Farmers & Merchants Bancorp, Inc. Reports 2023 Fourth-Quarter and Full-Year Financial Results

Farmers & Merchants Bancorp, Inc.

Tue, Feb 13, 2024, 2:30 PM 19 min read

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:

CRE Category	Dollar Balance		Percent of CRE Portfolio^(*)	Percent of Total Loan Portfolio^(*)

Industrial	$	253,683	19.0%	9.8%
Multi-family	$	232,776	17.4%	9.0%
Retail	$	218,580	16.3%	8.5%
Office	$	137,573	10.3%	5.3%
Hotels	$	127,646	9.6%	4.9%
Gas Stations	$	63,151	4.7%	2.4%
Food Service	$	50,990	3.8%	2.0%
Senior Living	$	32,290	2.4%	1.3%
Auto Dealers	$	29,714	2.2%	1.2%
Development	$	28,045	2.1%	1.1%
Other	$	163,318	12.2%	6.3%
Total CRE	$	1,337,766	100.0%	51.8%
* Numbers have been rounded

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.

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

	Three Months Ended														Twelve Months Ended
	December 31, 2023		September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022
Interest Income
Loans, including fees	$	34,493	$	33,783		$	31,365		$	29,703		$	27,302		$	129,344		$	94,264
Debt securities:
U.S. Treasury and government agencies		987		1,005			1,030			1,068			1,118			4,090			4,225
Municipalities		397		392			401			408			420			1,598			1,415
Dividends		365		246			148			123			126			882			318
Federal funds sold		8		6			9			21			2			44			21
Other		2,020		927			424			479			524			3,850			906
Total interest income		38,270		36,359			33,377			31,802			29,492			139,808			101,149
Interest Expense
Deposits		15,015		13,323			10,434			8,151			4,978			46,923			9,883
Federal funds purchased and securities sold
under agreements to repurchase		293		349			427			405			463			1,474			1,197
Borrowed funds		2,742		2,741			2,113			1,280			1,209			8,876			2,160
Subordinated notes		285		284			285			284			285			1,138			1,122
Total interest expense		18,335		16,697			13,259			10,120			6,935			58,411			14,362
Net Interest Income - Before Provision for Credit Losses*		19,935		19,662			20,118			21,682			22,557			81,397			86,787
Provision for Credit Losses - Loans*		278		460			143			817			755			1,698			4,600
Provision for Credit Losses - Off Balance Sheet Credit Exposures*		189		(76	)		(129	)		62			-			46			-
Net Interest Income After Provision for Credit Losses*		19,468		19,278			20,104			20,803			21,802			79,653			82,187
Noninterest Income
Customer service fees		2,576		2,208			2,361			2,447			2,862			9,592			9,958
Other service charges and fees		1,121		1,162			1,803			2,554			1,115			6,640			4,226
Net gain on sale of loans		230		294			108			67			165			699			1,353
Net loss on sale of available-for-sale securities		-		-			-			(891	)		-			(891	)		-
Total noninterest income		3,927		3,664			4,272			4,177			4,142			16,040			15,537
Noninterest Expense
Salaries and wages		6,981		6,777			6,500			6,657			6,353			26,915			22,700
Employee benefits		1,218		2,066			2,071			2,165			1,911			7,520			6,903
Net occupancy expense		1,187		950			840			856			753			3,833			2,566
Furniture and equipment		1,370		1,189			1,211			1,252			1,096			5,022			4,207
Data processing		785		840			796			726			1,917			3,147			3,956
Franchise taxes		308		434			379			366			(45	)		1,487			1,384
ATM expense		665		640			683			623			561			2,611			2,217
Advertising		397		865			830			514			531			2,606			1,646
Net (gain) loss on sale of other assets owned		86		49			-			-			12			135			(259	)
FDIC assessment		594		586			496			306			250			1,982			905
Servicing rights amortization - net		182		106			164			159			110			611			145
Consulting fees		192		179			231			230			637			832			1,302
Other general and administrative		2,555		2,363			2,643			3,077			2,964			10,638			9,577
Total noninterest expense		16,520		17,044			16,844			16,931			17,050			67,339			57,249
Income Before Income Taxes		6,875		5,898			7,532			8,049			8,894			28,354			40,475
Income Taxes		1,332		1,121			1,531			1,583			1,706			5,567			7,960
Net Income		5,543		4,777			6,001			6,466			7,188			22,787			32,515
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities		13,261		(4,514	)		(5,996	)		8,030			(628	)		10,781			(44,366	)
Reclassification adjustment for realized loss on sale of available-for-sale securities		-		-			-			891			-			891			-
Net unrealized gain (loss) on available-for-sale securities		13,261		(4,514	)		(5,996	)		8,921			(628	)		11,672			(44,366	)
Tax expense (benefit)		2,784		(947	)		(1,260	)		1,874			(132	)		2,451			(9,317	)
Other comprehensive income (loss)		10,477		(3,567	)		(4,736	)		7,047			(496	)		9,221			(35,049	)
Comprehensive Income (Loss)	$	16,020	$	1,210		$	1,265		$	13,513		$	6,692		$	32,008		$	(2,534	)
Basic Earnings Per Share	$	0.41	$	0.35		$	0.44		$	0.47		$	0.53		$	1.67		$	2.46
Diluted Earnings Per Share	$	0.41	$	0.35		$	0.44		$	0.47		$	0.53		$	1.67		$	2.46
Dividends Declared	$	0.2200	$	0.2100		$	0.2100		$	0.2100		$	0.2100		$	0.8500		$	0.8125

