FMCB's Q3 Net Income Jumps 7.2% on Strong Net Interest Income

TL;DR

**FMCB is showing solid growth in net income and deposits, but the jump in credit loss provisions is a yellow flag for loan quality.**

AI Summary

FARMERS & MERCHANTS BANCORP reported a net income of $23.718 million for the three months ended September 30, 2025, an increase of 7.22% from $22.121 million in the same period of 2024. For the nine months ended September 30, 2025, net income rose by 4.76% to $69.782 million, up from $66.611 million in 2024. Total assets increased by 4.84% to $5.629 billion as of September 30, 2025, from $5.370 billion at December 31, 2024. Net interest income grew by 6.59% to $55.417 million for the three-month period, and by 5.14% to $162.426 million for the nine-month period, driven by higher interest and dividends on investment securities, which increased by $4.299 million to $12.343 million for the quarter. The provision for credit losses increased significantly to $700 thousand for the quarter and $2.400 million for the nine months, compared to zero in the prior year periods. Total deposits increased by $185.875 million for the nine months, reaching $4.885 billion, with non-interest bearing deposits growing by $62.830 million. The company also saw an increase in unrealized gains on available-for-sale securities, which contributed $8.722 million to other comprehensive income for the quarter.

Why It Matters

FMCB's consistent net income growth, up 7.22% for the quarter and 4.76% year-to-date, signals robust financial health in a challenging banking environment. The significant increase in investment securities and deposits suggests effective balance sheet management and customer acquisition, which is crucial for regional banks competing with larger institutions. However, the rise in provision for credit losses, from $0 to $2.4 million year-to-date, warrants investor attention as it could indicate a more cautious outlook on loan quality. This performance could make FMCB an attractive option for investors seeking stability and growth in the regional banking sector, while also impacting local businesses and individuals who rely on F&M Bank for lending and deposit services.

Risk Assessment

Risk Level: medium — The provision for credit losses increased from $0 in the nine months ended September 30, 2024, to $2.400 million in the same period of 2025, indicating a potential deterioration in loan portfolio quality or a more conservative lending outlook. Additionally, while total assets grew, loans and leases held for investment, net, decreased from $3.603 billion at December 31, 2024, to $3.532 billion at September 30, 2025, suggesting a contraction in core lending activities.

Analyst Insight

Investors should monitor future credit loss provisions and the trend in loan growth closely. While net income is up, the increase in credit loss provisions suggests potential headwinds in asset quality. Consider FMCB for its stable deposit growth and net interest income, but be aware of the evolving risk profile in its loan portfolio.

Financial Highlights

debt To Equity

N/A

revenue

$67,528

operating Margin

N/A

total Assets

$5.629B

total Debt

$10,310

net Income

$23.718M

eps

$34.24

gross Margin

N/A

cash Position

$172,567

revenue Growth

N/A

Revenue Breakdown

Key Numbers

• $23.718M — Net Income (Q3 2025) (Increased 7.22% from $22.121M in Q3 2024)
• $69.782M — Net Income (YTD Sept 2025) (Increased 4.76% from $66.611M in YTD Sept 2024)
• $5.629B — Total Assets (Increased 4.84% from $5.370B at Dec 31, 2024)
• $162.426M — Net Interest Income (YTD Sept 2025) (Increased 5.14% from $154.487M in YTD Sept 2024)
• $2.400M — Provision for Credit Losses (YTD Sept 2025) (Increased from $0 in YTD Sept 2024)
• $4.885B — Total Deposits (Increased by $185.875M from Dec 31, 2024)
• $870.161M — Securities available-for-sale (Increased from $464.414M at Dec 31, 2024)
• $3.532B — Loans and leases held for investment, net (Decreased from $3.603B at Dec 31, 2024)
• $34.24 — Basic EPS (Q3 2025) (Increased from $29.96 in Q3 2024)
• $100.18 — Basic EPS (YTD Sept 2025) (Increased from $89.91 in YTD Sept 2024)

