GlobeNewswire Inc | Jul 21, 2021 08:00AM EDT

July 21, 2021

ARCHBOLD, Ohio, July 21, 2021 (GLOBE NEWSWIRE) -- Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2021 second quarter and year-to-date June 30, 2021.

2021 Second Quarter Financial and Operating Highlights (compared to the 2020 second quarter period unless noted):

-- Net income increased 3.7% to $5.0 million, and included one-time acquisition costs of $1.0 million -- Earnings increased 2.3% to $0.44 per basic and diluted share, and included one-time acquisition costs of $0.08 per basic and diluted share -- Net interest income after provision for loan losses increased by 17.9% to $15.3 million -- Noninterest income increased 21.1% to $4.0 million -- Second quarter after-tax income benefited from $0.35 million of accelerated fees associated with the Paycheck Protection Program (PPP) -- Loans have increased 3.9% organically year-to-date, not including recent acquisitions or PPP loans -- Net charge-offs to average loans were 0.00%, compared to 0.01% -- Adjusted return on average tangible equity increased to 11.28% from 9.98% -- Completed the acquisition of Ossian Financial -- Announced the acquisition of Perpetual Federal Savings Bank -- Appointed Frank R. Simon to the Board of Directors -- Opened a new full-service office in Fort Wayne, IN

I am excited by the progress F&M is making as we continue to achieve strong execution across all of our key business strategies, while deepening customer relationships, expanding into new markets, and delivering robust operating and financial results, stated Lars B. Eller, President and Chief Executive Officer. In 2019 we created a strategic plan aimed at growing earnings and creating value for shareholders by increasing total assets from $1.6 billion to $3.0 billion by 2023. We expect earnings growth will accelerate in the coming quarters as we benefit from the progress we are making on executing our strategic growth plan.

On April 30, 2021, F&M successfully closed the acquisition of Ossian Financial Services, Inc (OFSI). OFSI is F&Ms third recent acquisition in Northeast Indiana and immediately enhances the Companys growing franchise within the state. The integration and conversion were completed during the second quarter, and OFSIs offices and online portal have transitioned to F&M. Also, in the 2021 second quarter, the Company announced the upcoming acquisition of Perpetual Federal Savings Bank (PFSB), expanding F&Ms community banking franchise into the compelling Urbana, Columbus, Dayton, Springfield, Piqua, Tipp City, Troy, and Sidney markets. The Company expects the PFSB acquisition to close in October 2021.

Mr. Eller continued, Acquisition growth is an important component of our strategic growth plan and over the past 12 months we have announced two bank acquisitions and acquired an Indiana based wealth management company. Through the OFSI and PFSB acquisitions, we expect to add a combined $513 million in new assets and $413 million in new deposits. F&M will also see expense benefits as we re-align our footprint and add new customers to a single platform, which will help to contribute to earnings and allow us to further invest in technology to improve the experience for our customers and employees.

Mr. Eller continued, Despite our recent growth and expansion, we remain committed to honoring the community banking values that are responsible for our accomplishments over the past 124 years and continue to drive our success today. As a result, F&M has continued to experience strong organic loan growth outside of PPP and acquired loans during the first half of 2021. Organic loans have increased 3.9% year-to-date. In addition, our credit portfolio remains strong and 30+ days past due accounts as of June 30, 2021 were 0.12%, the lowest level since 2018.

Income StatementNet income for the 2021 second quarter ended June 30, 2021, was $5.0 million, compared to $4.8 million for the same period last year. Net income per basic and diluted share for the 2021 second quarter was $0.44, compared to $0.43 for the same period last year. Net income for the 2021 first half ended June 30, 2021, was $9.9 million, compared to $8.9 million for the same period last year. Net income per basic and diluted share for the 2021 first half was $0.88, compared to $0.80 for the same period last year.

Net income for the 2021 second quarter and first half included one-time tax adjusted expenses of $0.8 million and $1.0 million, respectively. On a per share basis, for the 2021 second quarter and first half, net income included one-time tax adjusted expenses of $0.08 or $0.11, respectively, per basic and diluted share.

Mr. Eller continued, F&Ms larger size and expanded footprint have helped establish diversity within our revenue streams and insulated our earnings. For the 2021 first half, noninterest income as a percent of total revenue has increased to 20.8%, compared to 15.7% for the same period last year. In addition, during the 2021 first half, we have incurred several one-time costs due to our strategic growth focus, which has reduced the level of profitability we are accustomed to seeing. However, we expect to realize significant long-term benefits from our strategies and we believe we will experience an acceleration in profitability in the coming quarters.

