Farmers & Merchants Bancorp, Inc. Reports 2023 First Quarter Financial Results

Source: Nasdaq GlobeNewswire / 19 Apr 2023 16:30:01 America/New_York

ARCHBOLD, Ohio, April 19, 2023 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2023 first quarter ended March 31, 2023.

2023 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

Net interest income before provision for credit losses increased 9.6% to $21.7 million
Adopted CECL accounting standards, which led to a one-time adjustment to equity of $3.4 million, net of tax
Net income of $6.5 million, compared to $8.1 million
Earnings were $0.47 per basic and diluted share, compared to $0.62 per basic and diluted share
Total loans increased 24.7% to a record $2.447 billion
Organic loan growth of 19.4%, excluding PPP loans and the Peoples-Sidney Financial Corporation acquisition
Total assets increased 14.3% to a record $3.07 billion, and up 1.8% from December 31, 2022
Deposits increased 11.5% to a record $2.51 billion, and up 1.8% from December 31, 2022
Uninsured deposits to total deposits of approximately 18% at March 31, 2023
Strong asset quality continues as nonperforming loans declined 10.1% to $7.7 million, or 0.32% of total loans
Net charge-offs to average loans were 0.00%
Allowance for credit losses, with the accretable yield adjustment from recent acquisitions, of 319.22% of nonperforming loans

Lars B. Eller, President and Chief Executive Officer, stated, “F&M’s increased scale, strong balance sheet, and highly profitable financial model supports our growth initiatives, while providing us with the flexibility to invest across our business and return capital to shareholders. Despite increased economic volatility, we remain focused on executing our new three-year strategic growth plan and I am pleased with the progress we are making. During the quarter, we successfully completed the integration of the October 2022 acquisition of the Peoples-Sidney Financial Corporation. We implemented CECL accounting standards, which maintained our allowance, even as non-performing loans declined 10.1% over the past 12 months. In the first quarter, we completed the conversion of our credit card sale with new cards issued and the scorecard rewards carried over to the new provider. In addition, we completed the first phase of our previously announced investments, preparing to open three new offices in the second quarter as well as enhancing our training, commercial and deposit operations, customer care center, and risk and compliance teams and capabilities. Finally, we added a new, highly experienced lending team in our Fort Wayne region to lead our growth within this compelling market.”

Mr. Eller continued, “We grew total deposits by $44.3 million over the past three months, despite extremely high competition for deposits. Competition for deposits has also significantly increased our cost of interest-bearing liabilities. Interest expense on deposits increased over five times from $1.4 million in the 2022 first quarter to $8.2 million, compared to an 11.5% increase in total deposits over this period. Despite these trends, net interest income before provision for credit losses increased 9.6% to a first quarter record as a result of strong loan growth and higher yields on loans.”

“Profitability was impacted by several strategic one-time expenses that we incurred during the 2023 first quarter including $541,000 of total charges related to the conversion of our credit card platform. In addition, we sold $21.6 million of investments and recognized a loss of $891,000 during the quarter, which temporarily reduced ROA by 9 basis points and ROE by 93 basis points. We expect this opportunistic sale to contribute to earnings going forward and earn a payback in approximately eight months. Offsetting these actions was significant growth in income from agriculture servicing rights, which were recognized at a value of $1.5 million during the first quarter. Overall, first quarter profitability was in line with our expectations. We expect the actions taken in the first quarter will enhance profitability going forward and we remain focused on investing in our growth initiatives, controlling operating expenses, and managing our cost of funds,” continued Mr. Eller.

Income Statement

Net income for the 2023 first quarter ended March 31, 2023, was $6.5 million, compared to $8.1 million for the same period last year. Net income per basic and diluted share for the 2023 first quarter was $0.47, compared to $0.62 for the same period last year.

Deposits
At March 31, 2023, total deposits were a record $2.513 billion, an increase of 11.5% from March 31, 2022, and an increase of 1.8% from December 31, 2022. The Company’s cost of interest-bearing liabilities increased to 1.85% for the quarter ended March 31, 2023, compared to 0.45% for the quarter ended March 31, 2022, and 1.32% for the quarter ended December 31, 2022.

At March 31, 2023, F&M’s average deposit account had an average balance of $25,544. In addition, uninsured deposits to total deposits were approximately 18% for the quarter ended March 31, 2023.

