FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
For Quarter Ended June 30, 2001 Commission File Number: 1.000-26099
FARMERS & MERCHANTS BANCORP
(Exact name of registrant as specified in its charter)
Delaware 94-3327828
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
121 W. Pine Street, Lodi, California 95240
(Address of principal Executive offices) (Zip Code)
Registrant's telephone number, including area code (209) 334-1101
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 [ ]
Number of shares of common stock of the registrant: Par value $0.01, authorized
2,000,000 shares; issued and outstanding 720,914 as of July 31, 2001.
FARMERS & MERCHANTS BANCORP
FORM 10-Q
TABLE OF CONTENTS
PART I. - FINANCIAL INFORMATION
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Page
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Item 1 - Financial Statements
Consolidated Balance Sheets as of June 30, 2001
December 31, 2000 and June 30, 2000. 3
Consolidated Statements of Income for the Three Months
and Six Months Ended June 30, 2001 and 2000. 4
Consolidated Statements of Comprehensive Income for the Three
Months and Six Months Ended June 30, 2001 and 2000. 5
Statement of Changes in Shareholders' Equity for the Six
Months Ended June 30, 2001 and 2000. 6
Consolidated Statement of Cash Flows for the Six
Months Ended June 30, 2001 and 2000. 7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis 9
PART II. - OTHER INFORMATION 22
-----------------
SIGNATURES 24
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2
PART I. - FINANCIAL INFORMATION
Item 1 - Financial Statements
FARMERS & MERCHANTS BANCORP
Consolidated Balance Sheets
- -----------------------------------------------------------------------------------------------------------------------
(in thousands) June 30, December 31, June 30,
2001 2000 2000
Assets (Unaudited) (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents:
Cash and Due From $ 39,599 $ 33,290 $ 27,691
Federal Funds Sold 40,200 41,000 7,350
Total Cash and Cash Equivalents 79,799 74,290 35,041
Investment Securities:
Trading 747 - -
Available-for-Sale 261,180 279,386 286,512
Held-to-Maturity 35,952 41,268 47,287
- -----------------------------------------------------------------------------------------------------------------------
Total Investment Securities 297,879 320,654 333,799
- -----------------------------------------------------------------------------------------------------------------------
Loans 529,334 497,730 476,106
Less: Unearned Income (500) (333) (405)
Less: Allowance for Loan Losses (12,655) (11,876) (10,657)
- -----------------------------------------------------------------------------------------------------------------------
Loans, Net 516,179 485,521 465,044
- -----------------------------------------------------------------------------------------------------------------------
Land, Buildings & Equipment 11,108 11,556 12,473
Interest Receivable and Other Assets 10,491 13,530 15,409
Total Assets $915,456 $905,551 $861,766
=======================================================================================================================
Liabilities & Shareholders' Equity
Deposits:
Demand $161,136 $183,779 $150,869
Interest Bearing Transaction 76,781 81,271 77,085
Savings 185,086 175,140 163,355
Time Deposits Over $100,000 158,130 135,757 133,284
Time Deposits Under $100,000 187,653 188,731 182,686
- -----------------------------------------------------------------------------------------------------------------------
Total Deposits 768,786 764,678 707,279
- -----------------------------------------------------------------------------------------------------------------------
Fed Funds Purchased/Borrowings 41,017 41,033 62,049
Other Liabilities 8,536 8,957 9,264
- -----------------------------------------------------------------------------------------------------------------------
Total Liabilities 818,339 814,668 778,592
- -----------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Common Stock 7 7 7
Additional Paid In Capital 61,762 53,559 53,592
Retained Earnings 32,900 36,527 33,361
Accumulated Other Comprehensive Income 2,448 790 (3,786)
- -----------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 97,117 90,883 83,174
- -----------------------------------------------------------------------------------------------------------------------
Total Liabilities & Shareholders' Equity $915,456 $905,551 $861,766
=======================================================================================================================
The accompanying notes are an integral part of these consolidated
financial statements
3
FARMERS & MERCHANTS BANCORP
Consolidated Statements of Income (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands) Three Months Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Interest Income:
Interest & Fees on Loans $11,485 $10,825 $22,743 $20,504
Federal Funds Sold 500 54 1,102 102
Securities:
Investments Available-for-Sale:
Taxable 3,861 4,525 7,848 8,995
Non-taxable 215 223 450 446
Investments Held-to-Maturity:
Taxable 65 74 153 197
Non-taxable 413 530 833 1,049
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Income 16,539 16,231 33,129 31,293
- ----------------------------------------------------------------------------------------------------------------------------
Interest Expense:
Interest Bearing Transaction 166 191 348 379
Savings 927 1,014 1,870 2,088
Time Deposits Over $100,000 1,589 1,191 3,171 2,210
Time Deposits Under $100,000 2,766 2,614 5,901 4,924
Interest on Borrowed Funds 557 890 1,110 1,519
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 6,005 5,900 12,400 11,120
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 10,534 10,331 20,729 20,173
Provision for Loan Losses 300 500 600 1,000
- ----------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 10,234 9,831 20,129 19,173
- ----------------------------------------------------------------------------------------------------------------------------
Non-Interest Income
Service Charges on Deposit Accounts 1,059 861 1,956 1,706
Net Gain (Loss) on Sale of Investment Securities (22) 62 66 (118)
Other 996 777 1,784 1,841
- ----------------------------------------------------------------------------------------------------------------------------
Total Non-Interest Income 2,033 1,700 3,806 3,429
- ----------------------------------------------------------------------------------------------------------------------------
Non-Interest Expense
Salaries & Employee Benefits 4,674 4,388 8,742 8,279
Occupancy 375 430 813 856
Equipment 448 495 963 919
Other Operating 1,577 1,729 3,276 3,723
- ----------------------------------------------------------------------------------------------------------------------------
Total Non-Interest Expense 7,074 7,042 13,794 13,777
- ----------------------------------------------------------------------------------------------------------------------------
Net Income Before Taxes 5,193 4,489 10,141 8,825
