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1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For six months ended June 30, 1996 Commission file number 014492 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.) 307-11 North Defiance Street 43502 - ------------------------------- ------------------------------------ (Address of principal executive (Zip Code) offices) Registrant's Telephone Number, including area code 419/446-2501 ------------ Not applicable - -------------------------------------------------------------------------------- Former name, former address, and former fiscal year, if changed since last year Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods 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: Class Outstanding as of June 30, 1996 - ------------------------------- ------------------------------------ Common Stock, No Par Value 1,300,000
2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q FARMERS & MERCHANTS BANKCORP, INC. INDEX Form 10-Q Items Page # - --------------- -------- PART I. FINANCIAL INFORMATION Item 1. Financial statements (unaudited) Condensed consolidated balance sheets- June 30, 1996 and December 31, 1995 1 Condensed consolidated statements of net earnings- six months ended June 30, 1996 and March 31, 1995 2 Condensed consolidated statements of cash flows- six months ended June 30, 1996 and March 31, 1995 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 8-K 6 SIGNATURES 7
3 FARMERS & MERCHANTS BANCORP, INC. ARCHBOLD, OHIO CONDENSED CONSOLIDATED BALANCE SHEET (in thousands of dollars) Quarter Ended Market Value Year Ended June 30 June 30 December 31 ASSETS 1996 1996 1995 - -------- ------------- ------------ ------------ Cash and due from banks $ 12,846 $ 14,951 Interest bearing deposits in other banks 145 100 Federal Funds Sold, & Securities Purchased Under Agreement to Resell 10,620 10,710 Investment Securities U.S. Treasury 27,880 22,719 22,757 U.S. Government Agencies 36,337 34,475 31,237 State & Political Subdivisions 25,047 21,464 19,926 All Others 13,941 10,777 10,795 Loans and leases 352,414 339,676 Bank premises and equipment 7,332 7,198 Accrued interest and other assets 7,075 6,740 ----------------------------- -------- TOTAL ASSETS $493,637 $89,435 $464,090 - ------------ ============================= ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ LIABILITIES - ----------- Deposits: Demand $ 40,663 $ 37,436 Time and savings 393,873 366,554 Federal Funds Purchased & Securities Sold Under Agreement to Repurchase 5,156 6,919 Other Borrowed Money 9,355 9,662 Accrued interest and other liabilities 3,685 3,898 ----------------------------- -------- TOTAL LIABILITIES 452,732 0 424,469 - ----------------- ----------------------------- -------- SHAREHOLDERS' EQUITY - -------------------- Common Stock, no par value - Authorized 300,000 shares; issued 260,000 shares in 1993 & 1992 12,677 12,677 Undivided profits 28,228 26,944 ----------------------------- -------- TOTAL SHAREHOLDERS' EQUITY 40,905 0 39,621 - -------------------------- ----------------------------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $493,637 $0 $464,090 - ------------------------------------------ ============================= ======== Market Value Quarter Ended December 31 June 30 ASSETS 1995 1995 - -------- ------------- ------------- Cash and due from banks $ 12,757 Interest bearing deposits in other banks 145 Federal Funds Sold, & Securities Purchased Under Agreement to Resell 4,505 Investment Securities U.S. Treasury 22,757 20,886 U.S. Government Agencies 31,237 21,184 State & Political Subdivisions 19,926 17,862 All Others 10,795 7,091 Loans and leases 328,320 Bank premises and equipment 7,294 Accrued interest and other assets 6,929 ------------------------------ TOTAL ASSETS $84,715 $426,973 - ------------ ============================== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ LIABILITIES - ----------- Deposits: Demand $ 32,673 Time and savings 338,220 Federal Funds Purchased & Securities Sold Under Agreement to Repurchase 6,053 Other Borrowed Money 9,650 Accrued interest and other liabilities 2,931 ----------------------------- TOTAL LIABILITIES 0 389,527 - ----------------- ----------------------------- SHAREHOLDERS' EQUITY - -------------------- Common Stock, no par value - Authorized 300,000 shares; issued 260,000 shares in 1993 & 1992 12,677 Undivided profits 24,769 ----------------------------- TOTAL SHAREHOLDERS' EQUITY 0 37,446 - -------------------------- ----------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $0 $426,973 - ------------------------------------------ ============================= See notes to condensed consolidated unaudited financial statements Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements of that date. 1