Key Players & Entities

• FARMERS & MERCHANTS BANCORP (company) — registrant
• F&M Bank (company) — wholly owned subsidiary
• SEC (regulator) — regulatory body
• $23.718 million (dollar_amount) — net income for Q3 2025
• $69.782 million (dollar_amount) — net income for nine months ended Sept 30, 2025
• $5.629 billion (dollar_amount) — total assets as of Sept 30, 2025
• $2.400 million (dollar_amount) — provision for credit losses for nine months ended Sept 30, 2025
• $4.885 billion (dollar_amount) — total deposits as of Sept 30, 2025
• FASB (regulator) — accounting standards body

FAQ

Risk Factors

• Credit Loss Provisions [medium — financial]: The provision for credit losses increased significantly to $700 thousand for the quarter and $2.400 million for the nine months ended September 30, 2025, compared to zero in the prior year periods. This indicates a potential increase in expected credit losses on loans and leases.
• Unrealized Losses on Securities [medium — market]: As of September 30, 2025, the company had unrealized losses of $18,713 thousand on available-for-sale securities and $131,625 thousand on held-to-maturity securities. While unrealized losses on available-for-sale securities impact other comprehensive income, significant unrealized losses on held-to-maturity securities represent potential future impairments.
• Regulatory Compliance [high — regulatory]: As a financial institution, FMCB is subject to extensive regulation by federal and state agencies. Changes in regulations, capital requirements, or compliance failures could materially impact operations and profitability.
• Interest Rate Sensitivity [medium — market]: The company's profitability is sensitive to changes in interest rates, which can affect net interest income and the fair value of investment securities. Fluctuations in interest rates can impact loan demand and deposit costs.
• Cybersecurity and Data Breaches [high — operational]: Like all financial institutions, FMCB is a target for cyberattacks. A successful breach could lead to financial losses, reputational damage, and regulatory penalties.

Industry Context

Farmers & Merchants Bancorp operates within the highly competitive U.S. banking industry. Key trends include a focus on digital transformation, evolving customer expectations for seamless service, and the ongoing impact of interest rate environments on net interest margins. Consolidation within the industry continues, with smaller banks facing pressure to achieve scale or find strategic partnerships.

Regulatory Implications

As a bank holding company, FMCB is subject to stringent regulatory oversight from the Federal Reserve and other agencies. Changes in capital adequacy rules, liquidity requirements, and consumer protection regulations can significantly impact its business model and profitability. The increased provision for credit losses may also draw scrutiny regarding risk management practices.

What Investors Should Do

1. Monitor the trend in provision for credit losses.
2. Analyze the composition and performance of investment securities.
3. Evaluate the growth in deposits, particularly non-interest bearing.
4. Assess the impact of rising interest income on investment securities.

Key Dates

• 2025-09-30: Quarterly Report Filing (10-Q) — Provides updated financial performance and condition for the period ending September 30, 2025.
• 2024-12-31: Year-End Financial Position — Baseline for asset and liability changes reported in the current 10-Q.

Glossary

Available-for-sale securities

Securities that are not classified as held-to-maturity or trading securities. They are reported at fair value, with unrealized gains and losses included in other comprehensive income. (The company has a significant increase in these securities, with unrealized gains contributing to other comprehensive income.)

Held-to-maturity securities

Debt securities that the entity has the intent and ability to hold until maturity. They are reported at amortized cost. (The company holds a substantial amount of these securities, with significant unrealized losses noted.)

Provision for credit losses

An expense recognized by financial institutions to account for potential losses on loans and leases that may not be repaid. (This provision has increased significantly, indicating a potential rise in credit risk.)

Other comprehensive income (loss)

Includes unrealized gains and losses on available-for-sale securities, foreign currency translation adjustments, and pension plan adjustments, which are not included in net income. (Unrealized gains on available-for-sale securities contributed positively to OCI in the current quarter.)

Non-interest bearing deposits

Deposits that do not earn interest, such as checking accounts. (These deposits have grown, which can be a cost-effective source of funding for the bank.)

