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FMAO Shareholder/Stockholder Letter Transcript:

FARMERS &
MERCHANTS
B A N C O R P, I N C.
2 24 ANNUAL REPORT
Momentum
BUILDING
DRIVING SUCCESS

Letter to Shareholders
President & CEO, Lars Eller
Dear Shareholders,
I am extremely pleased to report on our
operational and financial progress F&M made
during 2024. Our strong performance reflects
the solid execution of our multi-year strategic
plan, as we remain focused on continual
improvements, managing the items under
our control, and providing our customers and
communities with outstanding, local financial
services. Thanks to the unwavering dedication
of our team and the trust of our customers and
shareholders, F&M   s financial and operating
results strengthened throughout 2024.
The year was characterized by a series of small
wins that when added together produced
positive operating and financial momentum.
Wins during the year included enhancements
to our deposit base and increased lowcost checking (DDA) deposits, the growing
contribution of offices opened in 2023,
optimizing key vendor agreements, including
two large systems contracts, historically strong
asset quality, and the strategic investments we
continue to make to expand our operations,
capabilities, and team. These small wins
contributed to a 13.8% annual year-over-year
increase in earnings per share and an 8.9%
year-over-year expansion in our tangible book
value per share. Our 2024 performance creates
a solid foundation and further solidifies F&M   s
position as a leading community bank in the
Ohio, Indiana, and Michigan markets we serve.
Turning the Corner
As expected, 2024 marked a return to yearover-year growth in profitability, reflecting our
success navigating a higher rate environment
and a proactive focus on improving earnings.
As a reminder, the Federal Reserve increased
the Federal Funds Rate from 0.25% in March
2022 to 5.50% in July 2023. The rapid and
unprecedented increase shocked the financial
sector, causing significant competition for
deposits, elevating banks    costs of funds, and
impacting the accounting treatment for banks   
bond portfolios. Federal Funds Rate stayed at
5.50% throughout much of 2024. Through a
series of rate cuts starting in September 2024,
the Federal Reserve brought rates down to
4.50% at December 31, 2024. While down 100
basis points, rates are still at levels not seen
since November 2007 and many economic
forecasters currently expect rates to remain
high throughout 2025.
While it took time for our balance sheet to
adjust to the changing rate environment and
the unprecedented competition for deposits
that occurred in its wake, I am pleased that
our performance in 2024 indicates our balance
sheet has turned the corner. For example,
from 2022 to 2023, the yield on earning assets
increased 80 basis points, while the cost of
interest-bearing liabilities expanded by 179
2 | F&M Bancorp, Inc. Annual Report
basis points. This resulted in a 60-basis point
reduction in our net interest margin in 2023.
From 2023 to 2024, the yield on earning assets
increased 50 basis points, while the cost of
interest-bearing liabilities expanded by 59
basis points and produced a stable net interest
margin of 2.72% for 2024. At December 31,
2024, 31.4% of our loan portfolio was subject
to reprice in the next 12 months. As a result,
we expect our net interest margin to expand
in 2025 as we benefit from improved loan and
deposit pricing.
Deposit Growth Supported by F&M   s Valuable
Banking Franchise
Total deposits at December 31, 2024, increased
3.0% year-over-year to a record $2.69 billion.
This growth includes strategies we pursued this
past year aimed at optimizing our deposit base,
growing low-cost checking (DDA) deposits,
and investing in new technologies that
facilitate better account generation. Since the
beginning of 2024, we added nearly 7,500 new
checking accounts, and benefited from new and
expanded relationships. As a result, we ended
2024 with a loan-to-deposit ratio of 94.4%,
compared to 98.0% at December 31, 2023.
In addition, during 2023 we opened new offices
in Fort Wayne, IN, Birmingham, MI, Toledo, OH
and Oxford, OH. During 2024, these offices
added $53.9 million of new deposits to F&M,
as well as $80.5 million in new loans. Our ability
to rapidly grow new offices demonstrates the
need for the local community banking services
F&M provides, as well as the continued success
of our 2023 rebranding initiatives. Across our
footprint, I am pleased to report that F&M
was the third largest bank out of 58 financial
institutions we compete with in our markets,
according to the FDIC   s June 2024 annual
market share report. In fact, F&M is the number
one bank, based on deposits, in almost half of
the communities in which we operate.
