FMAO Farmers and Merchants Bancorp Inc

Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) today reported financial results for the 2023 third quarter and year-to-date September 30, 2023.

2023 Third Quarter Financial and Operating Highlights (on a year-over-year basis unless noted):

• 82 consecutive quarters of profitability
• Net income was $4.8 million, or $0.35 per basic and diluted share
• Stockholders’ equity increased 8.1% to $303.2 million
• Regulatory tangible book value per share increased 2.8% to $18.36 per share
• Total loans were a record of $2.53 billion and increased 7.2% from $2.36 billion at December 31, 2022
• Total assets increased 16.2% to a record $3.23 billion
• Deposits increased 4.3% to a record $2.58 billion
• Asset quality remains strong as nonperforming loans were 0.89% of total loans
• Net charge-offs to average loans were 0.00%
• Allowance for credit losses was 112.61% of nonperforming loans
• Tier 1 leverage ratio decreased to 8.02% from 9.11% last year
• Strategic investments to support long-term growth continue as F&M has opened new offices, unveiled new branding and a new logo, launched new deposit products, and implemented new features across its website and online banking platform

Lars B. Eller, President and Chief Executive Officer, stated, “Throughout 2023, we have been focused on executing against our strategic growth plan, while simultaneously navigating a challenging banking environment. I am pleased with the progress we are making as F&M opened two full-service offices in Oxford and Toledo, Ohio last quarter and since the end of the third quarter, the Bank has opened additional offices in Fort Wayne, Indiana and Birmingham, Michigan. We have also recently launched a new shared services group formation, invested in new internal audit and marketing capabilities, and restructured our HR department.”

Mr. Eller continued, “With most of the planned investments behind us, we are focused on scaling our new offices by expanding relationships within these new and existing markets. Early indications are encouraging and reflect F&M’s strong team of local bankers. As a result of our efforts across our new and existing offices, third-quarter deposits increased 4.3% from the second quarter to a record $2.58 billion, which included a 3.3% increase in non-interest-bearing deposits. We expect future deposit growth over the next quarters as our growth strategies accelerate and we benefit from new checking accounts that have been opened since the start of the year.”

Income StatementNet income for the 2023 third quarter ended September 30, 2023, was $4.8 million, compared to $9.0 million for the same period last year. Net income per basic and diluted share for the 2023 third quarter was $0.35, compared to $0.68 for the same period last year. Net income for the 2023 nine months ended September 30, 2023, was $17.2 million, compared to $25.3 million for the same period last year. Net income per basic and diluted share for the 2023 nine months was $1.26, compared to $1.94 for the same period last year.

“The rapid rise in the Federal Funds Rate continued to impact our cost of funds and increase the competition for deposits. As a result, our cost of interest-bearing liabilities has increased to 2.82% at September 30, 2023, from 0.68% at September 30, 2022. Our loan portfolio has also lagged in capturing sufficient yield to match the higher cost of funds mainly due to the timing to reprice our commercial real estate adjustable-rate mortgages. 13.3% of the loan portfolio will be subject to repricing next quarter with 22.3% subject to repricing in the next twelve months. These trends during the third quarter caused a 12.9% year-over-year decline in net interest income and impacted overall profitability. As we navigate a challenging rate environment over the near term, we continue to believe we are well positioned for net income growth to re-accelerate in 2024 and beyond, as we benefit from continued strong asset quality, and the contribution of our growth initiatives,” continued Mr. Eller.

DepositsAt September 30, 2023, total deposits were $2.58 billion, an increase of 12.8% from September 30, 2022, and an increase of 4.3% from December 31, 2022. The Company’s cost of interest-bearing liabilities was 2.82% for the quarter ended September 30, 2023, compared to 0.68% for the quarter ended September 30, 2022, and 1.32% for the quarter ended December 31, 2022.

At September 30, 2023, F&M’s average deposit account had an average balance of $25,426. In addition, uninsured deposits to total deposits were approximately 9.1% for the quarter ended September 30, 2023, and the percentage of uninsured by the FDIC was 18.84%.  

