Farmers & Merchants Bancorp (FMAO) 8-K Results of Operations and Financial Condition

Exhibit 99

  Post Office Box 216 307 North Defiance Street Archbold, Ohio 43502 NEWS RELEASE

Company Contact:	Investor and Media Contact:
Marty Filogamo Senior Vice President – Marketing Manager Farmers & Merchants Bancorp, Inc. (419) 445-3501 ext. 15435 mfilogamo@fm-bank.com.	Andrew M. Berger Managing Director SM Berger & Company, Inc. (216) 464-6400 andrew@smberger.com

Farmers & Merchants Bancorp, Inc. Reports

2017 Second-Quarter and Year-to-Date Financial Results

ARCHBOLD, OHIO, July 19, 2017, Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2017 second quarter and year-to-date June 30, 2017.

2017 Second Quarter Financial Highlights Include(on a year-over-year basis unless noted):

• 57 consecutive quarters of profitability

• Total assets up 4.4% to $1,066,175,000

• Total loans increased 8.3% to $790,838,000

• Net interest income after provision for loan losses increased 10.6% to $8,846,000

• Net income increased 8.4% to $3,223,000

• Earnings per basic and diluted shares increased 7.7% to $0.70

• Declared quarterly dividend increased 8.7% to $0.25 per share

• Return on average assets was 1.21%, up from 1.17%

• Return on average equity was 9.96%, up from 9.61%

“Record total loans outstanding and higher rates drove a 7.7% increase in F&M’s diluted earnings per share for the 2017 second quarter,” stated Paul S. Siebenmorgen, President and Chief Executive Officer. “In addition, during the second quarter F&M achieved several significant milestones including appearing in American Banker Magazine’s Top 200 Publicly Traded Community Banks and Thrifts, listing our common stock on the NASDAQ Capital Market, joining the Russell 3000^® index, and increasing the second quarter declared cash dividend by 8.7% to $0.25 per share. F&M’s strong year-to-date results reflect the platform we have created to drive sustainable and profitable growth. With leading market share in many of our communities, we are focused on increasing our presence in larger, higher growth markets. To this end, our new branches in Bowling Green, Ohio and Huntertown, Indiana are operating in line with our expectations. Both branches have strong, experienced, and motivated teams that are quickly establishing themselves within their local communities.”

Income Statement

Net income for the 2017 second quarter ended June 30, 2017 was $3,223,000, or $0.70 per basic and diluted share compared to $2,974,000, or $0.65 per basic and diluted share for the same period last year. The 8.4% improvement in net income for the 2017 second quarter was primarily due to a 10.6% increase in net interest income after provision for loan losses, partially offset by a slight decline in noninterest income, and by a small increase in noninterest expenses. Net income for the 2017 first half was $6,062,000, or $1.31 per basic and diluted share compared to $5,455,000, or $1.18 per basic and diluted share for the first half of 2016.

Loan Portfolio and Asset Quality

Total loans at June 30, 2017 increased 8.3% to a record $790,838,000, compared to $729,915,000 at June 30, 2016, and up 4.0% from $758,820,000 at December 31, 2016. Year-over-year loan growth was strong across many of the company’s lending areas and included a 17.8% increase in commercial and industrial loans, a 16.2% increase in consumer loans, an 11.2% increase in industrial development bonds, a 10.3% increase in commercial real estate loans, a 6.3% increase in agricultural real estate loans, and a 0.4% increase in agricultural loans, partially offset by a 4.7% reduction in consumer real estate loans.

The company’s provision for loan losses for the 2017 second quarter was $25,000, compared to $339,000 for the 2016 second quarter. Year-to-date, the provision for loan losses was $98,000, compared to $616,000 for the same period last year. The second quarter and year-to-date decrease in provision expense was a result of low charge offs, and stable asset quality within the company’s loan portfolio.

F&M’s loan quality remains strong as the allowance for loan losses to nonperforming loans was 502.2% at June 30, 2017, compared to 424.9% at June 30, 2016. Net charge-offs for the second quarter ended June 30, 2017 were $17,000, or 0.00% of average loans, compared to $131,000 or 0.02% of average loans, at June 30, 2016. Year-to-date, net charge-offs were $24,000, or 0.00% of average loans outstanding, compared to $180,000, or 0.01% of average loans outstanding for the same period last year.