Maintaining Excellent Asset Quality
Over the years, F&M has built best-in-class
credit, compliance, and risk capabilities, led by
talented, high-performing teams that maintain
a prudent credit culture. While this approach
has contributed to a legacy of excellent asset
quality, our performance in 2024 was historically
strong. At December 31, 2024, nonperforming
loans were $3.1 million, or 0.12% of total loans,
compared to $22.4 million, or 0.87% of total
loans at December 31, 2023. Charge-offs in
2024 were just $142,000, or 0.01% of average
loans, compared to $551,000, or 0.02% in 2023.
While we are extremely pleased with our asset
quality in 2024, we expect it will return to more
historical levels at some point in the future. In
addition, our allowance has remained stable and
was 1.07% of total loans at December 31, 2024,
compared to 1.06% at December 31, 2023.
Developing the Next Generation of Leaders
As F&M grows and our business becomes
more dynamic, developing the next generation
of board members and business leaders is
critically important. In fact, I believe F&M enjoys
a compelling competitive advantage due to our
longstanding approach cultivating a diverse
executive team and building an impressive
bench of proven talent. It also demonstrates
our Board   s commitment to comprehensive
succession planning and strong corporate
governance, while also ensuring that our
growing organization continues to operate as a
community bank with local decision making.
In January 2024, Rex Rice, EVP/Chief
Lending Officer and Ben  t Rupp, EVP/Chief
Administrative Officer announced their
retirements from F&M. Since joining the Bank
in 1981, Rex served in a variety of leadership
capacities and played an integral part of F&M   s
success, which saw our lending portfolio grow to
over $2.5 billion. Rex has been a trusted advisor
and invaluable partner. Ben  t joined F&M in
2019 and has been an instrumental member
of our executive team over the past five years.
Under Ben  t   s leadership we have continuously
improved significant functions within the bank
including human resources, operations, and
strategic planning. I greatly appreciate Rex and
Ben  t for their contributions to F&M and I wish
them all the best in their future endeavors.
Throughout 2024, we made a series of
leadership
promotions,
reflecting
the
ongoing success of our multi-stage employee
development programs. During the year, David
Gerken was promoted to EVP/Chief Lending
Officer, Kevin Becker was promoted to SVP/
Chief Credit Officer, Tim Carsey was promoted
to SVP/Chief Administrative Officer, and Amy

Cover was promoted to SVP/Chief Marketing
Officer. In addition, we continue to add talent
from outside our organization and in April 2024,
Mark Hutchinson joined F&M as Treasurer.
In this new position, Mark oversees certain
financial operations including budgeting,
planning, investing and other financial matters
for the Bank.
In January 2025, Andrew Baker our Regional
President of Indiana North, who also previously
served as Chief Retail Banking Officer, was
appointed Chief Strategy Officer. As Regional
President of Indiana North and Chief Strategy
Officer, Andy will chair the newly formed
Strategic Governance Committee, comprising
members of F&M   s senior leadership team,
which will guide the Bank   s strategic direction,
overseeing initiatives, projects, products,
and services. Additionally, Taryn Marino was
promoted to Chief Retail Banking Officer
after serving as Deputy Chief Retail Banking
Officer, working closely with Andy to lead
transformative projects for the retail banking
team. These leadership changes and strategic
initiatives position us to achieve sustainable
growth and deliver exceptional value to our
clients, employees, and stakeholders, while
demonstrating the deep bench of talent we
have developed.
There were also several changes to our Board
of Directors. In May 2024, Jack Johnson retired
from our Board after reaching the maximum
age requirement as outlined in F&M   s bylaws.
Jack was appointed to the Company   s Board
in January 1991, served as Vice Chairman from
April 2013 to July 2013, and became Chairman
of the Board of Directors on July 19, 2013,
a position he held until April 2024. Over his
remarkable tenure, Jack has been instrumental
in guiding the Bank through significant growth
and numerous milestones. His steadfast
leadership and unwavering commitment to
F&M   s mission have left an indelible mark on the
institution and the community it serves.
Following Jack   s retirement, Andrew Briggs was
appointed Chairman of Farmers & Merchants
Bancorp, Inc. and F&M Bank. Andrew has
served as a director of Farmers & Merchants
Bancorp, Inc., and F&M Bank since 2019. He
brings 40-plus years of banking experience
to F&M and was the former Chairman of
Limberlost Bancshares, Inc. and President of
its wholly owned subsidiary, Bank of Geneva,
which merged into F&M on January 1, 2019.
Having a leader of Andrew   s caliber at the helm
of our Boards exemplifies F&M   s steadfast
commitments to our people and our passions.
