fmao-ex99

Successful Integration of the Limberlost Acquisition and Organic Expansion of Deposits

ARCHBOLD, OHIO, April 26, 2019, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2019 first quarter ended March 31, 2019.

2019 First Quarter Financial Highlights Include (on a year-over-year basis unless noted):

“2019 is off to an excellent start as a result of the successful closing and integration of the Limberlost acquisition, as well as strong first quarter financial results and robust organic deposit growth,” stated Lars B. Eller, President and Chief Executive Officer. “The addition of Limberlost’s six highly productive offices, talented associates and management team, and approximately 5,400 customers accelerate our Indiana growth plans. F&M’s larger scale and improved scope are expected to improve earnings, while offering Bank of Geneva’s customers a diverse offering of community-oriented financial products. While F&M’s size has increased, we remain committed to providing our local communities with valuable financial services that improve our customers’ financial wellbeing. This commitment is resonating in our markets and during the 2019 first quarter we achieved strong year-to-date organic deposit growth of 5.4% or $52,416,000.”

On January 1, 2019, F&M completed the acquisition of Limberlost Bancshares, Inc. (“Limberlost”), the holding company for Bank of Geneva. Immediately following the acquisition, Bank of Geneva was merged into The Farmers and Merchants State Bank. This transaction resulted in the addition of $257,183,000 in loans, net, $206,134,000 in deposits and six full-service offices in the northeast Indiana communities of Geneva, Berne, Decatur, Monroe, Portland and Monroeville.

Net income for the 2019 first quarter ended March 31, 2019, was $3,224,000, compared to $3,767,000 for the same period last year. Excluding the $1,029,000 of one-time tax adjusted acquisition related expenses recorded in the 2019 first quarter, net income for the 2019 first quarter would have increased 31.9% to $4,253,000.

Net income per diluted share for the 2019 first quarter was $0.29 per basic and diluted share, compared to $0.41 per basic and diluted share for the same period last year. One-time tax adjusted acquisition related expenses for the 2019 first quarter were $0.09 per basic and diluted share. In addition, at March 31, 2019, F&M had 16.5% more shares outstanding as a result of the Limberlost acquisition.

In addition to the $1,029,000, or $0.09 per share of one-time tax adjusted acquisition related expenses, the company incurred soft acquisition costs such as employee overtime and less time focused on production that also impacted growth and profitability during the first quarter. As the company completes the integration of the Limberlost acquisition, management expects accelerating year-over-year improvements in earnings will occur throughout the remainder of 2019.

F&M’s net interest margin for the 2019 first quarter increased 15 basis points to 3.87%, from 3.72% for the same period last year. The net interest margin is benefitting as the yield on earnings assets outpaces growth in funding costs. In addition, upon completion of the acquisition, F&M retired more than half of Limberlost’s higher cost funding sources which also benefitted net interest margin during the quarter.

Total loans, net at March 31, 2019, increased 32.0% or by $267,226,000 to $1,101,963,000, compared to $834,737,000 at March 31, 2018. The year-over-year improvement resulted primarily from the contribution of the Limberlost acquisition and organic loan growth.

F&M’s asset quality remains strong. Despite the 30.4% year-over-year increase in total assets at March 31, 2019, nonperforming assets were up only $147,000 or 9.5%. In addition, nonperforming loans to total loans remains low and at March 31, 2019 were 0.11% and in line with the same period last year. The allowance for loan losses to nonperforming loans was 558.9% at March 31, 2019, compared to 755.2% at March 31, 2018. Net charge-offs for the year ended March 31, 2019 were $169,000, or 0.02% of average loans, compared to $108,000 or 0.01% of average loans, at March 31, 2018.