Provision for Taxes 2,032 1,685 3,940 3,307
- ----------------------------------------------------------------------------------------------------------------------------
Net Income $ 3,161 $ 2,804 $ 6,201 $ 5,518
============================================================================================================================
Earning Per Share $ 4.38 $ 3.87 $ 8.60 $ 7.61
============================================================================================================================
The accompanying notes are an integral part of these consolidated
financial statements
4
FARMERS & MERCHANTS BANCORP
Consolidated Statements of Comprehensive Income (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands) Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
Net Income $3,161 $2,804 $6,201 $5,518
Other Comprehensive Income (Loss) -
Unrealized holding gains (losses) arising during the period, net
of income tax effects of $317 and ($540) for the quarters ended
June 30, 2001 and 2000, respectively, and of $1,203 and ($643)
for the six months ended June 30, 2001 and 2000, respectively. 454 1,067 1,718 920
Less: Reclassification adjustment for realized (gains) losses
included in net income, net of related income tax effects of ($7)
and ($681) for the quarters ended June 30, 2001 and 2000,
respectively, and of ($45) and ($607) for the six months ended
June 30, 2001 and 2000, respectively. (10) (973) (60) (867)
- -----------------------------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income 444 94 1,658 53
- -----------------------------------------------------------------------------------------------------------------------------
Comprehensive Income $3,605 $2,898 $7,859 $5,571
=============================================================================================================================
The accompanying notes are an integral part of these consolidated
financial statements
5
FARMERS & MERCHANTS BANCORP
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands) Accumulated
Common Additional Other Total
Shares Common Paid-In Retained Comprehensive Shareholders'
Outstanding Stock Capital Earnings Income Equity
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 660,989 $7 $47,993 $36,040 $(3,839) $80,201
===============================================================================================================================
Net Income - - 5,518 - 5,518
Cash Dividends Declared on -
Common Stock - - (1,273) - (1,273)
5% Stock Dividend 32,496 - 6,824 (6,824) - -
Cash Paid in Lieu of Fractional
Shares Related to Stock Dividend - - (100) - (100)
Redemption of Stock (5,853) - (1,225) - - (1,225)
Changes in Net Unrealized Gain (Loss) on
Securities Available for Sale - - - 53 53
- -------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2000 687,632 $7 $53,592 $33,361 $(3,786) $83,174
===============================================================================================================================
Balance, December 31, 2000 687,491 $7 $53,559 $36,527 $ 790 $90,883
===============================================================================================================================
Net Income - - 6,201 - 6,201
Cash Dividends Declared on -
Common Stock - - (1,406) - (1,406)
5% Stock Dividend 33,831 - 8,288 (8,288) - -
Cash Paid in Lieu of Fractional
Shares Related to Stock Dividend - - (134) - (134)
Redemption of Stock (344) - (85) - - (85)
Changes in Net Unrealized Gain (Loss) on
Securities Available for Sale - - - 1,658 1,658
- -------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2001 720,978 $7 $61,762 $32,900 $ 2,448 $97,117
===============================================================================================================================
The accompanying notes are an integral part of these consolidated
financial statements
6
FARMERS & MERCHANTS BANCORP
Consolidated Statement of Cash Flows (Unaudited) Six Months Ended
- ---------------------------------------------------------------------------------------------------------------------
(in thousands) June 30, June 30,
2001 2000
- ---------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net Income $ 6,201 $ 5,518
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Loan Losses 600 1,000
Depreciation and Amortization 757 897
Provision for Deferred Income Taxes (480) (230)
Net Accretion of Investment Securities (229) (206)
Net (Gain) Loss on Sale of Investment Securities (88) 118
Net Change in Operating Assets & Liabilities:
Decrease in Trading Account Assets (2) 0
Decrease in Interest Receivable and Other Assets 2,360 (503)
Decrease in Interest Payable and Other Liabilities (421) (4,209)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 8,698 2,385
Investing Activities:
Trading Securities:
Purchased (306) 0
Sold or Matured 77 0
Securities Available-for-Sale:
Purchased (11,011) (40,649)
Sold or Matured 31,677 51,855
Securities Held-to-Maturity:
Purchased (60) (74)
Matured 5,534 2,102
Net Loans Originated or Acquired (31,627) (62,529)
Principal Collected on Loans Charged Off 369 107
Net Additions to Premises and Equipment (309) (663)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (5,656) (49,851)
Financing Activities:
Net Decrease in Demand, Interest-Bearing Transaction,
and Savings Accounts (17,187) (38,146)
Increase in Time Deposits 21,295 60,282
Federal Home Loan Bank Borrowings:
Advances 0 21,000
Paydowns (16) (15)
Cash Dividends (1,540) (1,373)
Stock Redemption (85) (1,225)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 2,467 40,523
Increase (Decrease) in Cash and Cash Equivalents 5,509 (6,943)
Cash and Cash Equivalents at Beginning of Year 74,290 41,984
- ---------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents as of June 30, 2001 and June 30, 2000 $ 79,799 $ 35,041
=====================================================================================================================
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
The foregoing financial statements are unaudited; however, in the opinion of
Management, all adjustments (comprised only of normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included. Results for the period ended June 30, 2001, are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole. A summary of the Company's significant accounting policies
is set forth in Note 1 to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for 2000.
2. Reclassifications
Certain reclassifications may have been made in the 2000 financial information
to conform to the presentation used in 2001.
3. Earnings per Share
The actual number of shares outstanding at June 30, 2001, were 720,978. Basic
earnings per share is calculated on the basis of the weighted average number of
shares outstanding during the period. Weighted average number of shares for the
six months ending June 30, 2001 and 2000 were 721,220 and 725,571. Prior period
per share amounts have been restated for the 5% stock dividend declared during
2001 and 2000.
