Farmers & Merchants Bancorp(US:FMAO)2025-10-31 15:08Acquisitions - 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[22]. - The acquisition of Peoples-Sidney Financial Corporation resulted in an increase in the deposit base in Sidney and the greater Shelby County, along with reduced transaction costs[22]. - Goodwill from the acquisition of Peoples-Sidney Financial Corporation amounted to $5.9 million, primarily due to expected synergies and economies of scale[23]. - The total consideration for the acquisition of Perpetual Federal Savings Bank was approximately $100.3 million, consisting of $59.2 million in cash and $41.1 million in stock[25]. - Goodwill from the acquisition of Perpetual Federal Savings Bank was $25.2 million, reflecting expected synergies and economies of scale[26]. - The total purchase price for the acquisition of Ossian Financial Services was approximately $20.0 million, all in cash[28]. - Goodwill from the acquisition of Ossian Financial Services was $7.9 million, which is deductible for tax purposes over 15 years[29]. - The total consideration for the acquisition of Limberlost Bancshares was approximately $78.9 million, consisting of $8.5 million in cash and $70.4 million in stock[30]. - The acquisition of Adams County Financial Resources involved a total purchase price of $825 thousand, with $800 thousand allocated to customer list intangible assets[33]. Amortization and Expenses - The amortization expense of core deposit intangible for the nine months ended September 30, 2024, was $1.2 million, with an estimated $1.7 million to be expensed in 2025[32]. - Amortization expense for the customer list intangible for the nine months ended September 30, 2024 was $92 thousand, with a total of $123 thousand to be expensed in 2025[34]. - The total amortized cost of nonaccrual loans as of September 30, 2025, was $5,155,000, with $4,104,000 in nonaccrual loans with no allowance for credit loss[47]. - The allowance for credit losses (ACL) was impacted by a one-time adjustment of $4,500,000 in 2023, which was $3,400,000 net of tax[71]. - The provision for credit losses on loans for the three months ended September 30, 2025, was $557,000, compared to a recovery of $282,000 for the same period in 2024, indicating a shift from recovery to provision[76]. - The total recoveries for the nine months ended September 30, 2025, were $207,000, compared to $55,000 in the same period of 2024, showing a substantial increase in recoveries[76]. - The charge-offs for the nine months ended September 30, 2025, totaled $587,000, compared to $587,000 in the same period of 2024, indicating no change in charge-offs year-over-year[76]. Loan Performance and Quality - Loan balances as of September 30, 2025, totaled $2,659,727 thousand, an increase from $2,562,545 thousand as of December 31, 2024[44]. - The net loans after accounting for deferred loan fees and allowance for credit losses amounted to $2,632,668 thousand as of September 30, 2025[44]. - The company employs a nine-tier risk rating system to grade its loans, which helps in assessing the credit risk associated with each loan[53]. - The company’s underwriting criteria for consumer real estate loans emphasize the borrower's income, debt level, and employment status, which are critical for repayment success[48]. - Agricultural loans are particularly vulnerable to commodity prices and weather conditions, with risk mitigated through the use of futures contracts and crop insurance[50]. - The company recognizes the importance of stress testing on higher balance loans to ensure borrowers' ability to repay in changing rate environments[51][52]. - The company’s commercial and industrial loans are subject to risks related to cash flow adequacy and economic trends, which are monitored closely[52]. - The total past due loans as of December 31, 2024, was $5,598,000, with $3,769,000 in loans 30-59 days past due, $712,000 in loans 60-89 days past due, and $1,117,000 in loans greater than 90 days past due[46]. - The company evaluates credit quality for consumer loans based on aging status and payment performance, with loans over 90 days past due classified as nonperforming[63]. Financial Performance - The net income for the three months ended September 30, 2025, was $8,854,000, an increase of 35.8% compared to $6,516,000 for the same period in 2024[89]. - Basic and diluted earnings per share for the nine months ended September 30, 2025, were $1.71, up from $1.28 for the same period in 2024, representing a growth of 33.6%[89]. - Net income for Q3 2025 was $2.3 million higher than Q3 2024 and $1.1 million higher than Q2 2025, indicating a trend towards greater profitability[148]. - The average loan balance grew by $97.5 million or 3.8%, with interest income on loans increasing by $4.1 million or 11.2% compared to the same quarter in 2024[206]. - Net interest income for the first nine months of 2025 increased by $13.4 million compared to the same period last year, with a year-to-date net interest margin improvement of 54 basis points[138]. Deposits and Securities - The total deposits as of September 30, 2025, amounted to $2.751 billion, slightly up from $2.687 billion at December 31, 2024[120]. - Interest-bearing deposits totaled $1.633 billion as of September 30, 2025, compared to $1.522 billion at December 31, 2024[120]. - The pledged investment securities totaled $267.1 million as of September 30, 2025, with an increase of $15.3 million compared to year-end 2024[199]. - The total fair value of securities available-for-sale as of September 30, 2025, was $421,315,000, compared to $426,626,000 as of December 31, 2024[111]. Interest Rate Management - The Bank entered into three pay-fixed receive variable interest rate swap transactions with a combined notional value of $100 million to manage interest rate risk[91]. - The cumulative fair value hedging adjustment for loans was $221,242,000 as of September 30, 2025, compared to $249,127,000 as of December 31, 2024, indicating a decrease of 11.2%[93]. - The Bank's notional amount of interest rate swaps associated with loans was $100,000, with a fair value loss of $(1,725) compared to a fair value loss of $(976) as of December 31, 2024[97]. Strategic Developments - The Bank opened a full-service branch in Troy, Michigan, on August 1, 2025, expanding its footprint[136]. - The company is developing its next three-year strategic plan during the fourth quarter of 2025, building on its record of success[136]. - The Bank's insurance agency, F&M Insurance Agency, LLC, was established in November 2023 to offer insurance products[160].