10-Q

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 June 30, 2024

☐ 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	13,679,944
Class	Outstanding as of August 2, 2024

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 - June 30, 2024 and December 31, 2023	3

	Condensed Consolidated Statements of Income - Three and Six Months Ended June 30, 2024 and June 30, 2023	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Six Months Ended June 30, 2024 and June 30, 2023	6

	Condensed Consolidated Statements of Changes to Stockholders’ Equity - Three and Six Months Ended June 30, 2024 and June 30, 2023	7

	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2024 and June 30, 2023	9

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	50

Item 3.	Qualitative and Quantitative Disclosures About Market Risk	74

Item 4.	Controls and Procedures	75

PART II.	OTHER INFORMATION	75

Item 1.	Legal Proceedings	75

Item 1A.	Risk Factors	75

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77

Item 3.	Defaults Upon Senior Securities	77

Item 4.	Mine Safety Disclosures	77

Item 5.	Other Information	77

Item 6.	Exhibits	78

Signatures		79

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 with Embedded Linkbase Documents. (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.

PART 1 - FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	(In Thousands)
	June 30, 2024			December 31, 2023
	(Unaudited)
Assets
Cash and due from banks	$	191,785		$	140,917
Federal funds sold		1,283			1,284
Total cash and cash equivalents		193,068			142,201
Interest-bearing time deposits		3,221			2,740
Securities - available-for-sale		365,209			358,478
Other securities, at cost		14,721			17,138
Loans held for sale		1,628			1,576
Loans, net of allowance for credit losses of $25,270 and $25,024		2,534,468			2,556,167
Premises and equipment		34,507			35,790
Construction in progress		38			8
Goodwill		86,358			86,358
Loan servicing rights		5,504			5,648
Bank owned life insurance		34,359			33,907
Other assets		49,552			43,218
Total Assets	$	3,322,633		$	3,283,229

Liabilities and Stockholders' Equity

Liabilities
Deposits
Noninterest-bearing	$	479,069		$	528,465
Interest-bearing
NOW accounts		821,145			816,790
Savings		673,284			599,191
Time		667,592			663,017
Total deposits		2,641,090			2,607,463
Securities sold under agreements to repurchase		27,218			28,218
Federal Home Loan Bank (FHLB) advances		266,102			265,750
Subordinated notes, net of unamortized issuance costs		34,759			34,702
Dividend payable		2,975			2,974
Accrued expenses and other liabilities		27,825			27,579
Total liabilities		2,999,969			2,966,686

Commitments and Contingencies

Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and outstanding 14,564,425 shares 6/30/24 and 12/31/23		135,829			135,515
Treasury stock - 884,481 shares 6/30/24, 899,784 shares 12/31/23		(11,006	)		(11,040	)
Retained earnings		226,430			221,080
Accumulated other comprehensive loss		(28,589	)		(29,012	)
Total stockholders' equity		322,664			316,543
Total Liabilities and Stockholders' Equity	$	3,322,633		$	3,283,229

See Notes to Condensed Consolidated Unaudited Financial Statements.

Note: The December 31, 2023, Condensed Consolidated Balance Sheet has been derived from the audited Condensed Consolidated Balance Sheet as of that date.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	(In Thousands, Except Per Share Data)						(In Thousands, Except Per Share Data)
	Three Months Ended						Six Months Ended
	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Interest Income
Loans, including fees	$	36,593		$	31,365		$	71,793		$	61,068
Debt securities:
U.S. Treasury and government agencies		1,148			1,030			2,193			2,098
Municipalities		389			401			783			809
Dividends		327			148			660			271
Federal funds sold		7			9			14			30
Other		2,702			424			4,377			903
Total interest income		41,166			33,377			79,820			65,179
Interest Expense
Deposits		16,488			10,434			31,767			18,585
Federal funds purchased and securities sold under agreements to repurchase		276			427			560			832
Borrowed funds		2,742			2,113			5,431			3,393
Subordinated notes		285			285			569			569
Total interest expense		19,791			13,259			38,327			23,379
Net Interest Income - Before Provision for Credit Losses		21,375			20,118			41,493			41,800
Provision for Credit Losses - Loans		605			143			316			960
Provision for Credit Losses - Off Balance Sheet Credit Exposures		(18	)		(129	)		(284	)		(67	)
		20,788			20,104			41,461			40,907
Noninterest Income
Customer service fees		189			369			787			669
Other service charges and fees		1,085			1,092			2,142			2,120
Interchange income		1,330			1,323			2,759			2,742
Loan servicing income		513			1,179			1,052			3,237
Net gain on sale of loans		314			108			421			175
Increase in cash surrender value of bank owned life insurance		236			201			452			397
Net loss on sale of available-for-sale securities		-			-			-			(891	)
Total noninterest income		3,667			4,272			7,613			8,449
Noninterest Expense
Salaries and wages		7,589			6,500			15,435			13,157
Employee benefits		2,112			2,071			4,283			4,236
Net occupancy expense		999			840			2,026			1,696
Furniture and equipment		1,407			1,211			2,760			2,463
Data processing		448			796			948			1,522
Franchise taxes		265			379			820			745
ATM expense		397			683			870			1,306
Advertising		519			830			1,049			1,344
Net gain on sale of other assets owned		(49	)		-			(49	)		-
FDIC assessment		507			496			1,087			802
Servicing rights amortization - net		187			164			355			323
Loan expense		251			233			480			568
Consulting fees		198			231			384			461
Professional fees		527			325			972			741
Intangible asset amortization		444			444			889			889
Other general and administrative		1,495			1,641			2,828			3,522
Total noninterest expense		17,296			16,844			35,137			33,775