Mr. Eller continued, “Economic trends within our markets remain stable, supporting F&M’s growth and excellent asset quality. While our loan portfolio is up significantly year-to-date, loans 30 days past due, as a percent of the portfolio were up only eight basis points to 0.17% at March 31, 2019 compared to 0.09% at December 31, 2018. In addition, one of the many benefits of the Limberlost acquisition, is the diversification it has created in our loan portfolio. Total agricultural loans were $307,823,000 at March 31, 2019 and within the agricultural loan portfolio, our lending capabilities have expanded to new concentrations including separate credit types for poultry barns, hog barns and soybean farming.”

Over the past three months, deposits have increased organically 5.4% or by $52,416,000, while total deposits over this period have grown 27.8% to $1,187,424,000 at March 31, 2019. The significant year-to-date organic deposit growth is primarily due to new product development that has allowed the company to attract new customers and expand existing customer holdings.

Tangible stockholders’ equity increased to $165,528,000 at March 31, 2019, compared to $138,885,000 at December 31, 2018, and $134,446,000 at March 31, 2018. On a per share basis, tangible stockholders’ equity at March 31, 2019, was $14.90, compared to $14.96 at December 31, 2018, and $14.06, at March 31, 2018. Tangible stockholders’ equity per share at March 31, 2019 was impacted by a 16.5% increase in the number of shares outstanding as a result of the Limberlost acquisition. At March 31, 2019, the company had a Tier 1 leverage ratio of 13.35%, compared to 12.11% at March 31, 2018.

Showing the core value of the Limberlost acquisition, goodwill associated with the acquisition was $43,266,000 at March 31, 2019. Stockholders’ equity increased 60.8% to $216,934,000 at March 31, 2019, from $134,877,000 at March 31, 2018 and increased 51.4% from $143,287,000 at December 31, 2018.

For the 2019 first quarter, the company declared cash dividends of $0.15 per share, which is a 15.4% increase over the 2018 first quarter declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over nine consecutive years.

“With the Limberlost integration behind us, we will continue to focus on executing our growth-oriented business plan and we are planning to open a new office in Ft. Wayne as well as remodel several existing offices to our new, modern banking format. F&M has a compelling platform of talented, experienced and motivated bankers to support our many growth opportunities. The additional equity we acquired from the acquisition enhances our flexibility to deploy capital to grow our business and enhance shareholders’ return. I am excited by our near- and long-term potential and expect 2019 to be another strong year for F&M,” concluded Mr. Eller.

Farmers & Merchants Bancorp, Inc. (“F&M”) (NASDAQ: FMAO), is the holding company for the Farmers & Merchants State Bank, 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 through its 30 offices. Our locations are in Fulton, Defiance, Hancock, Henry, Lucas, Williams, and Wood counties in Northwest Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay and Steuben counties.

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 or capital 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.

	Three Months Ended
	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018
Interest Income
Loans, including fees	$	14,680		$	10,955		$	10,725		$	10,521		$	10,102
Debt securities:
U.S. Treasury and government agencies		713			630			613			612			623
Municipalities		211			250			275			289			281
Dividends		88			56			56			53			55
Federal funds sold and other		170			112			84			62			75
Total interest income		15,862			12,003			11,753			11,537			11,136
Interest Expense
Deposits		2,613			1,670			1,611			1,389			1,319
Federal funds purchased and securities sold under agreement to repurchase		185			127			134			118			124
Borrowed funds		287			20			20			20			20
Total interest expense		3,085			1,817			1,765			1,527			1,463
Net Interest Income - Before Provision for Loan Losses		12,777			10,186			9,988			10,010			9,673
Provision for Loan Losses		30			105			47			132			40
Net Interest Income After Provision For Loan Losses		12,747			10,081			9,941			9,878			9,633
Noninterest Income
Customer service fees		1,578			1,612			1,392			1,465			1,466
Other service charges and fees		1,041			1,032			1,097			1,040			1,012
Net gain on sale of loans		102			140			184			301			132
Net gain (loss) on sale of available-for-sale securities		(26	)		(19	)		10			-			-
Total noninterest income		2,695			2,765			2,683			2,806			2,610
Noninterest Expense
Salaries and wages		4,312			3,834			3,391			3,225			3,310
Employee benefits		1,594			1,102			1,029			848			1,136
Net occupancy expense		667			451			478			441			387
Furniture and equipment		696			450			588			565			507
Data processing		1,299			318			364			305			331
Franchise taxes		258			244			243			228			239
ATM expense		447			368			327			333			312
Advertising		260			218			236			247			186
Net (gain) loss on sale of other assets owned		15			27			1			(1	)		17
FDIC assessment		96			77			81			81			87
Mortgage servicing rights amortization		75			100			84			95			85
Consulting fees		113			461			179			178			110
Other general and administrative		1,679			1,167			1,125			1,093			933
Total noninterest expense		11,511			8,817			8,126			7,638			7,640
Income Before Income Taxes		3,931			4,029			4,498			5,046			4,603
Income Taxes		707			836			623			932			836
Net Income		3,224			3,193			3,875			4,114			3,767
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities		1,749			2,374			(617	)		(344	)		(2,471	)

