Farmers & Merchants Bancorp(FMAO) - 2025 Q1 - Quarterly Report

Acquisitions - The total consideration for the acquisition of Peoples-Sidney Financial Corporation was approximately $23.2 million, consisting of$9.8 million in cash and $13.4 million in stock[21]. - The acquisition of Perpetual Federal Savings Bank had a total consideration of approximately$100.3 million, with $59.2 million in cash and$41.1 million in stock[24]. - The total purchase price for the acquisition of Ossian Financial Services, Inc. was approximately $20.0 million, all in cash[27]. - The acquisition of Limberlost Bancshares, Inc. amounted to approximately$78.9 million, with $8.5 million in cash and$70.4 million in stock[29]. - The goodwill resulting from the acquisition of Peoples Federal Savings and Loan Association was $5.9 million, primarily due to expected synergies and economies of scale[22]. - The Company has reduced costs through economies of scale as a result of the acquisitions[21]. Financial Performance - Net income for the three months ended March 31, 2025, was$6.952 million, a 29.7% increase from $5.359 million in the same period of 2024[90]. - Basic and diluted earnings per share increased to$0.51 for the three months ended March 31, 2025, up from $0.39 in 2024, reflecting improved profitability[90]. - Overall net income for Q1 2025 was$1.6 million higher than Q1 2024, indicating a positive outlook for profitability[149]. - Noninterest income exceeded $4 million for the quarter, driven primarily by treasury services and increased debit card usage[147]. - Noninterest expenses rose by$919 thousand compared to Q1 2024, with significant increases in consulting services and employee benefits[148]. Loan Portfolio - The company reported a net loan balance of $2.56 billion as of March 31, 2025, an increase from$2.54 billion as of December 31, 2024[45]. - The company’s loan portfolio included $1.33 billion in commercial real estate loans as of March 31, 2025, up from$1.31 billion at the end of 2024[45]. - Fixed-rate loans accounted for $1.04 billion of the total loan portfolio as of March 31, 2025, while variable-rate loans totaled$1.54 billion[46]. - The total current financing receivables as of March 31, 2025, were $2,580,190,000[49]. - The total gross charge-offs year-to-date for Consumer Real Estate loans are reported at$0, indicating no losses in this segment[60]. - The total risk rating for Consumer Real Estate loans indicates a significant portion, 38.41%, is under Special Mention (5) status, which may require monitoring[60]. Credit Quality and Allowance for Credit Losses - The total allowance for credit losses (ACL) increased to $26.352 million as of March 31, 2025, from$25.826 million at the end of 2024[78]. - The Company recorded a one-time adjustment of $4.5 million to the allowance for credit losses, which is$3.4 million net of tax[72]. - The specific reserve portion of the ACL was $159 thousand at March 31, 2025, up from$52 thousand at December 31, 2024[185]. - The company employs a nine-tier risk rating system to assess loan quality, with ratings ranging from 1 (Excellent) to 8 (Loss)[56]. - The company recognizes that repayment success for consumer loans is influenced by borrower income, debt levels, and employment status[51]. Securities and Investments - As of March 31, 2025, total available-for-sale securities amounted to $464.0 million with a fair value of$438.6 million, reflecting unrealized losses of $25.7 million[36]. - The total amortized cost of mortgage-backed securities was$140.9 million with a fair value of $130.9 million, indicating unrealized losses of$10.2 million[36]. - The fair value of securities is expected to recover as bonds approach their maturity date, indicating a positive outlook for the company's investment strategy[39]. - The balance of investments in qualified affordable housing projects was $3.5 million as of March 31, 2025, slightly down from$3.6 million at December 31, 2024[101]. Regulatory and Accounting Updates - Recent accounting pronouncements include ASU 2023-06, which requires additional disclosures related to cash flows and debt, effective for annual periods beginning after December 15, 2024[133]. - The company plans to adopt ASU 2023-07 regarding segment reporting, which enhances disclosure requirements, effective December 31, 2024[136]. - The company does not expect the adoption of recent accounting updates to have a material effect on its financial position or results of operations[135]. - The company is attentive to ongoing regulatory changes, including the CFPB's final rule on data collection for small business loans[167]. Capital and Liquidity - The company remains well-capitalized with strong liquidity levels and asset quality, positioning itself for future growth[149]. - The Bank declared a dividend of $3.5 million in Q1 2025 and remains well-capitalized with a Tier I Leverage Ratio of 9.10$327.0 million as of March 31, 2025[191]. - The company has issued $35,000,000 in subordinated notes with a fixed-to-floating interest rate, qualifying as Tier 2 capital until July 30, 2026[125].