Year-Over-Year Comparison

Compared to the prior year, Farmers & Merchants Bancorp has demonstrated solid growth in net income, with a 7.22% increase for the third quarter and 4.76% for the year-to-date period. Total assets have also expanded by 4.84%. A notable shift is the introduction of a $2.400 million provision for credit losses year-to-date, contrasting with zero in the previous year, suggesting a more cautious outlook on credit quality. Revenue from interest and dividends on investment securities has seen a substantial increase, contributing positively to net interest income, which grew by 6.59% for the quarter.

Key Financial Figures

• $0.01 — ant had 720,365 shares of common stock, $0.01 par value per share, outstanding. FARM

Filing Documents

• ef20054980_10q.htm (10-Q) — 5337KB
• ef20054980_ex31-a.htm (EX-31.(A)) — 8KB
• ef20054980_ex31-b.htm (EX-31.(B)) — 8KB
• ef20054980_ex32.htm (EX-32) — 6KB
• 0001140361-25-041120.txt ( ) — 20098KB
• fmcb-20250930.xsd (EX-101.SCH) — 50KB
• fmcb-20250930_def.xml (EX-101.DEF) — 359KB
• fmcb-20250930_lab.xml (EX-101.LAB) — 604KB
• fmcb-20250930_pre.xml (EX-101.PRE) — 381KB
• fmcb-20250930_cal.xml (EX-101.CAL) — 81KB
• ef20054980_10q_htm.xml (XML) — 5410KB

- FINANCIAL INFORMATION

PART I. - FINANCIAL INFORMATION Page

- Consolidated Financial Statements (Unaudited)

Item 1 - Consolidated Financial Statements (Unaudited) Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Shareholders' Equity 6 Consolidated Statements of Cash Flows 7

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8

- Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 36

- Quantitative and Qualitative Disclosures About Market Risk

Item 3 - Quantitative and Qualitative Disclosures About Market Risk 59

- Controls and Procedures

Item 4 - Controls and Procedures 61

- OTHER INFORMATION

PART II. - OTHER INFORMATION

– Legal Proceedings

Item 1 – Legal Proceedings 61

– Risk Factors

Item 1A – Risk Factors 61

– Unregistered Sales of Equity Securities and Use of Proceeds

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds 62

– Defaults Upon Senior Securities

Item 3 – Defaults Upon Senior Securities 63

– Mine Safety Disclosures

Item 4 – Mine Safety Disclosures 63

– Other Information

Item 5 – Other Information 63

– Exhibits

Item 6 – Exhibits 63

Signatures

Signatures 64 2 Table of Contents PART 1. FINANCIAL INFORMATION Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) FARMERS & MERCHANTS BANCORP CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except share and per share amounts) September 30, 2025 December 31, 2024 ASSETS Cash and due from banks $ 70,447 $ 71,058 Interest bearing deposits with banks 102,120 141,505 Total cash and cash equivalents 172,567 212,563 Securities available-for-sale, amortized cost $ 879,082 and $ 490,992 , respectively 870,161 464,414 Securities held-to-maturity, fair value $ 604,131 and $ 610,953 , respectively 734,628 769,443 Allowance for credit losses - securities held-to-maturity ( 450 ) ( 450 ) Total investment securities 1,604,339 1,233,407 Non-marketable securities 15,549 15,549 Loans and leases held for investment, net of unearned income 3,608,346 3,678,388 Allowance for credit losses - loans and leases ( 75,963 ) ( 75,283 ) Loans and leases held for investment, net 3,532,383 3,603,105 Bank-owned life insurance 75,954 74,085 Premises and equipment, net 54,369 51,367 Deferred income tax assets and income taxes receivable 28,224 36,729 Accrued interest receivable 31,505 30,152 Goodwill 11,183 11,183 Other intangibles 1,295 1,687 Other real estate owned 873 873 Other assets 101,626 99,496 Total Assets $ 5,629,867 $ 5,370,196 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Non-interest bearing $ 1,581,097 $ 1,518,267 Interest bearing: Demand 797,507 882,123 Savings and money market 1,757,896 1,583,202 Certificates of deposit 748,514 715,547 Total interest bearing 3,303,917 3,180,872 Total deposits 4,885,014 4,699,139 Subordinated debentures 10,310 10,310 Interest payable and other liabilities 89,291 87,675 Total Liabilities 4,984,615 4,797,124 COMMITMENTS AND CONTINGENCIES (Note 12) SHAREHOLDERS' EQUITY Preferred shares, no par value, 1,000,000 shares authorized and none issued or outs

