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1 UNITED STATES 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, 1997 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 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, Archbold, Ohio 43502 - ------------------------------------------------ ------------------------- (Address of principal executive offices) (Zip Code) (419) 446-2501 - -------------------------------------------------------------------------------- Registrant's Telephone Number, including area code 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 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 May 1, 1997
2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q FARMERS & MERCHANTS BANCORP, INC. INDEX FORM 10-Q ITEMS PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets- March 31, 1997, December 31, 1996 and March 31, 1996 1 Condensed Consolidated Statements of Net Earnings- Three Months Ended March 31, 1997 and March 31, 1996 2 Condensed Consolidated Statements of Cash Flows- Three Months Ended March 31, 1997 and March 31, 1996 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 8K 6 SIGNATURES 7
3 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands of dollars) March 31, 1997 December 31, 1996 March 31, 1996 ASSETS: Cash and due from banks $ 13,956 $ 15,871 $ 11,996 Interest bearing deposits in other banks 145 100 145 Federal funds sold and securities sold under agreement to resell 1,320 - 14,335 Investment Securities: U.S. Treasury 24,558 27,827 22,719 U.S. Government Agencies 33,459 32,896 34,475 State & political obligations 23,613 21,678 21,464 All others 21,555 19,320 10,777 Loans and leases 370,312 369,219 349,205 Bank premises and equipment 7,460 7,576 7,216 Accrued interest and other assets 6,878 6,962 7,241 TOTAL ASSETS $ 503,256 $ 501,449 $ 479,573 LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Deposits: Demand $ 37,774 $ 50,019 $ 35,873 Time and savings 405,740 388,358 383,824 Federal funds purchased and securities sold under agreement to repurchase 2,860 6,763 6,450 Other borrowed money 8,826 8,998 9,523 Accrued interest and other liabilities 3,740 3,930 3,710 TOTAL LIABILITIES 458,940 458,068 439,380 SHAREHOLDERS' EQUITY: Common stock, no par value - authorized 1,500,000 shares, issued 1,300,000 shares in 1996 and 1995 12,677 12,677 12,677 Undivided profits 31,639 30,704 27,516 TOTAL SHAREHOLDERS' EQUITY 44,316 43,381 40,193 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 503,256 $ 501,449 $ 479,573 See Notes to Condensed Consolidated Unaudited Financial Statements. Note: The December 31, 1996 Balance Sheet has been derived from the audited financial statements of that date. 1
4 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) (in thousands of dollars) Three Months & Year to Date Ended March 31, 1997 March 31, 1996 INTEREST INCOME: Loans and leases $ 8,400 $ 7,971 Investment Securities: U.S. Treasury 388 315 U.S. Government Agencies 541 496 States & Political Subdivisions 301 287 Other 388 159 Federal funds sold 68 167 Deposits with other banks - - TOTAL INTEREST INCOME 10,086 9,395 INTEREST EXPENSE: Deposits 5,025 4,888 Short-term borrowings 84 90 Other borrowed money 292 152 TOTAL INTEREST EXPENSE 5,401 5,130 NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 4,685 4,265 PROVISION FOR LOAN LOSSES 213 145 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,472 4,120 OTHER INCOME: Service charges 295 259 Other 465 380 Securities gains (losses) (7) - TOTAL OTHER INCOME 753 639 OTHER EXPENSE: Salaries 1,239 1,203 Pension and employee benefits 254 232 Occupancy 311 349 Other operating 966 886 TOTAL OTHER EXPENSES 2,770 2,670 NET INCOME BEFORE INCOME TAX 2,455 2,089 PROVISION FOR INCOME TAX 723 606 NET INCOME $ 1,732 $ 1,483 NET INCOME PER SHARE (Based upon weighted average number of shares outstanding of 1,300,000 for 1997 and 1996 $ 1.33 $ 1.14 DIVIDENDS PER SHARE DECLARED $ 0.25 $ 0.25 See Notes to Condensed Consolidated Unaudited Financial Statements. 2
