Farmers & Merchants Bankcorp Reports Record Second Quarter and Year-to-Date

EARNINGS (Lodi, California, July 27, 2020) – Farmers & Merchants Bancorp (OTCQX: FMCB) today announced record net income for the second quarter and first half of 2020. For the quarter ended June 30, 2020, Farmers & Merchants Bancorp reported net income of $14.3 million, an increase from net income of $14.1 million in the second quarter of 2019. On a per share basis, earnings were $18.03, compared to $17.92 per weighted average share of common stock outstanding in the second quarter of 2019. Net interest income for the quarter ended June 30, 2020 was $35.4 million, up slightly over the same quarter in 2019.

The Company’s net interest margin on a tax equivalent basis was 3.78% in the second quarter of 2020, compared to 4.50% in the second quarter of 2019. The net interest margin in the second quarter of 2020 was impacted by the overall decline in market interest rates, as well as the inclusion of $347.4 million in Small Business Administration Paycheck Protection Program loans (11.33% of total portfolio) originated during the second quarter which are accruing interest income at only 1% per annum. For the second quarter of 2020 the Company’s efficiency ratio was 50.83%. Return on average assets for the second quarter of 2020 was 1.41%, and return on average equity was 14.35%. During the quarter the Company declared a dividend of $7.25 per share or $5.8 million, an increase over the $7.05 per share paid in the same period of 2019. The Company has now paid a dividend for 85 consecutive years and has increased the dividend for 55 consecutive years.

Farmers & Merchants Bancorp remains one of only 30 publicly traded companies designated as a Dividend King by Sure Dividend. Total assets at quarter-end were $4.3 billion, up 23.9% from the second quarter of 2019. Total loans and leases outstanding reached $3.1 billion, an increase of 17.9% from June 30, 2019, and total deposits of $3.8 billion increased 25.0% from June 30, 2019. A portion of this balance sheet growth was due to the Bank’s participation in the Small Business Administration’s Paycheck Protection Program under which we funded $347.4 million of loans. At quarter-end, total checking deposits represented 55.3% of total deposits compared to 53.1% at June 30, 2019. The Company’s credit quality remained strong with only $473,000 of non-performing loans and leases at June 30, 2020. The provision for credit losses was $300,000 for the quarter, and at quarter-end, the Company’s allowance for credit losses was $55.1 million, or 1.80% of total loans and leases (2.03% exclusive of government fully guaranteed loans issued under the SBA’s Paycheck Protection Program).

The Company’s tier 1 leverage capital ratio was 9.56% at June 30, 2020, and the total capital ratio was 12.84%, resulting in the highest possible regulatory classification of “well capitalized.” Loans originated under the SBA’s PPP are assigned a risk-weighting of 0% so they have no impact on the Company’s risk based capital ratios. However, they are fully includable in the tier 1 leverage capital ratio calculation, which has resulted in a short-term reduction in that ratio (until the PPP loans are forgiven). Had the Company not participated in the PPP program, the net result would have been a 71 basis point improvement to the June 30, 2020 tier 1 leverage capital ratio, increasing the ratio to 10.27%.