Farmers & Merchants Bancorp, Inc. Reports Record 2020 Fourth-Quarter and Full-Year Financial Results

ARCHBOLD, Ohio, Feb. 10, 2021 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2020 fourth quarter and twelve months ended December 31, 2020.

2020 Fourth Quarter Financial Highlights Include (on a year-over-year basis unless noted):

• Net income increased 43.5% to a quarterly record of $6.8 million
• Earnings increased 39.5% to a quarterly record of $0.60 per basic and diluted share
• Net interest income after provision for loan losses increased 12.1% to $14.1 million, which included a $1.3 million increase in the provision for loan losses as a result of the COVID-19 crisis
• Noninterest income increased 88.5% to $5.6 million, primarily due to strong residential mortgage demand
• A gain on the settlement of a bank-owned life insurance contract (“BOLI”) and interest and fees associated with the Paycheck Protection Program (“PPP”) benefited 2020 fourth quarter after-tax income by $0.4 million and $1.0 million, respectively
• Efficiency ratio, adjusted for BOLI and PPP benefits, was 56.49%, compared to 63.67%
• Return on average assets adjusted for BOLI and PPP benefits, was 1.14%, compared to 1.18%
• Loans 30 days past due to total loans, excluding COVID related loans, was only 0.29%
• Net charge-offs to average loans were 0.02%, compared to 0.03%
  

2020 Full-Year Financial Highlights Include (on a year-over-year basis unless noted):

• Total loans increased 6.9% to $1.303 billion, and included $36.2 million of PPP loans
• Total assets increased 18.8% to a record $1.910 billion
• Total assets managed increased to a record $2.6 billion
• Deposits increased 23.9% to a record $1.596 billion
• Net interest income after provision for loan losses increased 0.7% to $52.8 million, which included a $5.8 million increase in the provision for loan losses as a result of the COVID-19 crisis
• Net income increased 9.2% to an annual record of $20.1 million
• Earnings increased 8.4% to an annual record of $1.80 per basic and diluted share
• Book value per share increased 7.6% to $22.25 per share
• Tangible book value per share increased 7.4% to $17.19 per share
• 2020 cash dividend increased 8.2% to $0.66 per share

2020 Operating Highlights Include:

• Created operation hubs to protect the health and safety of the Company’s employees, customers, and communities throughout the COVID-19 pandemic
• Approved $87.8 million in PPP loans, helping nearly 950 small businesses protect over 12,400 jobs
• Donated over $167,000 to local organizations during 2020, a nearly 20% increase from 2019
• Opened new loan production offices in Muncie, IN, Oxford, OH and West Bloomfield, MI
• Completed construction on a new full-service office in FT. Wayne, IN, which is expected to open in Q1 2021
• Announced the acquisition of Ossian Financial Services, Inc., which operates two full-service bank offices in Northeast Indiana and had approximately $122.0 million in assets at September 30, 2020
• Purchased the assets and clients of Adams County Financial Resources, a registered investment advisory firm located in Geneva, IN, with approximately $83.0 million of assets under management at November 30, 2020
• Announced an office realignment program that will consolidate three offices in Ohio and one office in Indiana
• Added talent to both the Company’s senior leadership team and Board of Directors
• Continued to invest in expanding the Company’s digital resources and infrastructure

“Across the board 2020 was a record year for F&M, despite the challenges associated with the COVID-19 pandemic. Our record results speak to the dedication of our 354 associates throughout our Ohio, Indiana, and Michigan markets and our daily commitment to provide our communities with superior and individual financial services,” stated Lars B. Eller, President and Chief Executive Officer. “In addition, our record performance demonstrates the success of our 2019 strategic plan that is focused on growing earnings and creating long-term value for our shareholders.”