DepositsAt June 30, 2021, total deposits were $1.854 billion, an increase of 25.5% from June 30, 2020, and an increase of 16.2% from December 31, 2020. The significant organic deposit growth being experienced is a result of continued strength in expanding relationships with new and existing customers, the benefits of PPP activity, and the completion of the Ossian Financial Services, Inc. acquisition. 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 June 30, 2021, increased 8.4%, or by $113.7 million to $1.458 billion, compared to $1.345 billion at June 30, 2020, and up from $1.303 billion at December 31, 2020. The year-over-year improvement resulted primarily from the contribution of continued organic loan growth and the completion of the Ossian Financial Services, Inc. acquisition. In addition, during the 2021 second quarter, the Company processed $12.9 million of PPP loan forgiveness and principal payments received, resulting in a total of $47.0 million of PPP loans within F&Ms loan portfolio at June 30, 2021.

Mr. Eller continued: At June 30, 2021, there were only two loans totaling $0.6 million of COVID-related payment modifications, all of which are interest-only modifications and secured by real estate. This compares to 190 loans representing a balance of $165 million in deferrals at the peak last year. As economic activity stabilizes, and our loan performance improves better than pre-pandemic levels, we expect contributions to our allowance for loan losses will also stabilize and align with loan growth in future periods.

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $7.0 million, or 0.48% of total loans at June 30, 2021, compared to $8.5 million, or 0.63% at June 30, 2020.

Mr. Eller continued, As we work to integrate and close our recent acquisitions, we remain focused on operational excellence, investments in technology, supporting our communities, and ensuring a best-in-class experience for our customers. In addition, we are committed to attracting and retaining experienced professionals across our organization, and I am encouraged with the addition of Frank R. Simon to our Board of Directors. We continue to believe 2021 will be a transformative year for F&M and we expect our enhanced scale and operating platform will magnify shareholder value.

Stockholders Equity and DividendsTotal stockholders equity increased 4.3% to $250.6 million at June 30, 2021, from $240.3 million at June 30, 2020. At June 30, 2021, the Company had a Tier 1 leverage ratio of 8.78%, compared to 10.70% at June 30, 2020.

Tangible stockholders equity increased to $189.6 million at June 30, 2021, compared to $181.7 million at June 30, 2020. On a per share basis, tangible stockholders equity at June 30, 2021, was $16.94 per share, compared to $16.33 per share at June 30, 2020.

For the six months ended June 30, 2021, the Company has declared cash dividends of $0.34 per share, which is a 6.3% increase over the 2020 six-month declared dividend payment. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over 26 consecutive years. For the six months ended June 30, 2021, the dividend payout ratio was 38.18% compared to 39.69% for the same period last year.

