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<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 September 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
-------- --------
Commision 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 October 1, 1998
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
FARMERS & MERCHANTS BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Form 10-Q Items Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-
September 30, 1998, December 31, 1997 and September 30, 1997 1
Condensed Consolidated Statements of Net Earnings-
Three Months and Nine Months Ended September 30, 1998 and September 30 2
Condensed Consolidated Statements of Cash Flows-
Three Months and Nine Months Ended September 30, 1998 and September 30 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>
<PAGE> 3
FARMERS & MERCHANTS BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Sept 30, 1998 December 31, 1997 Sept 30, 1997
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 15,528 $ 16,213 $ 12,315
Interest bearing deposits with banks 100 100 145
Federal funds sold 9,935 6,485 -
Investment Securities:
U.S. Treasury 17,286 22,372 23,434
U.S. Government 40,486 31,313 30,440
State & political obligations 30,727 25,618 23,604
All others 24,617 20,584 12,849
Loans and leases 396,281 390,806 387,454
Bank premises and equipment-net 8,918 7,665 7,351
Accrued interest and other assets 7,287 7,117 7,705
TOTAL ASSETS $551,165 $528,273 $505,297
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 40,771 $ 51,163 $ 36,958
Time and savings 437,345 410,135 403,943
Federal funds purchased and securities
sold under agreement to repurchase 3,443 2,598 3,202
Other borrowed money 10,432 11,292 8,473
Accrued interest and other liabilities 4,561 4,241 4,859
Total Liabilities 496,552 479,429 457,435
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 40,244 35,164 35,185
Accumulated other comprehensive income 1,690 1,002 0
Total Shareholders' Equity 54,611 48,844 47,862
LIABILITIES AND SHAREHOLDERS' EQUITY $551,163 $528,273 $505,297
</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.
<PAGE> 4
FARMERS & MERCHANTS BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and leases $ 9,064 $ 8,860 $26,906 $23,885
Investment Securities:
U.S. Treasury securities 281 373 957 1,094
Securities of U.S. Government agencies 585 486 1,539 1,569
Obligations of states and political subdivisions 407 304 1,097 915
Other 375 255 1,064 579
Federal funds 218 8 420 303
Deposits in banks 1 -- 3 --
Total Interest Income 10,931 10,286 31,986 28,345
INTEREST EXPENSE:
Deposits 5,364 5,034 15,805 14,887
Borrowed funds 222 360 678 733
Total Interest Expense 5,586 5,394 16,483 15,620
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 5,345 4,892 15,503 12,725
PROVISION FOR LOAN LOSSES 222 374 692 790
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,123 4,518 14,811 11,935
OTHER INCOME:
Service charges 337 294 980 818
Other 663 469 2,153 1,192
Net securities gains (losses) -- 6 0 --
1,000 769 3,133 2,010
OTHER EXPENSES:
Salaries and wages 1,444 1,065 3,946 3,639
Pension and other employee benefits 331 279 905 738
Occupancy expense (net) 134 332 379 949
Other operating expenses 1,339 1,014 3,920 2,882
3,248 2,690 9,150 8,208
INCOME BEFORE FEDERAL INCOME TAX 2,875 2,597 8,794 5,737
FEDERAL INCOME TAXES 800 750 2,546 1,653
NET INCOME 2,075 1,847 6,248 4,084
OTHER COMPREHENSIVE INCOME (NET OF TAX):
Unrealized gains (losses) on securities 642 1,048 610 --
COMPREHENSIVE INCOME $ 2,717 $ 2,895 $ 6,858 $ 4,084
NET INCOME PER SHARE (Based upon
weighted average number of shares outstanding of 1,300,000 $ 1.60 $ 1.33 $ 4.81 $ 2.67
DIVIDENDS DECLARED $ 0.30 $ 0.25 $ 0.60 $ 0.50
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
<PAGE> 5
FARMERS & MERCHANTS BANCORP, INC.