Loan Portfolio and Asset QualityTotal loans, net at September 30, 2023, increased 18.1%, or by $3.87 million to $2.53 billion, compared to $2.14 billion at September 30, 2022, and up 7.2% from $2.36 billion at December 31, 2022. The year-over-year improvement resulted primarily from the contribution of continued organic loan growth and the completion of the Peoples acquisition. Not including the Peoples acquisition, total net loans increased 13.2% organically, or by $282.8 million from the same period a year ago.

F&M continues to closely monitor its loan portfolio with a particular emphasis on higher risk sectors. Nonperforming loans were $22.4 million, or 0.89% of total loans at September 30, 2023, compared to $5.5 million, or 0.26% at September 30, 2022. At September 30, 2023, nonperforming loans increased by $16.2 million from June 30, 2023, which was primarily due to one agricultural relationship where the Bank is well collateralized and does not foresee a loss.

F&M maintains a well-balanced, diverse and high performing CRE portfolio. CRE loans represented 51.6% of the Company’s total loan portfolio at September 30, 2023. In addition, F&M’s commercial real estate office credit exposure represented 5.1% of the Company's total loan portfolio at September 30, 2023, with a weighted average loan-to-value of approximately 64% and an average loan of $870,000.

F&M’s CRE portfolio included the following categories at September 30, 2023:

CRE Category		Dollar Balance			Percent of CRE Portfolio(*)			Percent of Total Loan Portfolio(*)
Multi-family		$	241,804		18.5	%		9.5	%
Industrial		$	228,644		17.5	%		9.0	%
Retail		$	212,383		16.3	%		8.4	%
Hotels		$	133,579		10.2	%		5.3	%
Office		$	129,619		9.9	%		5.1	%
Gas Stations		$	61,484		4.7	%		2.4	%
Food Service		$	49,578		3.8	%		2.0	%
Mixed Use		$	39,842		3.1	%		1.6	%
Senior Living		$	35,788		2.7	%		1.4	%
Other		$	171,387		13.1	%		6.8	%
Total CRE		$	1,304,118		100.0	%		51.4	%

* Numbers have been rounded

At September 30, 2023, the Company’s allowance for credit losses to nonperforming loans was 112.61%, compared to 365.44% at September 30, 2022. The allowance to total loans was 1.00% at September 30, 2023, compared to 0.93% at September 30, 2022. As a result of F&M’s recent acquisitions, the Company had an accretable yield adjustment of $4.6 million at September 30, 2023, which further enhances F&M’s allowance, compared to $6.0 million at September 30, 2022. Including the accretable yield adjustment, F&M’s allowance for credit losses to total loans was 1.18% at September 30, 2023, compared to 1.21% at September 30, 2022.

Mr. Eller concluded, “At September 30, 2023, we saw nonperforming loans increase to 0.89% primarily due to one agricultural relationship where the Bank is well collateralized and does not foresee a loss. As we work through this credit, we are closely monitoring our loan portfolio for signs of stress, but overall, we expect our conservative credit culture and pricing will allow us to maintain excellent asset quality throughout various economic cycles. In addition, at September 30, 2023, we had the lowest level of loans over 30 days past due this year.   While we continue to believe 2023 will be a transitional year, we believe we are well positioned to emerge from this period with increased market share and higher profitability and I look forward to reporting on our success in the coming quarters. Our financial performance ratios reflect the pressure on the net interest margin and the cost of the strategic investments we have made. We are cognizant of the short-term expense and are confident it will enable long-term gains.”

Stockholders’ Equity and DividendsTotal stockholders’ equity increased 8.1% to $303.2 million at September 30, 2023, from $280.6 million at September 30, 2022. At September 30, 2023, the Company had a Tier 1 leverage ratio of 8.02%, compared to 9.11% at September 30, 2022.

Based on a regulatory basis, tangible stockholders’ equity increased to $250.9 million at September 30, 2023, compared to $234.1 million at September 30, 2022. On a per share basis, tangible stockholders’ equity at September 30, 2023, was $18.36 per share, compared to $17.86 per share at September 30, 2022.

