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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 September 30, 1999 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.) 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 - -------------------------------------------------------------------------------- (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 October 1, 1999
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- September 30, 1999, December 31, 1998 and September 30, 1998 1 Condensed Consolidated Statements of Net Earnings- Nine Months Ended September 30, 1999 and September 30, 1998 2 Condensed Consolidated Statements of Cash Flows- Nine Months Ended September 30, 1999 and September 30, 1998 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) Sept 30, 1999 December 31, 1998 Sept 30, 1998 ASSETS: Cash and due from banks $ 14,742 $ 18,549 $ 15,528 Interest bearing deposits with banks 100 100 100 Federal funds sold 0 19,045 9,935 Investment Securities: U.S. Treasury 6,958 17,112 17,286 U.S. Government 48,440 49,567 40,486 State & political obligations 32,634 35,520 30,727 All others 15,885 21,712 24,617 Loans and leases 456,574 407,721 396,281 Bank premises and equipment-net 9,755 9,430 8,918 Accrued interest and other assets 8,935 7,113 7,287 TOTAL ASSETS $ 594,023 $ 585,869 $ 551,165 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Demand $ 62,352 $ 52,631 $ 40,771 Time and savings 429,166 459,552 437,345 Federal funds purchased and securities sold under agreement to repurchase 15,433 2,916 3,443 Other borrowed money 25,244 11,240 10,432 Accrued interest and other liabilities 4,357 4,180 4,561 Total Liabilities 536,552 530,519 496,552 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 45,085 41,002 40,244 Accumulated other comprehensive income (291) 1,671 1,048 Total Shareholders' Equity 57,471 55,350 54,611 LIABILITIES AND SHAREHOLDERS' EQUITY $ 594,023 $ 585,869 $ 551,163 See Notes to Condensed Consolidated Unaudited Financial Statements. Note: The December 31, 1998 Balance Sheet has been derived from the audited financial statements of that date.
4 1 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) Three Months Ended Nine Months Ended Sept 30, 1999 Sept 30, 1998 Sept 30, 1999 Sept 30, 1998 INTEREST INCOME: Loans and leases $ 9,427 $ 9,064 $ 26,756 $ 26,906 Investment Securities: U.S. Treasury securities 140 281 583 957 Securities of U.S. Government agencies 746 585 2,370 1,539 Obligations of states and political subdivisions 409 407 1,254 1,097 Other 237 375 1,022 1,064 Federal funds 11 218 87 420 Deposits in banks 1 1 2 3 Total Interest Income 10,971 10,931 32,074 31,986 INTEREST EXPENSE: Deposits 4,837 5,364 14,861 15,805 Borrowed funds 426 222 894 678 Total Interest Expense 5,263 5,586 15,755 16,483 NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 5,708 5,345 16,319 15,503 PROVISION FOR LOAN LOSSES 471 222 1,069 692 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,237 5,123 15,250 14,811 OTHER INCOME: Service charges 400 337 1,114 980 Other 244 663 1,137 2,153 Net securities gains (losses) 11 - 31 - 655 1,000 2,282 3,133 OTHER EXPENSES: Salaries and wages 1,562 1,444 4,527 3,946 Pension and other employee benefits 403 331 1,116 905 Occupancy expense (net) 155 134 390 379 Other operating expenses 1,175 1,339 4,303 3,920 3,295 3,248 10,336 9,150 INCOME BEFORE FEDERAL INCOME TAX 2,597 2,875 7,196 8,794 FEDERAL INCOME TAXES 769 800 1,941 2,546 NET INCOME 1,828 2,075 5,255 6,248 OTHER COMPREHENSIVE INCOME (NET OF TAX): Unrealized gains (losses) on securities (425) 642 (1,538) 610 COMPREHENSIVE INCOME $ 1,403 $ 2,717 $ 3,717 $ 6,858 NET INCOME PER SHARE (Based upon weighted average nmber of shares outstanding of 1,300,000 $ 1.41 $ 1.60 $ 4.04 $ 4.81 DIVIDENDS DECLARED $ 0.30 $ 0.30 $ 0.60 $ 0.60 See Notes to Condensed Consolidated Unaudited Financial Statements.
