1,230
1,179
ATM expense
472
397
473
665
640
1,342
1,946
Advertising
597
519
530
397
865
1,646
2,209
Net (gain) loss on sale of other assets owned
-
(49
)
-
86
49
(49
)
49
FDIC assessment
516
507
580
594
586
1,603
1,388
Servicing rights amortization - net
219
187
168
182
106
574
429
Loan expense
244
251
229
246
241
724
809
Consulting fees
251
198
186
192
179
635
640
Professional fees
453
527
445
331
358
1,425
1,099
Intangible asset amortization
445
444
445
446
445
1,334
1,334
Other general and administrative
1,128
1,495
1,333
1,532
1,319
3,956
4,841
Total noninterest expense
17,425
17,296
17,841
16,520
17,044
52,562
50,819
Income Before Income Taxes
8,109
7,159
6,778
6,875
5,898
22,046
21,479
Income Taxes
1,593
1,477
1,419
1,332
1,121
4,489
4,235
Net Income
6,516
5,682
5,359
5,543
4,777
17,557
17,244
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities
11,664
2,531
(1,995
)
13,261
(4,514
)
12,200
(2,480
)
Reclassification adjustment for realized loss on sale of available-for-sale securities
-
-
-
-
-
-
891
Net unrealized gain (loss) on available-for-sale securities
11,664
2,531
