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, 2001 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 April 1, 2001
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, 2001, December 31, 2000 and March 31, 2000 1 Condensed Consolidated Statements of Net Earnings- Three Months Ended March 31, 2000 and March 31, 2001 2 Condensed Consolidated Statements of Cash Flows- Three Months Ended March 31, 2000 and March 31, 2001 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) March 31, 2001 December 31, 2000 March 31, 2000 ASSETS: Cash and due from banks $ 19,513 $ 17,951 $ 16,431 Interest bearing deposits with banks 100 100 100 Federal funds sold 19,985 370 -- Investment Securities: U.S. Treasury 7,794 7,921 7,443 U.S. Government 66,104 61,057 54,963 State & political obligations 32,323 32,157 30,263 All others 12,724 15,097 12,907 Loans and leases 472,930 480,645 466,085 Bank premises and equipment-net 10,602 10,354 10,118 Accrued interest and other assets 10,100 9,508 9,759 TOTAL ASSETS $ 652,175 $ 635,160 $ 608,069 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Demand $ 35,506 $ 40,729 $ 39,351 Time and savings 501,296 475,734 459,474 Federal funds purchased and securities sold under agreement to repurchase 22,714 18,903 20,544 Other borrowed money 20,565 30,786 24,831 Accrued interest and other liabilities 4,896 4,020 4,684 Total Liabilities 584,977 570,172 548,894 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 52,878 51,416 47,506 Accumulated other comprehensive income 1,643 895 (1,007) Total Shareholders' Equity 67,198 64,988 59,176 LIABILITIES AND SHAREHOLDERS' EQUITY $ 652,175 $ 635,160 $ 608,070 See Notes to Condensed Consolidated Unaudited Financial Statements. Note: The December 31, 2000 Balance Sheet has been derived from the audited financial statements of that date. 1
4 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) Three Months Ended Three Months Ended Sept 30, 2000 Sept 30, 1999 March 31, 2001 March 31, 2000 INTEREST INCOME: Loans and leases $ (9,723) $ 9,427 $ 10,822 $ 10,029 Investment Securities: U.S. Treasury securities (108) 140 123 114 Securities of U.S. Government agencies (632) 746 969 765 Obligations of states and political subdivisions (371) 409 388 382 Other (271) 237 220 286 Federal funds 93 11 160 66 Deposits in banks 27 1 29 -- Total Interest Income (10,985) 10,971 12,711 11,642 INTEREST EXPENSE: Deposits (4,507) 4,837 6,039 5,243 Borrowed funds (569) 426 847 533 Total Interest Expense (5,076) 5,263 6,886 5,776 NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES (5,909) 5,708 5,825 5,866 PROVISION FOR LOAN LOSSES (279) 471 184 167 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES (5,630) 5,237 5,641 5,699 OTHER INCOME: Service charges (369) 400 438 381 Other (151) 244 562 386 Net securities gains (losses) -- 11 153 -- (520) 655 1,153 767 OTHER EXPENSES: Salaries and wages (1,515) 1,562 1,783 1,662 Pension and other employee benefits (274) 403 464 375 Occupancy expense (net) (154) 155 122 130 Other operating expenses (1,384) 1,175 1,675 1,552 (3,327) 3,295 4,044 3,719 INCOME BEFORE FEDERAL INCOME TAX (2,823) 2,597 2,750 2,747 FEDERAL INCOME TAXES (745) 769 832 758 NET INCOME (2,078) 1,828 1,918 1,989 OTHER COMPREHENSIVE INCOME (NET OF TAX): Unrealized gains (losses) on securities 2,501 (425) 748 (1,538) COMPREHENSIVE INCOME $ 423 $ 1,403 $ 2,666 $ 451 NET INCOME PER SHARE (Based upon weighted average number of shares outstanding of 1,300,000 $ (1.60) $ 1.41 $ 1.48 $ 1.53 DIVIDENDS DECLARED $ 0.35 $ 0.30 $ 0.35 $ 0.35 See Notes to Condensed Consolidated Unaudited Financial Statements. 2
5 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) Three Months Ended March 31, 2001 March 31, 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,918 $ 1,989 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 284 274 Premium amortization (75) 21 Discount amortization (29) (2) Provision for loan losses 184 167 Provision for deferred income taxes (113) -- (Gain) loss on sale of fixed assets (2) -- (Gain) loss on sale of investment securities (153) -- Changes in Operating Assets and Liabilities: Accrued interest receivable and other assets (479) (1,103) Accrued interest payable and other liabilities 877 (408) Net Cash Provided by Operating Activities 2,412 938 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (530) (216) Proceeds from sale of fixed assets -- -- Proceeds from maturities of investment securities: 7,805 2,299 Proceeds from sale of investment securities: 2,105 -- Purchase of investment securities- (11,440) (9,737) Net increase in loans and leases 7,531 (2,305) Net Cash Used by Investing Activities 5,471 (9,959) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 20,339 (4,341) Net change in short-term borrowings 3,811 13,211 Increase in long-term borrowings -- -- Payments on long-term borrowings (10,221) (208) Payments of dividends (455) (455) Net Cash Provided by Financing Activities 13,474 8,207 Net change in cash and cash equivalents 21,357 (814) Cash and cash equivalents - Beginning of year 18,241 17,345 CASH AND CASH EQUIVALENTS - END OF THE YEAR $ 39,598 $ 16,531 RECONCILIATION OF CASH AND CASH EQUIVALENTS: Cash and cash due from banks $ 19,513 $ 16,431 Interest bearing deposits 100 100 Federal funds sold 19,985 -- $ 39,598 $ 16,531 See Notes to Condensed Consolidated Unaudited Financial Statements. 3
6 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, 2001 are not necessarily indicative of the results that are expected for the year ended December 31, 2001. 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, 2000. 4
7 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 March 31, 2001 comes primarily from net income from operations of $1.9 million. This compares with net income of $2.0 million for the same period in 2000. In addition, funds were purchased from correspondents, and the Federal Home Loan Bank. During the quarter loan balances were reduced by 7.7 million. This was primarily due to the payoff of several participation loans with another institution. This also added to the increase in liquidity as is reflected in the amount of Federal Funds sold being held by the bank. The following is a summary of five capital ratios as they are calculated from the March 31, 2001 financial statements: Primary Ratio 11.27% Total Capital Ratio 14.39% Risk Based Capital Tier 1 15.00% Risk Based Capital Tier 2 21.18% Stockholders' Equity/Total Assets 10.30% 5
8 PART II EXHIBIT AND REPORTS ON FORM 8-K ITEM 6 (A) The following documents are filed as part of this report: Exhibit No. None. (B) Reports on Form 8-K No reports on Form 8-K were filed by the registrant during the quarter ended September 30, 2000 6
9 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, 2001 By: /s/ Joe E. Crossgrove Joe E. Crossgrove President and Cashier Date: May 10, 2001 By: /s/ Randal H. Schroeder Randal H. Schroeder Asst. Vice-President and Chief Operating Officer 7