Is Farmers & Merchants Bancorp a Hidden Gem?

Photo of author
Written By Keziah Monique Gayo

Founded in 1916 and headquartered in Lodi, California, Farmers & Merchants Bancorp (OTCQX: FMCB) is a lesser-known entity in the financial sector with a market cap of $700 million.

Despite its modest size, FMCB boasts robust financial characteristics and a resilient dividend history, making it an intriguing investment opportunity deserving of closer attention.

Financial Strength and Stability

Credits: DepositPhotos

FMCB operates with low volatility and maintains a strong focus on credit risk management, distinguishing itself within the banking sector. One of its standout features is its consistent increase in Tangible Book Value (TBV) per share, even amidst challenging market conditions.

While many banks faced equity declines due to unrealized losses in Available-for-Sale (AFS) securities following the rise in Fed Funds Rate, FMCB managed its AFS portfolio adeptly, thereby minimizing adverse impacts on TBV per share.

Challenges with HTM Securities

Despite its success with AFS securities, concerns arise regarding FMCB’s Held-to-Maturity (HTM) securities. The bank holds HTM securities valued nearly three times that of its AFS holdings, with unrealized losses exceeding $157 million.

This substantial exposure poses a potential risk, as these losses could affect future equity positions and TBV per share growth if market conditions worsen.

Loan Portfolio and Investment Strategies

FMCB maintains a conservative approach to lending, evidenced by its low loan-to-deposit ratio of 74.20%.

The bank’s preference for fixed-rate loans, particularly those maturing between 5 to 15 years, positions it favorably in a stable interest rate environment. Despite sluggish credit demand, FMCB remains committed to prudent lending practices, as reflected in its minimal non-performing loans, which stood at a mere 0.10%.

Dividend Growth and Valuation

A standout feature of FMCB is its exceptional dividend history, having increased dividends consecutively for an impressive 59 years—a testament to its stability and commitment to shareholder value.

Despite a conservative dividend growth strategy and a current dividend yield of 1.80%, FMCB maintains a low Payout Ratio of just 15%, ensuring the sustainability of dividends and potential for future increases.

Valuation and Investment Thesis

From a valuation perspective, FMCB appears undervalued, currently trading at historically low Price/TBV per share multiples.

The current Price/TBV per share of 1.29x contrasts sharply with its 10-year average of 1.64x, indicating significant upside potential once market conditions stabilize. Analysts project a fair value range for FMCB’s TBV per share, reinforcing its undervaluation and potential for capital appreciation.

Interesting Investment Opportunity

Credits: DepositPhotos

In conclusion, Farmers & Merchants Bancorp presents a compelling investment opportunity for discerning investors seeking stability, dividend growth, and potential capital gains. Despite challenges posed by HTM securities, FMCB’s strong financial fundamentals, conservative lending practices, and resilient dividend track record underscore its long-term viability.

As market dynamics evolve and interest rates potentially normalize, FMCB is poised to capitalize on its strengths and deliver sustained value to shareholders.

Investors looking to capitalize on a hidden gem in the banking sector should consider Farmers & Merchants Bancorp, recognizing its solid financial foundation and commitment to shareholder returns through consistent dividend growth and prudent capital management strategies.

With its century-long history and steadfast approach to financial stewardship, FMCB stands out as a reliable investment choice in today’s uncertain economic landscape.


You should read and understand this disclaimer in its entirety before joining or viewing the website or email/blog list of (the “Publisher”). The information (collectively the “Advertisement”) disseminated by email, text or other method by the Publisher including this publication is a paid commercial advertisement and should not be relied upon for making an investment decision or any other purpose. The Publisher is engaged in the business of marketing and advertising the securities of publicly traded companies in exchange for compensation. The track record, gains, upside, and/or losses mentioned in the Advertisement, if any, should not be considered as true or accurate or be the basis for an investment. The Publisher does not verify the accuracy or completeness of any information included in the Advertisement. While the Publisher does not charge for the SMS service, standard carrier message and data rates may apply. To unsubscribe from receiving promotional text messages to your phone sent via an autodialer, using your phone reply to the sender’s phone number with the word STOP or HELP for help.

The Advertisement is not a solicitation or recommendation to buy securities of the advertised company. An offer to buy or sell securities can be made only by a disclosure document that complies with applicable securities laws and only in the states or other jurisdictions in which the security is eligible for sale. The Advertisement is not a disclosure document. The Advertisement is only a favorable snapshot of unverified information about the advertised company. An investor considering purchasing the securities, should always do so only with the assistance of his legal, tax and investment advisors. Investors should review with his or her investment advisor, tax advisor or attorney, if and to the extent available, any information concerning a potential investment at the web sites of the U.S. Securities and Exchange Commission (the "SEC") at; the Financial Industry Regulatory Authority (the "FINRA") at, and relevant State Securities Administrator website and the OTC Markets website at The Publisher cautions investors to read the SEC advisory to investors concerning Internet Stock Fraud at, as well as related information published by the FINRA on how to invest carefully. Investors are responsible for verifying all information in the Advertisement. As an advertiser, we do not verify any information we publish. The Advertisement should not be considered true or complete.

The Publisher does not offer investment advice or analysis, and the Publisher further urges you to consult your own independent tax, business, financial and investment advisors concerning any investment you make in securities particularly those quoted on the OTC Markets. Investing in securities is highly speculative and carries an extremely high degree of risk. You could lose your entire investment if you invest in any company mentioned in the Advertisement. You acknowledge that we are not an investment advisory service, a broker-dealer or an investment adviser and we are not qualified to act as such. You acknowledge that you will consult with your own independent, tax, financial and/or legal advisers regarding any decisions as to any company mentioned here. We have not determined if the Advertisement is accurate, correct or truthful. The Advertisement is compiled from publicly available information, which include, but are not limited to, no cost online research, magazines, newspapers, reports filed with the SEC or information furnished by way of press releases. Because all information relied upon by us in preparing an advertisement about an issuer comes from a public source, it is not reliable, and you should not assume it is accurate or complete.

By your subscription to our profiles, the viewing of this profile and/or use of our website, you have agreed and acknowledged the terms of our full disclaimer and privacy policy which can be viewed at the following link: and

By accepting the Advertisement, you agree and acknowledge that any hyperlinks to the website of (1) a client company, (2) the party issuing or preparing the information for the company, or (3) other information contained in the Advertisement is provided only for your reference and convenience. The advertiser is not responsible for the accuracy or reliability of these external sites, nor is it responsible for the content, opinions, products or other materials on external sites or information sources. If you use, act upon or make decisions in reliance on information contained in any disseminated report/release or any hyperlink, you do so at your own risk and agree to hold us, our officers, directors, shareholders, affiliates and agents harmless. You acknowledge that you are not relying on the Publisher, and we are not liable for, any actions taken by you based on any information contained in any disseminated email or hyperlink.