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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period September 30, 2023

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 001-38084

 

FARMERS & MERCHANTS BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

 

Ohio

34-1469491

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

307 North Defiance Street, Archbold, Ohio

43502

(Address of principal executive offices)

(Zip Code)

 

(419) 446-2501

Registrant’s telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report.)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of Each Exchange

Common Stock, No Par Value

FMAO

NASDAQ Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

Indicate the number of shares of each of the issuers’ classes of common stock, as of the latest practicable date:

 

Common Stock, No Par Value

13,666,182

Class

Outstanding as of October 27, 2023

 

1


 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10Q

 

FARMERS & MERCHANTS BANCORP, INC.

INDEX

 

Form 10-Q Items

Page

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

Condensed Consolidated Balance Sheets -
September 30, 2023 and December 31, 2022

3

 

 

 

Condensed Consolidated Statements of Income -
Three and Nine Months Ended September 30, 2023 and September 30, 2022

4

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) -
Three and Nine Months Ended September 30, 2023 and September 30, 2022

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes to Stockholders’ Equity -
Three and Nine Months Ended September 30, 2023 and September 30, 2022

6-7

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2023 and September 30, 2022

8-9

 

 

 

Notes to Condensed Consolidated Financial Statements

10

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition
and Results of Operations

53-78

 

 

 

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

79

 

 

 

Item 4.

Controls and Procedures

80

 

 

 

PART II.

OTHER INFORMATION

80

 

 

 

Item 1.

Legal Proceedings

80

 

 

 

Item 1A.

Risk Factors

80

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

83

 

 

 

Item 3.

Defaults Upon Senior Securities

83

 

 

 

Item 4.

Mine Safety Disclosures

83

 

 

 

Item 5.

Other Information

83

 

 

 

Item 6.

Exhibits

84

 

 

 

Signatures

85

 

 

 

101.INS

Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)

 

 

101.SCH

Inline XBRL Taxonomy Extension Schema Document (1)

 

 

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)

 

 

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document (1)

 

 

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document (1)

 

 

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)

 

 

(1)
Pursuant to Rule 406T of Regulation S-T, the interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

2


 

PART 1 - FINANCIAL INFORMATION

 

ITEM 1 FINANCIAL STATEMENTS

 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(in thousands of dollars)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

151,711

 

 

$

83,085

 

Federal funds sold

 

 

1,471

 

 

 

1,324

 

Total cash and cash equivalents

 

 

153,182

 

 

 

84,409

 

Interest-bearing time deposits

 

 

2,989

 

 

 

4,442

 

Securities - available-for-sale

 

 

348,255

 

 

 

390,789

 

Other securities, at cost

 

 

16,995

 

 

 

9,799

 

Loans held for sale

 

 

1,039

 

 

 

827

 

Loans, net

 

 

2,504,329

 

 

 

2,336,074

 

Premises and equipment

 

 

31,723

 

 

 

28,381

 

Construction in progress

 

 

3,044

 

 

 

278

 

Goodwill

 

 

86,358

 

 

 

86,358

 

Loan servicing rights

 

 

5,687

 

 

 

3,549

 

Bank owned life insurance

 

 

33,691

 

 

 

33,073

 

Other assets

 

 

47,388

 

 

 

37,372

 

Total Assets

 

$

3,234,680

 

 

$

3,015,351

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

Noninterest-bearing

 

$

505,358

 

 

$

532,794

 

Interest-bearing

 

 

 

 

 

 

NOW accounts

 

 

778,133

 

 

 

750,887

 

Savings

 

 

591,344

 

 

 

627,203

 

Time

 

 

700,445

 

 

 

557,980

 

Total deposits

 

 

2,575,280

 

 

 

2,468,864

 

Federal funds purchased and securities sold under agreements to
   repurchase

 

 

30,527

 

 

 

54,206

 

Federal Home Loan Bank (FHLB) advances

 

 

266,286

 

 

 