Stockholders’ Equity and Dividends

Tangible stockholders’ equity increased to $126,582,000 at June 30, 2017, compared to $120,763,000 at December 31, 2016, and $119,913,000 at June 30, 2016. On a per share basis, tangible stockholders’ equity at June 30, 2017 was $27.39, compared with $26.13 at December 31, 2016, and $26.04 at June 30, 2016. The increase in tangible stockholders’ equity is the result of growth in retained earnings due to increased profitability. At June 30, 2017, the company had a Tier 1 leverage ratio of 11.96%, compared to 11.74% at June 30, 2016.

For the 2017 second quarter, the company declared cash dividends of $0.25 per share. The dividend payout ratio at June 30, 2017 was 35.5% compared to 35.3% for the same period last year.

Mr. Siebenmorgen concluded, “F&M remains committed to becoming our customers’ Bank for Life. As a result, we must successfully manage growth with credit risk, and F&M continues to report strong asset quality. At June 30, 2017, non-performing assets declined 28.2% and net charge-offs declined 87.0% from the prior year period, while our loan portfolio has increased 8.3%. Continued loan growth, proactive cost management, and strong asset quality, has helped improve profitability. Reflecting continued improvements in profitability and F&M’s focus on creating value for shareholders, F&M’s board of directors approved an 8.7% increase in our quarterly dividend, representing the 18^th consecutive year we have increased our dividend payment. As you can see, operating and financial momentum remained strong in the second quarter and we expect 2017 will be another good year for the bank.”

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 24 offices. Our locations are in Fulton, Defiance, Henry, Lucas, Williams, and Wood counties in Northwest Ohio. In Northeast Indiana, we have offices located in DeKalb, Allen 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 Act of 1934, as amended. Actual results could vary materially depending on risks and uncertainties inherent in general and local banking conditions, competitive factors specific to markets in which F&M and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions or capital market conditions. F&M assumes no responsibility to update this information. For more details, please refer to F&M’s SEC filing, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. Such filings can be viewed at the SEC’s website, www.sec.gov.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME (UNAUDITED)

(in thousands of dollars, except per share data)

	Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Interest Income
Loans, including fees	$	9,120		$	8,362		$	17,820		$	16,368
Debt securities:
U.S. Treasury and government agencies		623			595			1,265			1,175
Municipalities		300			380			615			749
Dividends		44			37			86			75
Federal funds sold		3			2			3			2
Other		34			11			56			22
Total interest income		10,124			9,387			19,845			18,391
Interest Expense
Deposits		1,098			885			2,128			1,739
Federal funds purchased and securities sold under agreements to repurchase		118			126			231			231
Borrowed funds		37			36			73			73
Total interest expense		1,253			1,047			2,432			2,043
Net Interest Income—Before Provision for Loan Losses		8,871			8,340			17,413			16,348
Provision for Loan Losses		25			339			98			616
Net Interest Income After Provision
For Loan Losses		8,846			8,001			17,315			15,732
Noninterest Income
Customer service fees		1,330			1,308			2,811			2,786
Other service charges and fees		1,209			999			2,080			1,909
Net gain on sale of loans		218			234			419			403
Net gain on sale of available for sale securities		16			343			47			456
Total noninterest income		2,773			2,884			5,357			5,554
Noninterest Expense
Salaries and Wages		3,137			2,840			6,138			5,680
Employee benefits		783			715			1,705			1,577
Net occupancy expense		374			346			787			724
Furniture and equipment		491			443			963			855
Data processing		308			361			619			772
Franchise taxes		225			225			450			439
Net loss on sale of other assets owned		14			—			14			45
FDIC Assessment		82			121			165			242
Mortgage servicing rights amortization		97			99			181			188
Other general and administrative		1,587			1,507			3,147			3,121
Total other operating expenses		7,098			6,657			14,169			13,643
Income Before Income Taxes		4,521			4,228			8,503			7,643
Income Taxes		1,298			1,254			2,441			2,188
Net Income		3,223			2,974			6,062			5,455
Other Comprehensive Income (Net of Tax):
Net unrealized gain on available for sale securities		2,044			649			2,456			2,594
Reclassification adjustment for gain on sale of available for sale securities		(16	)		(343	)		(47	)		(456	)
Net unrealized gain on available for sale securities		2,028			306			2,409			2,138
Tax expense		690			104			819			727
Other comprehensive income		1,338			202			1,590			1,411
Comprehensive Income	$	4,561		$	3,176		$	7,652		$	6,866
Earnings Per Share—Basic and Diluted	$	0.70		$	0.65		$	1.31		$	1.18
Dividends Declared	$	0.25		$	0.23		$	0.48		$	0.45