For the nine months ended September 30, 2023, the Company has declared cash dividends of $0.63 per share, which is a 4.6% increase over the same period last year. F&M is committed to returning capital to shareholders and has increased the annual cash dividend for over 28 consecutive years. For the nine months ended September 30, 2023, the dividend payout ratio was 60.07% compared to 30.45% for the same period last year.

About Farmers & Merchants State Bank: Farmers & Merchants Bancorp, Inc. (Nasdaq: FMAO) is the holding company of F&M Bank, a local independent community bank that has been serving its communities since 1897. F&M Bank provides commercial banking, retail banking and other financial services. Our locations are in Butler, Champaign, Fulton, Defiance, Hancock, Henry, Lucas, Shelby, Williams, and Wood counties in Ohio. In Northeast Indiana, we have offices located in Adams, Allen, DeKalb, Jay, Steuben and Wells counties. The Michigan footprint includes Oakland County, and F&M has Loan Production Offices in West Bloomfield, Michigan; Muncie, Indiana; and Bryan, Ohio.

Safe Harbor 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 management’s expectations and comments, may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Exchange Act of 1934, as amended. Actual results could vary materially depending on risks and uncertainties inherent in general and local banking conditions, competitive factors specific to markets in which F&M and its subsidiaries operate, future interest rate levels, legislative and regulatory decisions, capital market conditions, or the effects of the COVID-19 pandemic, and its impacts on our credit quality and business operations, as well as its impact on general economic and financial market conditions. F&M assumes no responsibility to update this information. For more details, please refer to F&M’s SEC filing, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q. Such filings can be viewed at the SEC’s website, www.sec.gov or through F&M’s website www.fm.bank.

Non-GAAP Financial Measures This press release includes disclosure of financial measures not prepared in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed by GAAP. Farmers & Merchants Bancorp, Inc. believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and Farmers & Merchants Bancorp, Inc.’s marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial measures is included within this press release.