*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)

	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Assets
Cash and due from banks	$	140,917		$	151,711		$	69,760		$	62,780		$	83,085
Federal funds sold		1,284			1,471			1,433			1,545			1,324
Total cash and cash equivalents		142,201			153,182			71,193			64,325			84,409

Interest-bearing time deposits		2,740			2,989			3,485			4,435			4,442
Securities - available-for-sale		358,478			348,255			363,225			372,975			390,789
Other securities, at cost		17,138			16,995			17,535			11,543			9,799
Loans held for sale		1,576			1,039			1,459			951			827
Loans, net		2,556,167			2,504,329			2,490,883			2,422,018			2,336,074
Premises and equipment		35,790			31,723			30,398			28,679			28,381
Construction in progress		8			3,044			2,290			1,565			278
Goodwill		86,358			86,358			86,358			86,358			86,358
Loan servicing rights		5,648			5,687			5,635			4,985			3,549
Bank owned life insurance		33,907			33,691			33,470			33,269			33,073
Other assets		43,218			47,388			41,512			38,972			37,372

Total Assets	$	3,283,229		$	3,234,680		$	3,147,443		$	3,070,075		$	3,015,351

Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	528,465		$	505,358		$	488,678		$	520,145		$	532,794
Interest-bearing
NOW accounts		816,790			778,133			770,113			800,230			750,887
Savings		599,191			591,344			581,192			590,854			627,203
Time		663,017			700,445			628,757			601,939			557,980
Total deposits		2,607,463			2,575,280			2,468,740			2,513,168			2,468,864

Federal funds purchased and securities
sold under agreements to repurchase		28,218			30,527			51,567			30,496			54,206
Federal Home Loan Bank (FHLB) advances		265,750			266,286			266,818			164,327			127,485
Other borrowings		-			-			-			-			10,000
Subordinated notes, net of unamortized issuance costs		34,702			34,673			34,644			34,615			34,586
Dividend payable		2,974			2,838			2,834			2,831			2,832
Accrued expenses and other liabilities		27,579			21,892			18,177			18,881			19,238
Total liabilities		2,966,686			2,931,496			2,842,780			2,764,318			2,717,211

Commitments and Contingencies

Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and
outstanding 14,564,425 shares 12/31/23 and 12/31/22		135,515			135,171			135,647			135,241			135,497
Treasury stock - 899,784 shares 12/31/23 and 956,003 shares 12/31/22		(11,040	)		(11,008	)		(11,298	)		(11,310	)		(11,573	)
Retained earnings		221,080			218,510			216,236			213,012			212,449
Accumulated other comprehensive loss		(29,012	)		(39,489	)		(35,922	)		(31,186	)		(38,233	)
Total stockholders' equity		316,543			303,184			304,663			305,757			298,140