5 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (in thousands of dollars) Three Months Ended March 31, 1997 March 31, 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,735 $ 1,483 Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: Depreciation & amortization 163 198 Premium amortization 120 161 Discount accretion (47) (39) Provision for loan losses 213 145 Provision for deferred taxes 5 87 (Gain) loss on sale of securities - - Changes in Operating Assets & Liabilities: 7 - Accrued interest receivable 312 (415) Accrued interest payable 5 136 TOTAL CASH PROVIDED BY OPERATING ACTIVITIES 2,513 1,756 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (47) (216) Proceeds from sale of available for sale securities 1,979 - Proceeds from maturities of available for sale securities 35,488 - Purchase of available for sale securities (35,773) (4,358) Net change in loans and leases (5,252) (9,529) TOTAL CASH PROVIDED BY INVESTING ACTIVITIES (3,605) (14,103) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in deposits 5,137 15,707 Net change in short-term borrowings (3,903) (469) Increase in long-term borrowings - - Payments on long-term borrowings (172) (139) Payment of dividends (520) (650) Unrealized (gains) losses on securities - (387) TOTAL CASH PROVIDED BY FINANCING ACTIVITIES 542 14,062 NET CHANGE IN CASH FLOWS (550) 1,715 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 15,971 24,761 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 15,421 $ 26,476 RECONCILEMENT OF CASH AND CASH EQUIVALENTS Cash and due from banks $ 13,956 $ 11,996 Interest bearing deposits 145 145 Federal funds sold 1,320 14,335 TOTAL CASH AND CASH EQUIVALENTS $ 15,421 $ 26,476 See Notes to Condensed Consolidated Unaudited Financial Statements. 3
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 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, 1997 are not necessarily indicative of the results that are expected for the year ended December 31, 1997. 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, 1996. On June 28, 1996, the Board of Directors authorized a five-for-one stock split, thereby increasing the total number of shares authorized to 1,500,000 and the total number of shares issued and outstanding to 1,300,000. All references in the accompanying financial statements have been restated to reflect the stock split. 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, 1997 comes primarily from net income from operations of $1.7 million and from a $5.1 million increase in deposits. This increase in deposits represents a 1% increase from the December 31, 1996 deposits of $438 million. A concerted marketing effort has been implemented to attract more core deposits to help in maintaining an acceptable net interest margin. The principal uses of these funds were for the retirement of short-term debt and the funding of additional loans in the community. During the first three months of 1997, the loan portfolio increased by $5 million representing a one percent increase over December 31, 1996 levels. During the first quarter of 1997 pursuant to regulatory mandates, commercial paper has been reclassified from the loan portfolio to the investment portfolio. For purposes of the statement of cash flows, this reclassification was deemed retroactive to December 31, 1996. 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. Spending in this area will increase in the next few months due to the major renovation of one of the branch offices. The following is a list of five capital ratios as they are calculated from the March 31, 1997 financial statements: Primary Ratio 9.81% Total Capital Ratio 11.54% Risk Based Capital Tier 1 12.73% Risk Based Capital Tier 2 16.87% Stockholders' Equity/Total Assets 8.81% 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 March 31, 1997. 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 1, 1997 By: /s/ Joe E. Crossgrove Joe E. Crossgrove President and Cashier Date: May 1, 1997 By: /s/ Randal H. Schroeder Randal H. Schroeder Asst. Vice-President and Chief Operating Officer 7
10 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 27 Financial Data Schedule
9 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 13,946 145 1,320 0 103,185 0 0 375,889 5,577 503,256 443,514 2,860 3,740 8,826 0 0 12,677 31,639 503,256 8,400 1,618 68 10,086 5,025 376 4,685 213 (7) 2,010 2,455 1,732 0 0 1,732 1.33 1.33 3.71 3,042 2,729 0 5,771 5,500 353 217 5,577 5,577 0 0