4. Holding Company Formation
The accompanying financial statements include the accounts of Farmers &
Merchants Bancorp and the Bancorp's wholly owned subsidiary, Farmers & Merchants
Bank. Farmers & Merchants Bancorp was organized effective April 30, 1999.
Significant intercompany transactions have been eliminated in consolidation.
8
ITEM 2.
Management's Discussion and Analysis
Forward -Looking Statements
This report contains various forward-looking statements, usually containing the
words "estimate," "project," "expect," "objective," "goal," or similar
expressions and includes assumptions concerning the Company's operations, future
results, and prospects. These forward-looking statements are based upon current
expectations and are subject to risk and uncertainties. In connection with the
"safe-harbor" provisions of the private Securities Litigation Reform Act of
1995, the Company provides the following cautionary statement identifying
important factors which could cause the actual results of events to differ
materially from those set forth in or implied by the forward-looking statements
and related assumptions.
Such factors include the following: (i) the effect of changing regional and
national economic conditions; (ii) significant changes in interest rates and
prepayment speeds; (iii) credit risks of commercial, real estate, consumer, and
other lending activities; (iv) changes in federal and state Banking regulations
and; (v) other external developments which could materially impact the Company's
operational and financial performance. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to update any forward-looking
statements to reflect events or circumstances arising after the date on which
they are made.
Introduction
The following discussion and analysis is intended to provide a better
understanding of the Company's performance during the first six months of 2001
and the material changes in financial condition, operating income and expense of
the Company and its subsidiary as shown in the accompanying financial
statements. This section should be read in conjunction with the Company's
consolidated 2000 financial statements and the notes thereto, along with other
financial information included in this report.
Overview
For the six months ended June 30, 2001, Farmers & Merchants Bancorp reported net
income of $6,201,000, earnings per share of $8.60, return on average assets of
1.39% and return on average shareholders' equity of 13.24%. For the six months
ending June 30, 2000, net income totaled $5,518,000, earnings per share was
$7.61, return on average assets was 1.35% and the return on average
shareholders' equity totaled 12.76%.
The Company's improved financial performance in 2001 was due to a combination of
increased revenue generated from its core business, which include improved
growth rates in both loans outstanding and deposit balances along with capital
management strategies.
9
The following is a summary of the financial results for the six-month period
ending June 30, 2001 compared to June 30, 2000.
. Net income for the period totaled $6.2 million, up 12.4% over one year ago.
. Net interest income increased 2.8% to $20.7 million from $20.2 million.
. The provision for loan losses totaled $600 thousand for the period compared
to $1.0 million one year ago.
. Non-interest income increased 11.0% to $3.8 million, from the $3.4 million
reported for 2000.
. Non-interest expense remained unchanged, totaling $13.8 million for both
periods.
. Total assets increased 6.2% to $915.4 million.
. Gross loans increased 11.2% to $529.3 million, an increase of $53.2 million.
. Total deposits increased 8.7% to $768.8 million.
. Total investment securities totaled $297.9 million from $333.8 million at
June 30, 2000.
. Total shareholders' equity increased $13.9 million to $97.1 million.
Net Interest Income
Net interest income is the amount by which the interest and fees on loans and
interest earning assets exceed the interest paid on interest bearing sources of
funds. For the purpose of analysis, the interest earned on tax-exempt
investments and municipal loans is adjusted to an amount comparable to interest
subject to normal income taxes. This adjustment is referred to as "taxable
equivalent" and is noted wherever applicable. Interest income and expense are
affected by changes in the volume and mix of average interest earning assets and
average interest bearing liabilities, as well as fluctuations in interest rates.
Therefore, increases or decreases in net interest income are analyzed as changes
in volume, changes in rate and changes in the mix of assets and liabilities.
Net interest income grew 2.8% to $20.7 million during the first six months of
2001, compared to $20.2 million at June 30, 2000. On a fully taxable equivalent
basis, net interest income increased 2.0% and totaled $21.4 million at June 30,
2001, compared to $20.9 million for the first six months of 2000. Net interest
income on a taxable equivalent basis, expressed as a percentage of average total
earning assets, is referred to as the net interest margin, which represents the
average net effective yield on earning assets. For the six months ended June
30, 2001, the net interest
10
margin was 5.0% compared to 5.3% for the same period in 2000. The decrease in
net interest margin was primarily related to the drop in interest rates during
the first six months of 2001.
Loans, the Company's highest earning asset, increased $53.2 million as of June
30, 2001 compared to June 30, 2000. On an average balance basis, loans
increased by $62.3 million. The yield on the loan portfolio decreased 28 basis
points to 9.16% for the six months ending June 30, 2001 compared to 9.44% for
the six months ending June 30, 2000. This decrease in yield was offset by the
growth in balances which resulted in a positive effect on interest revenue from
loans in the amount of $2.2 million for the first six months of 2001.
The investment portfolio is the other main component of the Company's earning
assets. The Company's investment policy is conservative. The Company primarily
invests in mortgage-backed securities, U.S. Treasuries, U.S. Government
Agencies, and high-grade municipals. Since the risk factor for these types of
investments is significantly lower than that of loans, the yield earned on
investments is substantially less than that of loans.
Average investment securities decreased $43.8 million compared to the average
balance at June 30, 2000. The decrease in the average balance of investment
securities was followed with a corresponding decrease in interest income of $1.5
million for the six months ending June 30, 2001. The average yield, on a
taxable equivalent basis, in the investment portfolio was 6.5% in 2001 compared
to 6.6% in 2000. Net interest income on the Average Balance Sheet is shown on a
taxable equivalent basis, which is higher than net interest income on the
Consolidated Statements of Income because of adjustments that relate to income
on certain securities that are exempt from federal income taxes.