During 2024, two additional F&M directors
retired from our Board. Eugene Burkholder
retired in December 2024, after serving as
a director since March 2012, and Dr. K. Brad
Stamm retired in October 2024, after serving
as a director since November 2016. Gene
and Brad were both instrumental in the Bank   s
growth by providing years of expert leadership,
strategic counsel and community knowledge
to F&M. Gene, Brad, and Jack have been an
inspiration, and their legacies will continue to be
felt throughout F&M. On behalf of everyone at
F&M, we wish Gene, Brad and Jack the very best Annual net income returned to growth in 2024
in their retirements.
as a result of record net interest income, our
excellent asset quality, stable noninterest
With Brad   s retirement, Kevin Frey was income, and modest growth in noninterest
appointed to our Board of Directors in October expense. Net income for the year ended
2024. Kevin is the Vice President of E.H. Frey & December 31, 2024, was $25.9 million, or $1.90
Sons, Inc., a family-owned real estate brokerage per diluted share, a 13.8% increase from $22.8
and auction company that was incorporated in million, or $1.67 per diluted share for the year
1963 and is headquartered in Archbold, Ohio. ended December 31, 2023.
With deep roots in our legacy market and a
wealth of experience, he brings invaluable 30 Years of Dividend Growth and Counting
insights that will strengthen our connection We believe improving profitability and
to the communities we serve. F&M   s Board expanding net income translates into higher
decided not to fill the vacancy after Gene   s shareholder returns and supports our
retirement and our current Board comprises longstanding commitment to return more
11 directors, nine of which are independent. capital back to our shareholders through our
In addition, of our current directors, 63% have growing dividend program. I am proud to report
joined our Board since 2018, reflecting the that F&M paid a record $11.9 million in dividends
success of our multi-year efforts aimed at to our shareholders during 2024, an increase of
4.1% over the prior year. On a per share basis,
reprofiling F&M   s Board.
our annual dividend increased 3.8% to $0.8825
Continued Investments in our Communities
per share, compared to $0.85 per share last
We continue to re-invest in our communities year. F&M has increased its annual dividend
throughout our charitable giving programs. payment for 30 consecutive years reflecting a
During 2024, we provided nearly $0.5 million of legacy of returning capital back to shareholders.
charitable donations to support organizations In fact, F&M maintains one of the longest track
throughout Indiana and Ohio. This year we records of consecutive dividend increases of all
hosted the 7th Annual Ohio F&M Charity Golf publicly traded banks.
Classic and 3rd Annual Indiana F&M Charity
Golf Classic, which combined, raised a record Positive Momentum Supports Our Favorable
$80,000 for organizations in our Ohio and Outlook
and
financial
momentum
Indiana communities including Adriel, Love & Operating
Luggage, Healthier Moms & Babies, Bi-County accelerated during 2024, and for the quarter
Services, Inc. Outside of our annual Ohio and ended December 31, 2024, we achieved a net
Indiana golf classic events, highlights of our interest margin of 2.84%, compared to 2.71%
2024 charitable program include supporting for the quarter ended September 30, 2024,
the Cameron Memorial Hospital Foundation, and 2.57% for the quarter ended December 31,
Mom   s House, Art   s Place, Fulton County 2023. These trends helped quarterly earnings
Habitat for Humanity and Shelby County United per share increase to $0.61, from $0.41 at
December 31, 2023, and $0.48 at September
Way.
30, 2024. Going forward, we expect our efforts
2024 Financial Recap
to enhance and grow our balance sheet, drive
As you can see, F&M made meaningful progress operating efficiencies, and maintain excellent
in 2024 executing against our strategic plan, asset quality will produce another year of
investing in our business, maintaining excellent expanded profitability in 2025.
asset quality, and expanding our market share.
The success of these efforts drove solid Conclusion
financial results in 2024. Total assets increased I want to acknowledge the power of small
year-over-year by $81.5 million, or 2.5% to wins in shaping our success during 2024.
$3.36 billion. This growth was driven primarily Each milestone we reached   whether it was
by a 24.0% increase in our cash position and improving operational efficiencies, optimizing
a 19.0% increase in our securities portfolio, our balance sheet, or strengthening customer
reflecting our efforts in 2024 to prioritize relationships   has contributed meaningfully
liquidity and asset quality, over loan growth. to our growth and resilience during the past
Net interest income after the provision for year. These achievements, while individually
credit losses for 2024 increased year-over- modest, collectively reflect the dedication
year by 7.5% to $85.6 million as a result of and teamwork of our employees and the trust
stable balance sheet trends and pricing, and of our customers and shareholders. Looking
ahead, we are determined to build upon this
historically strong asset quality.
momentum, leveraging our foundation to
In addition to enhancing profitability by deliver continued value and opportunity for all
optimizing and expanding our balance sheet, the communities we serve. Together, we are
we also continue to focus on controlling poised for even greater success in the years
operating expenses and driving efficiencies. ahead.