Loan Portfolio and Asset Quality
Total loans, net at March 31, 2023, increased 24.5%, or by $476.6 million to a record $2.422 billion, compared to $1.945 billion at March 31, 2022, and up 3.7% from $2.336 billion at December 31, 2022. The year-over-year improvement resulted primarily from the contribution of continued strong organic loan growth and the completion of the Peoples acquisition. Not including the Peoples acquisition, total net loans increased 19.1% organically, or by $371.9 million from the same period a year ago.

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $7.7 million, or 0.32% of total loans at March 31, 2023, compared to $8.6 million, or 0.44% of total loans at March 31, 2022. Loans past due were 0.52% of the loan portfolio at March 31, 2023, which included one large farm loan that was paid off after the quarter ended and another loan that is expected to be refinanced through another bank in the 2023 second quarter. Past due loans adjusted for these two credits as a percent of the loan portfolio would have been 0.13% at March 31, 2023. CRE loans represented 50.1% of the Company’s total loan portfolio at March 31, 2023.

F&M maintains a well-balanced, diverse and high performing CRE portfolio, which included the following categories at March 31, 2023:

CRE Category	Dollar Balance	Percent of RE Portfolio^(*)	Percent of Total Loan Portfolio^(*)
Multi Family	$204,510	16.7%	8.4%
Retail	$217,447	17.7%	8.9%
Industrial	$174,296	14.2%	7.1%
Hotels	$151,562	12.4%	6.2%
Office	$96,087	7.8%	3.9%
Gas Stations	$59,239	4.8%	2.4%
Senior Living	$41,407	3.4%	1.7%
Food Service	$32,788	2.7%	1.3%
Other	$247,979	20.2%	10.1%
Total CRE	$1,225,315	100.0%	50.1%

* Numbers have been rounded

On January 1, 2023, F&M adopted ASU 2016-13 - Measurement of Credit Losses on Financial Instruments and implemented the current expected credit losses (“CECL”) accounting standards. As a result, the Company recorded the one-time adjustment from equity into the allowance for credit losses and unfunded commitment liability in the amount of $4.3 million, or $3.4 million, net of tax. The adoption of CECL did not have a material impact on the Bank’s regulatory capital ratios.

At March 31, 2023, the Company’s allowance for credit losses to nonperforming loans was 319.22%, compared to 198.29% at March 31, 2022. As a result of F&M’s recent acquisitions, the Company has an accretable yield adjustment of $5.8 million, which further enhances F&M’s allowance at March 31, 2023. Including the accretable yield adjustment, F&M’s allowance for credit losses to total loans was 1.24% at March 31, 2023, compared to 1.22% at March 31, 2022.

Mr. Eller concluded, “We expect to make approximately $7 million of annual strategic investments during 2023 across our business. These investments combined with a higher cost of funds are expected to temporarily impact profitability in 2023. We believe earnings growth will reaccelerate in 2024 as we benefit from the investments and strategies we are pursuing. I am encouraged by the progress we are making and the dedication of our team members, as we remain focused on supporting the financial needs of our Ohio, Indiana and Michigan communities.”

Stockholders’ Equity and Dividends
Total stockholders’ equity increased 6.7% to $305.8 million at March 31, 2023, from $286.5 million at March 31, 2022. At March 31, 2023, the Company had a Tier 1 leverage ratio of 8.36%, compared to 8.51% at March 31, 2022.

Based on a regulatory basis, tangible stockholders’ equity increased to $244.2 million at March 31, 2023, compared to $221.6 million at March 31, 2022. On a per share basis, regulatory tangible stockholders’ equity at March 31, 2023, was $17.92 per share, compared to $16.96 per share at March 31, 2022. A non-GAAP reconciliation is provided as a table in this press release.

For the 2023 first quarter, the company declared cash dividends of $0.21 per share, which is a 10.5% increase over the 2022 first quarter declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 28 consecutive years. For the 2023 first quarter, the dividend payout ratio was 43.79% compared to 30.64% for the same period last year.

About Farmers & 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. Our locations are in Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Shelby, Williams, and Wood counties in Western Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties, and we have Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Bryan and Oxford, Ohio.