	(in thousands of dollars)
	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018
	(Unaudited)
Assets
Cash and due from banks	$	48,740		$	37,492		$	28,782		$	31,838		$	39,349
Federal funds sold		33,109			873			939			726			559
Total cash and cash equivalents		81,849			38,365			29,721			32,564			39,908

Interest-bearing time deposits		4,509			4,019			4,019			4,019			4,019
Securities - available-for-sale		174,682			168,447			183,075			187,036			192,859
Other securities, at cost		5,789			3,679			3,717			3,717			3,717
Loans held for sale		859			495			1,679			913			2,769
Loans, net		1,091,829			839,599			831,943			824,226			827,937
Premises and equipment		25,205			22,615			22,117			21,957			21,980
Goodwill		47,340			4,074			4,074			4,074			4,074
Mortgage servicing rights		2,397			2,385			2,373			2,356			2,313
Other real estate owned		510			600			717			649			651
Bank owned life insurance		14,963			14,884			14,799			14,692			14,604
Other assets		15,729			17,001			9,778			9,129			8,911
Total Assets	$	1,465,661		$	1,116,163		$	1,108,012		$	1,105,332		$	1,123,742

Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	236,847		$	215,422		$	197,088		$	200,067		$	193,665
Interest-bearing
NOW accounts		418,773			298,254			314,873			311,185			327,433
Savings		272,875			227,701			230,306			238,167			245,895
Time		258,929			187,413			186,592			181,347			186,345
Total deposits		1,187,424			928,790			928,859			930,766			953,338

Federal Funds Purchased and securities sold under agreements to repurchase		25,521			32,181			27,026			23,898			23,307
Federal Home Loan Bank (FHLB) advances		24,682			-			5,000			5,000			5,000
Dividend payable		1,654			1,379			1,287			1,284			1,193
Accrued expenses and other liabilities		9,446			10,526			6,493			6,808			6,027
Total liabilities		1,248,727			972,876			968,665			967,756			988,865

Commitments and Contingencies

Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and outstanding 12,230,000 shares 3/31/19, 10,400,000 shares 12/31/18		81,760			10,823			10,589			11,842			11,690
Treasury stock - 1,122,937 shares 3/31/19, 1,114,739 shares 12/31/18		(12,680	)		(12,409	)		(12,409	)		(12,186	)		(12,158	)
Retained earnings		149,466			147,887			146,072			142,330			139,483
Accumulated other comprehensive loss		(1,612	)		(3,014	)		(4,905	)		(4,410	)		(4,138	)
Total stockholders' equity		216,934			143,287			139,347			137,576			134,877
Total Liabilities and Stockholders' Equity	$	1,465,661		$	1,116,163		$	1,108,012		$	1,105,332		$	1,123,742