CONDENSED CONSOLIDATED STATMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
Sept 30, 1998 Sept 30, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,248 $ 3,468
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 536 326
Premium amortization 190 238
Discount amortization (38) (87)
Provision for loan losses 692 462
Provision for deferred income taxes 20 (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 (190) (390)
Accrued interest payable and other liabilities 320 756
Net Cash Provided by Operating Activities 7,785 4,756
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,796) (178)
Proceeds from sale of fixed assets -- --
Proceeds from maturities of investment securities: 15,411 51,934
Proceeds from sale of investment securities: -- 3,972
Purchase of investment securities- (28,101) (51,823)
Net increase in loans and leases (6,167) (11,412)
Net Cash Used by Investing Activities (20,653) (7,507)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 16,818 2,549
Net change in short-term borrowings 845 (306)
Increase in long-term borrowings -- --
Payments on long-term borrowings (860) (347)
Payments of dividends (1,170) (845)
Net Cash Provided by Financing Activities 15,633 1,051
Net change in cash and cash equivalents 2,765 (1,700)
Cash and cash equivalents - Beginning of year 22,798 15,971
CASH AND CASH EQUIVALENTS - END OF THE YEAR $ 25,563 $ 14,271
RECONCILIATION OF CASH AND CASH EQUIVALENTS:
Cash and cash due from banks $ 15,528 $ 14,126
Interest bearing deposits 100 145
Federal funds sold 9,935 --
$ 25,563 $ 14,271
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
2
<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 March 31,
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.
3
<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 nine months ended September 30, 1998 comes primarily
from net income from operations of $6.2 million and increases in
deposits of $16.8 million. This compares with net income of $4.1
million and deposit increases of $2.5 million for the same period for
1997. Total deposits as of September 30, 1998 were $478,056 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.
The principal uses of these funds were for granting loans. Loans as of
September 30, 1998 were $402.2 million compared to $390.8 million as
of December 31, 1997, a $11.4 million or 2.9% increase after
reclassification of $7.8 million of commercial paper from the loan
category to other investments. December 31, 1997 and September 30,
1997 loans and investments have been restated to reflect this change
in classification.
Capital expenditures amounted to $1.8 million for the first nine
months of 1998.
The following is a summary of five capital ratios as they are
calculated from the September 30, 1998 financial statements:
<TABLE>
<S> <C>
Primary Ratio 10.87%
Total Capital Ratio 12.74%
Risk Based Capital Tier 1 14.22%
Risk Based Capital Tier 2 18.48%
Stockholders' Equity/Total Assets 9.91%
</TABLE>
4
<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 March 31, 1998.
5
<PAGE> 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 9, 1998 By: /s/ Joe E. Crossgrove
Joe E. Crossgrove
President and Cashier
Date: November 9, 1998 By: /s/ Randal H. Schroeder
Randal H. Schroeder
Asst. Vice-President
and Chief Operating Officer
6
<PAGE> 10
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
7
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 15,528
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 9,935
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 113,116
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 396,281
<ALLOWANCE> 5,927
<TOTAL-ASSETS> 551,165
<DEPOSITS> 478,116
<SHORT-TERM> 3,443
<LIABILITIES-OTHER> 4,561
<LONG-TERM> 10,432
0
0
<COMMON> 12,677
<OTHER-SE> 41,934
<TOTAL-LIABILITIES-AND-EQUITY> 551,163
<INTEREST-LOAN> 26,906
<INTEREST-INVEST> 4,657
<INTEREST-OTHER> 423
<INTEREST-TOTAL> 31,986
<INTEREST-DEPOSIT> 15,805
<INTEREST-EXPENSE> 678
<INTEREST-INCOME-NET> 15,503
<LOAN-LOSSES> 692
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,150
<INCOME-PRETAX> 8,794
<INCOME-PRE-EXTRAORDINARY> 6,248
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,248
<EPS-PRIMARY> 4.81
<EPS-DILUTED> 4.81
<YIELD-ACTUAL> 0
<LOANS-NON> 7,731
<LOANS-PAST> 6,222
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 13,953
<ALLOWANCE-OPEN> 5,850
<CHARGE-OFFS> 1,324
<RECOVERIES> 709
<ALLOWANCE-CLOSE> 5,927
<ALLOWANCE-DOMESTIC> 5,927
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
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