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(in thousands of dollars)
	June 30, 2017			December 31, 2016
	(Unaudited)
Assets
Cash and due from banks	$	28,613		$	27,348
Federal funds sold		646			974
Total cash and cash equivalents		29,259			28,322
Interest-bearing time deposits		2,541			1,915
Securities—available-for-sale		195,582			218,527
Other securities, at cost		3,717			3,717
Loans held for sale		1,666			2,055
Loans, net		783,980			751,310
Premises and equipment		20,942			21,457
Goodwill		4,074			4,074
Mortgage servicing rights		2,230			2,192
Other real estate owned		630			774
Bank owned life insurance		14,334			14,376
Other assets		7,220			7,176
Total Assets	$	1,066,175		$	1,055,895
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing	$	189,770		$	186,390
Interest-bearing
NOW accounts		274,236			230,446
Savings		226,505			226,537
Time		186,964			198,830
Total deposits		877,475			842,203
Federal Funds purchased and securities sold under agreements to repurchase		40,095			70,324
Federal Home Loan Bank (FHLB) advances		10,000			10,000
Dividend payable		1,144			1,053
Accrued expenses and other liabilities		6,226			6,738
Total liabilities		934,940			930,318
Commitments and Contingencies
Stockholders’ Equity
Common stock—No par value 10,000,000 shares authorized;		12,150			11,947
issued and outstanding 5,200,000 shares 6/30/17 and 12/31/16
Treasury Stock—579,125 shares 6/30/17, 579,125 shares 12/31/16		(12,267	)		(12,267	)
Retained earnings		131,734			127,869
Accumulated other comprehensive loss		(382	)		(1,972	)
Total stockholders’ equity		131,235			125,577
Total Liabilities and Stockholders’ Equity	$	1,066,175		$	1,055,895

	For the Three Months Ended June 30						For the Six Months Ended June 30
Selected financial data	2017			2016			2017			2016
Return on average assets		1.21	%		1.17	%		1.14	%		1.08	%
Return on average equity		9.96	%		9.61	%		9.47	%		8.90	%
Yield on earning assets		4.11	%		3.99	%		4.05	%		3.98	%
Cost of interest bearing liabilities		0.68	%		0.58	%		0.66	%		0.58	%
Net interest spread		3.43	%		3.41	%		3.39	%		3.40	%
Net interest margin		3.61	%		3.56	%		3.56	%		3.55	%
Efficiency		60.27	%		60.15	%		61.53	%		62.56	%
Dividend payout ratio		35.49	%		35.34	%		36.24	%		37.69	%
Tangible book value per share	$	27.39		$	26.04
Tier 1 capital to average assets		11.96	%		11.74	%
	June 30
Loans	2017			2016
(Dollar amounts in thousands)
Commercial real estate	$	394,649		$	357,838
Agricultural real estate		64,035			60,253
Consumer real estate		84,307			88,464
Commercial and industrial		122,950			104,336
Agricultural		83,614			83,287
Consumer		35,394			30,458
Industrial development bonds		6,617			5,952
Less: Net deferred loan fees and costs		(728	)		(673	)
Total loans	$	790,838		$	729,915
	June 30
Asset quality data	2017			2016
(Dollar amounts in thousands)
Nonaccrual loans	$	1,365		$	1,528
Troubled debt restructuring	$	662		$	795
90 day past due and accruing	$	—		$	—
Nonperforming loans	$	1,365		$	1,528
Other real estate owned	$	630		$	1,252
Non-performing assets	$	1,995		$	2,780
(Dollar amounts in thousands)
Allowance for loan and lease losses	$	7,077		$	6,493
Allowance for loan and lease losses/total loans		0.89	%		0.89	%
Net charge-offs:
Quarter-to-date	$	17		$	131
Year-to-date	$	24		$	180
Net charge-offs to average loans
Quarter-to-date		0.00	%		0.02	%
Year-to-date		0.00	%		0.01	%
Non-performing loans/total loans		0.17	%		0.21	%
Allowance for loan and lease losses/nonperforming loans		502.23	%		424.86	%