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. 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 SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME (Unaudited) (in thousands of dollars, except per share data) Three Months Ended Six Months Ended June 30, March 31, December 31, September June 30, June 30, June 30, 2021 2021 2020 30, 2020 2020 2021 2020Interest Income Loans, including $ 16,259 $ 15,612 $ 17,061 $ 16,181 $ 16,192 $ 31,871 $ 32,075 feesDebt securities: U.S. Treasury andgovernment 857 751 695 761 767 1,608 1,913 agenciesMunicipalities 289 308 295 279 243 597 505 Dividends 31 50 35 36 26 81 71 Federal funds sold 6 5 5 4 5 11 11 Other. 88 39 48 32 40 127 162 Total interest 17,530 16,765 18,139 17,293 17,273 34,295 34,737 incomeInterest Expense Deposits 1,276 1,340 1,619 1,864 2,254 2,616 5,155 Federal fundspurchased andsecurities sold 163 166 170 174 187 329 431 under agreementsto repurchaseBorrowed funds 115 222 226 231 257 337 523 Total interest 1,554 1,728 2,015 2,269 2,698 3,282 6,109 expenseNet Interest Income -Before Provision for 15,976 15,037 16,124 15,024 14,575 31,013 28,628 Loan LossesProvision for Loan 641 1,700 1,995 1,987 1,569 2,341 2,999 LossesNet Interest IncomeAfter Provision For 15,335 13,337 14,129 13,037 13,006 28,672 25,629 Loan LossesNoninterest Income Customer service 2,198 2,814 2,750 2,299 2,258 5,012 3,844 feesOther service 874 838 980 879 704 1,712 1,743 charges and feesNet gain on sale 955 1,046 1,894 1,537 364 2,001 591 of loansNet gain on saleof - 293 - - - 293 270 available-for-salesecuritiesTotal noninterest 4,027 4,991 5,624 4,715 3,326 9,018 6,448 incomeNoninterest ExpenseSalaries and wages 4,591 4,390 5,068 5,102 4,095 8,981 8,266 Employee benefits 1,915 1,994 1,140 1,566 1,218 3,909 2,895 Net occupancy 546 577 585 558 564 1,123 1,128 expenseFurniture and 848 791 760 875 750 1,639 1,508 equipmentData processing 428 505 428 490 408 933 850 Franchise taxes 294 446 241 368 369 740 737 ATM expense 459 449 456 444 376 908 790 Advertising 331 235 353 411 265 566 568 Net (gain) loss onsale of other 227 (25 ) 20 (7 ) (7 ) 202 (6 ) assets ownedFDIC assessment 276 236 223 194 144 512 216 Mortgage servicingrights 524 505 247 296 356 1,029 488 amortizationConsulting fees 394 223 407 205 217 617 356 Other general and 2,227 2,033 1,358 1,553 1,612 4,260 3,293 administrativeTotal noninterest 13,060 12,359 11,286 12,055 10,367 25,419 21,089 expenseIncome Before 6,302 5,969 8,467 5,697 5,965 12,271 10,988 Income TaxesIncome Taxes 1,319 1,060 1,691 1,287 1,161 2,379 2,079 Net Income 4,983 4,909 6,776 4,410 4,804 9,892 8,909 OtherComprehensive Income (Loss) (Netof Tax):Net unrealized gain(loss) on 786 (6,737 ) (207 ) 639 661 (5,951 ) 5,659 available-for-salesecuritiesReclassificationadjustment forrealized gain on sale - (293 ) - - - (293 ) (270 ) of available-for-salesecuritiesNet unrealized gain(loss) on 786 (7,030 ) (207 ) 639 661 (6,244 ) 5,389 available-for-salesecuritiesTax expense 165 (1,476 ) (44 ) 134 139 (1,311 ) 1,132 (benefit)Othercomprehensive 621 (5,554 ) (163 ) 505 522 (4,933 ) 4,257 income (loss)Comprehensive $ 5,604 $ (645 ) $ 6,613 $ 4,915 $ 5,326 $ 4,959 $ 13,166 Income (Loss)Basic and Diluted $ 0.44 $ 0.44 $ 0.60 $ 0.40 $ 0.43 $ 0.88 $ 0.80 Earnings Per ShareDividends Declared $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.16 $ 0.34 $ 0.32



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

June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020 2020 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Assets Cash and due from banks $ 93,636 $ 118,139 $ 98,279 $ 46,395 $ 54,336 Federal funds sold 57,483 57,361 77,427 41,358 31,105 Total cash and cash equivalents 151,119 175,500 175,706 87,753 85,441 Interest-bearing time 18,597 4,405 4,653 4,657 4,636 depositsSecurities - 407,500 352,974 307,812 259,041 236,292 available-for-saleOther securities, at cost 6,419 5,939 5,939 5,827 5,810 Loans held for sale 8,041 7,511 8,391 7,621 11,445 Loans, net 1,443,336 1,327,254 1,288,667 1,351,979 1,334,790 Premises and equipment 26,915 26,703 27,063 26,776 26,049 Goodwill 56,066 47,340 47,340 47,340 47,340 Mortgage servicing rights 3,146 3,444 3,320 3,027 2,740 Other real estate owned 198 148 71 206 135 Bank owned life insurance 27,218 25,347 25,208 15,501 15,399 Other assets 18,310 16,720 15,374 16,872 14,370 Total Assets $ 2,166,865 $ 1,993,285 $ 1,909,544 $ 1,826,600 $ 1,784,447 Liabilities and Stockholders' Equity Liabilities Deposits Noninterest-bearing $ 443,863 $ 384,558 $ 351,147 $ 330,845 $ 336,027 Interest-bearing NOW accounts 652,078 605,533 542,317 534,792 504,846 Savings 501,687 451,043 455,145 392,059 374,871 Time 256,445 242,717 247,553 261,177 261,631 Total deposits 1,854,073 1,683,851 1,596,162 1,518,873 1,477,375 Federal funds purchased and 29,882 30,072 30,239 29,859 30,949 securities sold under agreements to repurchaseFederal Home Loan Bank 17,868 17,840 17,861 17,724 19,087 (FHLB) advancesDividend payable 1,888 1,889 1,889 1,882 1,768 Accrued expenses and other 12,569 12,805 14,233 14,841 14,971 liabilities Total liabilities 1,916,280 1,746,457 1,660,384 1,583,179 1,544,150 Commitments and Contingencies Stockholders' Equity Common stock - No par value 20,000,000 sharesauthorized; issued and outstanding 12,230,000 82,259 82,030 81,804 81,577 82,134 shares 6/30/21 and 12/31/20Treasury stock - 1,040,948 shares 6/30/21, (12,172 ) (11,962 ) (11,932 ) (12,397 ) (12,668 ) 1,032,456 shares 12/31/20Retained earnings 179,734 176,617 173,591 168,381 165,476 Accumulated other comprehensive income 764 143 5,697 5,860 5,355 Total 250,585 246,828 249,160 243,421 240,297 stockholders' equity Total Liabilities and Stockholders' Equity $ 2,166,865 $ 1,993,285 $ 1,909,544 $ 1,826,600 $ 1,784,447



FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIESSELECT FINANCIAL DATA For the Three Months Ended For the Six Months EndedSelected financial June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020 June 30, 2021 June 30, 2020data 2020 2020Return on average 0.90 % 1.01 % 1.43 % 0.98 % 1.10 % 0.98 % 1.06 %assetsReturn on average 8.00 % 7.87 % 11.04 % 7.28 % 8.07 % 7.94 % 7.57 %equityYield on earning 3.53 % 3.71 % 4.09 % 4.04 % 4.25 % 3.61 % 4.44 %assetsCost of interest 0.44 % 0.53 % 0.64 % 0.74 % 0.91 % 0.48 % 1.06 %bearing liabilitiesNet interest spread 3.09 % 3.18 % 3.45 % 3.30 % 3.34 % 3.13 % 3.38 %Net interest margin 3.21 % 3.33 % 3.63 % 3.51 % 3.59 % 3.27 % 3.67 %Efficiency 64.98 % 62.57 % 52.20 % 62.11 % 57.91 % 63.72 % 60.43 %Dividend payout ratio 37.89 % 38.48 % 27.77 % 42.66 % 36.80 % 38.18 % 39.69 %Tangible book value $ 16.94 $ 17.50 $ 17.19 $ 16.78 $ 16.33 per share (1)Tier 1 capital to 8.78 % 10.39 % 10.46 % 10.65 % 10.70 % average assetsAverage Shares 11,191,043 11,197,012 11,177,765 11,142,797 11,129,341 11,194,011 11,132,105 Outstanding Loans June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020 2020 2020(Dollar amounts in thousands)Commercial real $ 691,122 $ 618,754 $ 588,825 $ 595,146 $ 589,382 estateAgricultural real 189,742 179,945 189,159 192,883 194,606 estateConsumer real estate 194,715 175,675 175,588 175,963 174,069 Commercial and 216,609 202,958 189,246 238,175 223,842 industrialAgricultural 100,756 100,022 94,358 103,330 107,458 Consumer 56,427 54,445 52,540 53,320 50,108 Other 13,549 14,088 15,757 9,030 9,714 Less: Netdeferred loan fees (4,497 ) (4,208 ) (2,483 ) (3,985 ) (4,456 ) and costsTotal loans,net $ 1,458,423 $ 1,341,679 $ 1,302,990 $ 1,363,862 $ 1,344,723 Asset quality data June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020 2020 2020(Dollar amounts in thousands)Nonaccrual loans $ 7,031 $ 8,139 $ 9,404 $ 7,870 $ 8,473 Troubled debt $ 5,492 $ 5,774 $ 6,514 $ 7,028 $ 7,034 restructuring90 day past due and $ - $ - $ - $ - $ - accruingNonperforming loans $ 7,031 $ 8,139 $ 9,404 $ 7,870 $ 8,473 Other real estate $ 198 $ 148 $ 71 $ 206 $ 135 ownedNonperforming assets $ 7,229 $ 8,287 $ 9,475 $ 8,076 $ 8,608 (Dollar amounts in thousands)Allowance for loan $ 15,087 $ 14,425 $ 13,672 $ 11,883 $ 10,538 and lease lossesAllowance for loanand lease losses/ 1.03 % 1.08 % 1.05 % 0.87 % 0.78 % total loansNet charge-offs (recoveries):Quarter-to-date $ (21 ) $ 947 $ 205 $ 37 $ 169 Year-to-date $ 926 $ 947 $ 537 $ 331 $ 294 Net charge-offs to average loansQuarter-to-date 0.00 % 0.07 % 0.02 % 0.00 % 0.01 % Year-to-date 0.07 % 0.07 % 0.04 % 0.03 % 0.02 % Nonperforming loans/ 0.48 % 0.61 % 0.72 % 0.58 % 0.63 % total loansAllowance for loanand lease losses/ 214.58 % 177.24 % 177.96 % 151.01 % 117.24 % nonperforming loans (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 June 30, 2021 June 30, 2020