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

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
(Unaudited) (in thousands of dollars, except per share data)
			Three Months Ended																				Nine Months Ended
			September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022				September 30, 2023				September 30, 2022
Interest Income
Loans, including fees			$	33,783			$	31,365			$	29,703			$	27,302			$	24,119			$	94,851			$	66,962
Debt securities:
U.S. Treasury and government agencies				1,005				1,030				1,068				1,118				1,049				3,103				3,107
Municipalities				392				401				408				420				373				1,201				995
Dividends				246				148				123				126				93				517				192
Federal funds sold				6				9				21				2				-				36				19
Other				927				424				479				524				213				1,830				382
Total interest income				36,359				33,377				31,802				29,492				25,847				101,538				71,657
Interest Expense
Deposits				13,323				10,434				8,151				4,978				2,166				31,908				4,905
Federal funds purchased and securities sold
under agreements to repurchase				349				427				405				463				416				1,181				734
Borrowed funds				2,741				2,113				1,280				1,209				398				6,134				951
Subordinated notes				284				285				284				285				284				853				837
Total interest expense				16,697				13,259				10,120				6,935				3,264				40,076				7,427
Net Interest Income - Before Provision for Credit Losses*				19,662				20,118				21,682				22,557				22,583				61,462				64,230
Provision for Credit Losses - Loans*				460				143				817				755				1,637				1,420				3,845
Provision for Credit Losses - Off Balance Sheet Credit Exposures*				(76	)			(129	)			62				-				-				(143	)			-
Net Interest Income After Provision for Credit Losses*				19,278				20,104				20,803				21,802				20,946				60,185				60,385
Noninterest Income
Customer service fees				2,208				2,361				2,447				2,862				2,300				7,016				7,096
Other service charges and fees				1,162				1,803				2,554				1,115				1,105				5,519				3,111
Net gain on sale of loans				294				108				67				165				327				469				1,188
Net loss on sale of available-for-sale securities				-				-				(891	)			-				-				(891	)			-
Total noninterest income				3,664				4,272				4,177				4,142				3,732				12,113				11,395
Noninterest Expense
Salaries and wages				6,777				6,500				6,657				6,353				5,479				19,934				16,347
Employee benefits				2,066				2,071				2,165				1,911				1,392				6,302				4,992
Net occupancy expense				950				840				856				753				693				2,646				1,813
Furniture and equipment				1,189				1,211				1,252				1,096				1,047				3,652				3,111
Data processing				840				796				726				1,917				781				2,362				2,039
Franchise taxes				434				379				366				(45	)			254				1,179				1,429
ATM expense				640				683				623				561				580				1,946				1,656
Advertising				865				830				514				531				578				2,209				1,115
Net (gain) loss on sale of other assets owned				49				-				-				12				-				49				(271	)
FDIC assessment				586				496				306				250				271				1,388				655
Mortgage servicing rights amortization - net				106				164				159				110				(50	)			429				35
Consulting fees				179				231				230				637				254				640				665
Other general and administrative				2,363				2,643				3,077				2,964				2,192				8,083				6,613
Total noninterest expense				17,044				16,844				16,931				17,050				13,471				50,819				40,199
Income Before Income Taxes				5,898				7,532				8,049				8,894				11,207				21,479				31,581
Income Taxes				1,121				1,531				1,583				1,706				2,253				4,235				6,254
Net Income				4,777				6,001				6,466				7,188				8,954				17,244				25,327
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities				(4,514	)			(5,996	)			8,030				(628	)			(8,197	)			(2,480	)			(43,738	)