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1—Basis of Presentation and Significant Accounting Policies The accompanying unaudited consolidated financial statements include the accounts of Farmers & Merchants Bancorp ("FMCB" or "Bancorp"), a bank holding company incorporated in the State of Delaware, and its wholly owned subsidiary, Farmers & Merchants Bank of Central California ("F&M Bank" or the "Bank") (collectively, the "Company"). These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC"). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information and note disclosures have been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. All significant intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Various elements of the Company's accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are significant to an understanding of Bank's financial statements. These policies relate to: (i) the determination of the provision and allowance for credit losses; (ii) the valuation of financial

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Note 1—Basis of Presentation and Significant Accounting Policies—Continued Recently Adopted Accounting Standards — The Accounting Standards Codification ("ASC") is the FASB officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities. Periodically, the FASB will issue Accounting Standard Updates ("ASU") to its ASC. Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for the Company as an SEC registrant. All other accounting literature is non-authoritative. In December 2023, the FASB issued ASU No. 2023-09 , "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. On January 1, 2025, the Company adopted this standard with no material impact on the Company's consolidated financial statements, and the new income tax disclosures will be required beginning with our 2025 Form 10-K. Accounting Standards Pending Adoption — The following paragraphs provide descriptions of newly issued but not yet effective accounting standards that could have a material effect on the Company's financial position or results of operations. In November 2024, the FASB issued ASU No. 2024-03, " Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) : Disaggregation of Income Statement Exp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Note 2—Investment Securities The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows: Amortized Gross Unrealized (Dollars in thousands) Cost Gains Losses Fair Value As of September 30, 2025 U.S. Government-sponsored securities $ 2,144 $ 1 $ 15 $ 2,130 Mortgage-backed securities (1) 758,047 6,599 18,183 746,463 Commercial mortgage-backed obligations (1) 1,231 23 - 1,254 Collateralized mortgage obligations (1) 21,356 - 479 20,877 Municipal securities 66,465 3,021 - 69,486 Corporate securities 29,529 148 36 29,641 Other 310 - - 310 Total available-for-sale securities $ 879,082 $ 9,792 $ 18,713 $ 870,161 (1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government. Amortized Gross Unrealized (Dollars in thousands) Cost Gains Losses Fair Value As of December 31, 2024 U.S. Government-sponsored securities $ 2,657 $ 4 $ 17 $ 2,644 Mortgage-backed securities (1) 466,302 464 26,908 439,858 Commercial mortgage-backed obligations (1) 1,228 - 16 1,212 Collateralized mortgage obligations (1) 5,653 - 156 5,497 Corporate securities 14,800 56 - 14,856 Other 352 - 5 347 Total available-for-sale securities $ 490,992 $ 524 $ 27,102 $ 464,414 (1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government. The book values, estimated fair values and unrecognized gains and losses of investments classified as held-to-maturity are as follows: Amortized Gross Unrecognized Allowance for Credit (Dollars in thousands) Cost Gains Losses Fair Value Losses As of September 30, 2025 Mortgage-backed securit

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Note 2—Investment Securities—Continued The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost basis of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts and (v) whether or not such securities are guaranteed or pre-refunded by the issuers. Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities. The following tables show the gross unrealized losses for available-for-sale securities, for which an allowance for credit losses has not been recorded, that have been in an unrealized loss position for less than 12 months or 12 months or more: September 30, 2025 Less Than 12 Months 12 Months or More

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