Total Liabilities and Stockholders' Equity	$	3,283,229		$	3,234,680		$	3,147,443		$	3,070,075		$	3,015,351

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

	For the Three Months Ended																For the Twelve Months Ended
Selected financial data	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023				December 31, 2022			December 31, 2023		December 31, 2022
Return on average assets		0.67	%		0.59	%		0.77	%		0.84	%			0.96	%	0.71	%	1.17	%
Return on average equity		7.27	%		6.26	%		7.84	%		8.59	%			10.00	%	7.46	%	11.30	%
Yield on earning assets		4.93	%		4.79	%		4.53	%		4.41	%			4.18	%	4.67	%	3.87	%
Cost of interest bearing liabilities		3.02	%		2.82	%		2.35	%		1.85	%			1.32	%	2.53	%	0.74	%
Net interest spread		1.91	%		1.97	%		2.18	%		2.56	%			2.86	%	2.14	%	3.13	%
Net interest margin		2.57	%		2.59	%		2.73	%		3.01	%			3.20	%	2.72	%	3.32	%
Efficiency		69.23	%		73.07	%		69.06	%		63.53	%			50.46	%	68.48	%	55.95	%
Dividend payout ratio		54.23	%		60.07	%		47.22	%		43.79	%			39.39	%	50.65	%	33.06	%
Tangible book value per share ⁽¹⁾	$	18.60		$	18.36		$	18.21		$	17.92			$	17.69
Tier 1 leverage ratio		8.20	%		8.02	%		9.85	%		8.36	%			8.39	%
Average shares outstanding		13,665,773			13,650,823			13,632,440			13,615,655				13,606,876		13,641,336		13,206,713

Loans	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023				December 31, 2022
(Dollar amounts in thousands)
Commercial real estate	$	1,337,766		$	1,304,118		$	1,280,902		$	1,225,315			$	1,152,603
Agricultural real estate		223,791			225,672			230,837			227,897				220,819
Consumer real estate		521,895			512,973			506,866			502,974				494,423
Commercial and industrial		254,935			250,891			253,444			241,598				242,360
Agricultural		132,560			123,735			128,344			131,467				128,733
Consumer		79,591			83,024			88,312			89,588				89,147
Other		30,136			31,083			28,996			29,316				29,818
Less: Net deferred loan fees, costs and other ⁽²⁾		517			(1,890	)		(1,908	)		(1,503	)			(1,516	)
Total loans,net	$	2,581,191		$	2,529,606		$	2,515,793		$	2,446,652		...	$	2,356,387


Asset quality data	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023				December 31, 2022
(Dollar amounts in thousands)
Nonaccrual loans	$	22,353		$	22,447		$	6,295		$	7,717			$	4,689
90 day past due and accruing	$	-		$	-		$	-		$	-			$	-
Nonperforming loans	$	22,353		$	22,447		$	6,295		$	7,717			$	4,689
Other real estate owned	$	-		$	-		$	-		$	-			$	-
Nonperforming assets	$	22,353		$	22,447		$	6,295		$	7,717			$	4,689


Allowance for credit losses ⁽³⁾	$	25,024		$	25,277		$	24,910		$	24,507			$	20,313
Accretable yield adjustment		4,018			4,565			5,209			5,754				6,427
Adjusted credit losses with accretable yield included ⁽³⁾	$	29,042		$	29,842		$	30,119		$	30,261			$	26,740
Allowance for credit losses/total loans ⁽³⁾		0.97	%		1.00	%		0.99	%		1.00	%			0.86	%
Adjusted credit losses with accretable yield/total loans ⁽³⁾		1.13	%		1.18	%		1.20	%		1.24	%			1.13	%
Net charge-offs:
Quarter-to-date	$	893		$	93		$	(133	)	$	60			$	431
Year-to-date	$	990		$	97		$	(73	)	$	60			$	529
Net charge-offs to average loans
Quarter-to-date		0.03	%		0.00	%		-0.01	%		0.00	%			0.02	%
Year-to-date		0.04	%		0.00	%		0.00	%		0.00	%			0.03	%
Nonperforming loans/total loans		0.87	%		0.89	%		0.25	%		0.32	%			0.20	%
Allowance for credit losses/nonperforming loans ⁽³⁾		111.95	%		112.61	%		395.71	%		319.22	%			273.67	%
NPA coverage ratio		129.92	%		132.94	%		478.46	%		392.13	%			570.27	%

