<PAGE> 1
SECURTIES 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, 1998
OR
Transition Report Pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commisison 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.)
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 August 1, 1998
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
FARMERS & MERCHANTS BANCORP, INC.
INDEX
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<CAPTION>
Form 10-Q Items Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-
June 30, 1998, December 31, 1997 and June 30, 1997 1
Condensed Consolidated Statements of Net Earnings-
Six Months Ended June 30, 1998 and June 30, 1997 2
Condensed Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1998 and June 30, 1997 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
</TABLE>
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FARMERS & MERCHANTS BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 June 30, 1997
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 13,699 $ 16,213 $ 14,126
Interest bearing deposits with banks 100 100 145
Federal funds sold 21,050 6,485 -
Investment Securities:
U.S. Treasury 20,590 22,372 24,771
U.S. Government 33,275 31,313 31,137
State & political obligations 28,771 25,618 23,376
All others 24,361 20,584 17,799
Loans and leases 385,111 390,806 380,169
Bank premises and equipment-net 8,152 7,665 7,428
Accrued interest and other assets 7,373 7,117 7,501
TOTAL ASSETS $ 542,482 $ 528,273 $ 506,452
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 47,692 $ 51,163 $ 39,585
Time and savings 424,521 410,135 401,341
Federal funds purchased and securities
sold under agreement to repurchase 2,833 2,598 6,457
Other borrowed money 10,922 11,292 8,651
Accrued interest and other liabilities 4,230 4,241 4,491
Total Liabilities 490,198 479,429 460,525
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 38,559 35,164 32,790
Accumulated other comprehensive income 1,048 971 460
Total Shareholders' Equity 52,284 48,844 45,927
LIABILITIES AND SHAREHOLDERS' EQUITY $ 542,482 $ 528,273 $ 506,452
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
Note: The December 31, 1997 Balance Sheet has been derived from the audited
financial statements of that date.
1
<PAGE> 4
FARMERS & MERCHANTS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and leases $ 8,932 $ 8,457 $ 17,842 $ 16,857
Investment Securities:
U.S. Treasury securities 337 385 676 773
Securities of U.S. Government agencies 473 521 954 1,062
Obligations of states and political subdivisions 353 308 691 609
Other 316 316 689 704
Federal funds 143 36 202 104
Deposits in banks - - 2 -
Total Interest Income 10,554 10,023 21,056 20,109
INTEREST EXPENSE:
Deposits 5,223 5,081 10,441 10,105
Borrowed funds 238 340 456 716
Total Interest Expense 5,461 5,421 10,897 10,821
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 5,093 4,602 10,159 9,288
PROVISION FOR LOAN LOSSES 331 249 470 462
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,762 4,353 9,689 8,826
OTHER INCOME:
Service charges 347 274 644 569
Other 755 299 1,490 764
Net securities gains (losses) - (3) 0 (10)
1,102 570 2,134 1,323
OTHER EXPENSES:
Salaries and wages 1,227 861 2,501 2,100
Pension and other employee benefits 277 290 574 544
Occupancy expense (net) 125 323 246 634
Other operating expenses 1,312 1,005 2,581 1,971
2,941 2,479 5,902 5,249
INCOME BEFORE FEDERAL INCOME TAX 2,923 2,444 5,921 4,900
FEDERAL INCOME TAXES 871 709 1,746 1,432
NET INCOME 2,052 1,735 4,175 3,468
OTHER COMPREHENSIVE INCOME (NET OF TAX):
Unrealized gains (losses) on securities 77 248 45 (268)
COMPREHENSIVE INCOME $ 2,129 1,983 $ 4,220 3,200
NET INCOME PER SHARE (Based upon
weighted average number of shares outstanding of 1,300,000 $ 1.58 $ 1.33 $ 3.21 $ 2.67
DIVIDENDS DECLARED $ 0.30 $ 0.25 $ 0.60 $ 0.50
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
2
<PAGE> 5
FARMERS & MERCHANTS BANCORP, INC.
