Executive Summary

F&M delivered a clean beat: Q1 2025 EPS was $0.51 vs S&P Global consensus $0.42*, and revenue was $27.6M vs $22.9M*; pre-tax, pre-provision income rose 49.6% YoY to $9.3M, driven by a 43 bps YoY and 19 bps QoQ NIM expansion to 3.03% .
Net income of $7.0M grew 29.7% YoY, though declined sequentially from Q4’s $8.4M as the efficiency ratio worsened sequentially to 66.79% (from 59.82%) and provision expense increased .
Asset quality remained strong: NPLs/loans were 0.17% (up from 0.12% in Q4), ACL/NPL coverage a robust 586% and net charge-offs were ~0.01% of average loans .
Management highlighted continued deposit mix optimization (decline in higher-cost time deposits), improving cost of funds, and disciplined loan pricing as drivers of NIM and earnings momentum into 2025 .
Potential stock reaction catalysts: the EPS/revenue beat, visible NIM inflection (+19 bps QoQ), and strong credit metrics; tempered by sequential EPS decline and higher noninterest expense vs Q4 .

What Went Well and What Went Wrong

What Went Well

NIM and revenue inflection: Net interest margin rose to 3.03% (+43 bps YoY, +19 bps QoQ), with “continued loan repricing… and strategic efforts to improve our cost of funds,” lifting total revenue (NII + noninterest income) and PTPP +49.6% YoY to $9.3M .
Deposit mix optimization: Management reduced costlier time deposits (down $19.5M YoY) while growing core deposits (+$78.9M YoY), supporting lower cost of funds (2.76% vs 3.06% YoY) and a healthier loan-to-deposit profile .
Credit quality resilience: NPLs were $4.5M (0.17% of loans); net charge-offs were 0.01% of average loans; ACL/NPL coverage was 586%—all pointing to strong underwriting and risk controls .

Management Quote: “2025 is off to a solid start… our net interest margin grew 43-basis points year-over-year to 3.03%… Total revenue increased 16.7% year-over-year… we expect continued year-over-year growth in net income” .

What Went Wrong

Sequential profitability down: Net income fell to $7.0M from $8.4M in Q4; EPS declined to $0.51 from $0.61 as the efficiency ratio deteriorated sequentially to 66.79% from 59.82% and provision for credit losses increased QoQ .
Noninterest expense step-up: Total noninterest expense rose to $18.8M from $16.1M in Q4, reflecting higher salaries/benefits and several operating lines (e.g., consulting fees) that pressured sequential operating leverage .
Slight uptick in NPLs: NPLs/loans increased to 0.17% from 0.12% in Q4, though still very low, keeping attention on higher-risk segments and office CRE exposure (5.4% of loans; ~63% WALOAN LTV) .

Financial Results

Headline P&L and Margins (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Diluted EPS ($)	$0.48	$0.61	$0.51
Net Income ($M)	$6.52	$8.38	$6.95
Net Interest Income ($M)	$21.59	$22.83	$23.91
Noninterest Income ($M)	$3.96	$4.00	$4.16
Net Interest Margin (%)	2.71%	2.84%	3.03%
Efficiency Ratio (%)	67.98%	59.82%	66.79%

Revenue and EPS vs S&P Global Consensus

Metric	Q1 2024	Q4 2024	Q1 2025
Revenue (Actual, $M)*	24.62*	26.58*	27.57*
Revenue (Consensus, $M)*	19.87*	24.04*	22.85*
EPS (Actual, $)*	0.39*	0.61*	0.51*
EPS (Consensus, $)*	0.35*	0.48*	0.42*

Q1 2025 beat: Revenue +$4.72M vs consensus; EPS +$0.09 vs consensus (bold positive surprise). Values retrieved from S&P Global.*

Balance Sheet and Credit KPIs (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Total Deposits ($M)	$2,684.8	$2,686.8	$2,700.3
Loans, net ($M)	$2,512.9	$2,536.0	$2,555.6
NPLs / Total Loans (%)	0.11%	0.12%	0.17%
Tier 1 Leverage Ratio (%)	8.04%	8.12%	8.44%

CRE Loan Exposure (Q1 2025)

Category	$000s	% of CRE	% of Total Loans
Industrial	$281,484	21.2%	10.9%
Multi-family	$217,903	16.4%	8.4%
Retail	$213,281	16.1%	8.3%
Hotels	$157,139	11.8%	6.1%
Office	$139,069	10.5%	5.4%
Other	$316,822	24.0%	12.2%
Total CRE	$1,325,698	100.0%	51.3%
(Office CRE avg LTV ~63%; avg loan ~$965K) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Formal quantitative guidance	2025	None provided	None provided; management “expects continued year-over-year growth in net income”	Qualitative: maintained constructive outlook
Net interest margin drivers	2025	Focus on mix and repricing	Continued loan repricing and improving cost of funds to support NIM	Qualitative: maintained
Loan growth	2025	Modest growth in back half (prior commentary)	Loans +0.8% QoQ in Q1; stable demand across markets	Qualitative: stable
Dividend	Q1 2025	$0.22125 prior quarter	Declared $0.22125 per share payable Apr 20, 2025	Maintained

Earnings Call Themes & Trends

(Company did not provide a transcript in our sources; themes reflect management commentary in quarterly releases.)

