GlobeNewswire Inc | Feb 10, 2021 04:30PM EST

February 10, 2021

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 Companys 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 Companys senior leadership team and Board of Directors -- Continued to invest in expanding the Companys 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 our354 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 StatementNet 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.

DepositsAt 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 QualityTotal 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&Ms 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 portfolios 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&Ms 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&Ms $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&Ms 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&Ms 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&Ms associates. Although F&Ms 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 DividendsTotal 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. BergerPresident and Chief Executive Officer Managing DirectorFarmers & Merchants Bancorp, Inc. SM Berger & Company, Inc.(419) 446-2501 (216) 464-6400leller@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 statementFarmers & 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 managements 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&Ms 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 SECs website, www.sec.gov or through F&Ms 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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME(Unaudited) (in thousands of dollars, except per share data)

Three Months Ended Twelve Months Ended December 31, September June 30, March 31, December 31, December 31, December 31, 2020 30, 2020 2020 2020 2019 2020 2019Interest Income Loans, including $ 17,061 $ 16,181 $ 16,192 $ 15,883 $ 15,608 $ 65,317 $ 62,213 feesDebt securities: U.S. Treasury andgovernment 695 761 767 1,146 840 3,369 3,341 agenciesMunicipalities 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 18,139 17,293 17,273 17,464 17,149 70,169 68,306 incomeInterest Expense Deposits 1,619 1,864 2,254 2,901 3,336 8,638 12,942 Federal fundspurchased and securities soldunder agreements 170 174 187 244 207 775 734 to repurchaseBorrowed funds 226 231 257 266 270 980 1,083 Total interest 2,015 2,269 2,698 3,411 3,813 10,393 14,759 expenseNet InterestIncome - Before 16,124 15,024 14,575 14,053 13,336 59,776 53,547 Provision for LoanLossesProvision for Loan 1,995 1,987 1,569 1,430 728 6,981 1,138 LossesNet InterestIncome After 14,129 13,037 13,006 12,623 12,608 52,795 52,409 Provision For LoanLossesNoninterest Income Customer service 2,750 2,299 2,258 1,586 1,732 8,893 6,726 feesOther service 980 879 704 1,039 1,132 3,602 4,443 charges and feesNet gain on sale 1,894 1,537 364 227 119 4,022 677 of loansNet gain (loss) onsale of - - - 270 - 270 (26 )available-for-salesecuritiesTotal noninterest 5,624 4,715 3,326 3,122 2,983 16,787 11,820 incomeNoninterest ExpenseSalaries 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 585 558 564 564 406 2,271 2,317 expenseFurniture and 760 875 750 758 596 3,143 2,775 equipmentData 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 onsale of other 20 (7 ) (7 ) 1 16 7 81 assets ownedFDIC assessment 223 194 144 72 (11 ) 633 183 Mortgage servicingrights 247 296 356 132 158 1,031 487 amortizationConsulting fees 407 205 217 139 264 968 668 Other general and 1,358 1,553 1,612 1,575 1,455 6,098 6,251 administrativeTotal noninterest 11,286 12,055 10,367 10,668 9,739 44,376 41,467 expenseIncome Before 8,467 5,697 5,965 5,077 5,852 25,206 22,762 Income TaxesIncome 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 OtherComprehensive Income (Loss) (Netof Tax):Net unrealizedgain (loss) on (207 ) 639 661 4,998 (472 ) 6,091 5,179 available-for-salesecuritiesReclassificationadjustment forrealized (gain) - - - (270 ) - (270 ) 26 loss on sale ofavailable-for-salesecuritiesNet unrealizedgain (loss) on (207 ) 639 661 4,728 (472 ) 5,821 5,205 available-for-salesecuritiesTax expense (44 ) 134 139 993 (99 ) 1,222 1,093 (benefit)Othercomprehensive (163 ) 505 522 3,735 (373 ) 4,599 4,112 income (loss)Comprehensive $ 6,613 $ 4,915 $ 5,326 $ 7,840 $ 4,350 $ 24,694 $ 22,514 IncomeBasic and Diluted $ 0.60 $ 0.40 $ 0.43 $ 0.37 $ 0.43 $ 1.80 $ 1.66 Earnings Per ShareDividends Declared $ 0.17 $ 0.17 $ 0.16 $ 0.16 $ 0.16 $ 0.66 $ 0.61