Reclassification adjustment for realized loss on sale of available-for-sale securities				-				-				891				-				-				891				-
Net unrealized gain (loss) on available-for-sale securities				(4,514	)			(5,996	)			8,921				(628	)			(8,197	)			(1,589	)			(43,738	)
Tax expense (benefit)				(947	)			(1,260	)			1,874				(132	)			(1,721	)			(333	)			(9,185	)
Other comprehensive income (loss)				(3,567	)			(4,736	)			7,047				(496	)			(6,476	)			(1,256	)			(34,553	)
Comprehensive Income (Loss)			$	1,210			$	1,265			$	13,513			$	6,692			$	2,478			$	15,988			$	(9,226	)
Basic Earnings Per Share			$	0.35			$	0.44			$	0.47			$	0.53			$	0.68			$	1.26			$	1.94
Diluted Earnings Per Share			$	0.35			$	0.44			$	0.47			$	0.53			$	0.68			$	1.26			$	1.94
Dividends Declared			$	0.2100			$	0.2100			$	0.2100			$	0.2100			$	0.2100			$	0.6300			$	0.6025
*ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands of dollars, except share data)
			September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
			(Unaudited)				(Unaudited)				(Unaudited)								(Unaudited)
Assets
Cash and due from banks			$	151,711			$	69,760			$	62,780			$	83,085			$	69,680
Federal funds sold				1,471				1,433				1,545				1,324				990
	Total cash and cash equivalents			153,182				71,193				64,325				84,409				70,670
Interest-bearing time deposits				2,989				3,485				4,435				4,442				5,187
Securities - available-for-sale				348,255				363,225				372,975				390,789				395,485
Other securities, at cost				16,995				17,535				11,543				9,799				8,227
Loans held for sale				1,039				1,459				951				827				2,182
Loans, net				2,504,329				2,490,883				2,422,018				2,336,074				2,122,626
Premises and equipment				31,723				30,398				28,679				28,381				26,484
Construction in progress				3,044				2,290				1,565				278				-
Goodwill				86,358				86,358				86,358				86,358				80,434
Loan servicing rights				5,687				5,635				4,985				3,549				3,583
Bank owned life insurance				33,691				33,470				33,269				33,073				28,051
Other assets				47,388				41,512				38,972				37,372				40,831
Total Assets			$	3,234,680			$	3,147,443			$	3,070,075			$	3,015,351			$	2,783,760
	Liabilities and Stockholders' Equity
Liabilities
Deposits
	Noninterest-bearing		$	505,358			$	488,678			$	520,145			$	532,794			$	506,928
	Interest-bearing
	NOW accounts			778,133				770,113				800,230				750,887				705,888
	Savings			591,344				581,192				590,854				627,203				607,375
	Time			700,445				628,757				601,939				557,980				462,845
	Total deposits			2,575,280				2,468,740				2,513,168				2,468,864				2,283,036
Federal funds purchased and securities
sold under agreements to repurchase				30,527				51,567				30,496				54,206				55,802
Federal Home Loan Bank (FHLB) advances				266,286				266,818				164,327				127,485				102,147
Other borrowings				-				-				-				10,000				10,000
Subordinated notes, net of unamortized issuance costs				34,673				34,644				34,615				34,586				34,557
Dividend payable				2,838				2,834				2,831				2,832				2,727
Accrued expenses and other liabilities				21,892				18,177				18,881				19,238				14,913
	Total liabilities			2,931,496				2,842,780				2,764,318				2,717,211				2,503,182
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and
outstanding 14,564,425 shares 9/30/23 and 12/31/22				135,171				135,647				135,241				135,497				121,811
Treasury stock - 898,843 shares 9/30/23 and 956,003 shares 12/31/22				(11,008	)			(11,298	)			(11,310	)			(11,573	)			(11,547	)
Retained earnings				218,510				216,236				213,012				212,449				208,051
Accumulated other comprehensive loss				(39,489	)			(35,922	)			(31,186	)			(38,233	)			(37,737	)
	Total stockholders' equity			303,184				304,663				305,757				298,140				280,578
Total Liabilities and Stockholders' Equity			$	3,234,680			$	3,147,443			$	3,070,075			$	3,015,351			$	2,783,760