5 2 FARMERS & MERCHANTS BANCORP, INC. CONDENSED CONSOLIDATED STATMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) Nine Months Ended Sept 30, 1999 Sept 30, 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,255 $ 6,248 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 925 536 Premium amortization 214 190 Discount amortization (38) (38) Provision for loan losses 1,069 692 Provision for deferred income taxes (62) 20 (Gain) loss on sale of fixed assets 23 7 (Gain) loss on sale of investment securities (31) -- Changes in Operating Assets and Liabilities: Accrued interest receivable and other assets (1,760) (190) Accrued interest payable and other liabilities 177 320 Net Cash Provided by Operating Activities 5,772 7,785 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,273) (1,796) Proceeds from sale of fixed assets -- -- Proceeds from maturities of investment securities: 28,054 15,411 Proceeds from sale of investment securities: 17,550 -- Purchase of investment securities- (27,719) (28,101) Net increase in loans and leases (49,922) (6,167) Net Cash Used by Investing Activities (33,310) (20,653) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits (20,665) 16,818 Net change in short-term borrowings 12,517 845 Increase in long-term borrowings -- -- Payments on long-term borrowings 14,004 (860) Payments of dividends (1,170) (1,170) Net Cash Provided by Financing Activities 4,686 15,633 Net change in cash and cash equivalents (22,852) 2,765 Cash and cash equivalents - Beginning of year 37,694 22,798 CASH AND CASH EQUIVALENTS - END OF THE YEAR $ 14,842 $ 25,563 RECONCILIATION OF CASH AND CASH EQUIVALENTS: Cash and cash due from banks $ 14,742 $ 15,528 Interest bearing deposits 100 100 Federal funds sold -- 9,935 $ 14,842 $ 25,563 See Notes to Condensed Consolidated Unaudited Financial Statements.
6 3 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 nine months ended September 30, 1999 are not necessarily indicative of the results that are expected for the year ended December 31, 1999. 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, 1998.
7 4 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 nine months ended September 30, 1999 comes primarily from net income from operations of $5.3 million This compares with net income of $6.25 million for the same period in 1998. In addition the excess in Federal Funds sold was used to help fund the additional loan growth. The principal uses of these funds were for granting loans. Loans as of September 30, 1999 were $456.6 million compared to $407.7 million as of December 31, 1998, a $45.9 million or 12% increase after reclassification of $3.5 million of commercial paper from the loan category to other investments. December 31, 1998 and September 30, 1998 loans and investments have been restated to reflect this change in classification. Capital expenditures amounted to $1.3 million for the first nine months of 1999. The following is a summary of five capital ratios as they are calculated from the September 30, 1999 financial statements: Primary Ratio 10.67% Total Capital Ratio 14.87% Risk Based Capital Tier 1 13.44% Risk Based Capital Tier 2 20.89% Stockholders' Equity/Total Assets 9.67%
8 5 PART II ITEM 6 EXHIBIT 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, 1999
9 6 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, theeunto duly authorized. Farmers & Merchants Bancorp, Inc., Date: Nov 12, 1999 By: /s/ Joe E. Crossgrove ----------------------- Joe E. Crossgrove President and Cashier Date: Nov 12, 1999 By: /s/ Randal H. Schroeder ------------------------ Randal H. Schroeder Asst. Vice-President and Chief Operating Officer
10 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ------------ ----------- Ex - 27 Financial Data Schedule
9 1,000 9-MOS DEC-31-1998 JAN-01-1999 SEP-30-1999 14,742 100 0 0 103,917 0 0 456,574 6,611 594,023 491,518 15,433 4,357 25,244 0 0 12,677 44,794 594,023 26,756 5,229 89 32,074 14,861 894 16,319 1,069 31 10,336 7,196 5,255 0 0 5,255 4.04 4.04 0 7,731 6,222 0 13,953 5,850 1,324 709 6,304 6,304 0 0