“As we look forward to 2021, I am excited to complete the Ossian acquisition, which we believe will be completed during the second quarter. In addition, we plan to finish integrating Adams County Financial Resources during the first quarter, as well as implementing our office realignment strategy, investing in new offices in compelling markets, and expanding our digital offerings throughout 2021. We expect to incur an estimated $2.5 million of one-time expenses associated with these initiatives in 2021. Once fully integrated, we believe the combination of reduced operating expenses and the contribution of additional sources of revenue will provide an approximately $2.1 million benefit to income in 2022 and beyond as we further increase our scale, diversify our revenues, improve our cost structure, and better serve our customers. Over the past two years, we have gained valuable experience integrating prior acquisitions, while we have focused on expanding our leadership team and investing in our infrastructure to support our rapid growth. I look forward to updating our shareholders on the progress we are making throughout 2021,” continued Mr. Eller.   

Income Statement
Net income for the 2020 fourth quarter ended December 31, 2020, was $6.8 million, compared to $4.7 million for the same period last year. Net income per basic and diluted share for the 2020 fourth quarter was $0.60, compared to $0.43 for the same period last year. Net income for the 2020 twelve-month period ended December 31, 2020, was $20.1 million, compared to $18.4 million for the same period last year. Net income per basic and diluted share for the 2020 twelve months was $1.80, compared to $1.66 for the same period last year.

Mr. Eller continued, “Our provision for loan losses increased from $1.1 million for the twelve months ended December 31, 2019, to $7.0 million for the twelve months ended December 31, 2020, as we prudently increased our allowance of loan losses primarily associated with the expected economic impacts caused by the COVID-19 crisis. The increase in our provision for loans losses was successfully offset by higher interest income, successful reductions in our cost of funds, interest and fees earned from the Paycheck Protection Program, a gain on the settlement of a BOLI contract, a 42.0% or $5.0 million year-over-year increase in noninterest income, and controlled noninterest expenses. 2020 was our sixth consecutive year of record earnings, while achieving our lowest efficiency ratio in 16 years.”

Deposits
At December 31, 2020, total deposits were $1.596 billion, an increase of 23.9% from December 31, 2019, and an increase of 5.1% from September 30, 2020. The significant organic deposit growth being experienced is a result of continued strength in expanding relationships with new and existing customers, and the benefits of PPP activity. In addition, we continue to see growing customer preferences to more stable and secure saving instruments as deposits have increased since the COVID-19 crisis began.

Loan Portfolio and Asset Quality
Total loans, net at December 31, 2020, increased 6.9% to $1.303 billion, compared to $1.219 billion at December 31, 2019. The year-over-year improvement resulted primarily from the contribution of strong organic loan growth. During 2020, the Company processed $51.6 million of PPP loan forgiveness and principal payments received and at December 31, 2020, there were $36.2 million of PPP loans included in F&M’s loan portfolio.

Mr. Eller continued, “Despite the challenges created by the COVID-19 crisis, we continue to grow our loan portfolio with high quality customers, reflecting the personal financial services and value we provide our local communities and the recent contribution of our newly opened loan production offices in Muncie, IN, Oxford, OH, and West Bloomfield, MI.”

Mr. Eller continued: “Our loan portfolio remains resilient as loans 30 days past due to total loans, excluding COVID related loans, was only 0.29% as of December 31, 2020. In addition, at year-end there were only five loans totaling $3.6 million of interest only and full deferrals out of 190 loans that had modification of terms due to the COVID-19 crisis during the year. These 190 loans had an overall loan outstanding at year-end of $120 million. Given the uncertainty surrounding the COVID-19 crisis and the continued impacts the pandemic is having on the global economy, we are proactively monitoring our portfolio’s performance and our approach to risk remains prudent. As a result, we have increased our allowance for loan and lease losses by 89.2% over the past 12 months. Our allowance for loan and lease losses to total loans, adjusted for our PPP balances, is now over 1.20% and includes the $1.7 million credit mark associated with the 2019 Bank of Geneva acquisition.”  

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $9.4 million or 0.72% of total loans at December 31, 2020, compared to $3.4 million, or 0.28% at December 31, 2019. The year-over-year increase in nonperforming loans is primarily due to the impacts of the COVID-19 crisis, as well as the accounting treatment for nonaccrual loans associated with a $5.2 million real-estate secured relationship.