Interest Average Interest/ Annualized Average Interest/ Annualized Earning Balance Dividends Yield/Rate Balance Dividends Yield/RateAssets:Loans $ 1,419,531 $ 16,259 4.58 % $ 1,321,405 $ 16,192 4.90 % Taxableinvestment 367,249 1,100 1.20 % 189,977 931 1.96 % securitiesTax-exemptinvestment 17,497 77 2.23 % 21,915 105 2.43 % securitiesFed funds 187,583 94 0.20 % 93,041 45 0.19 % sold & otherTotalInterest 1,991,860 $ 17,530 3.53 % 1,626,338 $ 17,273 4.25 % EarningAssets Nonearning 228,036 125,730 Assets Total Assets $ 2,219,896 $ 1,752,068 InterestBearing Liabilities:Savings $ 1,123,157 $ 566 0.20 % $ 859,644 $ 954 0.44 % depositsOther time 250,277 710 1.13 % 269,897 1,300 1.93 % depositsOtherborrowed 17,859 115 2.58 % 23,496 257 4.38 % moneyFed fundspurchased &securities 29,980 163 2.17 % 30,300 187 2.47 % sold underagreement torepurchaseTotalInterest $ 1,421,273 $ 1,554 0.44 % $ 1,183,337 $ 2,698 0.91 % BearingLiabilities Noninterestbearing 549,610 330,611 Liabilities Stockholders $ 249,013 $ 238,120 Equity Net InterestIncome and $ 15,976 3.09 % $ 14,575 3.34 % InterestRate Spread Net Interest 3.21 % 3.59 % 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 Six Months Ended For the Six Months Ended June 30, 2021 June 30, 2020

Interest Average Interest/ Annualized Average Interest/ Annualized Earning Balance Dividends Yield/Rate Balance Dividends Yield/RateAssets:Loans $ 1,374,302 $ 31,871 4.64 % $ 1,279,127 $ 32,075 5.02 % Taxableinvestment 345,893 2,109 1.22 % 190,067 2,252 2.37 % securitiesTax-exemptinvestment 18,936 177 2.37 % 25,374 237 2.36 % securitiesFed funds 162,646 138 0.17 % 71,927 173 0.48 % sold & otherTotalInterest 1,901,777 $ 34,295 3.61 % 1,566,495 $ 34,737 4.44 % EarningAssets Nonearning 126,533 117,818 Assets Total Assets $ 2,028,310 $ 1,684,313 InterestBearing Liabilities:Savings $ 1,069,179 $ 1,140 0.21 % $ 816,610 $ 2,439 0.60 % depositsOther time 246,155 1,476 1.20 % 273,738 2,716 1.98 % depositsOtherborrowed 17,854 337 3.78 % 24,141 523 4.33 % moneyFed fundspurchased &securities 30,095 329 2.19 % 34,627 431 2.49 % sold underagreement torepurchaseTotalInterest $ 1,363,283 $ 3,282 0.48 % $ 1,149,116 $ 6,109 1.06 % BearingLiabilities Noninterestbearing 415,722 299,859 Liabilities Stockholders $ 249,305 $ 235,338 Equity Net InterestIncome and $ 31,013 3.13 % $ 28,628 3.38 % InterestRate Spread Net Interest 3.27 % 3.67 % 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. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

Non-GAAP Allowance for Loan Losses, excluding PPP Loans (in thousands of dollars, except percentages) June 30, 2021 Allowance for Loan Losses $ 15,087 Credit Mark 2,172 Total Credit Mark and Allowance for Loan Losses 17,259 Loans $ 1,458,423 Adjustments PPP Loans (47,041 ) Loans excluding PPP Loans $ 1,411,382 Allowance for Loan Losses 1.03 % Effect of Credit Mark 0.15 % Effect of PPP Loans 0.04 % Allowance for Loan Losses, excluding PPP Loans 1.22 %



FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIESNON-GAAP RECONCILIATION OF NET INCOME (in thousands of (in thousands of dollars) dollars) Three Months Ended Six Months EndedNon-GAAP Reconciliation June 30, June 30, June 30, June 30,of Net Income 2021 2020 2021 2020 (Unaudited) (Unaudited)Net income as reported $ 4,983 $ 4,804 $ 9,892 $ 8,909Net income from OssianFinancial Services, Inc $ 54 $ - $ 269 $ -prior to acquisitionAcquisition expenses 1,092 - 1,248 -Tax effect (224 ) - (295 ) -Net income excluding $ 5,905 $ 4,804 $ 11,114 $ 8,909acquisition expenses



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