Interest expense increased 11.5% primarily as a result of growth in interest-
bearing deposit balances and promotional rates paid for certificates of deposit
in late 2000 and early 2001. Overall, average interest-bearing sources of funds
increased $43.5 million or 7.4%. Of that increase, average borrowings decreased
$13.1 million and interest-bearing deposits increased $56.6 million. Interest
expense increased disproportionately from the increase in deposit balances due
to certificates of deposit that were opened late in 2000 and early 2001 that
have not yet repriced at the lower prevailing rates. Overall, the average
interest cost on deposits was 3.9% at June 30, 2001 and 3.6% at June 30, 2000.
The Company's earning assets and rate sensitive liabilities are subject to
repricing at different times, which exposes the Company to income fluctuations
when interest rates change. In order to minimize income fluctuations, the
Company attempts to match asset and liability maturities. However, some
maturity mismatch is inherent in the asset and liability mix.
Allowance for Loan Losses
As a financial institution that assumes lending and credit risks as a principal
element of its business, the Company anticipates that credit losses will be
experienced in the normal course of business. The allowance for loan losses is
established to absorb losses inherent in the portfolio. The allowance for loan
losses is maintained at a level considered by management to be adequate to
provide for risks inherent in the loan portfolio. In determining the adequacy
of the allowance
11
for loan losses, management takes into consideration examinations by the
Company's supervisory authorities, results of internal credit reviews, financial
condition of borrowers, loan concentrations, prior loan loss experience, and
general economic conditions. The allowance is based on estimates and ultimate
losses may vary from the current estimates. Management reviews these estimates
periodically and, when adjustments are necessary, they are reported in the
period in which they become known.
The Company's written lending policies, along with applicable laws and
regulations governing the extension of credit, require risk analysis as well as
ongoing portfolio and credit management through loan product diversification,
lending limits, ongoing credit reviews and approval policies prior to funding of
any loan. The Company manages and controls credit risk through diversification,
dollar limits on loans to one borrower and by primarily restricting loans made
to its principal market area. Loans that are performing but have shown some
signs of weakness are subjected to more stringent reporting. Fixed-rate real
estate loans are comprised primarily of loans with maturities of less than five
years. Generally, long-term residential loans are originated by the Company and
sold on the secondary market.
The appropriate allowance amount is based upon growth in the loan portfolio,
management's evaluation of the credit quality of the loan portfolio, the
prevailing economic climate, and its effect on borrowers' ability to repay loans
in accordance with the terms of the notes and current loan losses. After
reviewing all factors, management concluded that the current amount in the
allowance for loan losses was adequate.
As of June 30, 2001, the allowance for loan losses was $12.6 million, which
represents 2.4% of the total loan balances. For the period ended June 30, 2000,
the allowance was $10.6 million and 2.2% of total loans. The table below
illustrates the change in the allowance for the first six months of 2001 and
2000.
Allowance for Loan Losses (in thousands)
- --------------------------
Balance, December 31, 2000 $11,876
Provision Charged to Expense 600
Recoveries of Loans Previously Charged Off 369
Loans Charged Off (190)
- ---------------------------------------------------------------------------
Balance, June 30, 2001 $12,655
===========================================================================
Balance, December 31, 1999 $ 9,787
Provision Charged to Expense 1,000
Recoveries of Loans Previously Charged Off 107
Loans Charged Off (237)
- ---------------------------------------------------------------------------
Balance, June 30, 2000 $10,657
===========================================================================
12
Non-Interest Income
Non-interest income increased 11.0% for the six months ending June 30, 2001,
compared to the same period of 2000. This change is the result of increases in
service charges on deposit accounts and a net gain on sale of investment
securities compared to a net loss on sale of investment securities during the
first half of 2000. Other non-interest income for the six months ended June 30,
2001 shows a decline from June 30, 2000 because of a non-recurring item recorded
in 2000.
Non-Interest Expense
Salaries and Employee Benefits increased $580 thousand or 7.1% from the prior
year due to merit increases and additional staffing requirements related to loan
production. Occupancy expense decreased due mostly to a decline in rental
expense paid by the Bank. Equipment expense increased $44 thousand or 4.8%.
This was due to upgraded computer equipment during the first quarter of 2001.
Other operating expense decreased 12.0% or $447 thousand from June 30, 2000.
The primary reason for this decrease was cost saving measures related to legal
fees and stationery and printing expenses. It is anticipated that the future
growth rate in other operating expense will remain modest and comparable to the
growth in assets.
Income Taxes
The provision for income taxes increased 19.1% to $3.9 million for the first six
months of 2001, primarily due to improved earnings. For the six months ended
June 30, 2000, the provision totaled $3.3 million. Additionally, the Company's
effective tax rate increased due to the decline through maturities of
investments in tax-exempt securities.
Balance Sheet Analysis
Investment Securities
The Financial Accounting Standards Board statement, Accounting for Certain
Investments in Debt and Equity Securities, requires the Company to classify its
investments as held-to-maturity, trading or available-for-sale. Securities are
classified as held-to-maturity and accounted for at amortized cost when the
Company has the positive intent and ability to hold the securities to maturity.
Trading securities are securities acquired for short-term appreciation and are
carried at fair value, with unrealized gains and losses recorded in non-interest
income. Securities classified as available-for-sale include securities, which
may be sold to effectively manage interest rate risk exposure, prepayment risk,
satisfy liquidity demand and other factors. These securities are reported at
fair value with aggregate, unrealized gains or losses excluded from income and
included as a separate component of shareholders' equity, net of related income
taxes.
The investment portfolio provides the Company with an income alternative to
loans. As of June 30, 2001 the investment portfolio represented 32.5% of the
Company's total assets. Total investment securities decreased $35.9 million
from a year ago and now total $297.9 million. Not included in the investment
portfolio are overnight investments in Federal Funds Sold. For the six months
ended June 30, 2001, average Federal Funds Sold was $43.3 million compared to
$3.3 in 2000.
13
Loans
The Company's loan portfolio at June 30, 2001 increased $53.2 million from June
30, 2000. The increase is the result of an aggressive calling program on high
quality prospects and a favorable economic climate in the Company's market area.