The Bank had 190 loans that received either deferment payments or interest only payments due to the COVID-19 crisis. As of December 31, 2020, there were only five modifications left representing a total of $3.6 million. Of those remaining there were no outstanding full payment deferment loans. Three loans are interest only in the entertainment sector with $1.2 million in total balances with all scheduled for original repayment terms to begin by early April 2021. One office building with a $2.3 million balance with interest only payments will return to payments in May 2021. One restaurant with a $13,000 balance received an interest only modification in December 2020 with payments to resume in March 2021.

F&M’s agriculture portfolio continues to perform well, with a 0.59% past due balance at December 31, 2020. F&M is optimistic trends will remain positive as a result of strong global demand for agricultural products and a favorable commodity price environment expected during 2021. At December 31, 2020, F&M’s $94.4 million agriculture portfolio consisted primarily of row crop and livestock production, with almost no dairy exposure. Agriculture customers are proven farmers with strong balance sheets and 95% of row crop producers utilize crop insurance to mitigate weather and production risks.  At December 31, 2020, approximately 24% of F&M’s agriculture portfolio was within the livestock sector, and approximately 69% of this exposure is to customers that support production but do not have direct livestock ownership. In addition, approximately 40% of F&M’s livestock exposure is for loans with balances under $750,000 and of the borrowers with direct livestock ownership, approximately 55% are not dependent on the income from livestock to manage their debt payments.   Of the $71.5 million of agricultural real estate loans originated in 2020, F&M sold approximately 45% in the secondary market at a premium of $1.2 million, while servicing and maintaining the relationship of these accounts.

Mr. Eller concluded: “As our record financial and operating results demonstrate, we successfully responded to the unprecedented challenges of the COVID-19 crisis, while remaining focused on executing our growth-oriented strategic plan. I am very proud of our performance during 2020 and the hard work of all F&M’s associates. Although F&M’s scale has increased, we remain committed to nurturing lasting and personal relationships within our communities throughout the near-term economic challenges and future periods of prosperity.”

Stockholders’ Equity and Dividends 
Total stockholders’ equity increased 8.2% to $249.2 million at December 31, 2020, from $230.3 million at December 31, 2019. At December 31, 2020, the Company had a Tier 1 leverage ratio of 10.46%, compared to 11.52% at September 30, 2019.

Tangible stockholders’ equity increased to $192.5 million at December 31, 2020, compared to $178.3 million at December 31, 2019. The largest change to intangible stockholders’ equity was an increase in accumulated comprehensive income, which increased from $1.098 million as of December 31, 2019, to $5.697 million as of December 31, 2020. On a per share basis, tangible stockholders’ equity at December 31, 2020, was $17.19 per share, compared to $16.01 per share at December 31, 2019.

For the twelve months ended December 31, 2020, the Company has declared cash dividends of $0.66 per share, which is an 8.2% increase over the 2019 twelve-month declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for 26 consecutive years. For the twelve months ended December 31, 2020, the dividend payout ratio was 35.76% compared to 36.59% for the same period last year.

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

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 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.