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 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 SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
(Unaudited) (in thousands of dollars, except per share data)

	Three Months Ended
	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Interest Income
Loans, including fees	$	29,703		$	27,302		$	24,119		$	22,388		$	20,455
Debt securities:
U.S. Treasury and government agencies		1,068			1,118			1,049			1,035			1,023
Municipalities		408			420			373			322			300
Dividends		123			126			93			57			42
Federal funds sold		21			2			-			9			10
Other.		479			524			213			100			69
Total interest income		31,802			29,492			25,847			23,911			21,899
Interest Expense
Deposits		8,151			4,978			2,166			1,379			1,360
Federal funds purchased and securities sold
under agreements to repurchase		405			463			416			166			152
Borrowed funds		1,280			1,209			398			218			335
Subordinated notes		284			285			284			284			269
Total interest expense		10,120			6,935			3,264			2,047			2,116
Net Interest Income - Before Provision for Credit Losses*		21,682			22,557			22,583			21,864			19,783
Provision for Credit Losses*		817			755			1,637			1,628			580
Net Interest Income After Provision for Credit Losses*		20,865			21,802			20,946			20,236			19,203
Noninterest Income
Customer service fees		2,447			2,862			2,300			2,148			2,648
Other service charges and fees		2,554			1,115			1,105			1,008			998
Net gain on sale of loans		67			165			327			164			697
Net loss on sale of available-for-sale securities		(891	)		-			-			-			-
Total noninterest income		4,177			4,142			3,732			3,320			4,343
Noninterest Expense
Salaries and wages		6,657			6,353			5,479			5,366			5,502
Employee benefits		2,165			1,911			1,392			1,546			2,054
Net occupancy expense		856			753			693			522			598
Furniture and equipment		1,252			1,096			1,047			1,008			1,056
Data processing		726			1,917			781			654			604
Franchise taxes		366			(45	)		254			757			418
ATM expense		623			561			580			544			532
Advertising		514			531			578			300			237
Net (gain) loss on sale of other assets owned		-			12			-			(266	)		(5	)
FDIC assessment		306			250			271			270			114
Mortgage servicing rights amortization		159			110			(50	)		59			26
Consulting fees		230			637			254			233			178
Other general and administrative		3,139			2,964			2,192			2,242			2,179
Total noninterest expense		16,993			17,050			13,471			13,235			13,493
Income Before Income Taxes		8,049			8,894			11,207			10,321			10,053
Income Taxes		1,583			1,706			2,253			2,050			1,951
Net Income		6,466			7,188			8,954			8,271			8,102
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities		9,812			(628	)		(8,197	)		(14,602	)		(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			(628	)		(8,197	)		(14,602	)		(20,939	)
Tax expense (benefit)		1,874			(132	)		(1,721	)		(3,067	)		(4,397	)
Other comprehensive income (loss)		7,047			(496	)		(6,476	)		(11,535	)		(16,542	)
Comprehensive Income (Loss)	$	13,513		$	6,692		$	2,478		$	(3,264	)	$	(8,440	)
Basic Earnings Per Share	$	0.47		$	0.53		$	0.68		$	0.63		$	0.62
Diluted Earnings Per Share	$	0.47		$	0.53		$	0.68		$	0.63		$	0.62
Dividends Declared	$	0.2100		$	0.2100		$	0.2100		$	0.2025		$	0.1900

*ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands of dollars, except share data)

		March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
		(Unaudited)						(Unaudited)			(Unaudited)			(Unaudited)
Assets
Cash and due from banks		$	62,780		$	83,085		$	69,680		$	69,955		$	94,118
Federal funds sold			1,545			1,324			990			1,484			45,404
	Total cash and cash equivalents		64,325			84,409			70,670			71,439			139,522

Interest-bearing time deposits			4,435			4,442			5,187			6,684			8,677
Securities - available-for-sale			372,975			390,789			395,485			399,687			413,996
Other securities, at cost			11,543			9,799			8,227			8,735			8,568
Loans held for sale			951			827			2,182			4,230			6,060
Loans, net			2,422,018			2,336,074			2,122,626			2,016,394			1,945,449
Premises and equipment			28,679			28,381			26,484			26,492			26,653
Construction in progress			1,565			278			-			-			-
Goodwill			86,358			86,358			80,434			80,434			80,434
Mortgage servicing rights			4,985			3,549			3,583			3,426			3,336
Other real estate owned			-			-			-			-			-
Bank owned life insurance			33,269			33,073			28,051			27,874			27,715
Other assets			38,972			37,372			40,831			29,321			25,735