127,485

 

Other borrowings

 

 

-

 

 

 

10,000

 

Subordinated notes, net of unamortized issuance costs

 

 

34,673

 

 

 

34,586

 

Dividend payable

 

 

2,838

 

 

 

2,832

 

Accrued expenses and other liabilities

 

 

21,892

 

 

 

19,238

 

Total liabilities

 

 

2,931,496

 

 

 

2,717,211

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Common stock - No par value 20,000,000 shares authorized; issued and outstanding 14,564,425 shares 9/30/23 and 12/31/22

 

 

135,171

 

 

 

135,497

 

Treasury stock - 898,843 shares 9/30/23, 956,003 shares 12/31/22

 

 

(11,008

)

 

 

(11,573

)

Retained earnings

 

 

218,510

 

 

 

212,449

 

Accumulated other comprehensive loss

 

 

(39,489

)

 

 

(38,233

)

Total stockholders' equity

 

 

303,184

 

 

 

298,140

 

Total Liabilities and Stockholders' Equity

 

$

3,234,680

 

 

$

3,015,351

 

 

See Notes to Condensed Consolidated Unaudited Financial Statements.

 

Note: The December 31, 2022, Condensed Consolidated Balance Sheet has been derived from the audited Condensed Consolidated Balance Sheet as of that date.

3


 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

(in thousands of dollars, except per share data)

 

 

(in thousands of dollars, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

33,783

 

 

$

24,119

 

 

$

94,851

 

 

$

66,962

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

 

1,005

 

 

 

1,049

 

 

 

3,103

 

 

 

3,107

 

Municipalities

 

 

392

 

 

 

373

 

 

 

1,201

 

 

 

995

 

Dividends

 

 

246

 

 

 

93

 

 

 

517

 

 

 

192

 

Federal funds sold

 

 

6

 

 

 

-

 

 

 

36

 

 

 

19

 

Other

 

 

927

 

 

 

213

 

 

 

1,830

 

 

 

382

 

Total interest income

 

 

36,359

 

 

 

25,847

 

 

 

101,538

 

 

 

71,657

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

13,323

 

 

 

2,166

 

 

 

31,908

 

 

 

4,905

 

Federal funds purchased and securities sold under
   agreements to repurchase

 

 

349

 

 

 

416

 

 

 

1,181

 

 

 

734

 

Borrowed funds

 

 

2,741

 

 

 

398

 

 

 

6,134

 

 

 

951

 

Subordinated notes

 

 

284

 

 

 

284

 

 

 

853

 

 

 

837

 

Total interest expense

 

 

16,697

 

 

 

3,264

 

 

 

40,076

 

 

 

7,427

 

Net Interest Income - Before Provision for Credit Losses*

 

 

19,662

 

 

 

22,583

 

 

 

61,462

 

 

 

64,230

 

Provision for Credit Losses - Loans*

 

 

460

 

 

 

1,637

 

 

 

1,420

 

 

 

3,845

 

Provision for Credit Losses - Off Balance Sheet Credit
  Exposures*

 

 

(76

)

 

 

-

 

 

 

(143

)

 

 

-

 

Net Interest Income After Provision for Credit Losses*

 

 

19,278

 

 

 

20,946

 

 

 

60,185

 

 

 

60,385

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

Customer service fees

 

 

2,208

 

 

 

2,300

 

 

 

7,016

 

 

 

7,096

 

Other service charges and fees

 

 

1,162

 

 

 

1,105

 

 

 

5,519

 

 

 

3,111

 

Net gain on sale of loans

 

 

294

 

 

 

327

 

 

 

469

 

 

 

1,188

 

Net loss on sale of available-for-sale securities

 

 

-

 

 

 

-

 

 

 

(891

)

 

 

-

 

Total noninterest income

 

 

3,664

 

 

 

3,732

 

 

 

12,113

 

 

 

11,395

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and wages

 

 

6,777

 

 

 

5,479

 

