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1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) ---- of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 OR Transition Report Pursuant to Section 13 or 15(d) ---- of the Securities Exchange Act of 1934 For the transition period from to -------- -------- Commission File Number 0-14492 ----------------------------- FARMERS & MERCHANTS BANCORP, INC. --------------------------------- (Exact name of registrant as specified in its charter) OHIO 34-1469491 -------------------------------- ---------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) North Defiance Street, Archbold, Ohio 43502 - ---------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) (419) 446-2501 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ Indicate the number of shares of each of the issuers classes of common stock, as of the latest practicable date: Common Stock, No Par Value 1,300,000 - -------------------------------------------- ----------------------------------------- Class Outstanding as of April 1, 1999
2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q FARMERS & MERCHANTS BANCORP, INC. INDEX Form 10-Q Items Page --------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets- March 31, 1999, December 31, 1998 and March 31, 1998 1 Condensed Consolidated Statements of Net Earnings- Three Months Ended March 31, 1999 and March 31, 1998 2 Condensed Consolidated Statements of Cash Flows- Three Months Ended March 31, 1999 and March 31, 1998 3 Notes to Condensed Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on form 8K 6 Signatures 7
3 1 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of dollars) March 31, 1999 December 31, 1998 March 31, 1998 ASSETS: Cash and due from banks $ 13,407 $ 18,549 $ 14,502 Interest bearing deposits with banks 100 100 100 Federal funds sold 0 19,045 2,495 Investment Securities: U.S. Treasury 15,096 17,112 22,541 U.S. Government 54,298 49,567 30,103 State & political obligations 34,485 35,520 26,241 All others 24,135 21,712 14,749 Loans and leases 411,580 407,721 407,606 Bank premises and equipment-net 9,644 9,430 7,772 Accrued interest and other assets 8,009 7,113 7,314 TOTAL ASSETS $ 570,754 $ 585,869 $ 533,423 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Demand $ 41,699 $ 52,631 $ 40,400 Time and savings 450,104 459,552 424,243 Federal funds purchased and securities sold under agreement to repurchase 7,994 2,916 2,566 Other borrowed money 11,044 11,240 11,108 Accrued interest and other liabilities 4,268 4,180 4,561 Total Liabilities 515,109 530,519 482,878 SHAREHOLDERS' EQUITY: Common stock, no par value - authorized 1,500,000 shares; issued 1,300,000 shares 12,677 12,677 12,677 Undivided profits 42,111 41,002 36,897 Accumulated other comprehensive income 857 1,671 971 Total Shareholders' Equity 55,645 55,350 50,545 LIABILITIES AND SHAREHOLDERS' EQUITY $ 570,754 $ 585,869 $ 533,423 See Notes to Condensed Consolidated Unaudited Financial Statements. Note: The December 31, 1997 Balance Sheet has been derived from the audited financial statements of that date.
4 2 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) Three Months Ended March 31, 1999 March 31, 1998 INTEREST INCOME: Loans and leases $ 8,502 $ 8,909 Investment Securities: U.S. Treasury securities 245 340 Securities of U.S. Government agencies 803 482 Obligations of states and political subdivisions 426 338 Other 480 373 Federal funds 66 59 Deposits in banks 1 1 Total Interest Income 10,523 10,502 INTEREST EXPENSE: Deposits 5,172 5,218 Borrowed funds 226 219 Total Interest Expense 5,398 5,437 NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 5,125 5,065 PROVISION FOR LOAN LOSSES 416 139 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,709 4,926 OTHER INCOME: Service charges 316 297 Other 515 734 Net securities gains (losses) 0 - 831 1,031 OTHER EXPENSES: Salaries and wages 1,463 1,274 Pension and other employee benefits 359 297 Occupancy expense (net) 133 121 Other operating expenses 1,542 1,269 3,497 2,961 INCOME BEFORE FEDERAL INCOME TAX 2,043 2,996 FEDERAL INCOME TAXES 545 875 NET INCOME 1,498 2,121 OTHER COMPREHENSIVE INCOME (NET OF TAX): Unrealized gains (losses) on securities (814) (32) COMPREHENSIVE INCOME $ 684 $ 2,089 NET INCOME PER SHARE (Based upon weighted average number of shares outstanding of 1,300,000 $ 1.15 $ 1.63 DIVIDENDS DECLARED $ 0.30 $ 0.30 See Notes to Condensed Consolidated Unaudited Financial Statements.