	For the Three Months Ended
Selected financial data	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018
Return on average assets		1.00	%		1.15	%		1.40	%		1.48	%		1.35	%
Return on average equity		7.16	%		9.04	%		11.19	%		12.08	%		11.20	%
Yield on earning assets		4.80	%		4.52	%		4.52	%		4.41	%		4.28	%
Cost of interest bearing liabilities		1.26	%		0.92	%		0.92	%		0.79	%		0.75	%
Net interest spread		3.54	%		3.60	%		3.60	%		3.62	%		3.53	%
Net interest margin		3.87	%		3.85	%		3.85	%		3.83	%		3.72	%
Efficiency		73.11	%		67.59	%		63.86	%		60.89	%		61.88	%
Dividend payout ratio		42.77	%		43.16	%		33.21	%		31.21	%		31.67	%
Tangible book value per share (1)	$	14.90		$	14.96		$	14.53		$	14.36		$	14.06
Tier 1 capital to average assets		13.35	%		12.81	%		12.63	%		12.38	%		12.11	%


Loans	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018
(Dollar amounts in thousands)
Commercial real estate	$	441,200		$	419,784		$	417,217		$	411,509		$	415,296
Agricultural real estate		192,903			68,609			68,548			69,701			67,596
Consumer real estate		161,180			80,766			83,134			82,853			84,501
Commercial and industrial		137,936			121,793			119,536			116,351			123,439
Agricultural		114,920			108,495			103,624			104,830			99,836
Consumer		47,573			41,953			41,444			40,513			38,569
Industrial development bonds		7,384			5,889			6,005			6,071			6,350
Less: Net deferred loan fees and costs		(1,133	)		(915	)		(810	)		(813	)		(850	)
Total loans, net	$	1,101,963		$	846,374		$	838,698		$	831,015		$	834,737


Asset quality data	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018
(Dollar amounts in thousands)
Nonaccrual loans	$	1,188		$	542		$	483		$	903		$	900
Troubled debt restructuring	$	102		$	178		$	205		$	218		$	527
90 day past due and accruing	$	-		$	-		$	-		$	-		$	-
Nonperforming loans	$	1,188		$	542		$	483		$	903		$	900
Other real estate owned	$	510		$	600		$	717		$	649		$	651
Non-performing assets	$	1,698		$	1,142		$	1,200		$	1,552		$	1,551

(Dollar amounts in thousands)
Allowance for loan and lease losses	$	6,636		$	6,755		$	6,755		$	7,104		$	6,800
Allowance for loan and lease losses/total loans		0.60	%		0.80	%		0.81	%		0.85	%		0.81	%
Net charge-offs:
Quarter-to-date	$	169		$	84		$	81		$	143		$	108
Year-to-date	$	169		$	417		$	332		$	251		$	108
Net charge-offs to average loans
Quarter-to-date		0.02	%		0.01	%		0.01	%		0.02	%		0.01	%
Year-to-date		0.02	%		0.05	%		0.04	%		0.03	%		0.01	%
Non-performing loans/total loans		0.11	%		0.06	%		0.06	%		0.11	%		0.11	%
Allowance for loan and lease losses/nonperforming loans		558.92	%		1249.57	%		1399.58	%		751.49	%		755.19	%

(1) Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible)

Reclassification adjustment for (gain) loss on sale of available- for-sale securities		26		19		(10	)		-			-
Net unrealized gain (loss) on available-for-sale securities		1,775		2,393		(627	)		(344	)		(2,471	)
Tax expense (benefit)		373		503		(132	)		(72	)		(519	)
Other comprehensive income (loss)		1,402		1,890		(495	)		(272	)		(1,952	)
Comprehensive Income	$	4,626	$	5,083	$	3,380		$	3,842		$	1,815
Basic and Diluted Earnings Per Share	$	0.29	$	0.34	$	0.42		$	0.44		$	0.41
Dividends Declared	$	0.15	$	0.15	$	0.14		$	0.14		$	0.13