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited) (in thousands of dollars, except share data)

December 31, September 30, June 30, 2020 March 31, 2020 December 31, 2020 2020 2019 (Unaudited) (Unaudited) (Unaudited) Assets Cash and due from $ 98,279 $ 46,395 $ 54,336 $ 49,844 $ 50,137 banksFederal funds sold 77,427 41,358 31,105 40,993 1,159 Total cash and cash 175,706 87,753 85,441 90,837 51,296 equivalents Interest-bearing time 4,653 4,657 4,636 4,869 4,309 depositsSecurities - 307,812 259,041 236,292 204,121 222,293 available-for-saleOther securities, at 5,939 5,827 5,810 5,810 5,810 costLoans 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 3,320 3,027 2,740 2,672 2,629 rightsOther real estate 71 206 135 185 214 ownedBank owned life 25,208 15,501 15,399 15,313 15,235 insuranceOther 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' EquityLiabilities 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 andsecurities sold underagreements to 30,239 29,859 30,949 30,585 48,073 repurchaseFederal Home Loan Bank 17,861 17,724 19,087 24,788 24,806 (FHLB) advancesDividend payable 1,889 1,882 1,768 1,768 1,768 Accrued expenses and 14,233 14,841 14,971 12,820 14,078 other liabilities 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 parvalue 20,000,000 shares authorized;issuedand outstanding12,230,000 shares 12/ 81,804 81,577 82,134 81,844 81,535 31/20 and 12/31/19Treasury stock -1,032,456 shares 12/31/ (11,932 ) (12,397 ) (12,668 ) (12,636 ) (12,456 ) 20, 1,093,065 shares 12/31/19Retained earnings 173,591 168,381 165,476 162,416 160,081 Accumulated other 5,697 5,860 5,355 4,833 1,098 comprehensive income Total stockholders' 249,160 243,421 240,297 236,457 230,258 equity Total Liabilities and $ 1,909,544 $ 1,826,600 $ 1,784,447 $ 1,655,125 $ 1,607,330 Stockholders' Equity