5 3 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) Three Months Ended March 31, 1999 March 31, 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,498 $ 2,121 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 304 171 Premium amortization 8 116 Discount amortization 34 (35) Provision for loan losses 416 139 Provision for deferred income taxes (9) (8) (Gain) loss on sale of fixed assets - 8 (Gain) loss on sale of investment securities - - Changes in Operating Assets and Liabilities: Accrued interest receivable and other assets (887) (189) Accrued interest payable and other liabilities 88 320 Net Cash Provided by Operating Activities 1,452 2,643 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (518) (286) Proceeds from sale of fixed assets - - Proceeds from maturities of investment securities: 20,137 41,558 Proceeds from sale of investment securities: - - Purchase of investment securities- (25,092) (35,155) Net increase in loans and leases (4,275) (16,939) Net Cash Used by Investing Activities (9,748) (10,822) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits (20,380) 3,344 Net change in short-term borrowings 5,078 (32) Increase in long-term borrowings - - Payments on long-term borrowings (196) (184) Payments of dividends (390) (650) Net Cash Provided by Financing Activities (15,888) 2,478 Net change in cash and cash equivalents (24,184) (5,701) Cash and cash equivalents - Beginning of year 37,694 22,798 CASH AND CASH EQUIVALENTS - END OF THE YEAR $ 13,510 $ 17,097 RECONCILIATION OF CASH AND CASH EQUIVALENTS: Cash and cash due from banks $ 13,407 $ 14,502 Interest bearing deposits 100 100 Federal funds sold - 2,495 $ 13,507 $ 17,097 See Notes to Condensed Consolidated Unaudited Financial Statements.
6 4 FARMERS & MERCHANTS BANCORP, INC. Notes to Condensed Consolidated Unaudited Financial Statements NOTE 1 BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10Q and Rule 10-01 of Regulation S-X; accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1999 are not necessarily indicative of the results that are expected for the year ended December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998.
7 5 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Farmers & Merchants Bancorp, Inc. was incorporated on February 25, 1985, under the laws of the State of Ohio. Farmers & Merchants Bancorp, Inc., and its subsidiaries The Farmers & Merchants State Bank and Farmers & Merchants Life Insurance Company are engaged in commercial banking and life and disability insurance, respectively. The executive offices of Farmers & Merchants Bancorp, Inc. are located at 307-11 North Defiance Street, Archbold, Ohio 43502. LIQUIDITY AND CAPITAL RESOURCES Liquidity for the nine months ended March 31, 1999 comes primarily from net income from operations of $1.5 million. This compares with net income of $2.1 million for the same period in 1998. In addition the excess in Federal Funds sold was used to help fund the additional loan growth. The principal uses of these funds were for granting loans. Loans as of March 31, 1999 were $411.5 million compared to $407.7 million as of December 31, 1998, a $3.8 million or 1% increase after reclassification of $1.7 million of commercial paper from the loan category to other investments. December 31, 1998 and March 30, 1998 loans and investments have been restated to reflect this change in classification. Capital expenditures amounted to $243 million for the first three months of 1999. The following is a summary of five capital ratios as they are calculated from the March 31, 1999 financial statements: Primary Ratio 10.71% Total Capital Ratio 12.62% Risk Based Capital Tier 1 13.92% Risk Based Capital Tier 2 18.22% Stockholders' Equity/Total Assets 9.75%
8 6 PART II ITEM 6 EXHIBIT AND REPORTS ON FORM 8-K (A) The following documents are filed as part of this report: Exhibit No. Description 27 Financial Data Schedule (B) Reports on Form 8-K No reports on Form 8-K were filed by the registrant during the quarter ended March 31, 1998.
9 7 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Farmers & Merchants Bancorp, Inc., Date: May 10, 1999 By: /s/ Joe E. Crossgrove Joe E. Crossgrove President and Cashier Date: May 10, 1999 By: /s/ Randal H. Schroeder Randal H. Schroeder Asst. Vice-President and Chief Operating Officer
10 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 27 Financial Data Schedule
9 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 13,407 100 0 0 128,014 0 0 411,580 6,140 570,754 491,803 7,994 4,268 11,044 0 0 12,677 42,968 570,754 8,502 1,954 67 10,523 5,172 226 5,125 416 0 3,497 2,043 1,498 0 0 1,498 1.15 1.15 0 7,731 6,222 0 13,953 5,850 1,324 709 5,651 5,651 0 0