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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 March 31, 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

13,630,122

Class

Outstanding as of April 28, 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 -
March 31, 2023 and December 31, 2022

3

 

 

 

Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2023 and March 31, 2022

4

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) -
Three Months Ended March 31, 2023 and March 31, 2022

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes to Stockholders’ Equity -
Three Months Ended March 31, 2023 and March 31, 2022

6-7

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2023 and March 31, 2022

8-9

 

 

 

Notes to Condensed Consolidated Financial Statements

10

 

 

 

Item 2.

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

49-69

 

 

 

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

70

 

 

 

Item 4.

Controls and Procedures

71

 

 

 

PART II.

OTHER INFORMATION

71

 

 

 

Item 1.

Legal Proceedings

71

 

 

 

Item 1A.

Risk Factors

71

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

72

 

 

 

Item 3.

Defaults Upon Senior Securities

72

 

 

 

Item 4.

Mine Safety Disclosures

72

 

 

 

Item 5.

Other Information

72

 

 

 

Item 6.

Exhibits

73

 

 

 

Signatures

74

 

 

 

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)

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

62,780

 

 

$

83,085

 

Federal funds sold

 

 

1,545

 

 

 

1,324

 

Total cash and cash equivalents

 

 

64,325

 

 

 

84,409

 

Interest-bearing time deposits

 

 

4,435

 

 

 

4,442

 

Securities - available-for-sale

 

 

372,975

 

 

 

390,789

 

Other securities, at cost

 

 

11,543

 

 

 

9,799

 

Loans held for sale

 

 

951

 

 

 

827

 

Loans, net

 

 

2,422,018

 

 

 

2,336,074

 

Premises and equipment

 

 

28,679

 

 

 

28,381

 

Construction in progress

 

 

1,565

 

 

 

278

 

Goodwill

 

 

86,358

 

 

 

86,358

 

Loan servicing rights

 

 

4,985

 

 

 

3,549

 

Bank owned life insurance

 

 

33,269

 

 

 

33,073

 

Other assets

 

 

38,972

 

 

 

37,372

 

Total Assets

 

$

3,070,075

 

 

$

3,015,351

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

Noninterest-bearing

 

$

520,145

 

 

$

532,794

 

Interest-bearing

 

 

 

 

 

 

NOW accounts

 

 

800,230

 

 

 

750,887

 

Savings

 

 

590,854

 

 

 

627,203

 

Time

 

 

601,939

 

 

 

557,980

 

Total deposits

 

 

2,513,168

 

 

 

2,468,864

 

Federal funds purchased and securities sold under agreements to
   repurchase

 

 

30,496

 

 

 

54,206

 

Federal Home Loan Bank (FHLB) advances

 

 

164,327

 

 

 

127,485

 

Other borrowings

 

 

-

 

 

 

10,000

 

Subordinated notes, net of unamortized issuance costs

 

 

34,615

 

 

 

34,586

 

Dividend payable

 

 

2,831

 

 

 

2,832

 

Accrued expenses and other liabilities

 

 

18,881

 

 

 

19,238

 

Total liabilities

 

 

2,764,318

 

 

 

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 3/31/23 and 12/31/22

 

 

135,241

 

 

 

135,497

 

Treasury stock - 934,303 shares 3/31/23, 956,003 shares 12/31/22

 

 

(11,310

)

 

 

(11,573

)

Retained earnings

 

 

213,012

 

 

 

212,449

 

Accumulated other comprehensive loss

 

 

(31,186

)

 

 

(38,233

)

Total stockholders' equity

 

 

305,757

 

 

 

298,140

 

Total Liabilities and Stockholders' Equity

 

$

3,070,075

 

 

$

3,015,351

 

 

See Notes to Condensed Consolidated Unaudited Financial Statements.

 

Note: The December 31, 2022, Condensed Consolidated Balance Sheets have been derived from the audited Condensed Consolidated Balance Sheets 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)

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Interest Income

 

 

 

 

 

 

Loans, including fees

 

$

29,703

 

 

$

20,455

 

Debt securities:

 

 

 

 

 

 

U.S. Treasury and government agencies

 

 

1,068

 

 

 

1,023

 

Municipalities

 

 

408

 

 

 

300

 

Dividends

 

 

123

 

 

 

42

 

Federal funds sold

 

 

21

 

 

 

10

 

Other

 

 

479

 

 

 

69

 

Total interest income

 

 

31,802

 

 

 

21,899

 

Interest Expense

 

 

 

 

 

 

Deposits

 

 

8,151

 

 

 

1,360

 

Federal funds purchased and securities sold under
   agreements to repurchase

 

 

405

 

 

 

152

 

Borrowed funds

 