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
SELECT FINANCIAL DATA
			For the Three Months Ended																			For the Nine Months Ended
Selected financial data		September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022				September 30, 2023				September 30, 2022
Return on average assets			0.59	%			0.77	%			0.84	%			0.96	%			1.31	%		0.73	%			1.25	%
Return on average equity			6.26	%			7.84	%			8.59	%			10.00	%			12.53	%		7.52	%			11.72	%
Yield on earning assets			4.79	%			4.53	%			4.41	%			4.18	%			4.00	%		4.57	%			3.76	%
Cost of interest bearing liabilities			2.82	%			2.35	%			1.85	%			1.32	%			0.68	%		2.35	%			0.53	%
Net interest spread			1.97	%			2.18	%			2.56	%			2.86	%			3.32	%		2.22	%			3.23	%
Net interest margin			2.59	%			2.73	%			3.01	%			3.20	%			3.49	%		2.77	%			3.37	%
Efficiency			73.07	%			69.06	%			63.53	%			50.46	%			51.19	%		68.24	%			53.16	%
Dividend payout ratio			60.07	%			47.22	%			43.79	%			39.39	%			30.45	%		49.50	%			40.58	%
Tangible book value per share (1)		$	18.36			$	18.21			$	17.92			$	17.69			$	17.86
Tier 1 leverage ratio			8.02	%			9.85	%			8.36	%			8.39	%			9.11	%
Average shares outstanding			13,650,823				13,632,440				13,615,655				13,606,876				13,083,145			13,633,101				13,071,859
Loans		September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
(Dollar amounts in thousands)
Commercial real estate		$	1,304,118			$	1,280,902			$	1,225,315			$	1,152,603			$	1,063,661
Agricultural real estate			225,672				230,837				227,897				220,819				205,089
Consumer real estate			512,973				506,866				502,974				494,423				416,001
Commercial and industrial			250,891				253,444				241,598				242,360				229,388
Agricultural			123,735				128,344				131,467				128,733				128,615
Consumer			83,024				88,312				89,588				89,147				70,602
Other			31,083				28,996				29,316				29,818				30,662
Less: Net deferred loan fees and costs			(1,890	)			(1,908	)			(1,503	)			(1,516	)			(1,402	)
Total loans,net		$	2,529,606			$	2,515,793			$	2,446,652			$	2,356,387			$	2,142,616
Asset quality data		September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
(Dollar amounts in thousands)
Nonaccrual loans		$	22,447			$	6,295			$	7,717			$	4,689			$	5,470
90 day past due and accruing		$	-			$	-			$	-			$	-			$	-
Nonperforming loans		$	22,447			$	6,295			$	7,717			$	4,689			$	5,470
Other real estate owned		$	-			$	-			$	-			$	-			$	-
Nonperforming assets		$	22,447			$	6,295			$	7,717			$	4,689			$	5,470
Allowance for credit losses (2)		$	25,277			$	24,910			$	24,507			$	20,313			$	19,990
Accretable yield adjustment			4,565				5,209				5,754				6,427				5,959
Adjusted credit losses with accretable yield included (2)		$	29,842			$	30,119			$	30,261			$	26,740			$	25,949
Allowance for credit losses/total loans (2)			1.00	%			0.99	%			1.00	%			0.86	%			0.93	%
Adjusted credit losses with accretable yield/total loans (2)			1.18	%			1.20	%			1.24	%			1.13	%			1.21	%
Net charge-offs:
Quarter-to-date		$	93			$	(133	)		$	60			$	431			$	71
Year-to-date		$	97			$	(73	)		$	60			$	529			$	97
Net charge-offs to average loans
Quarter-to-date			0.00	%			-0.01	%			0.00	%			0.02	%			0.00	%
Year-to-date			0.00	%			-0.00	%			0.00	%			0.03	%			0.00	%
Nonperforming loans/total loans			0.89	%			0.25	%			0.32	%			0.20	%			0.26	%
Allowance for credit losses/nonperforming loans (2)			112.61	%			395.71	%			319.22	%			273.67	%			365.44	%
(1) Tangible Equity = Stockholder Equity less goodwill, other intangibles (core deposit intangible, mortgage servicing rights and unrealized gain/loss on securities) plus CECL adjustment
(2) ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method.