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																					Twelve Months Ended
			December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019					December 31, 2020				December 31, 2019
Interest Income
Loans, including fees			$	17,061			$	16,181			$	16,192			$	15,883			$	15,608				$	65,317			$	62,213
Debt securities:
U.S. Treasury and government agencies				695				761				767				1,146				840					3,369				3,341
Municipalities				295				279				243				262				225					1,079				837
Dividends				35				36				26				45				60					142				293
Federal funds sold				5				4				5				6				97					20				416
Other.				48				32				40				122				319					242				1,206
Total interest income				18,139				17,293				17,273				17,464				17,149					70,169				68,306
Interest Expense
Deposits				1,619				1,864				2,254				2,901				3,336					8,638				12,942
Federal funds purchased and securities sold
under agreements to repurchase				170				174				187				244				207					775				734
Borrowed funds				226				231				257				266				270					980				1,083
Total interest expense				2,015				2,269				2,698				3,411				3,813					10,393				14,759
Net Interest Income - Before Provision for Loan Losses				16,124				15,024				14,575				14,053				13,336					59,776				53,547
Provision for Loan Losses				1,995				1,987				1,569				1,430				728					6,981				1,138
Net Interest Income After Provision For Loan Losses				14,129				13,037				13,006				12,623				12,608					52,795				52,409
Noninterest Income
Customer service fees				2,750				2,299				2,258				1,586				1,732					8,893				6,726
Other service charges and fees				980				879				704				1,039				1,132					3,602				4,443
Net gain on sale of loans				1,894				1,537				364				227				119					4,022				677
Net gain (loss) on sale of available-for-sale securities				-				-				-				270				-					270				(26	)
Total noninterest income				5,624				4,715				3,326				3,122				2,983					16,787				11,820
Noninterest Expense
Salaries and wages				5,068				5,102				4,095				4,223				4,029					18,488				16,329
Employee benefits				1,140				1,566				1,218				1,677				1,410					5,601				5,558
Net occupancy expense				585				558				564				564				406					2,271				2,317
Furniture and equipment				760				875				750				758				596					3,143				2,775
Data processing				428				490				408				442				396					1,768				2,553
Franchise taxes				241				368				369				368				246					1,346				981
ATM expense				456				444				376				414				434					1,690				1,715
Advertising				353				411				265				303				340					1,332				1,569
Net (gain) loss on sale of other assets owned				20				(7	)			(7	)			1				16					7				81
FDIC assessment				223				194				144				72				(11	)				633				183
Mortgage servicing rights amortization				247				296				356				132				158					1,031				487
Consulting fees				407				205				217				139				264					968				668
Other general and administrative				1,358				1,553				1,612				1,575				1,455					6,098				6,251
Total noninterest expense				11,286				12,055				10,367				10,668				9,739					44,376				41,467
Income Before Income Taxes				8,467				5,697				5,965				5,077				5,852					25,206				22,762
Income Taxes				1,691				1,287				1,161				972				1,129					5,111				4,360
Net Income				6,776				4,410				4,804				4,105				4,723					20,095				18,402
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities				(207	)			639				661				4,998				(472	)				6,091				5,179
Reclassification adjustment for realized (gain) loss on sale of available-for-sale securities				-				-				-				(270	)			-					(270	)			26
Net unrealized gain (loss) on available-for-sale securities				(207	)			639				661				4,728				(472	)				5,821				5,205
Tax expense (benefit)				(44	)			134				139				993				(99	)				1,222				1,093
Other comprehensive income (loss)				(163	)			505				522				3,735				(373	)				4,599				4,112
Comprehensive Income			$	6,613			$	4,915			$	5,326			$	7,840			$	4,350				$	24,694			$	22,514
Basic and Diluted Earnings Per Share			$	0.60			$	0.40			$	0.43			$	0.37			$	0.43				$	1.80			$	1.66
Dividends Declared			$	0.17			$	0.17			$	0.16			$	0.16			$	0.16				$	0.66			$	0.61