⁽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⁾ Includes carrying value adjustments of $2.7 million as of December 31, 2023 related to interest rate swaps associated with fixed rate loans
⁽³⁾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
	December 31, 2023						December 31, 2022
Interest Earning Assets:	Average Balance		Interest/Dividends		Annualized Yield/Rate		Average Balance		Interest/Dividends		Annualized Yield/Rate
Loans	$	2,553,023	$	34,493	5.41	%	$	2,301,204	$	27,302	4.75	%
Taxable investment securities		386,931		1,660	1.72	%		422,247		1,556	1.47	%
Tax-exempt investment securities		24,145		89	1.87	%		28,522		108	1.92	%
Fed funds sold & other		142,642		2,028	5.69	%		74,876		526	2.81	%
Total Interest Earning Assets		3,106,741	$	38,270	4.93	%		2,826,849	$	29,492	4.18	%

Nonearning Assets		189,202						173,048

Total Assets	$	3,295,943					$	2,999,897

Interest Bearing Liabilities:
Savings deposits	$	1,392,304	$	8,570	2.46	%	$	1,394,663	$	3,427	0.98	%
Other time deposits		701,347		6,445	3.68	%		485,461		1,551	1.28	%
Other borrowed money		265,948		2,742	4.12	%		135,013		1,209	3.58	%
Fed funds purchased & securities
sold under agreement to repurch.		28,739		293	4.08	%		53,506		463	3.46	%
Subordinated notes		34,683		285	3.29	%		34,567		285	3.30	%
Total Interest Bearing Liabilities	$	2,423,021	$	18,335	3.02	%	$	2,103,210	$	6,935	1.32	%

Noninterest Bearing Liabilities		567,813						609,253

Stockholders' Equity	$	305,109					$	287,434

Net Interest Income and Interest Rate Spread			$	19,935	1.91	%			$	22,557	2.86	%

Net Interest Margin					2.57	%					3.20	%

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


	For the Twelve Months Ended						For the Twelve Months Ended
	December 31, 2023						December 31, 2022
Interest Earning Assets:	Average Balance		Interest/Dividends		Annualized Yield/Rate		Average Balance		Interest/Dividends		Annualized Yield/Rate
Loans	$	2,491,502	$	129,344	5.19	%	$	2,073,737	$	94,264	4.55	%
Taxable investment securities		394,424		6,204	1.57	%		424,229		5,621	1.32	%
Tax-exempt investment securities		24,686		366	1.88	%		23,472		337	1.82	%
Fed funds sold & other		85,018		3,894	4.58	%		95,301		927	0.97	%
Total Interest Earning Assets		2,995,630	$	139,808	4.67	%		2,616,739	$	101,149	3.87	%

Nonearning Assets		197,726						158,361

Total Assets	$	3,193,356					$	2,775,100

Interest Bearing Liabilities:
Savings deposits	$	1,376,318	$	27,424	1.99	%	$	1,335,271	$	6,378	0.48	%
Other time deposits		640,390		19,499	3.04	%		451,013		3,505	0.78	%
Other borrowed money		220,175		8,876	4.03	%		74,379		2,160	2.90	%
Fed funds purchased & securities
sold under agreement to repurch.		35,421		1,474	4.16	%		45,314		1,197	2.64	%
Subordinated notes		34,640		1,138	3.29	%		34,524		1,122	3.25	%
Total Interest Bearing Liabilities	$	2,306,944	$	58,411	2.53	%	$	1,940,501	$	14,362	0.74	%