Total noninterest expense for 2024 was $68.7
million, a year-over-year increase of 2.2%. This Sincerely,
pace of growth is encouraging after noninterest
expense grew 17.6% in the previous year
reflecting expenses associated with our new
offices, as well as higher operating expenses
associated with higher inflation that occurred Lars Eller, President and CEO
in 2023.
F&M Bancorp, Inc. Annual Report | 3

Leadership
Board of Directors
Front row, from left: Kevin G. Frey, Vice President-E.H. Frey & Sons, Inc., Steven J. Planson, President-Planson Farms, Inc., Ian D. Boyce Founding
Member & Managing Partner-Dickmeyer Boyce Financial Management, Lars B. Eller, President/Chief Executive Officer-Farmers & Merchants Bancorp,
Inc., Farmers & Merchants State Bank, Jo Ellen Hornish, President and CEO, Fountain City Leasing Inc. / Advantage Powder Coating Inc. / One Source
Diversified Services LTD., and Hornish Properties LLC, Kevin J. Sauder, Former President/CEO, Sauder Woodworking Co., Marcia S. Latta, Principal,
Latta Strategies, Retired Vice President of University Advancement, The University of Findlay, David P. Vernon, Owner, Licensed Funeral Director &
Embalmer-Vernon Family Funeral Homes, Andrew J. Briggs, Chairman of the Board, Farmers & Merchants Bancorp, Inc., Frank R. Simon, Founding &
Managing Member/Attorney-Simon PLC Attorneys & Counselors, Lori A. Johnston, EVP-President     Paramount Healthcare at Medical Mutual
Senior Management
Barbara J. Britenriker
Executive Vice President
Chief Financial Officer
Katrina L. DeGroff
Senior Vice President
Chief Accounting Officer
Lars B. Eller
President
Chief Executive Officer
Andrew S. Baker
Senior Vice President
Chief Strategy Officer
Eric D. Faust
Senior Vice President
Chief Risk Officer
Tim Carsey
Senior Vice President
Chief Administrative Officer
Taryn Marino
Senior Vice President
Chief Retail Banking Officer
Amy L. Cover
Senior Vice President
Chief Marketing Officer
Doug Shaw Jr.
Senior Vice President
Regional President
4 | F&M Bancorp, Inc. Annual Report
Shalini Singhal
Senior Vice President
Chief Information Officer
Kevin Becker
Senior Vice President
Chief Credit Officer
David R. Gerken
Executive Vice President
Chief Lending Officer
Phillip P. Lucas
Senior Vice President
Regional President
Left to right

Making an
Impact Together.
Golf Outings (Ohio & Indiana)
Raised over $80,000 for four local nonprofits.
Habitat for Humanity Playhouse Build
COMMUNITY ENGAGEMENT
Momentum Through
Giving.
At F&M, we believe in investing in the small,
local communities where we work and live. Our
commitment goes beyond banking   we strive
to drive our communities forward by providing
financial support and hands-on involvement that
helps them thrive.
Whether it   s volunteering, teaching financial
literacy, or making donations, we proudly support
organizations that align with our mission to be
truly community vested.
Beyond financial contributions, our employees
dedicate their time to making a difference. From
volunteering at local food banks and humane
societies to serving on nonprofit boards
and leading financial literacy classes, we are
committed to strengthening the communities we
call home.
Additionally, we proudly support local schools
through sponsorships in yearbooks, athletic
programs, and facility improvements, ensuring
students have the resources they need to
succeed.
At F&M, giving back isn   t just a responsibility     it   s
who we are.
Constructed four playhouses to provide a safe
space for children in Northwest Ohio, with
over 40 F&M employees lending a hand.
Mom   s House (Toledo, OH)
Provided funding for a preschool classroom
in their new facility.
Cameron Memorial Hospital (Angola, IN)
Contributed to the development of a new
education wing.
Art   s Place (Portland, IN)
Continued support for fostering creativity in
the community.
YMCA Youth Memberships
Sponsored summer memberships at
Wayman Palmer YMCA in Toledo.
Diaper Drive with Healthier Moms
and Babies (Allen County)
Collected and donated essential supplies for
families in need.
Morgenstern Workshop (Geneva, IN)
Donated coal to ensure warmth and support
for their operations.
$511,525
donated back to our communities
235
local organizations
F&M Bancorp, Inc. Annual Report | 5



 3/3/2025 Letter Continued (Full PDF)