FARMERS & MERCHANTS BANCORP 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of Farmers & Merchants Bancorp is not widely held or listed on any exchange. However, trades are reported on the OTCQX under the symbol “FMCB”. The following tables summarize the actual high, low, and close sale prices for the Company's common stock since the first quarter of 2019. These figures are based on activity posted on the OTCQX. Calendar Quarter High Low Close Cash Dividends Declared (Per Share) 2020 Fourth quarter $ 770 $ 701 $ 760 $ 7.50 Third quarter 770 695 725 - Second quarter 800 626 706 7.25 First quarter 800 650 685 - Calendar Quarter High Low Close Cash Dividends Declared (Per Share) 2019 Fourth quarter $ 804 $ 755 $ 768 $ 7.15 Third quarter 850 757 780 - Second quarter 950 700 795 7.05 First quarter 788 695 725 - As of January 31, 2021, there were approximately 1,650 stockholders of record of the Company’s common stock. However, since approximately 30% of our common stock shares are held by brokers on behalf of stockholders, we are unable to determine the exact total number of stockholders. The Company and, before the Company was formed, the Bank, has paid cash dividends for the past 86 consecutive years. There are limitations under Delaware corporate law as to the amounts of cash dividends that may be paid by the Company. Additionally, if we decided to defer interest on our 2003 subordinated debentures, we would be prohibited from paying cash dividends on the Company’s common stock. The Company is dependent on cash dividends paid by the Bank to fund its cash dividend payments to its stockholders. There are regulatory limitations on cash dividends that may be paid by the Bank. See “Item 1. Business – Supervision and Regulation.” In 1998, the Board approved the Company’s first common stock repurchase program. This program has been extended and expanded several times since then, and most recently, on November 6, 2018, the Board of Directors approved an extension of the $20 million stock repurchase program over the three-year period ending December 31, 2021. Repurchases under the program may be made from time to time on the open market or through private transactions. The repurchase program also requires that no purchases may be made if the Bank would not remain “well-capitalized” after the repurchase. There were no stock repurchases in 2020 or 2019 under the Common Stock Repurchase Plan. The remaining dollar value of shares that may yet be purchased under the Company’s Common Stock Repurchase Plan is approximately $20 million. 33 Table of Contents On November 23, 2020, the Board of Directors of Farmers & Merchants Bancorp approved, and all applicable regulators provided statements of non-objection regarding, the Company’s repurchase and retirement of up to $8.5 million of its outstanding common stock during the fourth quarter of 2020 and the first half of 2021. These repurchases will be done outside of the Company’s current repurchase plan. All repurchases will be made at the then prevailing market prices. In the fourth quarter of 2020, the Company repurchased $2.8 million of shares from shareholders. On May 24, 2018, stockholders approved a proposal to increase our authorized shares of common stock from 7,500,000 to 40,000,000. In approving this proposal the stockholders also granted the Board discretionary authority (i.e., without further stockholder action) to determine whether to delay the proposed amendment. The Company has no immediate plans to effect the increase in the authorized shares of common stock. On August 5, 2008, the Board of Directors approved a Share Purchase Rights Plan (the “Rights Plan”), pursuant to which the Company entered into a Rights Agreement dated August 5, 2008, with Computershare as Rights Agent, and the Company declared a dividend of a right to acquire one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock, $0.01 par value per share, to stockholders of record at the close of business on August 15, 2008. Generally, the Rights are only triggered and become exercisable if a person or group (the “Acquiring Person”) acquires beneficial ownership of 10 percent or more of the Company’s common stock or announces a tender offer for 10 percent or more of the Company’s common stock. The Rights Plan is similar to plans adopted by many other publicly traded companies. The effect of the Rights Plan is to discourage any potential acquirer from triggering the Rights without first convincing the Company’s Board of Directors that the proposed acquisition is fair to, and in the best interest of, all of the stockholders of the Company. The provisions of the Plan, if triggered by the Acquiring Person, will substantially dilute the equity and voting interest of any potential acquirer unless the Board of Directors approves of the proposed acquisition (under Article XV of the Company’s Certificate of Incorporation, the Board of Directors has the authority to consider any and all factors in determining whether an acquisition is in the best interests of the Company and its stockholders). Each Right, if and when exercisable, will entitle the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock, no par value, at a purchase price of $1,600 for each one one-hundredth of a share, subject to adjustment. Each holder of a Right (except for the