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIESSELECT FINANCIAL DATA For the Three Months Ended For the Twelve Months EndedSelected December 31, September 30, June 30, 2020 March 31, 2020 December 31, December 31, December 31,financial data 2020 2020 2019 2020 2019Return on 1.43 % 0.98 % 1.10 % 1.02 % 1.18 % 1.14 % 1.23 %average assetsReturn on 11.04 % 7.28 % 8.07 % 7.06 % 8.26 % 8.38 % 8.26 %average equityYield on 4.09 % 4.04 % 4.25 % 4.66 % 4.63 % 4.25 % 4.85 %earning assetsCost ofinterest 0.64 % 0.74 % 0.91 % 1.22 % 1.40 % 0.87 % 1.42 %bearingliabilitiesNet interest 3.45 % 3.30 % 3.34 % 3.44 % 3.23 % 3.38 % 3.43 %spreadNet interest 3.63 % 3.51 % 3.59 % 3.75 % 3.60 % 3.62 % 3.80 %marginEfficiency 52.20 % 62.11 % 57.91 % 63.09 % 63.67 % 58.17 % 63.42 %Dividend payout 27.77 % 42.66 % 36.80 % 43.07 % 43.34 % 35.76 % 36.59 %ratioTangible bookvalue per share $ 17.19 $ 16.78 $ 16.33 $ 16.26 $ 16.01 (1)Tier 1 capitalto average 10.46 % 10.65 % 10.70 % 11.56 % 11.52 % assetsAverage Shares 11,177,765 11,142,797 11,129,341 11,134,870 11,137,004 11,146,270 11,113,810 Outstanding Loans December 31, September 30, June 30, 2020 March 31, 2020 December 31, 2020 2020 2019(Dollar amounts in thousands)Commercial real $ 588,825 $ 595,146 $ 589,382 $ 570,217 $ 551,309 estateAgricultural 189,159 192,883 194,606 194,383 199,105 real estateConsumer real 175,588 175,963 174,069 174,731 165,349 estateCommercial and 189,246 238,175 223,842 143,261 135,631 industrialAgricultural 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: Netdeferred loan (2,483 ) (3,985 ) (4,456 ) (1,893 ) (1,766 ) fees and costsTotal loans,net $ 1,302,990 $ 1,363,862 $ 1,344,723 $ 1,247,641 $ 1,218,999 Asset quality December 31, September 30, June 30, 2020 March 31, 2020 December 31, data 2020 2020 2019(Dollar amounts in thousands)Nonaccrual $ 9,404 $ 7,870 $ 8,473 $ 3,344 $ 3,400 loansTroubled debt $ 6,514 $ 7,028 $ 7,034 $ 1,934 $ 956 restructuring90 day past due $ - $ - $ - $ - $ - and accruingNonperforming $ 9,404 $ 7,870 $ 8,473 $ 3,344 $ 3,400 loansOther real $ 71 $ 206 $ 135 $ 185 $ 214 estate ownedNonperforming $ 9,475 $ 8,076 $ 8,608 $ 3,529 $ 3,614 assets (Dollar amounts in thousands)Allowance forloan and lease $ 13,672 $ 11,883 $ 10,538 $ 8,533 $ 7,228 lossesAllowance forloan and lease 1.05 % 0.87 % 0.78 % 0.68 % 0.59 % losses/totalloansNet charge-offs:Quarter-to-date $ 205 $ 37 $ 169 $ 125 $ 295 Year-to-date $ 537 $ 331 $ 294 $ 125 $ 685 Net charge-offsto average loansQuarter-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 % Nonperformingloans/total 0.72 % 0.58 % 0.63 % 0.27 % 0.28 % loansAllowance forloan and leaselosses/ 177.96 % 151.01 % 117.24 % 256.66 % 187.17 % nonperformingloans (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 Average Interest/ Annualized Average Interest/ AnnualizedEarning Balance Dividends Yield/Rate Balance Dividends Yield/Rate Assets:Loans $ 1,336,538 $ 17,061 5.11 % $ 1,174,748 $ 15,608 5.32 % TaxableInvestment 250,601 916 1.46 % 165,745 975 2.35 % SecuritiesTax-exemptInvestment 23,216 109 2.38 % 31,831 150 2.39 % SecuritiesFed Funds 169,116 53 0.13 % 114,278 416 1.46 % Sold & OtherTotalInterest 1,779,471 $ 18,139 4.09 % 1,486,602 $ 17,149 4.63 % EarningAssets Nonearning 112,177 111,367 Assets Total Assets $ 1,891,648 $ 1,597,969 InterestBearing Liabilities:Savings $ 967,355 $ 705 0.29 % 758,594 1,746 0.92 % DepositsOther Time 253,023 914 1.44 % 275,406 1,590 2.31 % DepositsOtherBorrowed 17,775 226 5.09 % 24,715 270 4.37 % MoneyFed FundsPurchased & SecuritiesSoldunder 30,100 170 2.26 % 30,464 207 2.72 % Agreement toRepurch.TotalInterest $ 1,268,253 $ 2,015 0.64 % $ 1,089,179 $ 3,813 1.40 % BearingLiabilities