Topic	Previous Mentions (Q3 2024 & Q4 2024)	Current Period (Q1 2025)	Trend
Net interest margin	Q3: NIM 2.71%; Q4: 2.84%; benefit from repricing, deposit optimization	NIM 3.03%; +43 bps YoY, +19 bps QoQ; continued repricing and lower cost of funds	Improving
Deposit mix/cost of funds	Q3/Q4: Added checking accounts; optimizing deposit base; cost of interest-bearing liabilities ~3.01% in Q4	Core deposits +$78.9M YoY; time deposits down $19.5M; cost of int.-bearing liabilities 2.76%	Improving
Asset quality	Q3: NPLs 0.11%; Q4: 0.12%; high coverage	NPLs 0.17%; ACL/NPL coverage 586%; NCOs 0.01%	Strong, slight uptick
CRE office exposure	Q3/Q4: ~5.2–5.3% of loans, LTV ~64%	Office 5.4% of loans; ~63% LTV; diversified CRE	Stable/managed
Operating efficiency	Q3: 67.98%; Q4: 59.82%	66.79% (sequentially worse; YoY better)	Mixed
Liquidity & capital	Q3/Q4: strong liquidity; Tier 1 leverage ~8.04–8.12%	Tier 1 leverage 8.44%	Strong

Management Commentary

Strategic focus: “Enhancing profitability, controlling growth, driving innovation, and achieving greater operational efficiency,” with strong execution across Ohio, Indiana, and Michigan .
NIM drivers: “Continued loan repricing… disciplined approach to new loan originations and strategic efforts to improve our cost of funds” supported NIM expansion to 3.03% .
Credit & growth: Stable demand, diversified CRE, and low NPLs underpin confidence: “We continue to believe 2025 will be another good year for F&M” .

Q&A Highlights

No earnings call transcript was available across our sources for Q1 2025; management’s public commentary emphasized NIM expansion via repricing/cost-of-funds actions, deposit mix improvement, and conservative risk posture in higher-risk segments including office CRE .
If/when a transcript is posted, we would revisit for any guidance clarifications on margin trajectory, opex normalization, and loan growth cadence.

Estimates Context

Q1 2025 actuals vs consensus: EPS $0.51 vs $0.42*; Revenue $27.57M vs $22.85M* → both clear beats (3 estimates for revenue and EPS). Values retrieved from S&P Global.
Trajectory of consensus vs actuals: FMAO beat S&P Global consensus in Q4 2024 and Q1 2025 on both revenue and EPS*, reinforcing positive estimate momentum into 1H25.*

Period	EPS Actual ($)*	EPS Consensus ($)*	Revenue Actual ($M)*	Revenue Consensus ($M)*	# Est EPS / Rev*
Q1 2024	0.39*	0.35*	24.62*	19.87*	n/a / n/a*
Q4 2024	0.61*	0.48*	26.58*	24.04*	n/a / n/a*
Q1 2025	0.51*	0.42*	27.57*	22.85*	3 / 3*

Values retrieved from S&P Global.*

Key Takeaways for Investors

Margin inflection is real: NIM rose to 3.03% (+19 bps QoQ, +43 bps YoY) on repricing and deposit mix actions—an important driver of earnings leverage in 2025 .
Earnings beat despite sequential normalization: Q1 beat on EPS and revenue vs S&P Global, but EPS fell sequentially; watch for expense run-rate and provision cadence into Q2 *.
Credit remains a differentiator: NPLs/loans at 0.17%, NCOs ~0.01% and robust ACL/NPL coverage provide downside protection even as office CRE is monitored (5.4% of loans; ~63% LTV) .
Deposit strategy working: Core deposit growth and lower time deposits reduced cost of funds to 2.76%, supporting spread expansion even without rate cuts .
Capital steady: Tier 1 leverage improved to 8.44%; dividend maintained at $0.22125, supporting an income component while margin tailwinds drive earnings .
Near-term setup: Continued NIM tailwinds and solid credit backdrop vs. a need for opex discipline should shape estimate revisions; bias to upside if NIM holds >3.0% and expense growth moderates .
Trading implications: Positive beat-and-raise narrative on margins and revenue is supportive; monitor sequential EPS trajectory and expense line for confirmation into Q2.

Sources and Notes:

Q1 2025 Form 8-K and attached press release, including full financial tables and selected data .
Q1 2025 company press release on IR site (duplicate of 8-K exhibit) .
Prior quarters’ press releases for Q4 2024 and Q3 2024 for trend context .
Dividend declaration press release (Q1 2025) .
IR “Quarterly Results” page for document availability (press release, 10-Q) .
S&P Global consensus and actuals for EPS/revenue marked with “”. Values retrieved from S&P Global.

FARMERS & MERCHANTS BANCORP INC (FMAO)·Q1 2025 Earnings Summary