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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 June 30, 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 August 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- June 30, 1997, December 31, 1996 and June 30, 1996 1 Condensed Consolidated Statements of Net Earnings- Three Months and Year to Date Ended June 30, 1997 and 1996 2 Condensed Consolidated Statements of Cash Flows- Six Months Ended June 30, 1997 and June 30, 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 6 Item 6. Exhibits and Reports on Form 8K SIGNATURES 7
3 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands of dollars) Jun 30, 1997 Dec 31, 1996 Jun 30, 1996 ASSETS: Cash and due from banks $14,126 $15,871 $12,846 Interest bearing deposits in other banks 145 100 145 Federal funds sold and securities sold under agreement to resell - - 10,620 Investment Securities: U.S. Treasury 24,771 27,827 27,880 U.S. Government Agencies 31,137 32,896 36,337 State & political obligations 23,376 21,678 25,047 All others 17,799 19,320 13,941 Loans and leases 380,169 369,219 352,414 Bank premises and equipment 7,428 7,576 7,332 Accrued interest and other assets 7,501 6,962 7,075 TOTAL ASSETS $ 506,452 $ 501,449 $ 493,637 LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Deposits: Demand $ 39,585 $ 50,019 $ 40,663 Time and savings 401,341 388,358 393,873 Federal funds purchased and securities sold under agreement to repurchase 6,457 6,763 5,156 Other borrowed money 8,651 8,998 9,355 Accrued interest and other liabilities 4,491 3,930 3,685 TOTAL LIABILITIES 460,525 458,068 452,732 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 33,250 30,704 28,228 TOTAL SHAREHOLDERS' EQUITY 45,927 43,381 40,905 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 506,452 $ 501,449 $ 493,637 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 Ended Six Months Ended Jun 30, 1997 Jun 30, 1996 Jun 30, 1997 Jun 30, 1996 INTEREST INCOME: Loans and leases $ 8,457 $ 7,770 $ 16,857 $ 15,741 Investment Securities: U.S. Treasury 385 361 773 676 U.S. Government Agencies 521 536 1,062 1,032 States & Political Subdivisions 308 297 609 584 Other 316 148 704 307 Federal funds sold 36 134 104 301 Deposits with other banks - - - - TOTAL INTEREST INCOME 10,023 9,246 20,109 18,641 INTEREST EXPENSE: Deposits 5,081 4,941 10,105 9,829 Short-term borrowings 51 80 135 170 Other borrowed money 289 150 581 302 TOTAL INTEREST EXPENSE 5,421 5,171 10,821 10,301 NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 4,602 4,075 9,288 8,340 PROVISION FOR LOAN LOSSES 249 268 462 413 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,353 3,807 8,826 7,927 OTHER INCOME: Service charges 274 274 569 533 Other 299 388 764 768 Securities gains (losses) (3) - (10) - TOTAL OTHER INCOME 570 662 1,323 1,301 OTHER EXPENSE: Salaries 861 1,195 2,100 2,398 Pension and employee benefits 290 233 544 465 Occupancy 323 268 634 617 Other operating 1,005 967 1,971 1,853 TOTAL OTHER EXPENSES 2,479 2,663 5,249 5,333 NET INCOME BEFORE INCOME TAX 2,444 1,806 4,900 3,895 PROVISION FOR INCOME TAX 709 555 1,432 1,161 NET INCOME $ 1,735 $ 1,251 $ 3,468 $ 2,734 NET INCOME PER SHARE (Based upon weighted average number of shares outstanding of 1,300,000 for 1997 and 1996 $ 1.33 $ 0.96 $ 2.67 $ 2.10 DIVIDENDS PER SHARE DECLARED $ 0.25 $ 0.25 $ 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) Six Months Ended Jun 30, 1997 Jun 30, 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,468 $ 2,734 Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: Depreciation & amortization 326 347 Premium amortization 238 336 Discount accretion (87) (76) Provision for loan losses 462 413 Provision for deferred taxes (27) 229 (Gain) loss on sale of securities 10 - Changes in Operating Assets & Liabilities: Accrued interest receivable and other assets (390) (106) Accrued interest payable and other payables 756 111 TOTAL CASH PROVIDED BY OPERATING ACTIVITIES 4,756 3,988 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (178) (480) Proceeds from sale of available for sale securities 3,972 - Proceeds from maturities of available for sale securities 51,934 - Purchase of available for sale securities (51,823) (18,749) Net change in loans and leases (11,412) (12,739) TOTAL CASH PROVIDED BY INVESTING ACTIVITIES (7,507) (31,968) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in deposits 2,549 30,674 Net change in short-term borrowings (306) (1,762) Increase in long-term borrowings - - Payments on long-term borrowings (347) (307) Payment of dividends (845) (975) Unrealized (gains) losses on securities - (800) TOTAL CASH PROVIDED BY FINANCING ACTIVITIES 1,051 26,830 NET CHANGE IN CASH FLOWS (1,700) (1,150) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 15,971 24,761 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 14,271 $ 23,611 RECONCILEMENT OF CASH AND CASH EQUIVALENTS Cash and due from banks $ 14,126 $ 12,846 Interest bearing deposits 145 145 Federal funds sold - 10,620 TOTAL CASH AND CASH EQUIVALENTS $ 14,271 $ 23,611 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 six months ended June 30, 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 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 for 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. During the first six months of 1997 the bank's loan portfolio has increased $10,950,000. This represents a 3% increase. This was the primary use of cash over the period. An increase of $2,549,000 in deposits was noted for the quarter ended June 30, 1997. This represents a 1% 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. The following is a list of five capital ratios as they are calculated from the June 30, 1997 financial statements: Primary Ratio 10.07% Total Capital Ratio 11.76% Risk Based Capital Tier 1 13.00% Risk Based Capital Tier 2 17.06% Stockholders' Equity/Total Assets 9.07% 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, 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: August 11, 1997 By: /s/ Joe E. Crossgrove ------------------------------ Joe E. Crossgrove President and Cashier Date: August 11, 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 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 14,126 145 0 0 97,083 0 0 380,169 0 506,542 440,926 6,457 4,491 8,651 0 0 12,677 33,250 506,452 16,857 3,148 104 20,109 10,105 716 9,288 462 (10) 5,249 4,900 4,900 0 0 3,468 2.67 2.67 3.65 2,052 1,495 0 3,547 5,500 749 454 5,667 5,667 0 0