(continued)

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (Continued)


	(In Thousands, Except Per Share Data)				(In Thousands, Except Per Share Data)
	Three Months Ended				Six Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Income Before Income Taxes		7,159		7,532		13,937		15,581
Income Taxes		1,477		1,531		2,896		3,114
Net Income	$	5,682	$	6,001	$	11,041	$	12,467
Basic Earnings Per Share	$	0.42	$	0.44	$	0.81	$	0.92
Diluted Earnings Per Share	$	0.42	$	0.44	$	0.81	$	0.92
Dividends Declared	$	0.22	$	0.21	$	0.44	$	0.42

See Notes to Condensed Consolidated Unaudited Financial Statements

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	(In Thousands)					(In Thousands)
	Three Months Ended					Six Months Ended
	June 30, 2024		June 30, 2023			June 30, 2024		June 30, 2023
Net Income	$	5,682	$	6,001		$	11,041	$	12,467
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities		2,531		(5,996	)		536		2,034
Reclassification adjustment for realized loss on sale of available-for-sale securities		-		-			-		891
Net unrealized gain (loss) on available-for-sale securities		2,531		(5,996	)		536		2,925
Tax expense (benefit)		531		(1,260	)		113		614
Other comprehensive income (loss)		2,000		(4,736	)		423		2,311
Comprehensive Income	$	7,682	$	1,265		$	11,464	$	14,778

See Notes to Condensed Consolidated Unaudited Financial Statements

Farmers & Merchants Bancorp, Inc. and Subsidiaries

CONDENSED Consolidated StatementS of Changes TO Stockholders’ Equity

For the THREE and SIX Months Ended June 30, 2024

(IN THOUSANDS, 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, 2024		13,664,641		$	135,515		$	(11,040	)	$	221,080		$	(29,012	)	$	316,543
Net income		-			-			-			5,359			-			5,359
Other comprehensive loss		-			-			-			-			(1,577	)		(1,577	)
Purchase of treasury stock		(4,490	)		-			(94	)		-			-			(94	)
Issuance of 23,369 shares of restricted stock (Net of forfeitures - 250)		23,119			(467	)		283			184			-			-
Stock-based compensation expense		-			434			-			-			-			434
Cash dividends declared - $0.22 per share		-			-			-			(2,975	)		-			(2,975	)
Balance - March 31, 2024		13,683,270			135,482			(10,851	)		223,648			(30,589	)		317,690
Net income		-			-			-			5,682			-			5,682
Other comprehensive income		-			-			-			-			2,000			2,000
Purchase of treasury stock		(11,000	)		-			(239	)		-			-			(239	)
Forfeiture of 1,200 shares of restricted stock		(1,200	)		27			(26	)		(1	)		-			-
Stock-based compensation expense		-			320			-			-			-			320
Director stock award		8,874			-			110			76			-			186
Cash dividends declared - $0.22 per share		-			-			-			(2,975	)		-			(2,975	)
Balance - June 30, 2024		13,679,944		$	135,829		$	(11,006	)	$	226,430		$	(28,589	)	$	322,664

See Notes to Condensed Consolidated Unaudited Financial Statements

Farmers & Merchants Bancorp, Inc. and Subsidiaries

CONDENSED Consolidated StatementS of Changes TO Stockholders’ Equity

For the THREE and SIX months Ended June 30, 2023

(IN THOUSANDS, 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