Noninterest Bearing Liabilities		580,931						546,731

Stockholders' Equity	$	305,481					$	287,868

Net Interest Income and Interest Rate Spread			$	81,397	2.14	%			$	86,787	3.13	%

Net Interest Margin					2.72	%					3.32	%

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 December 31, 2023													For the Three Months Ended December 31, 2022
	As Reported				Excluding Acc/Amort				Difference					As Reported			Excluding Acc/Amort			Difference
	$		Yield		$		Yield		$			Yield		$	Yield		$	Yield		$			Yield
Interest Earning Assets:
Loans	$	34,493	5.41	%	$	33,769	5.29	%	$	724		0.12	%	27,302	4.75	%	26,628	4.63	%	$	674		0.12	%
Taxable investment securities		1,660	1.72	%		1,660	1.72	%		-		0.00	%	1,556	1.47	%	1,556	1.47	%		-		0.00	%
Tax-exempt investment securities		89	1.87	%		89	1.87	%		-		0.00	%	108	1.92	%	108	1.92	%		-		0.00	%
Fed funds sold & other		2,028	5.69	%		2,028	5.69	%		-		0.00	%	526	2.81	%	526	2.81	%		-		0.00	%
Total Interest Earning Assets		38,270	4.93	%		37,546	4.84	%		724		0.09	%	29,492	4.18	%	28,818	4.08	%		674		0.10	%

Interest Bearing Liabilities:
Savings deposits	$	8,570	2.46	%	$	8,570	2.46	%	$	-		0.00	%	3,427	0.98	%	3,427	0.98	%	$	-		0.00	%
Other time deposits		6,445	3.68	%		6,381	3.64	%		64		0.04	%	1,551	1.28	%	2,010	1.66	%		(459	)	-0.38	%
Other borrowed money		2,742	4.12	%		2,760	4.15	%		(18	)	-0.03	%	1,209	3.58	%	1,227	3.64	%		(18	)	-0.06	%
Federal funds purchased and
securities sold under agreement to
repurchase		293	4.08	%		293	4.08	%		-		0.00	%	463	3.46	%	463	3.46	%		-		0.00	%
Subordinated notes		285	3.29	%		285	3.29	%		-		0.00	%	285	3.30	%	285	3.30	%		-		0.00	%
Total Interest Bearing Liabilities		18,335	3.02	%		18,289	3.02	%		46		0.00	%	6,935	1.32	%	7,412	1.41	%		(477	)	-0.09	%

Interest/Dividend income/yield		38,270	4.93	%		37,546	4.84	%		724		0.09	%	29,492	4.18	%	28,818	4.08	%		674		0.10	%
Interest Expense / yield		18,335	3.02	%		18,289	3.02	%		46		0.00	%	6,935	1.32	%	7,412	1.41	%		(477	)	-0.09	%
Net Interest Spread		19,935	1.91	%		19,257	1.82	%		678		0.09	%	22,557	2.86	%	21,406	2.67	%		1,151		0.19	%
Net Interest Margin			2.57	%			2.48	%				0.09	%		3.20	%		3.03	%				0.17	%


	For the Twelve Months Ended December 31, 2023													For the Twelve Months Ended December 31, 2022
	As Reported				Excluding Acc/Amort				Difference					As Reported			Excluding Acc/Amort			Difference
	$		Yield		$		Yield		$			Yield		$	Yield		$	Yield		$			Yield
Interest Earning Assets:
Loans	$	129,344	5.19	%	$	126,133	5.06	%	$	3,211		0.13	%	94,264	4.55	%	92,132	4.45	%	$	2,132		0.10	%
Taxable investment securities		6,204	1.57	%		6,204	1.57	%		-		0.00	%	5,621	1.32	%	5,621	1.32	%		-		0.00	%
Tax-exempt investment securities		366	1.88	%		366	1.88	%		-		0.00	%	337	1.82	%	337	1.82	%		-		0.00	%
Fed funds sold & other		3,894	4.58	%		3,894	4.58	%		-		0.00	%	927	0.97	%	927	0.97	%		-		0.00	%
Total Interest Earning Assets		139,808	4.67	%		136,597	4.57	%		3,211		0.10	%	101,149	3.87	%	99,017	3.79	%		2,132		0.08	%