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands of dollars, except share data)
			December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
							(Unaudited)				(Unaudited)				(Unaudited)
Assets
Cash and due from banks			$	98,279			$	46,395			$	54,336			$	49,844			$	50,137
Federal funds sold				77,427				41,358				31,105				40,993				1,159
	Total cash and cash equivalents			175,706				87,753				85,441				90,837				51,296
Interest-bearing time deposits				4,653				4,657				4,636				4,869				4,309
Securities - available-for-sale				307,812				259,041				236,292				204,121				222,293
Other securities, at cost				5,939				5,827				5,810				5,810				5,810
Loans held for sale				7,740				7,621				11,445				2,153				4,248
Loans, net				1,289,318				1,351,979				1,334,790				1,239,108				1,211,771
Premises and equipment				27,063				26,776				26,049				26,120				26,351
Goodwill				47,340				47,340				47,340				47,340				47,340
Mortgage servicing rights				3,320				3,027				2,740				2,672				2,629
Other real estate owned				71				206				135				185				214
Bank owned life insurance				25,208				15,501				15,399				15,313				15,235
Other assets				15,374				16,872				14,370				16,597				15,834
Total Assets			$	1,909,544			$	1,826,600			$	1,784,447			$	1,655,125			$	1,607,330
	Liabilities and Stockholders' Equity
Liabilities
Deposits
	Noninterest-bearing		$	351,147			$	330,845			$	336,027			$	261,786			$	265,156
	Interest-bearing
	NOW accounts			542,317				534,792				504,846				463,734				423,655
	Savings			455,145				392,059				374,871				341,256				322,973
	Time			247,553				261,177				261,631				281,931				276,563
	Total deposits			1,596,162				1,518,873				1,477,375				1,348,707				1,288,347
Federal Funds Purchased and
securities sold under agreements to repurchase				30,239				29,859				30,949				30,585				48,073
Federal Home Loan Bank (FHLB) advances				17,861				17,724				19,087				24,788				24,806
Dividend payable				1,889				1,882				1,768				1,768				1,768
Accrued expenses and other liabilities				14,233				14,841				14,971				12,820				14,078
	Total liabilities			1,660,384				1,583,179				1,544,150				1,418,668				1,377,072
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued
and outstanding 12,230,000 shares 12/31/20 and 12/31/19				81,804				81,577				82,134				81,844				81,535
Treasury stock - 1,032,456 shares 12/31/20, 1,093,065 shares 12/31/19				(11,932	)			(12,397	)			(12,668	)			(12,636	)			(12,456	)
Retained earnings				173,591				168,381				165,476				162,416				160,081
Accumulated other comprehensive income				5,697				5,860				5,355				4,833				1,098
	Total stockholders' equity			249,160				243,421				240,297				236,457				230,258
Total Liabilities and Stockholders' Equity			$	1,909,544			$	1,826,600			$	1,784,447			$	1,655,125			$	1,607,330

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA
			For the Three Months Ended																				For the Twelve Months Ended
Selected financial data		December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019					December 31, 2020				December 31, 2019