 

1,280

 

 

 

335

 

Subordinated notes

 

 

284

 

 

 

269

 

Total interest expense

 

 

10,120

 

 

 

2,116

 

Net Interest Income - Before Provision for Credit Losses*

 

 

21,682

 

 

 

19,783

 

Provision for Credit Losses - Loans*

 

 

817

 

 

 

580

 

Provision for Credit Losses - Off Balance Sheet Credit Exposures*

 

 

62

 

 

 

-

 

Net Interest Income After Provision for Credit Losses*

 

 

20,803

 

 

 

19,203

 

Noninterest Income

 

 

 

 

 

 

Customer service fees

 

 

2,447

 

 

 

2,648

 

Other service charges and fees

 

 

2,554

 

 

 

998

 

Net gain on sale of loans

 

 

67

 

 

 

697

 

Net loss on sale of available-for-sale securities

 

 

(891

)

 

 

-

 

Total noninterest income

 

 

4,177

 

 

 

4,343

 

Noninterest Expense

 

 

 

 

 

 

Salaries and wages

 

 

6,657

 

 

 

5,502

 

Employee benefits

 

 

2,165

 

 

 

2,054

 

Net occupancy expense

 

 

856

 

 

 

598

 

Furniture and equipment

 

 

1,252

 

 

 

1,056

 

Data processing

 

 

726

 

 

 

604

 

Franchise taxes

 

 

366

 

 

 

418

 

ATM expense

 

 

623

 

 

 

532

 

Advertising

 

 

514

 

 

 

237

 

Net loss on sale of other assets owned

 

 

-

 

 

 

(5

)

FDIC assessment

 

 

306

 

 

 

114

 

Mortgage servicing rights amortization - net

 

 

159

 

 

 

26

 

Consulting fees

 

 

230

 

 

 

178

 

Other general and administrative

 

 

3,077

 

 

 

2,179

 

Total noninterest expense

 

 

16,931

 

 

 

13,493

 

Income Before Income Taxes

 

 

8,049

 

 

 

10,053

 

Income Taxes

 

 

1,583

 

 

 

1,951

 

Net Income

 

$

6,466

 

 

$

8,102

 

Basic Earnings Per Share

 

$

0.47

 

 

$

0.62

 

Diluted Earnings Per Share

 

$

0.47

 

 

$

0.62

 

Dividends Declared

 

$

0.21

 

 

$

0.19

 

 

See Notes to Condensed Consolidated Unaudited Financial Statements

*ASU 2016-13 adopted during the first quarter of 2023; therefore, March 31, 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)

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Net Income

 

$

6,466

 

 

$

8,102

 

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

 

 

 

 

 

 

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

 

 

8,030

 

 

 

(20,939

)

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

 

 

891

 

 

 

-

 

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

 

 

8,921

 

 

 

(20,939

)

Tax expense (benefit)

 

 

1,874

 

 

 

(4,397

)

Other comprehensive income (loss)

 

 

7,047

 

 

 

(16,542

)

Comprehensive Income (Loss)

 

$

13,513

 

 

$

(8,440

)

 

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 Months Ended March 31, 2023

(000’s Omitted, Except Per Share Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common

 

 

Common

 

 

Treasury

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Stock

 

 

Stock

 

 

Stock

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance - January 1, 2023

 

 

13,608,422

 

 

$

135,497

 

 

$

(11,573

)

 

$

212,449

 

 

$

(38,233

)

 

$

298,140

 

Cumulative effect of change in accounting principle (ASU 2016-13)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,371

)

 

 

-

 

 

 

(3,371

)

Balance - January 1, 2023 as adjusted for change in accounting principle

 

 

13,608,422

 

 

 

135,497

 

 

 

(11,573

)

 

 

209,078

 

 

 

(38,233

)

 

 

294,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,466

 

 

 

-

 

 

 

6,466

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,047

 

 

 

7,047

 

Purchase of treasury stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of 21,700 shares of restricted stock

 

 

21,700

 

 

 

(562

)

 

 

263

 

 

 

299

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

306

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

306

 

Cash dividends declared - $0.21 per share

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,831

)

 

 

-

 

 

 

(2,831

)

Balance - March 31, 2023

 

 

13,630,122

 

 

$

135,241

 

 

$

(11,310

)

 

$

213,012

 

 

$

(31,186

)

 

$

305,757

 

See Notes to Condensed Consolidated Unaudited Financial Statements

 

6

 

Farmers & Merchants Bancorp, Inc. and Subsidiaries

CONDENSED Consolidated StatementS of Changes TO Stockholders’ Equity

For the THREE months Ended March 31, 2022

(000’s Omitted, Except Per Share Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common