Acquiring Person, whose Rights will be null and void upon such event) shall thereafter have the right to receive, upon exercise, that number of Common Shares of the Company having a market value of two times the exercise price of the Right. At any time before a person becomes an Acquiring Person, the Rights can be redeemed, in whole, but not in part, by Farmers and Merchants Bancorp’s Board of Directors at a price of $0.001 per Right. The Rights Plan was set to expire on August 5, 2018. On November 19, 2015, the Board of Directors approved a seven-year extension of the term of the Rights Plan. Pursuant to an Amendment to the Rights Agreement dated February 18, 2016, the term of the Rights Plan was extended from August 5, 2018 to August 5, 2025. The extension of the term of the Rights Plan was intended as a means to continue to guard against abusive takeover tactics and was not in response to any particular proposal. The Board also increased the purchase price under the Rights Plan to $1,600 per one one-hundredth of a preferred share from $1,200, to reflect the increase in the market price of the Company’s common stock over the past several years. During 2020, the Company issued a combined total 523 shares of common stock to the Bank’s non-qualified deferred compensation retirement plans. All of the shares were issued at a price of $770.00 per share based upon valuations completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(a)(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital. See Note 14, located in “Item 8. Financial Statements and Supplementary Data.” During 2019, the Company issued a combined total 9,312 shares of common stock to the Bank’s non-qualified deferred compensation retirement plans. All of the shares were issued at prices ranging from $715.00 to $770.00 per share based upon valuations completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(a)(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital. See Note 14, located in “Item 8. Financial Statements and Supplementary Data.” 34 Table of Contents Performance Graphs The following graph compares the Company’s cumulative total stockholder return on common stock from December 31, 2015 to December 31, 2020 to that of: (i) the Morningstar Banks Index - Regional (US) Industry Group; and (ii) the cumulative total return of the New York Stock Exchange market index. The graph assumes an initial investment of $100 on December 31, 2015 and reinvestment of dividends. The stock price performance set forth in the following graph is not necessarily indicative of future price performance. The Company’s stock price data is based on activity posted on the OTCQX and on private transactions between individual stockholders that are reported to the Company. This data was furnished by Zacks SEC Compliance Services Group. This graph shall not be deemed filed or incorporated by reference into any filing under the Securities Act of 1933. 35 Table of Contents Item 6. Selected Financial Data Farmers & Merchants Bancorp Five Year Financial Summary of Operations (in thousands except per share data) Summary of Income: 2020 2019 2018 2017 2016 Total Interest Income $ 158,652 $ 153,708 $ 133,453 $ 114,612 $ 99,266 Total Interest Expense 9,491 13,194 7,950 6,289 4,196 Net Interest Income 149,161 140,514 125,503 108,323 95,070 Provision for Credit Losses 4,500 200 5,533 2,850 6,335 Net Interest Income After Provision for Credit Losses 144,661 140,314 119,970 105,473 88,735 Total Non-Interest Income 15,696 17,241 15,219 16,762 15,257 Total Non-Interest Expense 82,406 82,242 75,459 67,754 58,172 Income Before Income Taxes 77,951 75,313 59,730 54,481 45,820 Provision for Income Taxes 19,217 19,277 14,203 26,111 16,097 Net Income $ 58,734 $ 56,036 $ 45,527 $ 28,370 $ 29,723 Balance Sheet Data: Total Assets $ 4,550,453 $ 3,721,830 $ 3,434,243 $ 3,075,452 $ 2,922,121 Loans & Leases 3,099,592 2,673,027 2,571,241 2,215,295 2,177,601 Allowance for Credit Losses 58,862 55,012 55,266 50,342 47,919 Investment Securities 876,665 567,615 548,962 536,056 506,372 Goodwill 11,183 11,183 11,183 - - Core Deposit Intangible 4,013 4,640 5,278 836 946 Deposits 4,060,267 3,278,019 3,062,832 2,723,228 2,581,711 Shareholders' Equity 423,665 369,296 311,215 299,660 279,981 Selected Ratios: Return on Average Assets 1.43 % 1.61 % 1.45 % 0.94 % 1.12 % Return on Average Equity 14.60 % 16.77 % 14.80 % 9.66 % 11.17 % Dividend Payout Ratio 19.92 % 20.02 % 24.49 % 38.71 % 35.25 % Average Loans & Leases to Average Deposits 80.77 % 84.38 % 84.36 % 82.18 % 88.63 % Average Equity to Average Assets 9.78 % 9.61 % 9.66 % 9.77 % 10.05 % Period-end Shareholders' Equity to Total Assets 9.31 % 9.92 % 9.06 % 9.74 % 9.58 % Basic and Diluted Per Share Data: Earnings (1) $ 74.03 $ 71.18 $ 56.82 $ 35.03 $ 37.44 Cash Dividends Per Share $ 14.75 $ 14.20 $ 13.90 $ 13.55 $ 13.10 Book Value Per Share at Year End (2) $ 536.53 $ 465.68 $ 397.10 $ 368.90 $ 346.80 (1) Based on the weighted average number of shares outstanding of 793,337, 787,227, 801,229, 809,834, and 793,970 for the years ended December 31, 2020, 2019, 2018, 2017, and 2016, respectively. (2) Based on the year-end number of shares outstanding of 789,646, 793,033, 783,721, 812,304, and 807,329 for the years ended December 31, 2020, 2019, 2018, 2017, and 2016, respectively. 36 Table of Contents