Interest Bearing Liabilities:
Savings deposits	$	27,424	1.99	%	$	27,424	1.99	%	$	-		0.00	%	6,378	0.48	%	6,378	0.48	%	$	-		0.00	%
Other time deposits		19,499	3.04	%		19,839	3.10	%		(340	)	-0.06	%	3,505	0.78	%	5,822	1.29	%		(2,317	)	-0.51	%
Other borrowed money		8,876	4.03	%		8,947	4.06	%		(71	)	-0.03	%	2,160	2.90	%	2,241	3.01	%		(81	)	-0.11	%
Federal funds purchased and
securities sold under agreement to
repurchase		1,474	4.16	%		1,474	4.16	%		-		0.00	%	1,197	2.64	%	1,197	2.64	%		-		0.00	%
Subordinated notes		1,138	3.29	%		1,138	3.29	%		-		0.00	%	1,122	3.25	%	1,122	3.25	%		-		0.00	%
Total Interest Bearing Liabilities		58,411	2.53	%		58,822	2.55	%		(411	)	-0.02	%	14,362	0.74	%	16,760	0.86	%		(2,398	)	-0.12	%

Interest/Dividend income/yield		139,808	4.67	%		136,597	4.57	%		3,211		0.10	%	101,149	3.87	%	99,017	3.79	%		2,132		0.08	%
Interest Expense / yield		58,411	2.53	%		58,822	2.55	%		(411	)	-0.02	%	14,362	0.74	%	16,760	0.86	%		(2,398	)	-0.12	%
Net Interest Spread		81,397	2.14	%		77,775	2.02	%		3,622		0.12	%	86,787	3.13	%	82,257	2.93	%		4,530		0.20	%
Net Interest Margin			2.72	%			2.60	%				0.12	%		3.32	%		3.15	%				0.17	%

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

	Three Months Ended						Twelve Months Ended
Non-GAAP Reconciliation of Net Income	December 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022
	(Unaudited)						(Unaudited)
Net income as reported	$	5,543		$	7,188		$	22,787		$	32,515
Acquisition expenses		24			2,019			208			2,511
Tax effect on acquisition expenses		(5	)		(386	)		(42	)		(455	)
Net income excluding acquisition expenses and tax effect	$	5,562		$	8,821		$	22,953		$	34,571

Weighted average common shares outstanding including participating securities		13,665,773			13,606,876			13,641,336			13,206,713

Basic and diluted earnings per share	$	0.41		$	0.65		$	1.68		$	2.62

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
	December 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022

Shares Outstanding		13,664,641			13,608,422			13,664,641			13,608,422

Tangible Equity
Equity	$	316,543		$	298,140		$	316,543		$	298,140
Goodwill		86,358			86,358			86,358			86,358
Other Intangible		7,548			9,327			7,548			9,327
Comprehensive Loss Adjustment*		-			-			29,012			38,233
CECL Adjustment**		-			-			2,528			-
Tangible Equity	$	222,637		$	202,455		$	254,177		$	240,688
Shares Outstanding		13,665			13,608			13,665			13,608
Tangible Book Equity per Share	$	16.29		$	14.88		$	18.60		$	17.69


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

Net Income	$	22,787		$	32,515		$	22,787		$	32,515
Acquisition Costs - Tax Adjusted		166			2,066			166			2,066

Average Shares Outstanding		13,641,336			13,206,713			13,641,336			13,206,713

Average Tangible Equity
Average Equity	$	305,481		$	287,868		$	305,481		$	287,868
Average Goodwill		86,358			80,164			86,358			80,164
Average Other Intangible		8,494			4,997			8,494			4,997
Average Comprehensive Loss Adjustment*		-			-			36,443			26,393
Average CECL Adjustment**		-			-			2,528			-
Average Tangible Equity	$	210,629		$	202,707		$	249,600		$	229,100
Average Shares Outstanding		13,641			13,207			13,641			13,207
Average Tangible Book Equity per Share	$	15.44		$	15.35		$	18.30		$	17.35

Return on Average Tangible Equity		10.82	%		16.04	%		9.13	%		14.19	%
Return on Average Tangible Equity w/o Acquisition		10.90	%		17.06	%		9.20	%		15.09	%


*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.

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