Noninterestbearing 377,791 280,027 Liabilities Stockholders $ 245,604 $ 228,763 Equity Net InterestIncome and $ 16,124 3.45 % $ 13,336 3.23 % interestrate spread Net Interest 3.63 % 3.60 % Margin Yields on Tax exempt securities and the portion of the tax-exemptIDB 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 Average Interest/ Annualized Average Interest/ AnnualizedEarning Balance Dividends Yield/Rate Balance Dividends Yield/Rate Assets:Loans $ 1,313,675 $ 65,317 4.98 % $ 1,129,231 $ 62,213 5.51 % TaxableInvestment 219,044 4,136 1.89 % 163,777 3,832 2.34 % SecuritiesTax-exemptInvestment 24,958 454 2.30 % 33,112 639 2.44 % SecuritiesFed Funds 99,304 262 0.26 % 86,971 1,622 1.86 % Sold & OtherTotalInterest 1,656,981 $ 70,169 4.25 % 1,413,091 $ 68,306 4.85 % EarningAssets Nonearning 113,303 86,119 Assets Total Assets $ 1,770,284 $ 1,499,210 InterestBearing Liabilities:Savings $ 879,669 $ 3,942 0.45 % $ 720,879 $ 7,323 1.02 % DepositsOther Time 264,827 4,696 1.77 % 265,046 5,619 2.12 % DepositsOtherBorrowed 21,245 980 4.61 % 25,538 1,083 4.24 % MoneyFed FundsPurchased & SecuritiesSoldunder 32,363 775 2.39 % 29,859 734 2.46 % Agreement toRepurch.TotalInterest $ 1,198,104 $ 10,393 0.87 % $ 1,041,322 $ 14,759 1.42 % BearingLiabilities Noninterestbearing 332,482 235,010 Liabilities Stockholders $ 239,698 $ 222,878 Equity Net InterestIncome and $ 59,776 3.38 % $ 53,547 3.43 % interestrate spread Net Interest 3.62 % 3.80 % Margin Yields on Tax exempt securities and the portion of the tax-exempt IDBloans 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-GAAPEarnings Per Share(in thousandsof dollars, Non-GAAP Three Months Ended Non-GAAP Twelve Months Endedexpect pershare data) 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:Acceleratednet fee income (1,211 ) - - - - (1,211 ) - forforgiveness ofPPP loansLess: Gain onsettlement of (430 ) - - - - (430 ) - bank ownedlife insuranceTax effect 254 - - - - 254 - Adjusted net 5,389 4,410 4,804 4,105 4,723 18,708 18,402 incomeLess:distributedearnings (16 ) (15 ) (13 ) (13 ) (14 ) (57 ) (51 )allocated toparticipatingsecuritiesLess:undistributedearnings (37 ) (19 ) (22 ) (18 ) (24 ) (96 ) (87 )allocated toparticipatingsecuritiesNet earningsavailable to $ 5,389 $ 4,376 $ 4,769 $ 4,074 $ 4,685 $ 18,555 $ 18,264 commonshareholders Weightedaverage commonsharesoutstanding 11,177,765 11,142,797 11,129,341 11,134,870 11,137,004 11,146,270 11,113,810 includingparticipatingsecuritiesLess: averageunvested (89,150 ) (83,257 ) (80,062 ) (84,732 ) (88,711 ) (84,879 ) (83,369 )restrictedsharesWeightedaverage common 11,088,615 11,059,540 11,049,279 11,050,138 11,048,293 11,061,391 11,030,441 sharesoutstandingBasic earningsand diluted $ 0.48 $ 0.40 $ 0.43 $ 0.37 $ 0.43 $ 1.68 $ 1.66 per share Three Months Twelve Months December 31, December 31, December 31, December 31,Reconciliationof Efficiency 2020 2020 2020 2020 Ratio Non-GAAP Actual Non-GAAP Actual Net interest 14,785 15,996 58,565 59,776 income (+)Noninterest 5,194 5,624 16,357 16,787 Income (+)Gain onSecurity Sale - - 270 270 (-)Operating 11,286 11,286 44,376 44,376 Expenses (/)Efficiency 56.49 % 52.20 % 59.44 % 58.17 %Ratio Three Months Twelve Months December 31, December 31, December 31, December 31, 2020 2020 2020 2020 Reconciliationof Return on Non-GAAP Actual Non-GAAP ActualAverage Assets Net income $ 6,776 $ 6,776 $ 20,095 $ 20,095 Less:Acceleratednet fee income (1,211 ) - (1,211 ) - forforgiveness ofPPP loansLess: Gain onsettlement of (430 ) - (430 ) - bank ownedlife insuranceTax effect 254 - 254 - Adjusted net 5,389 6,776 18,708 20,095 income Average Assets 1,891,648 1,891,648 1,770,284 1,770,284 ROA 1.14 % 1.43 % 1.06 % 1.14 %