Additionally, on an average balance basis loans have increased $62.3 million or
14.3%. Management believes that the growth rate in loans will continue at a
modest rate through third quarter, 2001. The table following sets forth the
distribution of the loan portfolio by type as of the dates indicated.
Loan Portfolio As Of:
- ---------------------
(in thousands) June 30, 2001 Dec. 31, 2000 June 30, 2000
- ------------------------------------------------------------------------------
Real Estate Construction $ 36,850 $ 28,354 $ 30,454
Real Estate - Other 269,709 261,910 253,433
Commercial 199,484 182,611 167,346
Consumer 23,291 24,855 24,873
- ------------------------------------------------------------------------------
Gross Loans 529,334 497,730 476,106
Less:
Unearned Income 500 333 405
Allowance for Loan 12,655 11,876 10,657
Losses
- ------------------------------------------------------------------------------
Net Loans $516,179 $485,521 $465,044
==============================================================================
Non-Performing Assets
The Company's policy is to place loans on non-accrual status when, for any
reason, principal or interest is past due for ninety days or more unless it is
both well secured and in the process of collection. Any interest accrued, but
unpaid, is reversed against current income. Thereafter, interest is recognized
as income only as it is collected in cash.
As a result of events beyond the Company's control, problem loans can and do
occur. As of June 30, 2001, non-performing loans were $903 thousand compared to
$2.3 million at June 30, 2000. Managing problem loans continues to be a
significant Company objective. The Company reported no other real estate owned
at June 30, 2001, compared to the $200 thousand as of June 30, 2000. Accrued
interest reversed from income on loans placed on a non-accrual status totaled
$77 thousand at June 30, 2001 compared to $102 thousand at June 30, 2000.
Non-Performing Assets
- ---------------------
(dollar amounts in June 30, 2001 Dec. 31, 2000 June 30, 2000
thousands)
- -------------------------------------------------------------------------------
Nonperforming Loans $ 903 $1,495 $2,347
Other Real Estate Owned 0 88 200
- -------------------------------------------------------------------------------
Total $ 903 $1,583 $2,547
===============================================================================
Non-Performing Assets
as a % of Total Loans 0.2% 0.3% 0.5%
Allowance for Loan
Losses as a % of 1401.4% 794.4% 454.1%
Non-Performing Loans
14
Deposits
At June 30, 2001, deposits totaled $768.8 million. This represents an increase
of 8.7% or $61.5 million from June 30, 2000. The majority of the increase was
focused in time deposits over $100,000, which increased $24.8 million or 18.6%.
This increase was the result of increased marketing and advertising efforts. It
is not anticipated that this trend will change significantly through the third
quarter of 2001.
The most volatile deposits in any financial institution are certificates of
deposit over $100,000. The Company has not found its certificates of deposit
over $100,000 to be as volatile as some other financial institutions as it does
not solicit these types of deposits from brokers. It has been the Company's
experience that large depositors have placed their funds with the Company due to
its reputation for safety and soundness.
Capital
Much attention has been directed at the capital adequacy of the financial
institution industry. The Company relies on capital generated through the
retention of earnings to satisfy its capital requirements. The Company engages
in an ongoing assessment of its capital needs in order to support business
growth and to insure depositor protection. Shareholders' Equity totaled $97.1
million at June 30, 2001 and $83.2 million at June 30, 2000, which represents an
increase of $13.9 million or 16.8%.
The Board of Governors of the Federal Reserve System, and the Federal Deposit
Insurance Corporation have adopted risk-based capital guidelines. The
guidelines are designed to make capital requirements more sensitive to
differences in risk related assets among Banking organizations, to take into
account off-balance sheet exposures and to aid in making the definition of Bank
capital uniform. Company assets and off-balance sheet items are categorized by
risk. The results of these regulations are that assets with a higher degree of
risk require a larger amount of capital; assets, such as cash, with a low degree
of risk have little or no capital requirements. Under the guidelines the
Company is currently required to maintain regulatory risk based capital equal to
at least 8.0%. As of June 30, 2001 the Company meets all capital adequacy
requirements to which it is subject. The following table illustrates the
relationship between regulatory capital requirements and the Company and Bank's
capital position.
To Be Well
Capitalized Under
Regulatory Capital Prompt Corrective
(in thousands) Actual Requirements Action Provisions
June 30, 2001 Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------------------
Total Bank Capital to Risk Weighted Assets $102,174 14.22% $57,485 8.0% $71,856 10.0%
Total Consolidated Capital to Risk Weighted Assets $103,705 14.42% $57,517 8.0% N/A N/A
Tier I Bank Capital to Risk Weighted Assets $ 93,147 12.96% $28,743 4.0% $43,114 6.0%
Tier I Consolidated Capital to Risk Weighted Assets $ 94,670 13.17% $28,759 4.0% N/A N/A
Tier I Bank Capital to Average Assets $ 93,147 10.43% $35,726 4.0% $44,657 5.0%
Tier I Consolidated Capital to Average Assets $ 94,670 10.59% $35,745 4.0% N/A N/A
15
Risk Management
The Company has adopted a Risk Management Plan to ensure the proper control and
management of all risk factors inherent in the operation of the Company and the
Bank. Specifically, credit risk, interest rate risk, liquidity risk, compliance
risk, strategic risk, reputation risk and price risk can all affect the market
risk of the Company. These specific risk factors are not mutually exclusive.
It is recognized that any product or service offered by the Company may expose
the Company and Bank to one or more of these risk factors.
Credit Risk
Credit risk is the risk to earnings or capital arising from an obligor's failure
to meet the terms of any contract or otherwise fail to perform as agreed.
Credit risk is found in all activities where success depends on counterparty,
issuer, or borrower performance.