Total Assets		$	3,070,075		$	3,015,351		$	2,783,760		$	2,674,716		$	2,686,145

	Liabilities and Stockholders' Equity
Liabilities
Deposits
	Noninterest-bearing	$	520,145		$	532,794		$	506,928		$	503,395		$	497,249
	Interest-bearing
	NOW accounts		800,230			750,887			705,888			678,552			681,975
	Savings		590,854			627,203			607,375			617,850			626,787
	Time		601,939			557,980			462,845			424,249			447,586
	Total deposits		2,513,168			2,468,864			2,283,036			2,224,046			2,253,597

Federal funds purchased and
securities sold under agreements to repurchase			30,496			54,206			55,802			71,944			31,680
Federal Home Loan Bank (FHLB) advances			164,327			127,485			102,147			42,635			22,656
Other borrowings			-			10,000			10,000			-			40,000
Subordinated notes, net of unamortized issuance costs			34,615			34,586			34,557			34,528			34,499
Dividend payable			2,831			2,832			2,727			2,626			2,462
Accrued expenses and other liabilities			18,881			19,238			14,913			18,064			14,773
	Total liabilities		2,764,318			2,717,211			2,503,182			2,393,843			2,399,667

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			121,811			123,145			122,886
Treasury stock - 934,303 shares 3/31/23, 956,003 shares 12/31/22			(11,310	)		(11,573	)		(11,547	)		(11,822	)		(11,739	)
Retained earnings			213,012			212,449			208,051			200,811			195,057
Accumulated other comprehensive loss			(31,186	)		(38,233	)		(37,737	)		(31,261	)		(19,726	)
	Total stockholders' equity		305,757			298,140			280,578			280,873			286,478

Total Liabilities and Stockholders' Equity		$	3,070,075		$	3,015,351		$	2,783,760		$	2,674,716		$	2,686,145

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA

		For the Three Months Ended
Selected financial data	March 31, 2023				December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Return on average assets		0.84%				0.96%			1.31%			1.23%			1.21%
Return on average equity		8.59%				10.00%			12.53%			11.66%			11.00%
Yield on earning assets		4.41%				4.18%			4.00%			3.79%			3.47%
Cost of interest bearing liabilities		1.85%				1.32%			0.68%			0.44%			0.45%
Net interest spread		2.56%				2.86%			3.32%			3.35%			3.02%
Net interest margin		3.01%				3.20%			3.49%			3.47%			3.14%
Efficiency		63.53%				50.46%			51.19%			50.17%			55.44%
Dividend payout ratio		43.79%				39.39%			30.45%			30.02%			30.64%
Tangible book value per share (1)	$	17.92			$	17.69		$	17.86		$	17.43		$	16.96
Tier 1 leverage ratio		8.36%				8.39%			9.11%			8.75%			8.51%
Average shares outstanding		13,615,655				13,606,876			13,083,145			13,065,975			13,066,272

Loans	March 31, 2023					December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
(Dollar amounts in thousands)
Commercial real estate	$	1,225,315			$	1,152,603		$	1,063,661		$	979,176		$	910,839
Agricultural real estate		227,897				220,819			205,089			199,972			196,223
Consumer real estate		502,974				494,423			416,001			410,450			410,120
Commercial and industrial		241,598				242,360			229,388			232,975			216,918
Agricultural		131,467				128,733			128,615			127,143			140,709
Consumer		89,588				89,147			70,602			55,411			57,521
Other		29,316				29,818			30,662			31,243			31,573
Less: Net deferred loan fees and costs		(1,503	)			(1,516	)		(1,402	)		(1,552	)		(1,683	)
Total loans,net	$	2,446,652			$	2,356,387		$	2,142,616		$	2,034,818		$	1,962,220


Asset quality data	March 31, 2023				December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
(Dollar amounts in thousands)
Nonaccrual loans	$	7,717			$	4,689		$	5,470		$	5,247		$	8,581
Troubled debt restructuring	$	3,516			$	3,645		$	3,978		$	2,748		$	7,268
90 day past due and accruing	$	-			$	-		$	-		$	-		$	-
Nonperforming loans	$	7,717			$	4,689		$	5,470		$	5,247		$	8,581
Other real estate owned	$	-			$	-		$	-		$	-		$	-
Nonperforming assets	$	7,717			$	4,689		$	5,470		$	5,247		$	8,581