Return on average assets			1.43	%			0.98	%			1.10	%			1.02	%			1.18	%			1.14	%			1.23	%
Return on average equity			11.04	%			7.28	%			8.07	%			7.06	%			8.26	%			8.38	%			8.26	%
Yield on earning assets			4.09	%			4.04	%			4.25	%			4.66	%			4.63	%			4.25	%			4.85	%
Cost of interest bearing liabilities			0.64	%			0.74	%			0.91	%			1.22	%			1.40	%			0.87	%			1.42	%
Net interest spread			3.45	%			3.30	%			3.34	%			3.44	%			3.23	%			3.38	%			3.43	%
Net interest margin			3.63	%			3.51	%			3.59	%			3.75	%			3.60	%			3.62	%			3.80	%
Efficiency			52.20	%			62.11	%			57.91	%			63.09	%			63.67	%			58.17	%			63.42	%
Dividend payout ratio			27.77	%			42.66	%			36.80	%			43.07	%			43.34	%			35.76	%			36.59	%
Tangible book value per share (1)		$	17.19			$	16.78			$	16.33			$	16.26			$	16.01
Tier 1 capital to average assets			10.46	%			10.65	%			10.70	%			11.56	%			11.52	%
Average Shares Outstanding			11,177,765				11,142,797				11,129,341				11,134,870				11,137,004				11,146,270				11,113,810
Loans		December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
(Dollar amounts in thousands)
Commercial real estate		$	588,825			$	595,146			$	589,382			$	570,217			$	551,309
Agricultural real estate			189,159				192,883				194,606				194,383				199,105
Consumer real estate			175,588				175,963				174,069				174,731				165,349
Commercial and industrial			189,246				238,175				223,842				143,261				135,631
Agricultural			94,358				103,330				107,458				109,584				111,820
Consumer			52,540				53,320				50,108				49,022				49,237
Other			15,757				9,030				9,714				8,336				8,314
Less: Net deferred loan fees and costs			(2,483	)			(3,985	)			(4,456	)			(1,893	)			(1,766	)
Total loans,net		$	1,302,990			$	1,363,862			$	1,344,723			$	1,247,641			$	1,218,999
Asset quality data		December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
(Dollar amounts in thousands)
Nonaccrual loans		$	9,404			$	7,870			$	8,473			$	3,344			$	3,400
Troubled debt restructuring		$	6,514			$	7,028			$	7,034			$	1,934			$	956
90 day past due and accruing		$	-			$	-			$	-			$	-			$	-
Nonperforming loans		$	9,404			$	7,870			$	8,473			$	3,344			$	3,400
Other real estate owned		$	71			$	206			$	135			$	185			$	214
Nonperforming assets		$	9,475			$	8,076			$	8,608			$	3,529			$	3,614
(Dollar amounts in thousands)
Allowance for loan and lease losses		$	13,672			$	11,883			$	10,538			$	8,533			$	7,228
Allowance for loan and lease losses/total loans			1.05	%			0.87	%			0.78	%			0.68	%			0.59	%
Net charge-offs:
Quarter-to-date		$	205			$	37			$	169			$	125			$	295
Year-to-date		$	537			$	331			$	294			$	125			$	685
Net charge-offs to average loans
Quarter-to-date			0.02	%			0.00	%			0.01	%			0.01	%			0.03	%
Year-to-date			0.04	%			0.03	%			0.02	%			0.01	%			0.06	%
Nonperforming loans/total loans			0.72	%			0.58	%			0.63	%			0.27	%			0.28	%
Allowance for loan and lease losses/nonperforming loans			177.96	%			151.01	%			117.24	%			256.66	%			187.17	%
(1) Tangible Equity = Stockholder Equity less goodwill and other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities)

