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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 nine months ended September 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 offices) (Zip Code) 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 November 6, 1996 Common Stock, No Par Value 1,300,000
2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q FARMERS & MERCHANTS BANCORP, INC. INDEX FORM 10-Q ITEMS PAGE NO. PART 1. FINANCIAL INFORMATION Item I. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets- September 30, 1996, December 31, 1995 and September 30, 1995 1 Condensed Consolidated Statements of Net Earnings- Nine Months Ended September 30, 1996 and September 30, 1995 2 Condensed Consolidated Statements of Cash Flows- Nine Months Ended September 30, 1996 and September 30, 1995 3 Notes to Condensed Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition 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. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands of dollars) September 30, 1996 December 31, 1995 September 30, 1995 ASSETS: Cash and due from banks $ 14,233 $ 14,951 $ 12,773 Interest bearing deposits in other banks 145 100 145 Federal funds sold and securities sold under agreement to resell -- 10,710 13,510 Investment Securities: U.S. Treasury 26,975 22,757 21,623 U.S. Government Agencies 32,254 31,237 26,803 State & political obligations 23,991 19,926 18,086 All others 17,247 10,795 6,102 Loans and leases 369,216 339,676 338,252 Bank premises and equipment 7,521 7,198 7,282 Accrued interest and other assets 7,306 6,740 7,147 TOTAL ASSETS $498,888 $464,090 $451,723 LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Deposits: Demand $ 38,210 $ 37,436 $ 21,826 Time and savings 393,758 366,554 372,097 Federal funds purchased and securities sold under agreement to repurchase 11,903 6,919 5,926 Other borrowed money 9,193 9,662 9,892 Accrued interest and other liabilities 3,948 3,898 3,301 TOTAL LIABILITIES 457,012 424,469 413,042 SHAREHOLDERS' EQUITY: Common stock, no par value - authorized 300,000 shares, issued 260,000 shares in 1996 and 1995 12,677 12,677 12,677 Undivided profits 29,199 26,944 26,004 TOTAL SHAREHOLDERS' EQUITY 41,876 39,621 38,681 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $498,888 $464,090 $451,723 See Notes to Condensed Consolidated Unaudited Financial Statements. Note: The December 31, 1995 Balance Sheet has been derived from the audited financial statements of that date.
4 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaided) (in thousands of dollars) Three Months Ended Nine Months Ended September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995 INTEREST INCOME: Loans and leases $23,885 $21,518 $8,144 $7,450 Investment Securities: U.S. Treasury 1,094 725 418 278 U.S. Government Agencies 1,569 1,086 537 332 States & Political Subdivisions 915 852 331 270 Other 579 367 272 109 Federal funds sold 303 250 2 124 Deposits with other banks -- -- -- -- TOTAL INTEREST INCOME 28,345 24,798 9,704 8,563 INTEREST EXPENSE: Deposits 14,887 11,955 5,058 4,513 Short-term borrowings 284 274 362 77 Other borrowed money 449 483 147 151 TOTAL INTEREST EXPENSE 15,620 12,712 5,567 4,741 NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 12,725 12,086 4,137 3,822 PROVISION FOR LOAN LOSSES 790 -- 377 -- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,935 12,086 3,760 3,822 OTHER INCOME: Service charges 818 750 285 254 Other 1,192 1,021 424 568 Securities gains (losses) -- (27) -- 2 TOTAL OTHER INCOME 2,010 1,744 709 824 OTHER EXPENSE: Salaries 3,639 2,902 1,241 992 Pension and employee benefits 738 669 273 264 Occupancy 949 875 332 316 Other operating 2,882 3,087 781 915 TOTAL OTHER EXPENSES 8,208 7,533 2,627 2,487 NET INCOME BEFORE INCOME TAX 5,737 6,297 1,842 2,159 PROVISION FOR INCOME TAX 1,653 1,882 492 670 NET INCOME $4,084 $4,415 $1,350 $1,489 NET INCOME PER SHARE (Based upon weighted average number of shares outstanding of 1,300,000 for 1995 and 1996 $ 3.14 $ 3.40 $ 1.04 $ 1.15 See Notes to Condensed Consolidated Unaudited Financial Statements.
5 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaided) (in thousands of dollars) Nine Months Ended September 30, 1996 September 30, 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,084 $ 4,415 Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: Depreciation & amortization 549 460 Premium amortization 463 97 Discount accretion (131) (590) Provision for loan losses 790 -- Provision for deferred taxes (209) 325 (Gain) loss on sale of securities -- (27) Changes in Operating Assets & Liabilities: Accrued interest receivable (389) (1,192) Accrued interest payable 406 628 TOTAL CASH PROVIDED BY OPERATING ACTIVITIES - 5,563 4,116 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (872) (24,480) Purchase of securities (16,083) (996) Proceeds from maturities of securities 0 29,513 Net change in loans and leases (30,328) (36,670) TOTAL CASH PROVIDED BY INVESTING ACTIVITIES - (47,283) (32,633) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in deposits 27,978 49,528 Net change in short-term borrowings 4,984 (8,472) Increase in long-term borrowings -- 400 Payments on long-term borrowings (469) (383) Payment of dividends (1,300) (1,040) Unrealized (gains) losses on securities (856) 444 TOTAL CASH PROVIDED BY FINANCING ACTIVITIES 30,337 40,477 NET CHANGE IN CASH FLOWS (11,383) 11,960 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 25,761 14,452 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 14,378 $ 26,412 RECONCILEMENT OF CASH AND CASH EQUIVALENTS Cash and due from banks $ 14,233 $ 12,757 Interest bearing deposits 145 145 Federal funds sold -- 13,510 TOTAL CASH AND CASH EQUIVALENTS $ 14,378 $ 26,412 See Notes to Condensed Consolidated Unaudited Financial Statements.
6 FARMERS & MERCHANTS BANCORP, INC. Notes to Condensed Consolidated Unaided Financial Statements Note 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordace 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 nine months ended September 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.
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 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 increases in this area due to the major renovation of one of the branch offices. The following is a list of four capital ratios as they are calculated from the September 30, 1996 financial statements: Risk-based Capital Ratio 12.80% Leverage Capital Ratio 8.35% Risk Based Capital Tier 1 11.55% Tangible Equity Radio 8.14% During the first nine months of 1996, the bank's loan portfolio has increased $30,358,000. This represents a 9% increase. This was the primary use of cash over the period. An increase of $27,978,000 in deposits was noted at the quarter ended September 30, 1996. This represents a 7% 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 effort has been implemented to attract more "core" deposits to help with the maintaining of an acceptable net interest margin.
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 September 30, 1996.
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: November 12, 1996 By: /s/ Joe E. Crossgrove ------------------------------ Joe E. Crossgrove Executive Vice-President and Cashier Date: November 12, 1996 By: /s/ Randal H. Schroeder ------------------------------ Randal H. Schroeder Asst. Vice-President and Chief Accounting Officer
10 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 27 Financial Data Schedule
9 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 14,233 145 0 0 100,467 0 0 374,716 5,500 498,888 431,968 11,903 3,948 9,193 0 0 12,677 29,199 498,888 23,885 4,157 303 28,345 14,887 733 12,725 790 0 6,198 5,737 5,737 0 0 4,084 3.14 3.14 8.14 2,399 3,886 0 6,285 5,500 1,259 469 5,500 5,500 0 0