Farmers & Merchants Bancorp (FMAO) investor relations material

Business overview and growth strategy

• Operates in Ohio, Indiana, and Michigan with $3.4B in assets and 38 branches, focusing on ag and commercial banking, with 70% of income from commercial activities.

• Achieved asset growth at a 16% CAGR and net income growth over 7% in the past decade, with significant deposit growth in Ohio (46%) and Indiana (28%) over four years.

• Expanded through a mix of organic growth and acquisitions, tripling in size over seven years, with a balanced approach between new branches and M&A.

• Opened new branches and loan production offices in key markets, leveraging local talent to drive growth and market entry.

• Maintains a 3% dividend, raised for 30 consecutive years, with a strong retail shareholder base and only 25% institutional ownership.

Operational highlights and financial performance

• Focused on core deposit growth, especially checking accounts, to support loan funding and boost noninterest income.

• Maintains a well-capitalized position with a strong uninsured deposit ratio and a diversified loan portfolio, over 51% in commercial real estate.

• Adjusted loan mix to achieve a near 50/50 split between fixed and variable rates, aiming for rate agnosticism and stable profitability.

• Asset quality is a key differentiator, with extremely low net charge-offs and a robust stress-testing process, avoiding TARP during the financial crisis.

• Efficiency ratio improved from 72 to 63, with ongoing efforts to reach the 50s, supported by digital innovation and streamlined product offerings.

Strategic initiatives and future outlook

• Strategic plan emphasizes profitability, controlled growth, innovation, and efficiency, with a focus on maintaining a NIM above 3.25% and ROA at 1.25%.

• Actively evaluates M&A opportunities, targeting 15 banks in adjacent markets, while also planning organic expansion through a 'next 10' locations strategy.

• Digital transformation includes partnerships with fintechs like Mantle to streamline account opening and enhance deposit generation.

• Diversifies revenue through treasury management, card services, swaps, and investment business, with nearly $400M in AUM.

• Well-positioned for a lower interest rate environment, expecting NIM expansion in the near term and resilience in ag lending due to experienced borrowers and risk mitigation strategies.