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(in thousands of dollars, except percentages)
		For the Three Months Ended									For the Three Months Ended
		September 30, 2023									September 30, 2022
Interest Earning Assets:		Average Balance			Interest/Dividends			Annualized Yield/Rate			Average Balance			Interest/Dividends			Annualized Yield/Rate
Loans		$	2,536,885		$	33,783		5.33	%		$	2,082,486		$	24,119		4.63	%
Taxable investment securities			393,910			1,559		1.58	%			422,250			1,426		1.35	%
Tax-exempt investment securities			23,986			84		1.77	%			25,169			89		1.79	%
Fed funds sold & other			85,515			933		4.36	%			58,266			213		1.46	%
Total Interest Earning Assets			3,040,296		$	36,359		4.79	%			2,588,171		$	25,847		4.00	%
Nonearning Assets			180,193									150,044
Total Assets		$	3,220,489								$	2,738,215
Interest Bearing Liabilities:
Savings deposits		$	1,367,168		$	7,673		2.24	%		$	1,328,344		$	1,586		0.48	%
Other time deposits			667,880			5,650		3.38	%			423,668			580		0.55	%
Other borrowed money			266,467			2,741		4.11	%			60,455			398		2.63	%
Fed funds purchased & securities
sold under agreement to repurch.			34,128			349		4.09	%			63,388			416		2.63	%
Subordinated notes			34,654			284		3.28	%			34,538			284		3.29	%
Total Interest Bearing Liabilities		$	2,370,297		$	16,697		2.82	%		$	1,910,393		$	3,264		0.68	%
Noninterest Bearing Liabilities			544,801									542,077
Stockholders' Equity		$	305,391								$	285,745
Net Interest Income and Interest Rate Spread					$	19,662		1.97	%					$	22,583		3.32	%
Net Interest Margin								2.59	%								3.49	%
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 Nine Months Ended									For the Nine Months Ended
		September 30, 2023									September 30, 2022
Interest Earning Assets:		Average Balance			Interest/Dividends			Annualized Yield/Rate			Average Balance			Interest/Dividends			Annualized Yield/Rate
Loans		$	2,470,770		$	94,851		5.12	%		$	1,997,081		$	66,962		4.47	%
Taxable investment securities			396,917			4,544		1.53	%			424,882			4,065		1.28	%
Tax-exempt investment securities			24,865			277		1.88	%			21,794			229		1.77	%
Fed funds sold & other			67,869			1,866		3.67	%			101,922			401		0.52	%
Total Interest Earning Assets			2,960,421		$	101,538		4.57	%			2,545,679		$	71,657		3.76	%
Nonearning Assets			176,568									158,378
Total Assets		$	3,136,989								$	2,704,057
Interest Bearing Liabilities:
Savings deposits		$	1,373,110		$	18,854		1.83	%		$	1,315,793		$	2,951		0.30	%
Other time deposits			620,071			13,054		2.81	%			439,534			1,954		0.59	%
Other borrowed money			204,927			6,134		3.99	%			54,184			951		2.34	%
Fed funds purchased & securities
sold under agreement to repurch.			37,649			1,181		4.18	%			42,584			734		2.30	%
Subordinated notes			34,625			853		3.28	%			34,509			837		3.23	%
Total Interest Bearing Liabilities		$	2,270,382		$	40,076		2.35	%		$	1,886,604		$	7,427		0.53	%
Noninterest Bearing Liabilities			561,001									529,439
Stockholders' Equity		$	305,606								$	288,014
Net Interest Income and Interest Rate Spread					$	61,462		2.22	%					$	64,230		3.23	%
Net Interest Margin								2.77	%								3.37	%
Yields on Tax exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF TANGIBLE BOOK VALUE
		Actual End of Period								Regulatory End of Period
Non-GAAP Reconciliation of Tangible Book Value		Year to Date								Year to Date
		September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
Shares Outstanding			13,665,582				13,107,500				13,665,582				13,107,500
Tangible Equity
Equity		$	303,184			$	280,578			$	303,184			$	280,578
Goodwill			86,358				80,434				86,358				80,434
Other Intangible			7,992				3,744				7,992				3,744
Comprehensive Loss Adjustment*			-				-				39,489				37,737
CECL Adjustment**			-				-				2,528				-
Tangible Equity		$	208,834			$	196,400			$	250,851			$	234,137
Shares Outstanding			13,666				13,108				13,666				13,108
Tangible Book Equity per Share		$	15.28			$	14.98			$	18.36			$	17.86
		Actual Average								Regulatory Average
		Year to Date								Year to Date
		September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
Net Income		$	17,244			$	25,327			$	17,244			$	25,327
Acquisition Costs - Tax Adjusted			147				463				147				463
Average Shares Outstanding			13,633,101				13,071,859				13,633,101				13,071,859
Average Tangible Equity
Average Equity		$	305,606			$	288,014			$	305,606			$	288,014
Average Goodwill			86,358				80,434				86,358				80,434
Average Other Intangible			8,717				4,119				8,717				4,119
Average Comprehensive Loss Adjustment*			-				-				35,497				21,181
Average CECL Adjustment**			-				-				2,528				-
Average Tangible Equity		$	210,531			$	203,461			$	248,556			$	224,642
Average Shares Outstanding			13,633				13,072				13,633				13,072
Average Tangible Book Equity per Share		$	15.44			$	15.56			$	18.23			$	17.19
Return on Average Tangible Equity			10.92	%			16.60	%			9.25	%			15.03	%
Return on Average Tangible Equity w/o Acquisition			11.01	%			16.90	%			9.33	%			15.31	%
*The Bank has adopted the Accumulated Other Comprehensive Income (AOCI) opt out election which removed AOCI
from the calculation of tangible equity for regulatory purposes.
**ASU 2016-13 adopted during the first quarter of 2023; therefore, prior period's provision amount reflects the incurred loss method and
the Bank has elected to spread the Capital adjustment over three years. The first year permits 75% of the capital adjustment to be removed
from the calculation of tangible equity for regulatory purposes.