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	Farmers & Merchants Bancorp Inc	21.685	0.035	0.16%
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ARCHBOLD, Ohio, Feb. 13, 2024 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2023 fourth quarter and twelve months ended December 31, 2023.

2023 Fourth Quarter Financial and Operating Highlights (on a year-over-year basis unless noted):

• 83 consecutive quarters of profitability
• Net income was $5.5 million, or $0.41 per basic and diluted share
• Asset quality remains strong as nonperforming loans were 0.87% of total loans
• Net charge-offs to average loans were 0.03%
• Allowance for credit losses was 111.95% of nonperforming loans
• Tier 1 leverage ratio was 8.20%
• Opened first bank office in Michigan and new regional headquarters in Fort Wayne, Indiana
• Added Ian D. Boyce to the Board of Directors of both the Company and the Bank
• Realigned organizational structure to support future growth and drive profitability
• Dividend raised 4.8% year-over-year, representing the 29^th consecutive annual increase in the Company's regular dividend payment since 1994

2023 Full-Year Financial Highlights Include (on a year-over-year basis unless noted):

• Total loans were a record of $2.58 billion and increased 9.5% from $2.36 billion at December 31, 2022
• Total assets increased 8.9% to a record $3.28 billion
• Deposits increased to 5.6% to a record $2.61 billion
• Stockholders' equity increased 6.2% to a record $316.5 million
• Net interest income after provision for credit losses decreased 3.1% to $79.7 million
• Net income was $22.8 million, or $1.67 per basic and diluted share
• Return on average tangible equity was 12.17%
• Opened a total of four new bank offices including new offices in Ohio, Indiana and Michigan
• Successfully launched new forward-looking logo and brand-name
• Provided a record $802,000 of charitable donations to support organizations throughout Ohio and Indiana

Lars B. Eller, President and Chief Executive Officer, stated, "I am extremely proud of how F&M's team responded to the challenging operating environment in 2023 as unprecedented rate increases caused significant competition for deposits and elevated our costs of funds. While these trends impacted earnings growth in 2023, we ended the year with record total assets, loans, net, and total deposits, as well as stockholders' equity. Our ability to grow our balance sheet throughout the year is a testament to the value we provide to our Ohio, Indiana and Michigan communities and the successful execution of our growth-oriented strategic plan."

Mr. Eller continued, "As we successfully navigated the challenging macro-landscape in 2023, we simultaneously invested in our business to make sure we had the right platform in place to support F&M's current and future needs. As a result, throughout 2023 we made calculated investments to expand our office network, enhance our products, add new IT capabilities, refine our corporate organization, and redesign our brand strategy. Highlights include adding offices in new markets including Oxford, OH and Birmingham MI, as well as expanding our local presence by adding a new office in Fort Wayne and a new regional office in downtown Toledo. In addition, our brand refresh to F&M has helped differentiate the Bank in our non-legacy markets, while doubling down on the strength of the F&M brand in our existing markets. During 2023, we also made several organizational changes to our leadership structure and added new back-office capabilities that we believe can support a bank with $4 billion in assets."

Income Statement
Net income for the 2023 fourth quarter ended December 31, 2023, was $5.5 million, compared to $7.2 million for the same period last year. Net income per basic and diluted share for the 2023 fourth quarter was $0.41, compared to $0.53 for the same period last year. Net income for the 2023 twelve months ended December 31, 2023, was $22.8 million, compared to $32.5 million for the same period last year. Net income per basic and diluted share for the 2023 twelve months was $1.67, compared to $2.46 for the same period last year.

"Throughout 2023, the rapid rise in the Federal Funds Rate impacted our cost of funds and increased the competition for deposits. As a result, our cost of interest-bearing liabilities increased to 2.53% for the year ended December 31, 2023, from 0.74% last year. Our loan portfolio has also lagged in capturing sufficient yield to match the higher cost of funds mainly due to the timing to reprice our commercial real estate adjustable-rate mortgages. Approximately 25% of our loan portfolio will be subject to repricing in 2024. A challenging rate environment impacted overall profitability, as net interest income declined year-over-year by 10.7% for the fourth quarter, and by 3.1% for the full year. We are optimistic that the Federal Funds Rate has peaked and with a more stable rate environment expected in 2024, we believe we are well positioned for improved profitability this year," continued Mr. Eller.

Deposits
At December 31, 2023, total deposits were $2.61 billion, an increase of 5.6% from December 31, 2022. The Company's cost of interest-bearing liabilities was 3.02% for the quarter ended December 31, 2023, compared to 1.32% for the quarter ended December 31, 2022 and for the 2023 twelve months ended December 31, 2023 was 2.53% compared to 0.74% in the prior year.

Loan Portfolio and Asset Quality
Total loans, net at December 31, 2023, increased 9.5%, or by $224.8 million to $2.58 billion, compared to $2.36 billion at December 31, 2022. 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 $22.4 million, or 0.87% of total loans at December 31, 2023, compared to $4.7 million, or 0.20% at December 31, 2022, and $22.4 million, or 0.89% at September 30, 2023. The year-over-year increase in nonperforming loans was primarily due to two agricultural relationships, representing a combined balance of $19.4 million. F&M does not foresee a loss on either loan and expects to receive settlements during the 2024 first and second quarters.

F&M maintains a well-balanced, diverse and high performing CRE portfolio. CRE loans represented 51.8% of the Company's total loan portfolio at December 31, 2023. In addition, F&M's commercial real estate office credit exposure represented 5.3% of the Company's total loan portfolio at December 31, 2023, with a weighted average loan-to-value of approximately 63% and an average loan of $888,000.

F&M's CRE portfolio included the following categories at December 31, 2023:

At December 31, 2023, the Company's allowance for credit losses to nonperforming loans was 111.95%, compared to 273.67% at December 31, 2022. The allowance to total loans was 0.97% at December 31, 2023, compared to 0.86% at December 31, 2022. As a result of F&M's recent acquisitions, the Company had an accretable yield adjustment of $4.0 million at December 31, 2023, which further enhances F&M's allowance, compared to $6.4 million at December 31, 2022. Including the accretable yield adjustment, F&M's allowance for credit losses to total loans was 1.13% at December 31, 2023, compared to 1.13% at December 31, 2022.

Mr. Eller concluded, "Looking to 2024 and beyond, we believe we are well positioned to support a larger and more profitable bank in the future as a result of the investments we made over the past 12 months. With strong asset quality and a more stable rate environment expected in 2024, we are focused on supporting customers across our Ohio, Indiana and Michigan communities and reaccelerating earnings growth."

Stockholders' Equity and Dividends
Total stockholders' equity increased 6.2% to $316.5 million at December 31, 2023, from $298.1 million at December 31, 2022. At December 31, 2023, the Company had a Tier 1 leverage ratio of 8.20%, compared to 8.39% at December 31, 2022.

Based on a regulatory basis, tangible stockholders' equity increased to $253.8 million at December 31, 2023, compared to $240.7 million at December 31, 2022. On a per share basis, tangible stockholders' equity at December 31, 2023, was $18.60 per share, compared to $17.69 per share at December 31, 2022.

For the twelve months ended December 31, 2023, the Company has declared cash dividends of $0.85 per share, which is a 4.6% 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 twelve months ended December 31, 2023, the dividend payout ratio was 50.65% compared to 33.06% 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 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.