ARCHBOLD, Ohio, May 01, 2024 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) today reported financial results for the 2024 first quarter ended March 31, 2024. 2024 First Quarter Financial and Operating Highlights (on a year-over-year basis unless noted): 84 consecutive quarters of profitability Net income was $5.4 million, or $0.39 per basic and diluted share Net interest income after provision for credit losses increased 6.2% from December 31, 2023, primarily due to a stabilizing net interest margin and solid asset quality Total loans increased 3.9% to $2.54 billion at March 31, 2024 Total cash and cash equivalents increased by $123.5 million, or 191.9% to $187.8 million Total assets increased 7.1% to a record $3.29 billion Deposits increased to 4.3% to a record $2.62 billion Stockholders' equity increased 3.9% to a record $317.7 million Asset quality remains solid as net charge-offs to average loans were 0.00% Allowance for credit losses was 127.28% of nonperforming loans Lars B. Eller, President and Chief Executive Officer, stated, "Our first quarter financial results demonstrate the strategies we are pursuing to enhance profitability, leverage the operating investments we made last year, and further strengthen our balance sheet. The progress we made, especially from the 2023 fourth quarter is encouraging and is a testament to the hard work of our team members, as well as the local value we provide our Ohio, Indiana and Michigan communities." Mr. Eller continued, "We are cautiously optimistic that our net interest margin has stabilized, even as we continue to navigate high levels of deposit competition and overall interest rate uncertainty. Over the past three months, F&M experienced a slight increase in its net interest margin, which combined with stable asset quality, drove a 6.2% increase in net interest income during this period. We expect to benefit from higher productivity of the four offices we opened during 2023 as our local market presence expands. In fact, total deposits at March 31, 2024, included $78.6 million of deposits from these new offices. In addition, we expect our efficiency ratio to improve throughout 2024 as we benefit from the investments we made last year to support a bank with over $4 billion in assets." Income StatementNet income for the 2024 first quarter ended March 31, 2024, was $5.4 million, compared to $6.5 million for the same period last year. Net income per basic and diluted share for the 2024 first quarter was $0.39, compared to $0.47 for the same period last year. "Core profitability has improved from fourth quarter levels due to higher net interest and noninterest income. We continue to believe that approximately 25% of our loan portfolio will be subject to repricing in 2024, which will benefit the yield on earnings assets and profitability in the coming quarters. Loan growth on a year-over-year basis is expected to be more limited compared to prior years as we focus on the spread between loans and deposits, pursue opportunities to pay down higher cost of funds, and increase our cash position. The progress we are making is encouraging and since the 2023 fourth quarter our cash position has increased by 32.1%, while our Federal Home Loan Bank advances has decreased by 3.4%. We also continue to make progress growing deposits with a prudent focus on managing the interest rates on deposit accounts. On a year-over-year basis, total deposits increased 4.3% and we continue to experience net, new demand deposit account (DDA) growth, which increased 1.4% over the past 12 months," continued Mr. Eller.   DepositsAt March 31, 2024, total deposits were $2.62 billion, an increase of 4.3% from March 31, 2023. The Company's cost of interest-bearing liabilities was 3.06% for the quarter ended March 31, 2024, compared to 1.85% for the quarter ended March 31, 2023, and 3.02% for the 2023 fourth quarter ended December 31, 2023. Loan Portfolio and Asset QualityTotal loans, net at March 31, 2024, increased 3.9%, or by $94.7 million to $2.52 billion, compared to $2.42 billion at March 31, 2023. The year-over-year improvement resulted primarily from the contribution of continued organic loan growth. F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $19.4 million, or 0.76% of total loans at March 31, 2024, compared to $7.7 million, or 0.32% at March 31, 2023, and $22.4 million, or 0.87% at December 31, 2023. The year-over-year increase in nonperforming loans was primarily due to one agricultural relationship, representing a balance of $16.5 million. F&M expects to receive a paydown on this lending relationship in the second quarter this year. 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 March 31, 2024. In addition, F&M's commercial real estate office credit exposure represented 5.5% of the Company's total loan portfolio at March 31, 2024, with a weighted average loan-to-value of approximately 63% and an average loan of approximately $921,000. F&M's CRE portfolio included the following categories at March 31, 2024: CRE Category   Dollar Balance   Percent ofCRE Portfolio(*)   Percent ofTotal LoanPortfolio(*)               Industrial   $ 259,191       19.9 %     10.2 % Multi-family   $ 221,884       17.0 %     8.7 % Retail   $ 220,755       16.9 %     8.7 % Office   $ 139,021       10.7 %     5.5 % Hotels   $ 128,313       9.8 %     5.0 % Gas Stations   $ 63,202       4.9 %     2.5 % Food Service   $ 47,304       3.6 %     1.9 % Senior Living   $ 34,534       2.7 %     1.4 % Development   $ 33,961       2.6 %     1.3 % Auto Dealers   $ 31,856       2.4 %     1.2 % Other   $ 124,379       9.5 %     4.9 % Total CRE   $ 1,304,400       100.0 %     51.3 % * Numbers have been rounded                                                   At March 31, 2024, the Company's allowance for credit losses to nonperforming loans was 127.28%, compared to 319.38% at March 31, 2023, and 