Central to the Company's credit risk management is a proven loan risk rating
system. Limitations on industry concentration, aggregate customer borrowings
and geographic boundaries also reduce loan credit risk. Credit risk in the
investment portfolio is minimized through clearly defined limits in the Bank's
policy statements. Senior Management, Directors Committees, and the Board of
Directors are provided with timely and accurate information to appropriately
identify, measure, control and monitor the credit risk of the Company and the
Bank.
The allowance for loan losses is based on estimates of probable losses inherent
in the loan portfolio. The amount actually incurred with respect to these
losses can vary significantly from the estimated amounts. The Company's
methodology includes several features which are intended to reduce the
difference between estimated and actual losses.
Implicit in lending activities is the risk that losses will and do occur and
that the amount of such losses will vary over time. Consequently, the Company
maintains an allowance for loan losses by charging a provision for loan losses
to earnings. Loans determined to be losses are charged against the allowance
for loan losses. The Company's allowance for loan losses is maintained at a
level considered by management to be adequate to provide for estimated credit
losses inherent in the portfolio.
The Company's methodology for assessing the appropriateness of the allowance
consists of several key elements, which include the formula allowance, specific
allowances for identified problem loans and portfolio segments and the
unallocated allowance. Specific allowances are established in cases where
management has identified conditions or circumstances related to credit that
management believes indicate the possibility that a loss may be incurred in
excess of the amount determined by the application of the formula reserve.
Management performs a detailed analysis of these loans, including, but not
limited to appraisals of the collateral, conditions of the marketplace for
liquidating the collateral and assessment of the guarantors. Management then
determines the loss potential and allocates a portion of the allowance for
losses for each of these credits.
Management believes that the allowance for loan losses at June 30, 2001 was
adequate to provide for recognized, unidentified and estimated inherent losses
in the portfolio. No assurances can be
16
given that future events may not result in increases in delinquencies, non-
performing loans or net loan chargeoffs that would increase the provision for
loan losses and thereby adversely affect the results of operations.
Asset / Liability Management - Interest Rate Risk
The mismatch between maturities of interest sensitive assets and liabilities
results in uncertainty in the Company's earnings and economic value and is
referred to as interest rate risk. Farmers & Merchants Bancorp's primary
objective in managing interest rate risk is to minimize the potential for
significant loss as a result of changes in interest rates.
The Company measures interest rate risk in terms of potential impact on both its
economic value and earnings. The methods for governing the amount of interest
rate risk include: analysis of asset and liability mismatches (GAP analysis),
the utilization of a simulation model and limits on maturities of investment,
loan and deposit products to relatively short periods which reduces the market
volatility of those instruments.
The gap analysis measures, at specific time intervals, the divergence between
earning assets and interest bearing liabilities for which repricing
opportunities will occur. A positive difference, or gap, indicates that earning
assets will reprice faster than interest-bearing liabilities. This will
generally produce a greater net interest margin during periods of rising
interest rates and a lower net interest margin during periods of declining
interest rates. Conversely, a negative gap will generally produce a lower net
interest margin during periods of rising interest rates and a greater net
interest margin during periods of decreasing interest rates.
The interest rates paid on deposit accounts do not always move in unison with
the rates charged on loans. In addition, the magnitude of changes in the rates
charged on loans is not always proportionate to the magnitude of changes in the
rate paid for deposits. Consequently, changes in interest rates do not
necessarily result in an increase or decrease in the net interest margin solely
as a result of the differences between repricing opportunities of earning assets
or interest bearing liabilities.
The Company also utilizes the results of a dynamic simulation model to quantify
the estimated exposure of net interest income to sustained interest rate
changes. The sensitivity of the Company's net interest income is measured over
a rolling one-year horizon. The simulation model estimates the impact of
changing interest rates on interest income from all interest earning assets and
the interest expense paid on all interest bearing liabilities reflected on the
Company's balance sheet. This sensitivity analysis is compared to policy
limits, which specify a maximum tolerance level for net interest income exposure
over a one-year horizon assuming no balance sheet growth, given both a 200 basis
point upward and downward shift in interest rates. A parallel and pro rata
shift in rates over a 12-month period is assumed. Results that exceed policy
limits, if any, are analyzed for risk tolerance and reported to the Board with
appropriate recommendations. At June 30, 2001, the Company's estimated net
interest income sensitivity to changes in interest rates, as a percent of net
interest income was an increase in net interest income of 14.33% if rates
increase by 200 basis points and a decrease in net interest income of 18.49% if
rates decline 200 basis points.
17
The estimated sensitivity does not necessarily represent a Company forecast and
the results may not be indicative of actual changes to the Company's net
interest income. These estimates are based upon a number of assumptions
including: the nature and timing of interest rate levels including yield curve
shape, prepayments on loans and securities, pricing strategies on loans and
deposits, replacement of asset and liability cashflows, and other assumptions.
While the assumptions used are based on current economic and local market
conditions, there is no assurance as to the predictive nature of these
conditions including how customer preferences or competitor influences might
change.
Liquidity
Liquidity risk is the risk to earnings or capital resulting from the Bank's
inability to meet its obligations when they come due without incurring
unacceptable losses. It includes the ability to manage unplanned decreases or
changes in funding sources and to recognize or address changes in market
conditions that affect the Bank's ability to liquidate assets or acquire funds
quickly and with minimum loss of value. The Company endeavors to maintain a
cash flow adequate to fund operations, handle fluctuations in deposit levels,
respond to the credit needs of borrowers and to take advantage of investment
opportunities as they arise. The principal sources of liquidity include
interest and principal payments on loans and investments, proceeds from the
maturity or sale of investments, and growth in deposits.
In general, liquidity risk is managed daily by controlling the level of Fed
Funds and the use of funds provided by the cash flow from the investment
portfolio. The Company maintains overnight investments in Fed Funds as a
reserve for temporary liquidity needs. During the first half of 2001, Federal
Funds averaged $43.4 million. In addition, the Company maintains Federal Fund
credit lines of $136 million with major correspondent banks subject to the
customary terms and conditions for such arrangements.