Allowance for credit losses(2)	$	24,507			$	20,313		$	19,990		$	18,424		$	16,771
Accretable yield adjustment		5,754				6,427			5,959			6,724			7,201
Adjusted credit losses with accretable yield included(2)		30,261			$	26,740		$	25,949		$	25,148		$	23,972
Allowance for credit losses/total loans(2)	$	1.00%				0.86%			0.93%			0.91%			0.85%
Adjusted credit losses with accretable yield/total loans(2)	$	1.24%				1.13%			1.21%			1.24%			1.22%
Net charge-offs:
Quarter-to-date		60			$	431		$	71		$	(25	)	$	51
Year-to-date		60			$	529		$	97		$	26		$	51
Net charge-offs to average loans				0.28%
Quarter-to-date		0.00%				0.02%			0.00%			0.00%			0.00%
Year-to-date		0.00%				0.03%			0.00%			0.00%			0.00%
Nonperforming loans/total loans		0.32%				0.20%			0.26%			0.26%			0.44%
Allowance for credit losses/nonperforming loans(2)		319.22%				273.67%			365.44%			351.44%			198.29%

(1) Tangible Equity = Stockholder Equity less goodwill, other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities) plus CECL adjustment
(2) ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(in thousands of dollars, except percentages)


	For the Three Months Ended						For the Three Months Ended
	March 31, 2023						March 31, 2022
Interest Earning Assets:	Average Balance		Interest/Dividends		Annualized Yield/Rate		Average Balance		Interest/Dividends		Annualized Yield/Rate
Loans	$	2,397,061	$	29,703	4.96	%	$	1,907,478	$	20,455	4.29	%
Taxable investment securities		397,480		1,499	1.51	%		429,899		1,295	1.20	%
Tax-exempt investment securities		26,352		100	1.92	%		18,587		70	1.91	%
Fed funds sold & other		68,557		500	2.92	%		167,319		79	0.19	%
Total Interest Earning Assets		2,889,450	$	31,802	4.41	%		2,523,283	$	21,899	3.47	%

Nonearning Assets		180,259						165,064

Total Assets	$	3,069,709					$	2,688,347

Interest Bearing Liabilities:
Savings deposits	$	1,400,769	$	4,943	1.41	%	$	1,293,099	$	588	0.18	%
Other time deposits		579,409		3,208	2.21	%		459,854		772	0.67	%
Other borrowed money		132,494		1,280	3.86	%		63,364		335	2.11	%
Fed funds purchased & securities
sold under agreement to repurch.		38,853		405	4.17	%		29,104		152	2.09	%
Subordinated notes		34,596		284	3.28	%		34,480		269	3.12	%
Total Interest Bearing Liabilities	$	2,186,121	$	10,120	1.85	%	$	1,879,901	$	2,116	0.45	%

Noninterest Bearing Liabilities		582,345						513,745

Stockholders' Equity	$	301,243					$	294,701

Net Interest Income and Interest Rate Spread			$	21,682	2.56	%			$	19,783	3.02	%

Net Interest Margin					3.01	%					3.14	%

Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(in thousands of dollars, except percentages)

	For the Three Months Ended March 31, 2023										For the Three Months Ended March 31, 2022
	As Reported			Excluding Acc/Amort			Difference				As Reported			Excluding Acc/Amort			Difference
	$	Yield		$	Yield		$		Yield		$	Yield		$	Yield		$		Yield
Loans	29,703	4.96	%	29,036	4.85	%	667		0.11	%	20,455	4.29	%	20,081	4.12	%	374		0.17	%
Taxable investment securities	1,499	1.51	%	1,499	1.51	%	-		0.00	%	1,295	1.20	%	1,295	1.20	%	-		0.00	%
Tax-exempt investment securities	100	1.92	%	100	1.92	%	-		0.00	%	70	1.91	%	70	1.91	%	-		0.00	%
Fed funds sold & other	500	2.92	%	500	2.92	%	-		0.00	%	79	0.19	%	79	0.19	%	-		0.00	%
Total Interest Earning Assets	31,802	4.41	%	31,135	4.31	%	667		0.10	%	21,899	3.47	%	21,525	3.42	%	374		0.05	%