111.95% at December 31, 2023. The allowance to total loans was 0.97% at March 31, 2024, compared to 1.01% at March 31, 2023. Including accretable yield adjustments, associated with the Company's recent acquisitions, F&M's allowance for credit losses to total loans was 1.11% at March 31, 2024, compared to 1.24% at March 31, 2023. Mr. Eller concluded, "Our asset quality remains strong, and I am pleased to report that during the first quarter one of two larger nonperforming credits paid off in full. In addition, net charge-offs to average outstanding loans remains at historically low levels, we remain well reserved, and we continue to proactively monitor our loan portfolio for any signs of stress. While the macro-economic environment is expected to remain fluid, we believe we are well positioned to navigate this period by maintaining solid asset quality, optimizing our balance sheet, and improving earnings." Stockholders' Equity and DividendsTotal stockholders' equity increased 3.9% to $317.7 million at March 31, 2024, from $305.8 million at March 31, 2023. At March 31, 2024, the Company had a Tier 1 leverage ratio of 8.40%, compared to 8.36% at March 31, 2023. Based on a regulatory basis, tangible stockholders' equity increased to $256.5 million at March 31, 2024, compared to $244.2 million at March 31, 2023. On a per share basis, tangible stockholders' equity at March 31, 2024, was $18.75 per share, compared to $17.92 per share at March 31, 2023. For the three months ended March 31, 2024, the Company has declared cash dividends of $0.22 per share, which is a 4.8% increase over the same period last year. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 29 consecutive years. For the three months ended March 31, 2024, the dividend payout ratio was 55.52% compared to 43.79% 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 F&M has Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; 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   March 31, 2024   December 31, 2023   September 30, 2023   June 30, 2023   March 31, 2023 Interest Income                   Loans, including fees $ 35,200     $ 34,493     $ 33,783     $ 31,365     $ 29,703   Debt securities:                   U.S. Treasury and government agencies   1,045       987       1,005       1,030       1,068   Municipalities   394       397       392       401       408   Dividends   333       365       246       148       123   Federal funds sold   7       8       6       9       21   Other   1,675       2,020       927       424       479   Total interest income   38,654       38,270       36,359       33,377       31,802   Interest Expense                   Deposits   15,279       15,015       13,323       10,434       8,151   Federal funds purchased and securities sold under agreements to repurchase   284       293       349       427       405   Borrowed funds   2,689       2,742       2,741       2,113       1,280   Subordinated notes   284       285       284       285       284   Total interest expense   18,536       18,335       16,697       13,259       10,120   Net Interest Income - Before Provision for Credit Losses   20,118       19,935       19,662       20,118       21,682   Provision for Credit Losses - Loans   (289 )     278       460       143       817   Provision for Credit Losses - Off Balance Sheet Credit Exposures   (266 )     189       (76 )     (129 )     62   Net Interest Income After Provision for Credit Losses   20,673       19,468       19,278       20,104       20,803   Noninterest Income                   Customer service fees   2,782       2,576       2,208       2,361       2,447   Other service charges and fees   1,057       1,121       1,162       1,803       2,554   Net gain on sale of loans   107       230       294       108       67   Net loss on sale of available-for-sale securities   -       -       -       -       (891 ) Total noninterest income   3,946       3,927       3,664       4,272       4,177   Noninterest Expense                   Salaries and wages   7,846       6,981       6,777       6,500       6,657   Employee benefits   2,171       1,218       2,066       2,071       2,165   Net occupancy expense   1,027       1,187       950       840       856   Furniture and equipment   1,353       1,370       1,189       1,211       1,252   Data processing   500       785       840       796       726   Franchise taxes   555       308       434       379       366   ATM expense   473       665       640       683       623   Advertising   530       397       865       830       514   Net loss on sale of other assets owned   -       86       49       -       -   FDIC assessment   580       594       586       496       306   Servicing rights amortization - net   168       182       106       164       159   Consulting fees   186       192       179       231       230   Other general and administrative   2,452       2,555       2,363       2,643       3,077   Total noninterest expense   17,841       16,520       17,044       16,844       16,931   Income Before Income Taxes   6,778       6,875       5,898       7,532       8,049   Income Taxes   1,419       1,332       1,121       1,531       1,583   Net Income   5,359       5,543       4,777       6,001       6,466   Other Comprehensive Income (Loss) (Net of Tax):                   Net unrealized gain (loss) on available-for-sale securities   (1,995 )     13,261       (4,514 )     (5,996 )     8,030   Reclassification adjustment for realized loss on sale of available-for-sale securities   -       -       -       -       891   Net unrealized gain (loss) on available-for-sale securities   (1,995 )     13,261       (4,514 )     (5,996 )     8,921   Tax expense (benefit)   (418 )     2,784       (947 )     (1,260 )     1,874   Other comprehensive income (loss)   (1,577 )     10,477       (3,567 )     (4,736 )     7,047   Comprehensive Income $ 3,782     $