At June 30, 2001, the Company had available liquid assets, which included cash
and unpledged investment securities of approximately $144.1 million, which
represents 15.7% of total assets.
Average Balance Sheets
The tables on the following pages reflect the Company's average balance sheets
and volume and rate analysis for the six-month periods ending June 30, 2001 and
2000. The average yields on earning assets and average rates paid on interest-
bearing liabilities have been computed on an annualized basis for purposes of
comparability with full year data. Average balance amounts for assets and
liabilities are the computed average of daily balances.
18
Farmers & Merchants Bancorp
Year-to-Date Average Balances and Interest Rates
(Interest and Rates on a Taxable Equivalent Basis)
(in thousands)
Six Months Ended June 30, 2001
Assets Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------
Federal Funds Sold $ 43,355 $ 1,102 5.10%
Trading Securities 709 - 0.00%
Investment Securities Available-for-Sale
U.S. Treasuries 2,059 55 5.36%
U.S. Agencies 5,948 172 5.80%
Municipals - Taxable 1,990 62 6.25%
Municipals - Non-Taxable 21,771 685 6.31%
Mortgage Backed Securities 230,128 7,368 6.42%
Other 5,111 186 7.30%
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Securities Available-for-Sale 267,007 8,528 6.41%
- ------------------------------------------------------------------------------------------------------------------------
Investment Securities Held-to-Maturity
U.S. Treasuries 0 0 0.00%
U.S. Agencies 740 22 5.96%
Municipals - Taxable 2,936 98 6.69%
Municipals - Non-Taxable 33,822 1,264 7.50%
Mortgage Backed Securities 0 0 0.00%
Other 659 34 10.35%
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Securities Held-to-Maturity 38,157 1,418 7.46%
- ------------------------------------------------------------------------------------------------------------------------
Loans
Real Estate 294,322 13,730 9.36%
Commercial 178,941 7,753 8.69%
Consumer 20,383 1,026 10.09%
Credit Card 3,463 185 10.71%
Municipal 898 43 9.60%
- ------------------------------------------------------------------------------------------------------------------------
Total Loans 498,007 22,737 9.16%
- ------------------------------------------------------------------------------------------------------------------------
Total Earning Assets 847,235 $33,785 8.00%
========================
Unrealized Gain/(Loss) on Securities Available-for-Sale 2,296
Allowance for Loan Losses (12,207)
Cash and Due From Banks 27,216
All Other Assets 25,575
- -----------------------------------------------------------------------------------------------
Total Assets $890,115
===============================================================================================
Liabilities & Shareholders' Equity
Interest Bearing Deposits
Interest Bearing DDA $ 74,242 $ 348 0.94%
Savings 178,681 1,870 2.10%
Time Deposits Over $100,000 112,508 3,172 5.65%
Time Deposits Under $100,000 221,138 5,900 5.35%
- ------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits 586,569 11,290 3.86%
Other Borrowed Funds 41,026 1,110 5.43%
- ------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 627,595 $12,400 3.96%
========================
Non Interest Bearing DDA 159,701
All Other Liabilities 9,134
- -----------------------------------------------------------------------------------------------
Total Liabilities 796,430
Shareholders' Equity 93,685
- -----------------------------------------------------------------------------------------------
Total Liabilities & Shareholders' Equity $890,115
===============================================================================================
Net Interest Margin 5.06%
========================================================================================================================
Notes: Yields on municipal securities have been calculated on a fully taxable
equivalent basis using the applicable Federal and State income tax rates for the
period. Loan Fees are included in interest income for loans. Unearned discount
is included for rate calculation purposes. Nonaccrual loans and lease financing
receivables have been included in the average balances. Yields on securities
available-for-sale are based on historical cost.
19
Farmers & Merchants Bancorp
Year-to-Date Average Balances and Interest Rates
(Interest and Rates on a Taxable Equivalent Basis)
(in thousands)
Six Months Ended June 30, 2000
Assets Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------
Federal Funds Sold $ 3,292 $ 102 6.21%
Investment Securities Available-for-Sale
U.S. Treasuries 11,694 325 5.57%
U.S. Agencies 7,145 208 5.84%
Municipals 24,052 784 6.54%
Mortgage Backed Securities 253,311 8,133 6.44%
Other 4,821 225 9.36%
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Securities Available-for-Sale 301,023 9,675 6.45%
- ------------------------------------------------------------------------------------------------------------------------
Investment Securities Held-to-Maturity
U.S. Treasuries 0 0 0.00%
U.S. Agencies 1,996 59 5.93%
Municipals 45,100 1,701 7.56%
Mortgage Backed Securities 0 0 0.00%
Other 818 38 9.32%
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Securities Held-to-Maturity 47,914 1,798 7.52%
- ------------------------------------------------------------------------------------------------------------------------
Loans
Real Estate 273,211 12,624 9.27%
Commercial 138,961 6,763 9.76%
Installment 20,032 921 9.22%
Credit Card 3,225 186 11.57%
Municipal 320 10 6.27%
- ------------------------------------------------------------------------------------------------------------------------
Total Loans 435,749 20,504 9.44%
- ------------------------------------------------------------------------------------------------------------------------
Total Earning Assets 787,978 $32,078 8.16%
=====================
Net Unrealized Gain/(Loss) on Securities Available-for-Sale (8,539)
Allowance for Loan Losses (10,192)
Cash and Due From Banks 25,419
All Other Assets 30,186
- -----------------------------------------------------------------------------------------
Total Assets $824,852
=========================================================================================
Liabilities & Shareholders' Equity
Interest Bearing Deposits
Transaction $ 65,175 $ 379 1.17%
Savings 185,189 2,088 2.26%
Time Deposits Over $100,000 85,542 2,210 5.18%
Time Deposits Under $100,000 194,066 4,924 5.09%
- ------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits 529,972 9,601 3.63%
Other Borrowed Funds 54,160 1,519 5.62%
- ------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 584,132 $11,120 3.82%
=====================
Demand Deposits 151,137
All Other Liabilities 7,470
- -----------------------------------------------------------------------------------------
Total Liabilities 742,739
Shareholders' Equity 82,113
- -----------------------------------------------------------------------------------------
Total Liabilities & Shareholders' Equity $824,852
=========================================================================================
Net Interest Margin 5.33%
========================================================================================================================
Notes: Yields on municipal securities have been calculated on a fully taxable equivalent basis using the applicable
Federal and State income tax rates for the period. Loan Fees are included in interest income for loans. Unearned
discount is included for rate calculation purposes. Nonaccrual loans and lease financing receivables have been
included in the average balances. Yields on securities available-for-sale are based on historical cost.