Savings deposits	4,943	1.41	%	4,943	1.41	%	-		0.00	%	588	0.18	%	588	0.18	%	-		0.00	%
Other time deposits	3,208	2.21	%	3,667	2.53	%	(459	)	-0.32	%	772	0.67	%	1,391	1.21	%	(619	)	-0.54	%
Other borrowed money	1,280	3.86	%	1,298	3.92	%	(18	)	-0.06	%	335	2.11	%	356	2.25	%	(21	)	-0.14	%
Federal funds purchased and
securities sold under agreement to
repurchase	405	4.17	%	405	4.17	%	-		0.00	%	152	2.09	%	152	2.09	%	-		0.00	%
Subordinated notes	284	3.28	%	284	3.28	%	-		0.00	%	269	3.12	%	269	3.12	%	-		0.00	%
Total Interest Bearing Liabilities	10,120	1.85	%	10,597	1.94	%	(477	)	-0.09	%	2,116	0.45	%	2,756	0.59	%	(640	)	-0.14	%

Interest/Dividend income/yield	31,802	4.41	%	31,135	4.31	%	667		0.10	%	21,899	3.47	%	21,525	3.42	%	374		0.05	%
Interest Expense / yield	10,120	1.85	%	10,597	1.94	%	(477	)	-0.09	%	2,116	0.45	%	2,756	0.59	%	(640	)	-0.14	%
Net Interest Spread	21,682	2.56	%	20,538	2.37	%	1,144		0.19	%	19,783	3.02	%	18,769	2.83	%	1,014		0.19	%
Net Interest Margin		3.01	%		2.85	%			0.16	%		3.14	%		2.98	%			0.16	%

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET INCOME
(in thousands of dollars)


	Three Months Ended
Non-GAAP Reconciliation of Net Income	March 31, 2023			March 31, 2022
	(Unaudited)
Net income as reported	$	6,466		$	8,102
Acquisition expenses		96			145
Tax effect on acquisition expenses		(19	)		(30	)
Net income excluding acquisition expenses and tax effect	$	6,543		$	8,217

Weighted average common shares outstanding including participating securities		13,615,655			13,066,272

Basic and diluted earnings per share	$	0.48		$	0.63

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF TANGIBLE BOOK VALUE


	Actual End of Period						Regulatory End of Period
Non-GAAP Reconciliation of Tangible Book Value	Year to Date						Year to Date
	March 31, 2023			March 31, 2022			March 31, 2023			March 31, 2022

Shares Outstanding		13,630,122			13,066,083			13,630,122			13,066,083

Tangible Equity
Equity	$	305,757		$	286,478		$	305,757		$	286,478
Goodwill		86,358			80,434			86,358			80,434
Other Intangible		8,882			4,203			8,882			4,203
Comprehensive Loss Adjustment*		-			-			31,186			19,726
CECL Adjustment**		-			-			2,528			-
Tangible Equity	$	210,517		$	201,841		$	244,231		$	221,566
Shares Outstanding		13,630			13,066			13,630			13,066
Tangible Book Equity per Share	$	15.44		$	15.45		$	17.92		$	16.96


	Actual Average						Regulatory Average
	Year to Date						Year to Date
	March 31, 2023			March 31, 2022			March 31, 2023			March 31, 2022

Net Income	$	6,466		$	8,102		$	6,466		$	8,102
Acquisition Costs - Tax Adjusted		77			115			77			115

Average Shares Outstanding		13,206,713			11,664,852			13,206,713			11,664,852

Average Tangible Equity
Average Equity	$	301,243		$	294,701		$	301,243		$	294,701
Average Goodwill		86,358			80,434			86,358			80,434
Average Other Intangible		9,167			4,356			9,167			4,356
Average Comprehensive Loss Adjustment*		-			-			36,764			8,155
Average CECL Adjustment**		-			-			2,528
Average Tangible Equity	$	205,718		$	209,911		$	245,010		$	218,066
Average Shares Outstanding		13,616			13,066			13,616			13,066
Average Tangible Book Equity per Share	$	15.11		$	16.07		$	17.99		$	16.69

Return on Average Tangible Equity		12.57	%		15.44	%		10.56	%		14.86	%
Return on Average Tangible Equity w/o Acquisition		12.72	%		15.66	%		10.68	%		15.07	%


*The Bank has adopted the Accumulated Other Comprehensive Income (AOCI) opt out election which removed AOCI
from the calculation of tangible equity for regulatory purposes.
**ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method and
the Bank has elected to spread the Capital adjustment over three years. The first year permits 75% of the capital adjustment to be removed
from the calculation of tangible equity for regulatory purposes.

Company Contact:	Investor and Media Contact:
Lars B. Eller President and Chief Executive Officer Farmers & Merchants Bancorp, Inc. (419) 446-2501 leller@fm.bank	Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com

Farmers & Merchants Bancorp, Inc. Reports 2023 First Quarter Financial Results

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