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1 SECURTIES 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 June 30, 2000 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 preceding 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 July 1, 2000
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- June 30, 2000, December 31, 1999 and June 30, 1999 1 Condensed Consolidated Statements of Net Earnings- Three Months Ended June 30, 1999 and June 30, 2000 2 Condensed Consolidated Statements of Cash Flows- Three Months Ended June 30, 1999 and June 30, 2000 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 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of dollars) June 30, 2000 December 31, 1999 June 30, 1999 ASSETS: Cash and due from banks $ 19,529 $ 17,245 $ 14,101 Interest bearing deposits with banks 100 100 100 Federal funds sold 0 - - Investment Securities: U.S. Treasury 6,930 6,842 10,956 U.S. Government 52,688 47,906 52,751 State & political obligations 29,707 31,246 33,453 All others 11,963 12,411 16,229 Loans and leases 478,098 463,947 425,285 Bank premises and equipment-net 10,024 10,176 9,491 Accrued interest and other assets 10,181 8,656 8,647 TOTAL ASSETS 619,220 $ 598,529 $ 571,013 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Demand $ 39,300 $ 54,051 $ 46,541 Time and savings 456,243 449,115 444,063 Federal funds purchased and securities sold under agreement to repurchase 22,284 7,343 8,968 Other borrowed money 36,619 25,039 10,846 Accrued interest and other liabilities 4,088 5,092 4,186 Total Liabilities 558,534 540,640 514,604 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 48,867 45,975 43,598 Accumulated other comprehensive income (858) (763) 134 Total Shareholders' Equity 60,686 57,889 56,409 LIABILITIES AND SHAREHOLDERS' EQUITY $619,220 $ 598,529 $ 571,013 See Notes to Condensed Consolidated Unaudited Financial Statements. Note: The December 31, 1998 Balance Sheet has been derived from the audited financial statements of that date.
4 1 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) Three Months Ended Six Months Ended June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 INTEREST INCOME: Loans and leases $ 10,516 $ 8,827 $ 20,545 $ 17,329 Investment Securities: U.S. Treasury securities 117 198 231 443 Securities of U.S. Government agencies 836 821 1,601 1,624 Obligations of states and political subdivisions 376 418 758 844 Other 206 304 491 785 Federal funds 1 9 67 75 Deposits in banks 1 1 2 2 Total Interest Income 12,053 10,578 23,695 21,102 INTEREST EXPENSE: Deposits 5,302 4,852 10,545 10,024 Borrowed funds 883 243 1,416 469 Total Interest Expense 6,185 5,095 11,961 10,493 NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 5,868 5,483 11,734 10,609 PROVISION FOR LOAN LOSSES 394 183 561 598 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,474 5,300 11,173 10,011 OTHER INCOME: Service charges 426 398 806 714 Other 326 378 712 893 Net securities gains (losses) - - 0 11 752 776 1,518 1,618 OTHER EXPENSES: Salaries and wages 1,636 1,503 3,299 2,966 Pension and other employee benefits 363 354 738 713 Occupancy expense (net) 222 155 216 263 Other operating expenses 1,507 1,586 3,059 3,128 3,728 3,598 7,312 7,070 INCOME BEFORE FEDERAL INCOME TAX 2,498 2,478 5,379 4,559 FEDERAL INCOME TAXES 819 627 1,577 1,172 NET INCOME 1,679 1,851 3,802 3,387 OTHER COMPREHENSIVE INCOME (NET OF TAX): Unrealized gains (losses) on securities 149 (723) (96) (1,538) COMPREHENSIVE INCOME $ 1,828 $ 1,128 $ 3,706 $ 1,849 NET INCOME PER SHARE (Based upon weighted average number of shares outstanding of 1,300,000 $ 1.29 $ 1.42 $ 2.92 $ 2.61 DIVIDENDS DECLARED $ 0.35 $ 0.30 $ 0.70 $ 0.60 See Notes to Condensed Consolidated Unaudited Financial Statements.
5 2 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) Six Months Ended June 30, 2000 June 30, 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,802 $ 1,498 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 549 304 Premium amortization 122 8 Discount amortization (47) 34 Provision for loan losses 561 416 Provision for deferred income taxes (124) (9) (Gain) loss on sale of fixed assets 1 - (Gain) loss on sale of investment securities - - Changes in Operating Assets and Liabilities: Accrued interest receivable and other assets (1,401) (887) Accrued interest payable and other liabilities (1,004) 88 Net Cash Provided by Operating Activities 2,459 1,452 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (398) (518) Proceeds from sale of fixed assets - - Proceeds from maturities of investment securities: 7,953 20,137 Proceeds from sale of investment securities: - - Purchase of investment securities- (11,006) (25,092) Net increase in loans and leases (14,712) (4,275) Net Cash Used by Investing Activities (18,163) (9,748) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits (7,623) (20,380) Net change in short-term borrowings 14,941 5,078 Increase in long-term borrowings - - Payments on long-term borrowings 11,580 (196) Payments of dividends (910) (390) Net Cash Provided by Financing Activities 17,988 (15,888) Net change in cash and cash equivalents 2,284 (24,184) Cash and cash equivalents - Beginning of year 17,345 37,694 CASH AND CASH EQUIVALENTS - END OF THE YEAR $ 19,629 $ 13,510 RECONCILIATION OF CASH AND CASH EQUIVALENTS: Cash and cash due from banks $ 19,529 $ 13,407 Interest bearing deposits 100 100 Federal funds sold - - $ 19,629 $ 13,507 See Notes to Condensed Consolidated Unaudited Financial Statements.
6 3 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 six months ended June 30, 2000 are not necessarily indicative of the results that are expected for the year ended December 31, 2000. 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, 1999.
7 4 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 three months ended June 30, 2000 comes primarily from net income from operations of $3.80 million. This compares with net income of $3.39 million for the same period in 1999. In addition, funds were purchased from correspondents, and the Federal Home Loan Bank. The principal uses of these funds were for granting loans. Loans as of June 30, 2000 were $478.1 million compared to $463.95 million as of December 31, 1999, a $14.2 million or 0.3% increase after reclassification of $1 million of commercial paper from the loan category to other investments. December 31, 1999 and June 30, 1999 loans and investments have been restated to reflect this change in classification. The following is a summary of five capital ratios as they are calculated from the September 30, 1999 financial statements: Primary Ratio 10.79% Total Capital Ratio 16.64% Risk Based Capital Tier 1 13.66% Risk Based Capital Tier 2 23.46% Stockholders' Equity/Total Assets 9.80%
8 5 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 June 30, 2000
9 6 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: August 10, 2000 By: /s/ Joe E. Crossgrove Joe E. Crossgrove President and Cashier Date: August 10, 2000 By: /s/ Randal H. Schroeder Randal H. Schroeder Asst. Vice-President and Chief Operating Officer
10 7 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 27 Financial Data Schedule
9 3-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 19,529 100 0 0 101,288 0 0 478,098 6,899 619,220 495,543 22,284 4,088 36,619 0 0 12,677 48,009 619,220 20,545 3,081 69 23,695 10,545 1,416 11,734 561 0 7,312 5,379 3,802 0 0 3,802 2.92 2.92 0 6,782 7,820 0 14,602 6,750 560 339 7,090 7,090 0 0