20
Farmers & Merchants Bancorp
Volume and Rate Analysis of Net Interest Revenue
(Rates on a Taxable Equivalent Basis)
(in thousands)
2001 versus 2000
Amount of Increase
(Decrease) Due to Change in:
Average Average Net
Interest Earning Assets Balance Rate Change
- --------------------------------------------------------------------------------------------------------------
Federal Funds Sold $1,057 $ (58) $ 1,000
Trading Securities 0 0 0
Investment Securities Available for Sale
U.S. Treasuries (258) (12) (270)
U.S. Agencies (34) (2) (36)
Municipals - Taxable (41) (2) (43)
Municipals - Non-Taxable 61 (55) 6
Mortgage Backed Securities (743) (23) (765)
Other 34 (73) (39)
- --------------------------------------------------------------------------------------------------------------
Total Investment Securities Available for Sale (981) (168) (1,147)
- --------------------------------------------------------------------------------------------------------------
Investment Securities Held to Maturity
U.S. Treasuries 0 0 0
U.S. Agencies (37) 1 (37)
Municipals - Taxable 1 (2) (1)
Municipals - Taxable (312) (25) (337)
Mortgage Backed Securities 0 0 0
Other (16) 11 (4)
- --------------------------------------------------------------------------------------------------------------
Total Investment Securities Held to Maturity (365) (14) (379)
- --------------------------------------------------------------------------------------------------------------
Loans:
Real Estate 984 122 1,106
Commercial 2,871 (1,882) 990
Installment 16 88 105
Credit Card 28 (29) (1)
Other 25 8 33
- --------------------------------------------------------------------------------------------------------------
Total Loans 3,925 (1,692) 2,233
- --------------------------------------------------------------------------------------------------------------
Total Earning Assets 3,637 (1,932) 1,707
- --------------------------------------------------------------------------------------------------------------
Interest Bearing Liabilities
Interest Bearing Deposits:
Transaction 111 (142) (31)
Savings (71) (148) (218)
Time Deposits Over $100,000 746 216 962
Time Deposits Under $100,000 714 263 976
- --------------------------------------------------------------------------------------------------------------
Total Interest Bearing Deposits 1,499 188 1,689
Other Borrowed Funds (359) (51) (409)
- --------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 1,141 138 1,280
- --------------------------------------------------------------------------------------------------------------
Total Change $2,496 $(2,070) $ 427
==============================================================================================================
Notes: Rate/volume variance is allocated based on the percentage relationship
of changes in volume and changes in rate to the total "net change." The above
figures have been rounded to the nearest whole number.
21
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings
- -------------------------
None
ITEM 2. Changes in Securities
- -----------------------------
None
ITEM 3. Defaults Upon Senior Securities
- ---------------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
Annual Meeting of Shareholders of Farmers & Merchants Bancorp held on April 16,
2001. The business conducted at the meeting included election of directors and
ratification of PricewaterhouseCoopers LLP as the Company's independent
auditors. Following is the voting results from the 2001 annual meeting of
shareholders. As of April 16, 2001, 445,684 shares represented in person and by
proxy participated in this election and shares were voted on the two measures
before the shareholders as follows:
1. ELECTION OF DIRECTORS
Directors % For % Withheld
- -------------------------- ------------ -------------- ------------- --------------
Stewart C. Adams, Jr. 99.75 444,572 0.25 1,112
------------- ---------------- -------------- ----------------
Ralph Burlington 99.75 444,572 0.25 1,112
------------- ---------------- -------------- ----------------
Robert F. Hunnell 99.60 443,908 0.40 1,776
------------- ---------------- -------------- ----------------
Ole R. Mettler 99.67 444,199 0.33 1,485
------------- ---------------- -------------- ----------------
James E. Podesta 99.67 444,231 0.33 1,453
------------- ---------------- -------------- ----------------
Harry C. Schumacher 99.65 444,121 0.35 1,563
------------- ---------------- -------------- ----------------
George Scheideman 99.30 442,554 0.70 3,130
------------- ---------------- -------------- ----------------
22
Hugh Steacy 99.12 441,756 0.88 3,928
------------- ---------------- -------------- ----------------
Kent A. Steinwert 99.75 444,572 0.25 1,112
------------- ---------------- -------------- ----------------
Calvin (Kelly) Suess 99.75 444,572 0.25 1,112
------------- ---------------- -------------- ----------------
Carl A. Wishek, Jr. 98.79 440,288 1.21 5,396
------------- ---------------- -------------- ----------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS, LLP
No. of Shares %
For: 443,420 64.50
-------------------- --------------------
Against: 262 00.04
-------------------- --------------------
Abstain 2,002 00.29
-------------------- --------------------
ITEM 5. Other Information
- -------------------------
None
ITEM 6(a). Exhibits
- -------------------
None
ITEM 6(b). Reports on Form 8-K
- ------------------------------
None
23
SIGNATURES
----------
Pursuant to the requirement 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
/s/ Kent A. Steinwert
Date: August 6, 2001 ________________________
Kent A. Steinwert
President and
Chief Executive Officer
(Principal Executive Officer)
/s/ John R. Olson
Date: August 6, 2001 ________________________
John R. Olson
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
24