CONDENSED CONSOLIDATED STATMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,175 $ 3,468
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 351 326
Premium amortization 149 238
Discount amortization (37) (87)
Provision for loan losses 470 462
Provision for deferred income taxes 5 (27)
(Gain) loss on sale of fixed assets 7 -
(Gain) loss on sale of investment securities - 10
Changes in Operating Assets and Liabilities:
Accrued interest receivable and other assets (261) (390)
Accrued interest payable and other liabilities (11) 756
Net Cash Provided by Operating Activities 4,848 4,756
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (845) (178)
Proceeds from sale of fixed assets - -
Proceeds from maturities of investment securities: 7,111 51,934
Proceeds from sale of investment securities: - 3,972
Purchase of investment securities- (14,288) (51,823)
Net increase in loans and leases 5,225 (11,412)
Net Cash Used by Investing Activities (2,797) (7,507)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 10,915 2,549
Net change in short-term borrowings 235 (306)
Increase in long-term borrowings - -
Payments on long-term borrowings (370) (347)
Payments of dividends (780) (845)
Net Cash Provided by Financing Activities 10,000 1,051
Net change in cash and cash equivalents 12,051 (1,700)
Cash and cash equivalents - Beginning of year 22,798 15,971
CASH AND CASH EQUIVALENTS - END OF THE YEAR $ 34,849 $ 14,271
RECONCILIATION OF CASH AND CASH EQUIVALENTS:
Cash and cash due from banks $ 13,699 $ 14,126
Interest bearing deposits 100 145
Federal funds sold 21,050 -
$ 34,849 $ 14,271
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
3
<PAGE> 6
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 three months ended June 30, 1998 are
not necessarily indicative of the results that are expected for the year
ended December 31, 1998. 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,
1997.
4
<PAGE> 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 June 30, 1998 comes primarily from
net income from operations of $4.2 million and increases in deposits of
$10.9 million. This compares with net income of $3.5 million and deposit
increases of $2.5 million for the same period for 1997. Total deposits
as of June 30, 1998 were $472 million compared to $461 million as of
December 31, 1997. A concerted marketing effort continues to be made in
order to attract more core deposits to help maintain an acceptable net
interest margin.
Capital expenditures amounted to $286 thousand for the first three
months of 1998.
The following is a summary of five capital ratios as they are calculated
from the March 31, 1998 financial statements:
Primary Ratio 10.63%
Total Capital Ratio 12.62%
Risk Based Capital Tier 1 14.08%
Risk Based Capital Tier 2 18.63%
Stockholders' Equity/Total Assets 9.64%
5
<PAGE> 8
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 June 30, 1998.
6
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,699
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 21,050
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 106,997
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 385,111
<ALLOWANCE> 5,997
<TOTAL-ASSETS> 542,482
<DEPOSITS> 472,213
<SHORT-TERM> 2,833
<LIABILITIES-OTHER> 4,230
<LONG-TERM> 10,922
0
0
<COMMON> 12,677
<OTHER-SE> 39,607
<TOTAL-LIABILITIES-AND-EQUITY> 542,482
<INTEREST-LOAN> 17,842
<INTEREST-INVEST> 3,010
<INTEREST-OTHER> 204
<INTEREST-TOTAL> 21,056
<INTEREST-DEPOSIT> 10,441
<INTEREST-EXPENSE> 456
<INTEREST-INCOME-NET> 10,159
<LOAN-LOSSES> 470
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,902
<INCOME-PRETAX> 5,921
<INCOME-PRE-EXTRAORDINARY> 4,175
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,175
<EPS-PRIMARY> 3.21
<EPS-DILUTED> 3.21
<YIELD-ACTUAL> 2.33
<LOANS-NON> 5,530
<LOANS-PAST> 5,404
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 10,934
<ALLOWANCE-OPEN> 5,850
<CHARGE-OFFS> 354
<RECOVERIES> 303
<ALLOWANCE-CLOSE> 6,269
<ALLOWANCE-DOMESTIC> 6,269
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
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