 

 

19,934

 

 

 

16,347

 

Employee benefits

 

 

2,066

 

 

 

1,392

 

 

 

6,302

 

 

 

4,992

 

Net occupancy expense

 

 

950

 

 

 

693

 

 

 

2,646

 

 

 

1,813

 

Furniture and equipment

 

 

1,189

 

 

 

1,047

 

 

 

3,652

 

 

 

3,111

 

Data processing

 

 

840

 

 

 

781

 

 

 

2,362

 

 

 

2,039

 

Franchise taxes

 

 

434

 

 

 

254

 

 

 

1,179

 

 

 

1,429

 

ATM expense

 

 

640

 

 

 

580

 

 

 

1,946

 

 

 

1,656

 

Advertising

 

 

865

 

 

 

578

 

 

 

2,209

 

 

 

1,115

 

Net (gain) loss on sale of other assets owned

 

 

49

 

 

 

-

 

 

 

49

 

 

 

(271

)

FDIC assessment

 

 

586

 

 

 

271

 

 

 

1,388

 

 

 

655

 

Servicing rights amortization - net

 

 

106

 

 

 

(50

)

 

 

429

 

 

 

35

 

Consulting fees

 

 

179

 

 

 

254

 

 

 

640

 

 

 

665

 

Other general and administrative

 

 

2,363

 

 

 

2,192

 

 

 

8,083

 

 

 

6,613

 

Total noninterest expense

 

 

17,044

 

 

 

13,471

 

 

 

50,819

 

 

 

40,199

 

Income Before Income Taxes

 

 

5,898

 

 

 

11,207

 

 

 

21,479

 

 

 

31,581

 

Income Taxes

 

 

1,121

 

 

 

2,253

 

 

 

4,235

 

 

 

6,254

 

Net Income

 

$

4,777

 

 

$

8,954

 

 

$

17,244

 

 

$

25,327

 

Basic Earnings Per Share

 

$

0.35

 

 

$

0.68

 

 

$

1.26

 

 

$

1.94

 

Diluted Earnings Per Share

 

$

0.35

 

 

$

0.68

 

 

$

1.26

 

 

$

1.94

 

Dividends Declared

 

$

0.2100

 

 

$

0.2100

 

 

$

0.6300

 

 

$

0.6025

 

See Notes to Condensed Consolidated Unaudited Financial Statements

*ASU 2016-13 adopted during the first quarter of 2023; therefore, September 30, 2022 provision amount reflects the incurred loss method.

4


 

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

(in thousands of dollars)

 

 

(in thousands of dollars)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

Net Income

 

$

4,777

 

 

$

8,954

 

 

$

17,244

 

 

$

25,327

 

Other Comprehensive Loss (Net of Tax):

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized loss on available-for-sale
   securities

 

 

(4,514

)

 

 

(8,197

)

 

 

(2,480

)

 

 

(43,738

)

Reclassification adjustment for realized loss on sale
   of available-for-sale securities

 

 

-

 

 

 

-

 

 

 

891

 

 

 

-

 

Net unrealized loss on available-for-sale
   securities

 

 

(4,514

)

 

 

(8,197

)

 

 

(1,589

)

 

 

(43,738

)

Tax benefit

 

 

(947

)

 

 

(1,721

)

 

 

(333

)

 

 

(9,185

)

Other comprehensive loss

 

 

(3,567

)

 

 

(6,476

)

 

 

(1,256

)

 

 

(34,553

)

Comprehensive Income (Loss)

 

$

1,210

 

 

$

2,478

 

 

$

15,988

 

 

$

(9,226

)

 

See Notes to Condensed Consolidated Unaudited Financial Statements

5


 

Farmers & Merchants Bancorp, Inc. and Subsidiaries

CONDENSED Consolidated StatementS of Changes TO Stockholders’ Equity

For the THREE AND NINE Months Ended September 30, 2023

(000’s Omitted, Except Per Share Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common