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, 2020									December 31, 2019
Interest Earning Assets:		Average Balance			Interest/Dividends			Annualized Yield/Rate			Average Balance			Interest/Dividends			Annualized Yield/Rate
Loans		$	1,336,538		$	17,061		5.11	%		$	1,174,748		$	15,608		5.32	%
Taxable Investment Securities			250,601			916		1.46	%			165,745			975		2.35	%
Tax-exempt Investment Securities			23,216			109		2.38	%			31,831			150		2.39	%
Fed Funds Sold & Other			169,116			53		0.13	%			114,278			416		1.46	%
Total Interest Earning Assets			1,779,471		$	18,139		4.09	%			1,486,602		$	17,149		4.63	%
Nonearning Assets			112,177									111,367
Total Assets		$	1,891,648								$	1,597,969
Interest Bearing Liabilities:
Savings Deposits		$	967,355		$	705		0.29	%			758,594			1,746		0.92	%
Other Time Deposits			253,023			914		1.44	%			275,406			1,590		2.31	%
Other Borrowed Money			17,775			226		5.09	%			24,715			270		4.37	%
Fed Funds Purchased & Securities
Sold under Agreement to Repurch.			30,100			170		2.26	%			30,464			207		2.72	%
Total Interest Bearing Liabilities		$	1,268,253		$	2,015		0.64	%		$	1,089,179		$	3,813		1.40	%
Noninterest bearing Liabilities			377,791									280,027
Stockholders Equity		$	245,604								$	228,763
Net Interest Income and interest rate spread					$	16,124		3.45	%					$	13,336		3.23	%
Net Interest Margin								3.63	%								3.60	%
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, 2020									December 31, 2019
Interest Earning Assets:		Average Balance			Interest/Dividends			Annualized Yield/Rate			Average Balance			Interest/Dividends			Annualized Yield/Rate
Loans		$	1,313,675		$	65,317		4.98	%		$	1,129,231		$	62,213		5.51	%
Taxable Investment Securities			219,044			4,136		1.89	%			163,777			3,832		2.34	%
Tax-exempt Investment Securities			24,958			454		2.30	%			33,112			639		2.44	%
Fed Funds Sold & Other			99,304			262		0.26	%			86,971			1,622		1.86	%
Total Interest Earning Assets			1,656,981		$	70,169		4.25	%			1,413,091		$	68,306		4.85	%
Nonearning Assets			113,303									86,119
Total Assets		$	1,770,284								$	1,499,210
Interest Bearing Liabilities:
Savings Deposits		$	879,669		$	3,942		0.45	%		$	720,879		$	7,323		1.02	%
Other Time Deposits			264,827			4,696		1.77	%			265,046			5,619		2.12	%
Other Borrowed Money			21,245			980		4.61	%			25,538			1,083		4.24	%
Fed Funds Purchased & Securities
Sold under Agreement to Repurch.			32,363			775		2.39	%			29,859			734		2.46	%
Total Interest Bearing Liabilities		$	1,198,104		$	10,393		0.87	%		$	1,041,322		$	14,759		1.42	%
Noninterest bearing Liabilities			332,482									235,010
Stockholders Equity		$	239,698								$	222,878
Net Interest Income and interest rate spread					$	59,776		3.38	%					$	53,547		3.43	%
Net Interest Margin								3.62	%								3.80	%
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.
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
Non-GAAP Earnings Per Share
(in thousands of dollars, expect per share data)		Non-GAAP Three Months Ended																				Non-GAAP Twelve Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
			2020				2020				2020				2020				2019				2020				2019
Net income		$	6,776			$	4,410			$	4,804			$	4,105			$	4,723			$	20,095			$	18,402
Less: Accelerated net fee income for forgiveness of PPP loans			(1,211	)			-				-				-				-				(1,211	)			-
Less: Gain on settlement of bank owned life insurance			(430	)			-				-				-				-				(430	)			-
Tax effect			254				-				-				-				-				254				-
Adjusted net income			5,389				4,410				4,804				4,105				4,723				18,708				18,402
Less: distributed earnings allocated to participating securities			(16	)			(15	)			(13	)			(13	)			(14	)			(57	)			(51	)
Less: undistributed earnings allocated to participating securities			(37	)			(19	)			(22	)			(18	)			(24	)			(96	)			(87	)
Net earnings available to common shareholders		$	5,389			$	4,376			$	4,769			$	4,074			$	4,685			$	18,555			$	18,264
Weighted average common shares outstanding including participating securities			11,177,765				11,142,797				11,129,341				11,134,870				11,137,004				11,146,270				11,113,810
Less: average unvested restricted shares			(89,150	)			(83,257	)			(80,062	)			(84,732	)			(88,711	)			(84,879	)			(83,369	)
Weighted average common shares outstanding			11,088,615				11,059,540				11,049,279				11,050,138				11,048,293				11,061,391				11,030,441
Basic earnings and diluted per share		$	0.48			$	0.40			$	0.43			$	0.37			$	0.43			$	1.68			$	1.66
		Three Months																				Twelve Months
		December 31,				December 31,																December 31,				December 31,
Reconciliation of Efficiency Ratio			2020				2020																2020				2020
		Non-GAAP				Actual																Non-GAAP				Actual
Net interest income (+)			14,785				15,996																58,565				59,776
Noninterest Income (+)			5,194				5,624																16,357				16,787
Gain on Security Sale (-)			-				-																270				270
Operating Expenses (/)			11,286				11,286																44,376				44,376
Efficiency Ratio			56.49	%			52.20	%															59.44	%			58.17	%
		Three Months																				Twelve Months
		December 31,				December 31,																December 31,				December 31,
			2020				2020																2020				2020
Reconciliation of Return on Average Assets		Non-GAAP				Actual																Non-GAAP				Actual
Net income		$	6,776			$	6,776															$	20,095			$	20,095
Less: Accelerated net fee income for forgiveness of PPP loans			(1,211	)			-																(1,211	)			-
Less: Gain on settlement of bank owned life insurance			(430	)			-																(430	)			-
Tax effect			254				-																254				-
Adjusted net income			5,389				6,776																18,708				20,095
Average Assets			1,891,648				1,891,648																1,770,284				1,770,284
ROA			1.14	%			1.43	%															1.06	%			1.14	%