4 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS (In thousands of dollars) Six Months Ended Three Months Ended June 30 June 30 1996 1995 1996 1995 ---- ---- ---- ---- INTEREST INCOME: Loans and leases $15,741 $14,068 $7,770 $7,544 Investment Securities U.S. Treasury 676 447 361 229 U.S. Gov't Agencies 1,032 754 536 325 States & Political Subdiv. 584 582 297 298 Other 307 258 148 122 Federal funds sold 301 126 134 55 Deposits with other banks 0 0 0 0 ------- ------- ------ ------ Total Interest Income 18,641 16,235 9,246 8,573 ------- ------- ------ ------ INTEREST EXPENSE: Deposits 9,829 7,442 4,941 3,982 Short-term borrowings 170 197 80 81 Other borrowed money 302 332 150 153 ------- ------ ------ ------ Total Interest Expense 10,301 7,971 5,171 4,216 ------- ------ ------ ------ NET INTEREST INCOME 8,340 8,264 4,075 4,357 PROVISION FOR LOAN LOSSES 413 0 268 0 ------- ------ ------ ------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,927 8,264 3,807 4,357 OTHER INCOME: Service charges 533 496 274 268 Other 768 453 388 215 Securities gains (losses) 0 (29) 0 (17) ------- ------- ------ ------ 1,301 920 662 466 ------- ------- ------ ------ OTHER EXPENSE: Salaries 2,398 1,910 1,195 972 Pension and Employee Benefits 465 405 233 230 Occupancy 617 559 268 278 Other operating 1,853 2,172 967 1,135 ------- ------- ------ ------ 5,333 5,046 2,663 2,615 ------- ------- ------ ------ EARNINGS BEFORE INCOME TAX 3,895 4,138 1,806 2,208 PROVISION FOR FEDERAL INCOME TAX 1,161 1,212 555 648 ------- ------- ------ ------ NET EARNINGS $ 2,734 $ 2,926 $1,251 $1,560 ======= ======= ====== ====== Net income per share (Based upon the weighted average number of shares outstanding of 1,300,000 for 1996 and 1995) 2.10 2.25 0.96 1.20 ======= ======= ====== ====== See notes to condensed consolidated unaudited financial statements. 2
5 Farmers and Merchants Bancorp, Inc. Cash Flows From Operating Activities Jun 30 Jun 30 (In Thousands) 1996 1995 Net Earnings 2,734 2,926 Adj To Reconcile Net Earnings to Cash provided by Operating activities Depreciation and Amortization 347 300 Premium Amortization 336 59 Discount Amortization (76) (429) Provision for Loan Losses 413 0 Provision for Deferred Taxes 229 395 (Gain) Loss on Sale of Fixed Assets 0 0 (Gain) Loss on Sale of Securities 0 29 Changes in Assets and Liabilities Accrued Int Receivable & Other Assets (106) (1,043) Accrued Int Payable & Other Liabilities 111 258 Net Cash Provided By Operating Act 3,988 2,495 Cash Flows from Investing Activities Capital Expenditures (480) (1,337) Proceeds from Sale of Fixed Assets 0 0 Proceeds from Sale of Securities 0 0 Proceeds from Maturities of Securities 0 10,933 Purchase of Securities (18,749) 0 Net (Increase) Decrease in Loans (12,749) (26,721) Net (Increase) Decrease in Leases 10 1 Net Cash Used by Investing Activities (31,968) (17,124) Cash Flows from Financing Activities Net Increase (Decrease) in Deposits 30,674 26,498 Net Increase (Decrease) in Short Term Borrowings (1,762) (8,344) Net Increase in Long Term Borrowings 0 0 Payments on Long Term Borrowings (307) (224) Payments of Dividends (975) (780) Unrealized Gains/Losses on Securities (800) 434 Net Cash Provided by Financing Act 26,830 17,584 Net Change in Cash & Cash Equivalents (1,150) 2,955 Cash & Cash Equivalents at Beginning of Year 24,761 14,452 Cash & Cash Equivalents at end of year 23,611 17,407 Reconcilements of Cash & Cash Equivalents Cash and Due from Banks 12,846 12,757 Interest Bearing Deposits 145 145 Federal Funds Sold 10,620 4,505 Total Cash and Cash Equivalents 23,611 17,407 3
6 FARMERS & MERCHANTS STATE BANK Notes to Condensed Consolidated 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 10-Q and Rule 10-1 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, 1996 are not necessarily indicative of the results that are expected for the year ended December 31, 1996. 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, 1995. 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 and Merchants Bancorp, Inc., and its subsidiary. The Farmers & Merchants State Bank are engaged only in commercial banking. The executive offices of Farmers & Merchants Bancorp, Inc., are located at 307-11 North Defiance Street, Archbold, Ohio 43502. LIQUIDITY AND CAPITAL RESOURCES Liquidity has continued to be enhanced by the generation of cash through operations primarily by reduction in expenses, and the collection of interest income from productive assets. The rate of increase on Capital Expenditures has slowed with the completion of the renovation of the main office and the implementation of the new proof system. There will be reasonable increase in this area due to the major renovation of one of the branch offices. The following is a list of 5 capital ratios as they are calculated from the June 30, 1996 financial statements. Primary Ratio 9.30% Total Capital Ratio 11.17% Risk Based Capital Tier 1 8.03% Risk Based Capital Tier 2 10.94% Stockholders Equity/Total Assets 8.29% During the first six months of 1996 the bank's loan portfolio has increased $12,749,000. This represents a 4% increase. This was the primary use of cash over the period. An increase of $30,674,000 in deposits was noted for the six months ended June 30, 1996. This represents a 8% increase. This increase was do in part to the fact that the bank offers very competitive rates for its deposit products. In addition a concerted marketing effort has been implemented to attract more "core" deposits to help with the maintaining of an acceptable net interest margin. 5
8 PART II ITEM 6. EXHIBITS 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, 1996. 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, Date: August 1, 1996 By: /s/ Joe E. Crossgrove ----------------------------- Joe E. Crossgrove Executive Vice President and Cashier Date: August 1, 1996 By: /s/ Randal H. Schroeder ----------------------------- Randal H. Schroeder Asst. Vice President and Chief Accounting Officer 7
10 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule
9 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 12,846 145 10,620 0 103,205 0 0 357,914 5,500 493,637 434,536 5,156 3,685 9,355 0 0 12,677 28,228 493,637 7,770 1,342 134 9,246 4,941 5,171 4,075 268 0 2,663 1,806 1,806 0 0 1,251 .96 .96 8.42 3,969 3,877 0 7,846 5,500 458 190 5,500 5,500 0 0