FARMERS & MERCHANTS BANCORP INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS (form 10-Q)

Published: 2021-10-26 15:42:04 ET FMAO

NOTE 9 PROPOSED BUSINESS COMBINATION (Continued)

NOTE 10 RECENT ACCOUNTING PRONOUNCEMENTS

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

significant savings going forward. This will allow the Company to use the savings to fund expansion and transformation of existing offices. ATM's remain at the locations and all have ceased operations as of the end of the second quarter 2021.

and located in Nevada. We report our financial condition and net income on a consolidated basis and we have only one segment.

Consumer Loans:

• Loans above 100% are generally the result of additional charges for

Up to 80% LTV less retainages and greater than 90 days.

Real Estate:

RECENT REGULATORY DEVELOPMENTS

• A one-page simplified forgiveness process for PPP loans under $150,000.

lender "hold

• A further delay in Troubled Debt Restructuring (TDR) accounting until

January 1,

modification for

• Funding for agricultural support programs and for renter assistance programs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The chart below shows the breakdown of the loan portfolio category as of September 30, for the last three years, net of deferred fees and costs.

The following is a contractual maturity schedule by major category of loans excluding fair value adjustments as of September 30, 2021.

September 30, 2021, pledged investment securities totaled $77.1 million. The current portfolio is in a net unrealized gain position of $1.1 million.

With the exception of FHLB stocks, carried at cost, which is shown as other securities, all of the Company's security portfolio is categorized as "available-for-sale" and as such is recorded at fair value.

Overall total assets increased 16.2% since yearend 2020 and grew 21.5% since September 30, 2020. The largest growth in both periods was in the loan portfolios and securities. Cash and cash equivalents also increased significantly compared to September 30, 2020.

The Holding Company has sufficient liquidity to maintain its dividend policy without relying on the upstreaming of dividends from the Bank.

The Bank continues to be well-capitalized in accordance with Federal regulatory capital requirements as the capital ratios below show:

MATERIAL CHANGES IN RESULTS OF OPERATIONS

Comparison of Results of Interest Earnings and Expenses for three month periods ended September 30, 2021 and 2020

Interest Income

Total Interest Earning Assets $ 2,829 $ 2,172 $

September 30, 2021 September 30, 2020 Savings deposits

Total Interest Bearing Liabilities $ (597 ) $ 392 $

Comparison of Noninterest Results of Operations for three month periods ended September 30, 2021 and 2020

1,359,156 $ 1,126,173

Loans classified as nonaccrual were lower as of September 30, 2021 at $6.2 million as compared to $7.9 million as of September 30, 2020. The consumer real estate portfolio decreased $1.1 million while the commercial real estate and

The following table presents the balances for allowance for loan losses by loan type for nine months ended September 30, 2021 and September 30, 2020.

(388 ) - Mortgage Servicing Rights net, September 30, $ 3,097 $ 3,027 $ 3,097 $ 3,027

Income Taxes

Comparison of Results of Interest Earnings and Expenses for nine month periods ended September 30, 2021 and 2020

PPP loan interest income recognized was $291.4 thousand for the first nine months of 2021 with net fee income of $3.9 million compared to $389.6 thousand of loan interest income and $735.1 thousand of net fee income for 2020. The growth factor contribution is shown in the charts which follow.

The average interest earning asset base was $350.3 million higher in the first nine months 2021 than the first nine months of 2020, an increase of approximately 21.7%.

Interest/Dividends September 30, 2021 September 30, 2020 Loans

(229 ) Total Interest Earning Assets $ 2,387 $ 6,509 $ (4,122 )

The change chart below shows the decreased cost was driven more by rate than volume.

Total Interest Bearing Liabilities $ (3,424 ) $ 682 $

Comparison of Results of Noninterest Earnings and Expenses for nine month periods ended September 30, 2021 and 2020

Provision Expense

1,305,998 $ 1,113,892

Noninterest Expense

Income Taxes

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